Foreign minds, local legitimacy: the innovation dilemma of returnee entrepreneurs

Purpose This study investigates how returnee entrepreneurs (REs) in China balance dual knowledge sources to secure legitimacy and enhance innovation performance. It examines the mediating role of legitimacy in linking local stakeholder engagement with innovation outcomes and explores how local and overseas knowledge moderate this relationship. Design/methodology/approach Empirical analysis is based on survey data from 178 technology-based SMEs led by REs in Zhongguancun, Beijing. Regression analysis and structural equation modeling (SEM) were used to test a moderated mediation model grounded in the knowledge-based view and legitimacy theory. Findings Results reveal that legitimacy mediates the impact of local stakeholder engagement on innovation performance. Specifically, local knowledge strengthens the effect of stakeholder engagement on legitimacy, whereas overseas knowledge weakens it. In contrast, overseas knowledge enhances the influence of legitimacy on innovation performance, while local knowledge diminishes this impact. Research limitations/implications Focusing solely on a single geographic cluster in Beijing may constrain generalizability. Future research should adopt comparative approaches across other emerging economies to validate and extend these findings. Practical implications REs should strategically integrate global and local knowledge to build legitimacy and foster innovation. Policymakers are encouraged to design targeted support mechanisms that enhance local stakeholder connectivity and facilitate knowledge adaptation. Social implications Enhanced integration of diverse knowledge sources may promote broader social and economic development by reinforcing the legitimacy and sustainability of innovation-driven ventures. Originality/value The study extends returnee entrepreneurship literature by uncovering the asymmetric roles of dual knowledge in the legitimization process. It demonstrates that knowledge can function as both an asset and a liability, contingent on its contextual application, thus offering a more nuanced understanding of innovation drivers in emerging economies.