Why are the industrial firms of emerging economies short-termistic in innovation? Industry-level evidence from Chinese manufacturing

We examine the influences of intra-industry and inter-industry foreign direct investment (FDI) presence, financial constraints and technological uncertainty on the short-termism in innovation by using an industry-level panel data of Chinese large- and medium-size manufacturing enterprises during the period of 2000 to 2009. Innovation behaviour is conceptualised as a process of knowledge acquisition and knowledge creation from a learning perspective. The empirical results show that intra-industry and inter-industry FDI presence have strong influences on firms’ short-termism in both knowledge acquisition and knowledge creation, while financial constraints and technological uncertainty only affect firms’ short-termism in knowledge acquisition. Another interesting finding is that intra-industry FDI presence is negatively related to firms’ short-termism in knowledge acquisition and positively related to firms’ short-termism in knowledge creation.

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