اثر تعدیل شدت سرمایه گذاری مستقیم خارجی بر سرمایه گذاری منابع نامشهود شرکت های محلی و پیامدهای عملکرد: مورد از چین

Foreign direct investment (FDI) has been known to generate positive externalities to increase the productivity and competitiveness of domestic industries through knowledge and technology spillover. This study focuses on the indirect effect of FDI by investigating whether FDI intensity benefits local firms by enhancing the local intellectual property rights (IPR) environment. We argue that due to the inadequate IPR environment in emerging economies, local firms' intangible resources investment can be negatively related to firm performance. Further, we suggest that FDI intensity can improve the local IPR environment, thereby enhancing the appropriability of local firms' intangible resources investment. We find empirical evidence to support our arguments by examining 70 semiconductor firms in China from 1999 to 2006, and we discuss the theoretical and practical implications of the impact of FDI intensity on the local IPR environment.

After the 1990s, developing countries experienced rapid inflows of foreign direct investment (FDI), and in recent years they have attracted more than one-third of the worldwide FDI inflow (Vu et al., 2008). The inflows of FDI from multinational corporations (MNCs) and their interaction with local firms generate positive and negative externalities on the host country's economic growth and local firms' competitiveness (e.g., Buckley et al., 2007, Markusen and Venables, 1999, Van Pottelsberghe and Lichtenberg, 2001 and Wijeweera et al., 2010). Potential positive externalities include knowledge spillovers (e.g., new technologies, marketing techniques, and managerial skills), network externalities, and supportive institutions (industry associations and R&D facilities) (e.g., Saxenian, 1990). In addition, FDI could change the structure of imperfectly competitive industries of the host country (Markusen and Venables, 1999). Although current studies find evidence in support of the positive FDI spillovers on local firms, little research has examined the benefits of FDI intensity to local firms from an institutional perspective, especially in an emerging country context. Due to the lack of appropriate institutional infrastructure, many emerging economies suffer from underdeveloped intellectual property rights (IPR) protection in terms of enactment and enforcement (Peng, 2002 and Rawski, 1994). A weak IPR environment may negatively affect firms' innovation activities due to potential technology imitation and unfair competition (Zhao, 2006). This is especially the case for technology-intensive industries (Baldwin, 1996), in that the appropriation of intangible resources requires a supportive IPR environment (Hall, 1992). Although previous studies suggest that intangible resources have positive relationships with innovation (e.g., Bueno et al., 2010) and are positively related to a firm's superior performance (e.g., Amit and Schoemaker, 1993, Choo and Bontis, 2002, Dierickx and Cool, 1989, Itami, 1987 and Juma and Payne, 2004), the positive relationship between intangible resources and firm performance is built on the assumption that firms are able to appropriate part of the value created by their intangible resources (Villalonga, 2004). Less concern has been shown about such a relationship in emerging countries, which have weaker IPR protection than developed countries against firms appropriating their investment in intangible resources. Further, although a weak institution constrains shapes firms' behavior, organizations may also shape the institutional environment in which they are embedded (DiMaggio, 1988, Oliver, 1991 and Powell and DiMaggio, 1991). The increasing inflows of FDI from MNCs and their interaction with local firms create a densely populated and competitive environment, providing all firms both opportunities and pressures to innovate and experiment with new technological knowledge (Beaudry and Breschi, 2003). However, previous studies report that compared with local firms, MNCs could be more likely to be adversely affected by spillover effects, such as allowing local competitors to access to their new products and technology through reverse engineering, invaluable human capital through human resource mobility, and other critical resources that are essential to firm performance (e.g., Shaver and Flyer, 2000 and Yang and Jiang, 2007). Accordingly, we suspect that, to survive the weak IPR protection in an emerging market, MNCs are more likely to react actively to enhance the institutional environment to lessen the negative spillover effects. Therefore, whether the effect of FDI intensity benefits the local institutional environment warrants further investigation. We pose two research questions in this study: (1) What is the relationship between local firms' intangible resources investment and their performance in the context of relatively weak IPR protection? (2) Does geographical FDI intensity moderate the relationship between intangible resources investment and performance of local firms? We intend to make three important contributions to the literature on knowledge management and the FDI spillover effect. First, we aim to enrich our understanding of whether the inadequate IPR framework in an emerging economy challenges the basic premise of the resource-based view (RBV), which suggests that intangible resources are essential to firms' competitive advantage (Barney, 1996, Rumelt, 1984 and Wernerfelt, 1984). Second, our investigation of whether the intensity of FDI inflows enhances the local institutional environment by benefiting local firms' intangible resources investment extends current knowledge on the positive effects of FDI externalities. Third, our research has practical implications for companies that have intangible resources investment in emerging markets by helping them better comprehend the nature of the institutional environment and the effects of their intangible resources investment. To examine these questions, we selected China's semiconductor industry. China is an appropriate context for investigating these questions because the country's institutional IPR protection is still weak in terms of enforcement and enactment (Peng, 2002), yet it has increasingly attracted FDI from MNCs (Buckley et al., 2002). Since local high-technology firms have been actively involved in innovative activities to survive domestic and foreign competition, the Chinese semiconductor industry provides a good platform for our study. We first review the literature available on intangible resources and their relationship with firm performance. Then we focus on the role that geographical FDI intensity may play in the relationship between local firms' investment in intangible resources and performance. We develop our hypotheses on the literature review and discussion. Empirical results are based on the analysis of 70 Chinese firms in the semiconductor industry, from across the country, over an 8-year period. Finally, we draw conclusions and discuss areas for future research.

This study makes two major theoretical contributions. First, we argue that although intangible resources are essential to firms' competitive advantage, in a weak intellectual property protection environment, intangible resources can negatively affect firms' financial performance. By integrating a resource-based view with an institutional perspective (Meyer et al., 2009), this study enhances our current understanding of the relationship between intangible resources and firm performance with evidence from a unique institutional environment. Second, with globalization, barriers to entry into emerging markets become weaker, and emerging markets continually attract FDI from MNCs. Prior studies have examined the circumstances under which local firms benefit from the presence of MNCs due to micro-analytical factors such as knowledge spillover and technology transfer (e.g., Buckley et al., 2002 and Crespo and Fontoura, 2007). The macro-level institutions, in particular the country-level IPR protection that is closely related to intangible resources appropriation, have been relatively underexplored. We argue that FDI from MNCs in a dense geographical area could improve the appropriability regime of the local environment, thus supporting local firms' appropriation of intangible resources investment. Our findings are consistent with prior evidence that regional institutions can exert a strong impact on firm behavior and performance (e.g., Chan et al., 2010). We provide a fine-grained analysis of the relationships among FDI geographical agglomeration, institutional environment and the resource-based perspective. We chose China as our study context because the country has become the world's largest and fastest-growing emerging economy, as well as one of the largest emerging market destinations of FDI (UNCTAD, 2005). To capture the effect of the dynamic evolution of the emerging country's institutional environment on firms' performance, we tested semiconductor firms from 1999 to 2006, including both the pre-WTO and post-WTO period and did not find significant differences on firm performance. Furthermore, by dividing our sample into sub-samples on geographic FDI intensity, we found that the effect of firms' intangible resources intertwines with their geographic locations to improve financial performance. These findings imply that firms that are located in intensified FDI geographic location are more likely to benefit from investing in intangible resources. In light of the weak enactment and enforcement of IPR in emerging markets, studies on intangible resources management in emerging markets may need to incorporate institutional-, industry-, and firm-level factors to conduct a more comprehensive analysis. To the best of our knowledge, our study is the first to extensively investigate the influence of intangible resources on firm performance in an emerging economy. In light of the emergent research on the knowledge management of firms that originate in emerging economies (Lu et al., 2008), we provide insights to complement the current conceptual analysis of the relationship between intangible resources and firm performance. We also contribute to an understanding of how FDI from foreign countries can affect the institutional environment of emerging markets. Our study also has important implications for practitioners. For managers in emerging economies, it is essential to understand that there are vast regional differences in China's economic development (Tsui, 1996). The central government has made significant progress in joining international IPR conventions, establishing domestic IPR laws, and passing legislation regarding enforcement, enactment and training procedures. However, due to the decentralized nature of the Chinese administration, it is common to find regional variations in the implementation of government policies (Tan et al., 2007). Although the inadequate institutional environment is not within the firm's control, firms need to take advantage of the intra-regional differences and select favorable geographical locations, especially those with high FDI intensity, to protect their investments in intangible resources. Alternatively, when the institutional environments are far from satisfactory, firms need to internalize their technology structures to substitute for inadequate external IPR protection (Zhao, 2006). Like all research, this study has some limitations. First, we investigate intangible resources as a whole instead of examining the relative importance of the contribution made by each type of intangible resource to a business's overall success. This is partly due to the constraints of our data source. Although CSMAR provides a comprehensive range of firm-level variables, such as sales and firm size, it lacks conventional measures of intangible resources, such as R&D expenses and advertising expenses, which have been widely used in studies based on Compustat data. We hope that future research on the emerging market of China will use finer-grained primary data to further investigate how various types of intangible resources have different impacts on firm performance. It will help to further explore how to effectively manage and develop intangible resources to achieve sustainability. Further, current studies suggest that innovation quality (radical vs. incremental) and innovation type (product vs. process) may require different legal environments to spur innovation activities (e.g., Ahuja et al., 2008). Although the legal protection of the appropriability regime is a critical factor in protecting firms' innovation activities (Encaoua et al., 2006, Gallini, 2002 and Mansfield, 1986), our study does not investigate how complementary assets such as a firm's marketing capability and brand name may help a firm protect its intangible resources. Future studies should continue to uncover the effects of various characteristics on the appropriation level of firms' intangible resources. Moreover, it takes time for MNCs to influence the formulation of IPR protection and the improvement of IPR policy enforcement and enactment. Although we conducted empirical tests of the interaction effects between current year intangible resource investment and previous years' FDI intensity for up to six years, a better approach might have been to use direct measures of the improvement in the IPR environment and to examine its relationship with the effect of FDI from MNCs over time.8 The last concern has to do with the generalizability of this research. Our study is based on one industry in a single country, so we must take care in discussing its implications. Although we believe that our results may be generalizable outside China given the continuous improvements in the institutional environments of most emerging markets, we must acknowledge the possibility that China could be a special case when it comes to the intertwined effects of intangible resources and foreign investment intensity on firm performance. We therefore encourage more studies of other emerging economies to extend our understanding of the effect of intangible resources on firm performance.