How OFDI Promotes High-Technology Multinationals’ Innovation: From the Perspective of a Cross-Border Business Model

Abstract

High-quality innovation in cross-border business models is the focus of innovative development. However, some enterprises are blindly obsessed with focusing on the quantity of innovation, while they neglect the quality of innovation. As a result, the quantity of innovation in cross-border business models is not proportional to the quality, and cross-border business models need continuous improvement. High-quality innovation in cross-border business models is also related to outward foreign direct investment (OFDI) and knowledge absorptive capacity. The purpose of this study is to explore the relationship between OFDI and innovation quality in cross-border business models. This study proposes that knowledge absorptive capacity plays a mediating transmission role between OFDI and innovation quality. Based on panel data for 478 Chinese high-tech multinational enterprises in the period from 2014 to 2019, the paper uses moderated path analysis to construct a non-linear mediated transmission model of knowledge absorptive capacity in terms of the OFDI and innovation quality of high-tech enterprises. The results show that there is an inverted U-shaped relationship between OFDI and innovation quality. Knowledge absorptive capacity plays an inverted U-shaped mediating role in the transmission between OFDI and innovation quality. In a post hoc analysis, it was found that a low degree of OFDI has an inverted U-shaped relationship with innovation quality, and a high degree of OFDI negatively inhibits innovation quality. Therefore, Chinese high-tech enterprises operating cross-border must maintain an appropriate level of OFDI by improving the matching mechanism between OFDI and knowledge absorptive capacity, which is conducive to improving the innovation quality of multinational enterprises in host countries.