Imitative innovation and financial distress risk: The moderating role of executive foreign experience

Bai Liu*, Tao Ju, Min Bai, Chia Feng (Jeffrey) Yu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Citations (Scopus)

Abstract

This paper investigates how imitative innovation affects firms’ financial distress risk and how executive foreign experience moderates this relationship. Using the 2008–2017 patent application data for Chinese listed firms, we find robust evidence that imitative innovation increases firms’ financial distress risk and that executives’ foreign experience can mitigate this adverse impact. Additional tests reveal that firms conduct imitative innovation to gain competitive advantage, but this also tightens their financial constraints, leading to greater financial distress risk. Overall, our results highlight the dark side of imitative innovation and the value of executives’ foreign experience for firms operating in emerging markets that rely on imitative innovation.

Original languageEnglish
Pages (from-to)526-548
Number of pages23
JournalInternational Review of Economics and Finance
Volume71
DOIs
Publication statusPublished - Jan 2021
Externally publishedYes

Keywords

  • Executives’ foreign experience
  • Financial distress risk
  • Imitative innovation

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