Reverse international knowledge transfer in the MNE: (Where) does affiliate performance boost parent performance?

Abstract

We examine the extent to which the knowledge or technological capability of foreign affiliates actually enhances the performance of their parent companies. Our results draw on a firm-level panel of more than 1,600 multinationals and more than 4,000 of their overseas affiliates, covering 46 home and host countries. We find considerable evidence of enhanced parent productivity as a result of their affiliates' performance, which we interpret as evidence of reverse knowledge transfer from affiliates to parents. This effect is robust to different tests including IV estimation and a falsification exercise based on unconnected 'matched' affiliates. We find that both physical and strategic location markedly affects the affiliate-parent relationship, and that distance reduces the positive impact that affiliate performance has on that of the parent. HighlightsWe link effective technology sourcing to firm performance. While location matters, the position of the affiliate within the parent company determines effective technology sourcing. We develop a "falsification test" to confirm the importance of the parent-affiliate relationship.

Firm-specific intangible assets and subsidiary profitability: The moderating role of distance, ownership strategy and subsidiary experience

“…A few other papers (e.g. Yang et al, 2013, Driffield et al 2016 make this similar assumption when using Amadeus (European version of Orbis) and Orbis data. The initial firm samples we have include 3,438 multinational parents and their 9,280 overseas subsidiaries.…”

“…We also include control variables suggested by the literature to measure heterogeneous firm characteristics namely firm age (Yang and Driffield 2012), debt to equity ratio (Pantzalis 2001), wage per worker (Martins and Yang 2015) and capital per worker (Driffield et al 2016). Additionally, we control for country fixed effects, year fixed effects and the home and host country GDP.…”

Ownership Control of Foreign Affiliates: A Property Rights Theory Perspective

“…2 Where a foreign affiliate is part of the parent MNE's core activity, this is related to higher levels of particularly valuable technology transfer (Driffield et al, 2010;Driffield, Love, & Yang, 2016). This in turn increases the value of the parent's contribution, implying a larger ownership share, and also makes it more likely that this share will be sustained over time.…”

Do Non‐exporting Plants Benefit from Exporting Peer Plants?*

“…The recent prevalence of multinational firms has highlighted the need for an academic study on the economic importance of the internal activities of firms. Some academic efforts have successfully shown a likelihood of the internal knowledge transfer between parent firms and their affiliates (Atalay et al, ; Driffield et al, ; Chun et al, ). Focusing on export firms instead of multinational firms, our study adds a new finding to this line of literature by showing a possible internal spillover effect from exporting to non‐exporting plants within a firm.…”