Downstream foreign MNEs and local suppliers’ innovation in a dynamic environment: the moderating effect of network diversity

This study investigates how the presence of foreign multinational enterprises (MNEs) in downstream sectors influences innovation in upstream local suppliers via backward linkages. Analysis using Korean Innovation Surveys shows backward linkages of foreign MNEs to have negative effects on local suppliers. While local suppliers operating in dynamic environments can avert negative effects, those locked in extant innovation networks continue to experience adverse effects. Our findings show that the effect of MNE presence on local firms should be evaluated in conjunction with given industrial changes and heterogeneous firm strategies.