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Abstract

China has taken a foreign direct investment-based approach toward increasing its capital and knowledge base, and developing into an innovative economy. However, little quantitative evidence exists about the factors that drive innovations of foreign-invested enterprises (FIEs) there. This paper uses survey data from high-technology firms in Shanghai to discuss factors affecting their innovativeness. It takes the concepts of absorptive capacity, export orientation, and innovation-related cooperation as a starting point. It highlights how the interplay of strategies and resources affects innovativeness and heterogeneity of FIEs. The most innovative FIEs are endowed with a strong human capital base and R&D activities, which at the same time target export markets and whose cooperative partners involve firms other than their parent company. The results underline the necessity to differentiate between the different types of FIEs when examining their innovativeness.