Foreign knowledge acquisition through inter-firm collaboration and recruitment: Implications for domestic growth of emerging market firms

• This paper focuses on two mechanisms through which firms acquire foreign technological and managerial knowledge—collaboration with foreign firms and recruiting returnees, and examines to what extent the two mechanisms benefit emerging market firms in terms of their performance in the local market.
• We propose that the differences in institutional origins of emerging market firms affect the extent to which they can benefit from the two mechanisms.
• Our findings show that privatized state-owned firms benefit more from collaboration with foreign firms, while entrepreneurial firms benefit more from recruiting returnees. Also, the positive impact of foreign collaboration was reduced by the presence of returnees in the top management team.

Institutional transition from central planning toward an open and market-oriented economic system has pressured emerging market firms to learn new ways of doing business and to strengthen their competitive positions at home. To speed up the learning process, emerging market firms often acquire advanced technology and managerial skills from more developed countries. This paper focuses on two mechanisms through which emerging market firms acquire foreign technological and managerial knowledge, i.e. collaborating with foreign firms and recruiting returnees, and examines the extent to which the two mechanisms facilitate the firms’ performance in the local market. Empirical findings based on a sample of firms that made initial public offerings (IPOs) domestically and from the Zhongguancun Science Park in China indicated that privatized state-owned firms benefit more from foreign collaboration, while entrepreneurial firms benefit more from recruiting returnees. Also, the positive impact of foreign collaboration was reduced by the presence of returnees on the top management team.