Research Summary
This study examines the impact of international experience (IE) on innovation performance (IP) in the context of emerging economy multinational enterprises (EMNEs). EMNE internationalization is often driven by strategic asset‐seeking behavior to improve their knowledge base. But, does internationalization lead to more innovation for these EMNEs? Drawing on organizational learning theory, we find a positive relationship; however, the IE–IP curve is not linear, instead it follows an S–shaped curve. We also introduce the moderating role of the difference in the direct and indirect learning rate, as well as the knowledge distance between an EMNE’s home and host countries, to the IE–IP relationship. Data on 161 Indian biopharmaceutical firms, of which 64 are EMNEs, from 1997 to 2013 were used to empirically test our hypotheses.
Managerial Summary
Emerging economy multinational enterprises (EMNEs) are expanding to foreign countries to seek new knowledge and improve their ability to compete with more advanced developed country firms. In this article, we examine whether international expansion by EMNEs actually improves their innovation performance. We find that international experience does improve innovation because of organizational learning. Further, we look at whether firms are able to learn faster—both from their own innovation efforts as well as the innovation efforts of their partners. We also look at the difference in the level of knowledge at home versus at the location of the foreign subsidiaries and the impact of this distance on the international experience—innovation performance relationship. We examine EMNEs from the Indian biopharmaceutical industry. Our study provides managerial insights on the international expansion and innovation‐related activities of EMNEs.