Foreign ownership and novelty of product innovations in China

This paper examines a relationship between foreign ownership and innovation novelty in the context of host advanced developing economies. The analysis is focused on two dimensions ofproduct innovation novelty, the novelty of introduced innovations and the economic benefitsfrom introduced novelty. We find that foreign affiliates do not have higher odds than domesticfirms to introduce product innovations of higher novelty. Indeed, the findings indicate that thehigher odds of foreign firms of introducing innovations of higher novelty are moderated byexploitation of ownership advantages and by a host market orientation. However, we find that foreign affiliates have higher odds to capture higher economic benefits from product innovationsof higher novelty than domestic firms. Hence, although foreign affiliates are not higher up on aninnovation novelty ladder than domestic firms, they replenish their product and innovationportfolio with innovations of higher novelty at a faster rate than domestic firms.