This study proposes a moderated mediating framework to describe the relationships among international diversification, technological capability, market orientation and emerging market multinational enterprises’ new product performance. Within this framework, emerging market multinational enterprises’ technological capabilities mediate the impact of internationalization on new product performance. This mediating effect is more salient for firms entering more developed markets than those entering less developed markets. Analysis of a sample of Chinese multinationals’ internationalization process supports these relationships.

Introduction

Studies of international diversification and organizational learning have suggested that international diversification enhances product innovation by exposing a firm to diverse customer requirements (Matarazzo & Resciniti, 2013; Zahra, Ireland, & Hitt, 2000). Notably absent in the literature is a basic but puzzling question: Does international diversification relate to new product performance through technological capability? This question has received little attention, perhaps because scholars investigating the topic have mainly focused on multinational enterprises (MNEs) from developed markets and assumed that all MNEs possess strong technological capabilities and can develop new solutions to satisfy different customer requirements (Petison, Thongthou, & Lekmoung, 2012). But recent studies have questioned this assumption because they have found many MNEs from emerging markets (EMNEs) have technological capability which is actually weak compared with their counterparts from developed markets (Piperopoulos, Wu, & Wang, 2017; Wu & Park, 2017). In order to satisfy diverse requirements of international customers and succeed in global markets, EMNEs need an ability to develop new products that solve those customers problems. So academic and practical considerations call for an explanation of how EMNEs international diversification relates to their technological capabilities and innovation performance.