Political risk on foreign direct investment and firm innovation: A tale of two stories in Taiwan

• In Event: AI, Digital Capitalism, and Infrastructural Power

Abstract

Firm’s outward foreign direct investment will influence the firm’s innovation performance while little studies examine the potential influence from political regime risk. Employing political economy viewpoints, we try to tell a tale of two stories on the political regime risk impact on the relationships between outward foreign direct investment and innovation performance. Utilizing an over 30-years data in Taiwan, we found that Taiwanese firms that invested in China will be positively influence the firm’s innovation performance; however, this positive influence will be negatively moderated after year 2012, under the Xi Jinping’ leadership in China. Specifically, the linkage of investment in China, the year impact from the leadership in China, and the firm’s innovation performance, are only significant for those electronic firms. Those firms belonging to Taiwan Semiconductor Industry Association do not have the above linkages. The findings of this study shed insights on the innovation and geopolitics issues in international business, and also will contribute to the discussion of national leadership on the firm’s innovation.

Authors

• Hsi-Mei Chung, Department of Business Administration, I-Shou University, Taiwan

• Thung-Hong Lin, Academia Sinica

• Chun-Yin Lee, National Chengchi University