The Role of Foreignness in the Relationship between Disruptive Innovation and MNE Performance

Abstract

The innovation-performance literature has failed to make a distinction between the effects of incremental and disruptive innovation on multinational enterprise (MNE) performance. The understanding of the role of foreignness has overemphasized the negative side. From the institutional anomie theory perspective, this study investigates how foreignness, which consists of national culture, industrial competition, and innovative national capacity, affects the relationship between disruptive innovation and MNE performance. We illustrate the distinctiveness between incremental and disruptive innovation and then build a conceptual model to show the moderating role of foreignness on the innovation-performance link. The model suggests that foreignness provides contextual conditions under which the relationship between disruptive innovation and MNE performance is either strengthened or impeded. Also, firm-level cultural intelligence (CQ) can help MNEs to overcome the negative effects of foreignness, as well as enhance its positive effects. Propositions are discussed for further research.

Keywords

• innovation
• mnes
• performance
• competitive advantage
• foreignness
• cultural distance
• national innovative capacity