Embeddedness of innovation receivers in the multinational corporation: Effects on business performance

This paper investigates how relationship embeddedness in MNC subsidiaries’ corporate and external networks influences the contribution of innovation transfer to the recipient subsidiary's business performance. OLS regressions using data on the intra-MNC transfer of 224 innovations indicate that the embeddedness of a subsidiary's relationships in the corporate and external network positively affects the received innovation's contribution to business performance. More detailed analysis demonstrates that the positive link between a subsidiary's embeddedness in the external network and the contribution to business performance of receiving an innovation is negatively affected when the innovation is unique compared with other innovations on the market.     

Sources of open innovation in foreign subsidiaries: An enriched typology

This paper analyzes the drivers of multinational affiliates’ innovation, using a dataset based on the Community Innovation Survey for Belgium. Specifically, we investigate the role of external knowledge sources on foreign affiliates’ research efforts and innovation. We thereby develop an enriched typology by taking both the MNC and the host country perspective into consideration and distinguish between different types of subsidiaries, in order to disentangle differences in the use of knowledge sources between technology exploiting, seeking and creating subsidiaries. Our findings show that technology-creating foreign affiliates are able to tap into a combination of industry-based value chain partners and science-based partners. In particular, a combination of clients and universities have a powerful impetus on the research effort of technology creating firms. Our results also indicate that technology-seeking subsidiaries make more use of collaboration with competitors. Technology exploiting subsidiaries make significantly less use of external knowledge sources and have a lower R&D intensity.     

The relationships between types of network organization and adoption of management mechanisms: an empirical study of knowledge transactions of MNC’s subsidiaries in Taiwan

This paper examines the relationships of various types of network organizations and the adoption of management mechanisms through the application of network theory. We found that strong relationships exist as described within the four hypotheses by empirically evaluating case studies of MNC subsidiaries in Taiwan. Based on “the knowledge transaction density” observed between an MNC’s enterprise group and local firms, the subsidiaries can be classified into three categories of network organization, namely: (1) Self-sufficient, (2) Production- based, and (3) Operation-centered subsidiaries. The literature review suggests that there are four types of mechanisms that MNC headquarters use to control their foreign subsidiaries. These mechanisms are bureaucratic, personnel, performance and cultural controls. This research reports three major findings. Firstly, for Operation-centered subsidiaries, headquarters prefer to adopt two or more management mechanisms simultaneously. Secondly, for Production-based subsidiaries, headquarters prefer to adopt bureaucratic management mechanisms. Finally, for Self-sufficient subsidiaries, headquarters prefer to adopt performance and cultural management mechanisms.     

Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK

The regional location of multinational corporation (MNC) subsidiaries in their host country and their associated entrepreneurial output and networking activities are likely to affect their economic development contribution, measured in terms of technology and management know-how transfers; enhancement of innovativeness of other firms; and company spinoffs. This theme has considerable research and public policy value. We investigate the issue drawing from a large-scale study of 264 MNC subsidiaries based in the UK. The findings show that activities in developed regions are associated with higher economic development contribution than those in less developed regions. Moreover, entrepreneurial output and networking with partners external to the MNC system positively affect economic development contribution. Key implications of this study are that entrepreneurship critically influences economic development contribution, underlying the importance of the MNC subsidiary research stream; and that the policy practice of supply-side measures fostering entrepreneurial output and embeddedness in local networks seems to be appropriate to pursue.     

Proximity at a distance: The relationship between foreign subsidiary co-location and MNC headquarters board interlock formation

Corporations seek various relationships, such as board interlocks, with other firms to reduce resource dependencies. The consistent theoretical expectation and empirical finding that physical proximity is an important driver for board interlock formation is seemingly at odds with the emerging and growing literature on transnational board interlock ties. We argue that the effect of proximity on multinational corporation (MNC) board interlock formation can also be attributed to the firms’ internationalization strategy, namely, when they have co-located subsidiaries in foreign markets. We call this “proximity at a distance”. We test our assumptions on a dataset covering almost 43,000 board interlocks among MNC headquarters and their 12 million subsidiary co-location pairs. We confirm that proximity among headquarters increases the odds of interlocking but also find robust evidence that co-located subsidiaries also increase firms’ propensity to interlock, particularly for transnational board interlocks. Our results help provide an explanation for the “paradox of distance” by showing that the interlock between two distant MNCs may be driven by proximity to their foreign subsidiaries. As such, we illustrate how MNCs’ resource-dependent strategic responses can occur at the headquarters level to address uncertainties experienced at the subsidiary level.     

Analysing corporate political activity in MNC subsidiaries through the integration-responsiveness framework

Our study applies the well-known, market-strategy focussed integration-responsiveness (IR) framework and extends it to incorporate the non-market corporate political strategies of MNC subsidiaries. We find government regulation and the market strategies of integration and innovation have positive relationships with MNC subsidiary political activities. Interestingly, whereas the market strategy of innovation has a positive effect on subsidiary performance (but not on legitimacy), the non-market corporate political activities undertaken by MNC subsidiaries enhance subsidiary legitimacy (but not subsidiary performance). In addition, both market innovation and non-market subsidiary political activities are useful tools to gain favourable government decisions. Overall, our study incorporates both market and non-market strategies within a single overarching IR framework, and highlights their complementary role in achieving the twin goals of performance and legitimacy respectively.     

Stakeholder pressures,EMS implementation,and green innovation in MNC overseas subsidiaries

In this paper, we address the issue of green innovation by the overseas subsidiaries of multinational corporations (MNCs). Drawing upon stakeholder theory and institutional theory, we propose a conceptual model to explain how stakeholder pressures in host countries prompt MNC subsidiaries to undertake green product and process innovations. Our findings indicate that MNC subsidiaries need to meet market stakeholders’ pressures in order to achieve social legitimacy in host countries, and that the implementation of formal environmental management systems (EMS) is an important mechanism translating these pressures into green innovation initiatives. Furthermore, we find that the positive relationship between market stakeholder pressures and EMS implementation is reinforced by global ‘green’ institutional pressures in the different host countries.     

Revisiting the external impact of MNCs: An empirical study of the mechanisms behind knowledge spillovers from MNC subsidiaries

The majority of studies of knowledge spillovers from the presence of multinational corporations (MNCs) have focused on whether or not, rather than how knowledge spillovers occur from MNC subsidiaries to local host country firms. Using survey data from 210 MNC subsidiaries in Sweden, a composite model is developed examining the impact of two different environmental conditions on the occurrence of knowledge spillovers arising from innovation transfer within MNCs. We distinguish between horizontal knowledge spillovers (i.e., to competitors) and vertical knowledge spillovers (i.e., to customers and suppliers), and emphasise the conceptually important distinction between the two. The former are largely unintentional by nature whereas the latter can be considered as intentional knowledge diffusion. The results show that competitive pressure in the recipient subsidiary's local environment gives rise to unintentional knowledge spillovers, whereas it is negatively related to intentional knowledge diffusion. The results also support the notion that the degree of embeddedness of in a subsidiary's business network in the host country is positively related to intentional knowledge diffusion. An important finding of the study is that there is a positive relationship between intentional knowledge diffusion and unintentional knowledge spillovers.     

Institutional development and firm profitability in transition economies

Although transition economies experience significant institutional transformations that vary in their pace and magnitude, our understanding of how such changes influence firm performance is rather limited. We examine how variations in institutional reforms and international openness in 16 transition economies in Central and Eastern Europe (CEE) influence firm profitability. We enhance the understanding of this subject by showing that such institutional changes have different effects on the competitive advantages and in turn profitability of domestic firms and foreign subsidiaries. Our analysis of over 230,000 observations reveals that institutional reforms benefit domestic firms. Conversely, a completely different pattern emerges for foreign subsidiaries, indicating that institutional reforms have negative consequences for their profitability. Hence, in contrast to the established assumption that developed institutional environments are advantageous for foreign subsidiaries, the nature of institutional changes makes domestic firms the main beneficiaries.     

Tax competition with asymmetric market structures: The role of policy instruments*

We analyze the location choice of a multinational corporation (MNC) between two host countries with different market structures, i.e. the number of competing domestic firms in them. We consider the effects of import tariffs and lump-sum subsidies on the MNC's locational choice. Our findings include: (1) with lump-sum subsidy, the country with fewer firms always gets the MNC, (2) with tariffs, the country with more domestic firms gets the MNC when the export transportation cost is high and the domestic firms are sufficiently inefficient, while the country with fewer domestic firms wins the MNC when export transportation cost is low, and (3) the MNC location decision may crucially depend on which instrument is used to attract the MNC.     

Learning from foreign subsidiaries: An empirical investigation of headquarters' benefits from reverse knowledge transfers

Within MNCs, the traditional role of headquarters as prime source of knowledge and competencies is changing. Increasingly, headquarters act as a receiver of knowledge from their internationally dispersed subsidiaries. But what drives the benefits headquarters can gain from such reverse knowledge transfers? Drawing on an empirical sample of 294 intra-MNC knowledge transfers, we identify the key variables impacting on headquarters' ability to benefit from reverse knowledge transfer. Taken collectively, our findings indicate that the efficiency of the MNC as a knowledge integrating institution is being driven by changes in both, the subsidiary's context and its capabilities to process knowledge. We discuss the implications of our analysis on the emerging knowledge based theory of the firm, draw out inferences for the strategic agenda of MNCs and suggest avenues for future research.     

Knowledge outflows from foreign subsidiaries and the tension between knowledge creation and knowledge protection: Evidence from the semiconductor industry

This paper analyzes the MNC subsidiaries’ trade-off between the need for knowledge creation and the need for knowledge protection, and relates it to the extent of knowledge outflows generated within the host location. Combining research in International Business with Social Theory, we build a conceptual framework suggesting that subsidiaries that extensively draw on external knowledge sources are also more likely to generate knowledge outflows to local firms. We argue that this may be explained by the subsidiaries’ willingness to build the trust that facilitates the establishment of reciprocal knowledge linkages. However, when the value of the subsidiary's knowledge stock is very high, the need for knowledge protection restrains reciprocity mechanisms in knowledge exchanges, thus reducing the extent of knowledge outflows to the host location. This study contributes to the literature on the firm-level antecedents of FDI-mediated local knowledge outflows, as well as to the broad IB literature on the relationship between subsidiaries and their host regions. The implications for managers and policy-makers are also discussed.     

The effect of host country Internet infrastructure on foreign expansion of Korean MNCs

This study examines the effect of host country Internet infrastructure on a multinational corporation (MNC) foreign expansion. Using Heckman’s selection model on a sample of 2589 subsidiaries of 487 Korean MNCs between 1990 and 2011, we find that host country Internet infrastructure is important in MNC expansion decisions. In addition, we find that a well-developed Internet infrastructure within a host country leads to more investments from MNCs producing consumer over industrial goods and is more attractive to domestic market followers than market leaders. We find that the host country’s Internet infrastructure is important for an MNC foreign expansion decision, suggesting that efficient communication within an MNC is critical in coordinating globalized MNC subsidiary operations.     

跨国公司分布式创新及其影响因素分析

跨国公司分布式创新是由一家主导性跨国公司发起,选定创新任务,在创新合作伙伴或者内部分支创新机构之间分配创新任务,最后对创新成果进行集成的创新模式。根据集成模式的不同,跨国公司分布式创新可分为模块式分布式创新(并行式)、序列式分布式创新(串行式)以及混合式分布式创新。跨国公司分布式创新的影响因素包括两类,一类是驱动因素,另一类是促进因素。     

Global competition and latecomer production strategies: Samsung of Korea in China

This contribution illustrates how latecomer multinational companies (MNCs) have organized international production activities and maintained their competitive advantage under growing global competition. In doing so, an interdisciplinary approach, including an evolutionary theory of MNCs, global strategic management, and organizational and technological learning, is adopted through the case study of Samsung Electronics as a sample latecomer MNC. Samsung reveals that competition in the electronics industry in China is based on the diferential capabilities of players in the market, and their ability to transfer and improve these capabilities faster than competitors. Latecomer MNCs' foreign subsidiaries are under strong pressure to be actively involved in design and product development activities near to production facilities. In order to gain a sustainable competitive advantage, foreign subsidiaries of latecomer MNCs need to rapidly improve their product innovation capability by combining knowledge transferred from the MNC headquarters and global subsidiaries' networks with information about consumer requirements in the foreign location.     

A transnational perspective on knowledge sharing: lessons learned from IKEA's entry into Russia,China and Japan

When adopting the view of the multinational corporation (MNC) as a transnational corporation, subsidiaries become strategic partners. It is important to recognize that within the MNC knowledge may originate also from subsidiaries and thus flow in different directions. The aim of the article is to understand the role of multiple knowledge flows when international retail firms enter new markets. A qualitative case study of IKEA is reported which focuses on lessons learnt from entering Russia, China and Japan. The discussion centres on forward, reverse and lateral knowledge flows within the IKEA world. Taking a transnational perspective stresses the need to understand multiple knowledge flows in order to secure both differentiation and integration.     

Organizing for knowledge flows within MNCs

This paper conceptualizes the multinational corporation (MNC) as a network of knowledge flows and argues that, within the same MNC, subsidiary strategic roles can be expected to differ in terms of the extent and directionality of knowledge flows between a focal subsidiary and the rest of the corporation. Building on this framework, the paper hypothesizes and empirically tests for systematic associations between a subsidiary's knowledge-flow based strategic role and the systems and processes linking the subsidiary to the rest of the corporation. The empirical data, collected from 359 subsidiaries of major US, Japanese, and European MNCs (i) provide strong support to the notion of differentiated knowledge flow roles as well as differentiated systems and processes within MNCs, and (ii) suggest that innovation by foreign subsidiaries is more typically the result of autonomous initiative by the subsidiaries rather than strategic directives issued from corporate headquarters.     

Performance of foreign direct investment from Singapore

This study was conducted with two broad aims: to assess the performance levels attained by foreign direct investment (FDI) undertaken by Singapore firms and to identify the key determinants of the performance levels attained. We employed a broad set of perceptual measures, as reported by the MNC parent managers, to assess the performance of foreign subsidiaries. The measures included: stability, profitability, overall success, market share and sales growth. We hypothesized that the performance of (FDI) will be influenced by the following factors: mode of entry, cultural distance, relative size of the subsidiary and host government attitudes. Based on an analysis of 128 responses to a survey, we find that Singapore firms’ foreign subsidiaries achieve moderate levels of performance. The data analysis also revealed that FDI performance was positive under the following conditions: the host government attitudes were positive and the subsidiaries were of large size relative to the parent.     

Subsidiary strategy of emerging market multinationals: A home country institutional perspective

We examine the effects of home country institutional factors, namely, home country government support, domestic institutional weaknesses, and state ownership on the subsidiary-level strategy of global integration (I) and local responsiveness (R) of emerging market multinational enterprises (EMNEs). We draw upon the home country institution-based view and the I/R framework to develop our theoretical model. We empirically test our hypotheses using an original new survey data collected from Chinese multinational subsidiary managers supplemented with parent-level and country-level data. We find that home country government support and domestic institutional weaknesses have significant and negative effects on global integration strategy of Chinese multinational subsidiaries. On the other hand, domestic institutional weaknesses push foreign subsidiaries to pursue local responsiveness strategy. Nevertheless, those with greater degree of state ownership in their parent firms are neither willing to disintegrate from their parent firms nor motivated to pursue local responsiveness strategy in order to deal with home country institutional deficiencies and develop new sources of competitiveness in foreign markets. Our findings have advanced the literature on subsidiary strategy in the context of EMNEs, and provide important implications for subsidiary managers and policy makers.     

The endogenous role of location choice in product innovations

The location choice of product innovations is a prevalent phenomenon one that has received little attention in the literature. This study examines the ways in which comparative industry environment, technology and product characteristics, and entry timing affect the firm's location choice of new product development activities between headquarters and foreign subsidiaries and the implications of location choice for performance. Our findings indicate that: (1) firms are more likely to locate their new product development activities at foreign subsidiaries in mainland China than at headquarters in Taiwan when the industry environment at foreign subsidiaries is more favorable, when technologies and products are more mature, and when the entry to mainland China's market is earlier than that of its competitors; (2) in general, firms locating their new product development activities at headquarters in Taiwan perform better than firms locating their new product development activities at foreign subsidiaries in mainland China after controlling for endogeneity bias; (3) firms locating their new product development activities at headquarters (at foreign subsidiaries) perform better than if they had located their new product development activities at foreign subsidiaries (at headquarters). Managerial implications and future research directions are discussed.