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.
|Early online date||11 Dec 2021|
|Publication status||Published - Jun 2022|
Bibliographical noteFunding Information:
This work is supported by National Natural Science Foundation of China (Grant No. 71804198 ), Human and Social Science Foundation of Ministry of Education of China ( 18YJC790149 ), and China-UK Innovation and Development Association (Grant No. RF350137 ).
© 2021 Elsevier Ltd
- Abandoned innovation
- Foreign direct investment in R&D
- Multiple signals
- Negative signals
- Patent applications
- Signaling theory
ASJC Scopus subject areas
- Management of Technology and Innovation