In this study, we examine how foreign direct investment (FDI) spillovers to domestic firms in an emerging market occur over time. From the organizational learning perspective, we propose that, as entry tenure of foreign firms in an industry increases, domestic firms can learn from the foreign firms over time and improve their productivity. We further build upon the competitor imitation argument to propose that this effect will be stronger when barriers to imitation faced by the domestic firms are lower. Based upon a comprehensive panel dataset on manufacturing firms in China in 1998-2007, our findings strongly support these arguments. We find that entry tenure of foreign firms in an industry has a positive relationship with the productivity of individual domestic firms in the same industry, albeit at a diminishing rate. We also find that this positive relationship is stronger when the foreign firms have lower export intensity, lower intangible asset intensity, and have followed a more rhythmic (i.e., less irregular) entry pattern-situations characterizing lower barriers to imitation.

While boards are known to react to corporate misconduct by removing the executives responsible, little is known about whether the board's response is shaped by the firm's social context. Using the 2006 stock option backdating scandal, in which firms manipulated stock option grant dates, we examine the impact of two dimensions of social context-the pervasiveness of the misconduct and the media attention to the misconduct. We find that firms implicated later in the backdating scandal are less likely to experience executive turnover than those implicated earlier. We also find that the amount of media attention to backdating at the time a firm is implicated in the scandal increases the likelihood that the firm experiences executive turnover. and the characteristics associated with misconduct need to be taken into account.

Research Summary While geographic and cultural distances deter firms' international expansion, they do so via different mechanisms, such that firms with advantages in overcoming one‐dimension may face disadvantages in overcoming the other. Larger, older, and state‐owned firms have better access to resources in their home countries than smaller, younger, and non‐state‐owned firms, and thus are less concerned about the high operating costs associated with larger geographic distances. However, they are less adaptable to culturally distant countries and thus are more concerned about larger cultural distances. We propose that firm size, age, and state ownership weaken the deterrent effect of geographic distance while amplifying the deterrent effect of cultural distance. Results using data on Chinese firms' location choices of foreign direct investments in 2001–2013 support our predictions. Managerial Summary A key decision that managers need to make in expanding overseas is the foreign location choice. Although managers generally refrain from expanding to geographically and culturally distant countries, the importance of geographic and cultural distances in their consideration varies across firms, which tend to differ in resource endowment and adaptability. Because larger, older, and state‐owned firms are better positioned to absorb additional operating costs but are less adaptable to foreign countries' local environments than smaller, younger, and non‐state‐owned firms, the deterrent effect of geographic distance (cultural distance) is weaker (stronger) for the former than for the latter. Our findings show that foreign countries that seem to be good fits when considering geographic distance may be misfits when considering cultural distance, and vice versa.

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