Regional innovation ecosystem helps China’s cities pursue global outward foreign direct investment? A configurational analysis in the pandemic era

Despite extensive research on the relationship between Outward Foreign Direct Investment (OFDI) and innovation, the mechanisms by which regional innovation ecosystems influence the geographical diversification of OFDI flows remain underexplored. Moreover, the pandemic’s impact on OFDI dynamics has not been thoroughly examined. To address this gap, our study employs fuzzy-set qualitative comparative analysis (fsQCA) to identify configurations of regional innovation ecosystems influencing the geographical diversification of OFDI flows in China’s cities during the global pandemic. We also validate our findings using necessary condition analysis (NCA) and compare configurations across countries and industry types. We find that, first, technological innovation output was more significant before the pandemic outbreak, whereas socio-economic innovation output became more important after the pandemic outbreak. Second, the roles of universities, market environment, and human resources have diminished, but the impact of capital has intensified. Third, relying solely on universities may hinder OFDI diversification, whereas capital remains critical but contingent on other conditions. Last, the role of enterprises and capital has grown significantly following the pandemic, particularly for diversification into developing countries. Before the pandemic outbreak, socio-economic innovation output played a central role in diversifying OFDI flows into both developed and developing countries; however, after the pandemic outbreak, its influence was evident only in OFDI flows to developed countries. This paper elucidates the dynamics and interactions within the regional innovation ecosystems and uncovers their configurational effects on the geographical diversification of OFDI flows. Furthermore, this paper offers practical implications for China’s cities to bolster their internationalization and foster OFDI diversification.