The influence of communist ideology on firm innovation and FDI

Abstract

Innovation and foreign direct investment are essential drivers of global competitiveness of emerging market multinational enterprises. Prior research has examined a variety of institutional and managerial factors that shape firms’ innovation and FDI decisions, such as governance structures, regulatory environments, and leadership characteristics. While political ideology has been recognized as an important influence on firm strategy, especially in studies of advanced economies, its role in shaping business behavior in emerging markets has only recently begun to receive attention. Within this growing literature, China represents a particularly underexplored context, despite its highly institutionalized ideological environment. This study addresses this gap by examining how Communist ideology shapes firm-level behaviors related to innovation and outward FDI, focusing specifically on non-state-owned enterprises in China.
The first empirical study replicates the work of Xu, Zhou, and Chen (2023), which examines how Maoist ideology influences patenting behavior in Chinese non-state-owned enterprises by focusing on the ideological orientation of board chairs. I adopt this replication approach as a preliminary step to verify the robustness of their findings and theoretical assumptions. Surprisingly, my results reveal an opposite pattern: Party-member chairs are associated with more patent applications and fewer instances of patent infringement. This discrepancy motivated a revision of the ideological framework and led to further hypothesis revision and testing.
The second empirical study examined the impact of an evolving ideology on firms’ OFDI, particularly regarding location choice, establishment mode, and investment speed. To empirically test the hypotheses, I analyzed data from publicly listed manufacturing companies from 2005 to 2022. The findings indicated that, influenced by Dengism, top management teams with a higher ratio of Communist Party of China (CPC) members were more likely to invest in developed countries, showed a lower inclination towards mergers and acquisitions, and exhibited slower FDI speed. Furthermore, younger and more educated executives have had a diminished effect on ideological imprinting due to the diminishing influence of Xi Jinping’s thoughts.
This study contributes to theoretical research by revealing persistence and decaying ideological imprints. Additionally, it expands the application of imprint theory by incorporating political ideology alongside the characteristics of TMT. The findings provide valuable practical insights for business managers and policymakers navigating the intersection of ideology and firm strategy in the rapidly evolving global economy.

Date of Award	Jul 2025
Original language	English
Awarding Institution	University of Nottingham
Supervisor	Lei Li (Supervisor) & Zhijing Zhu (Supervisor)