Subsidiaries and knowledge creation: the influence of the MNC and host country on innovation

Abstract

This paper studies the influence of external knowledge on innovation in subsidiaries of multinational firms. The focus on subsidiaries is especially interesting since they are simultaneously embedded in two knowledge contexts: (a) the internal multinational corporation (MNC) comprised of the headquarters and other subsidiaries; and (b) an external environment of regional or host country firms. We develop hypotheses to suggest that the extent of influences of these contexts on subsidiary technological innovation depends on the characteristics of the knowledge network (technological richness and diversity) and the knowledge linkages of the subsidiary with other entities. The study uses patent citation data pertaining to innovations by foreign subsidiaries of U.S. semiconductor firms to test these hypotheses. The paper finds that (a) the technological richness of the MNC, (b) the subsidiary's knowledge linkages to host country firms, and (c) the technological diversity within the host country have a positive impact on innovation.

Subsidiary managers’ knowledge mobilizations: Unpacking emergent knowledge flows

“…This leads to a reuse of technologies, practices, processes and competence across the MNC (Ghoshal & Bartlett, 1988;Kostova, 1999;Kostova & Roth, 2002;Szulanski, 1996;Szulanski & Jensen, 2006;Zander & Kogut, 1995). Second, knowledge flows in the MNC serve as inputs for knowledge creation whereby different existing knowledge is integrated and blended to create new knowledge (Almeida & Phene, 2004;Ghoshal & Bartlett, 1988;Kotabe, Dunlap-Hinkler, Parente, & Mishra, 2007;Phene & Almeida, 2008;Regner & Zander, 2011;Tsai, 2001). …”

Are patents with multiple inventors from different countries a good indicator of international R&D collaboration? The case of ABB

“…First, although the literature tends to assume that inventors work in their country of residence (cf. Almeida and Phene, 2004;Cantwell and Piscitello, 2000;Frost, 2001;Guellec and van Pottelsberghe de la Potterie, 2001;Le Bas and Sierra, 2002;Patel and Vega, 1999;Zander, 1999), this is not always the case. For example, many people live and work in different countries.…”

“…However, MNC differ in terms of the level of integration of their subsidiaries (Almeida and Phene, 2004). As a consequence, collaboration with another unit within the same MNC can be as challenging as inter-firm collaboration, even under the umbrella of joint ownership.…”

Supplier strategies to compensate for knowledge asymmetries in buyer-supplier relationships: implications for economic upgrading

“…This body of literature presumes the knowledge flow to be a one-way process in which subsidiaries are regarded as mere learners (Lyles and Salk, 2007). An alternative stream of IB literature highlights the role of subsidiaries in knowledge creation (Almeida and Phene, 2004;Andersson et al, 2005), their contribution in extracting local knowledge and then feeding it into MNEs' global networks (Buckley and Carter, 2002;Mudambi, 2002). These studies shift the focus towards subsidiaries from the traditional one on headquarters as the focal nodes of knowledge.…”