Although previous studies on resource dependence theory (RDT) in international business (IB) indicate that multinationals rely on resources from other countries to promote innovation and maintain competitiveness, the question of how disruptions of such dependencies affect multinationals’ dependence-managing strategies and performance outcomes, especially for those from emerging economics, remains unexplored. To address this gap in the literature, our research explores the impact of trade restrictions from developed countries on EMNEs’ knowledge dependencies and innovation outcomes. We employ a Difference-in-Differences (DD) research design by leveraging the trade restrictions imposed on Chinese high-tech firms by the U.S. Bureau of Industry and Security Entity List (hereinafter the Entity List) in 2019 as a natural experiment. Through a patent-level analysis with matched samples, our findings reveal that U.S trade restrictions reduce innovation novelty and impact of Chinese EMNEs by impeding their dependencies on international knowledge, as evidenced by decreased overseas backward citations and international R&D collaborations. We further show that these effects can be counterbalanced by the geographic dispersion of international knowledge dependencies, reflected in broader backward citations and outward foreign direct investment (OFDI). These findings extend scholarly understanding of RDT by underscoring the critical role of external factors in challenging EMNEs’ international knowledge dependence strategies and uncovering their effect on innovation outcomes.
