The innovation tug‐of‐war: Local grit versus global grit in emerging markets

Abstract Research Summary Drawing on vicarious learning, competition‐driven innovation incentives, and the temporal dynamics of competitive activity, this study explores which type of competition, local versus foreign, most benefits advanced economy MNEs' (AEMNEs) emerging market (EM) innovation performance, when and in what temporal patterns. We predict that local competition contributes more to AEMNEs' EM innovation performance and that this positive impact is reinforced by foreign competition. We further predict that irregular local competition amplifies the innovation performance‐enhancing effect of local competition, whereas irregular foreign competition diminishes the benefits of foreign competition for innovation performance. Our multi‐level analysis of AEMNEs operating in China's high‐tech sector supports these predictions. The findings offer novel insights into how competition heterogeneity and its temporal dynamics shape the innovation performance of AEMNEs in EMs. Managerial Summary AEMNEs face competition from both local and foreign rivals, but not all competition equally drives innovation. Our study of AEMNEs operating in China shows that competing with local counterparts delivers greater innovation performance, and the innovation benefits of engaging with one type of rival are reinforced by the other. Competitive rhythm also matters. Local competition enhances innovation when local rivals act irregularly, while irregular moves by foreign peers reduce their innovation benefits. Managers should strategically track both competitor types and align innovation efforts with the rhythm of market dynamics to maximize innovation outcomes.