PERFORMANCE ASPIRATION, OUTWARD FOREIGN DIRECT INVESTMENT AND FIRM INNOVATION

Abstract

This dissertation addresses the antecedents and outcomes of outward foreign direct investment of emerging market firms by analyzing how firms’ performance relative to aspirations affect the extent of their outward foreign direct investment (OFDI), and how firms’ foreign expansions influence their innovation output. In first essay, I investigate behavioral explanations for the Chinese firms’ outward FDI by focusing on the effects of performance relative to aspiration level, and extend the model of decision making to a competitive context to develop theory about how foreign competition in domestic markets affects firms’ decision making. In the second essay, I explore the effects of Chinese OFDI on their innovation in home country and the contingency effects of performance aspirations and industry competition. Empirical analysis of Chinese listed firms between 2002 and 2010, generally support my hypotheses in two essays.