Do international joint ventures foster or inhibit innovative activities in emerging economies?

Abstract

Using a sample of 267 business groups that operated in Taiwan between 1981 and 1998, this study examines the effect of international joint ventures (IJVs) on the innovative performance of business groups in an emerging economy. Contrary to received wisdom, we find a systematic negative impact of IJV on groups' innovativeness, measured by number of patent applications, both new invention patent and process patent. This relationship between IJV and group innovativeness also varies across business groups with different strategic orientation (measured by group-level product and geographic diversification) and internal structure (such as, intra-group network density). Specifically, the negative effects of IJV on group innovativeness intensify with group-level product diversification while the negative effects of IJV decline with group-level geographic diversification and business density. The results are robust to both parametric as well non-parametric regression techniques.