Abandoning innovation projects, filing patent applications and receiving foreign direct investment in R&D

Rebecca Yu Li, Karena Ji Yan, Nengzhi Yao, Kun Tian, Senmao Xia, Xiao hui Yang, Yu Xiong

Research output: Contribution to journalArticlepeer-review

Abstract

Foreign direct investment in R&D is one of the popular channels indigenous firms use to upgrade their technological capacities and improve market intelligence following innovation setbacks. Firms often employ various signals to secure higher levels of foreign direct investment in R&D. However, the majority of research on this topic focuses on the role of positive rather than negative signals. Firms are often conservative about communicating negative information regarding their innovation projects due to concerns around competition and managerial performance appraisal. Drawing on signaling theory, this study investigates the impact of a negatively valenced signal – the experience of abandoning innovation projects – on attracting foreign direct investment in R&D. Moreover, although firms are known to send multiple signals simultaneously, little is known about how the interactions between oppositely valenced signals (specifically, the experience of abandoning innovation projects, which is a negative signal, and the filing of patent applications, which is a positive signal) affect foreign direct investment in R&D. A study of 11,354 Spanish firms from the Spanish Technological Innovation Panel during the period 2008–2015 found that the experience of abandoning innovation projects has a positive effect on foreign direct investment in R&D. However, this positive effect is weakened by patent applications due to the signaling of conflicting messages. These results have important theoretical and practical implications for the advancement of signaling theory and the management of innovation setbacks.

Original languageEnglish
Article number102435
JournalTechnovation
Early online date11 Dec 2021
DOIs
Publication statusE-pub ahead of print - 11 Dec 2021

Keywords

  • Abandoned innovation
  • Foreign direct investment in R&D
  • Multiple signals
  • Negative signals
  • Patent applications
  • Signaling theory

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