The innovation performance of MNE subsidiaries and local embeddedness: evidence from an emerging economy |
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Authors: | Paulo N Figueiredo Klauber Brito |
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Institution: | (1) Brazilian School of Public and Business Administration (EBAPE), Getulio Vargas Foundation (FGV), Rio de Janeiro, Brazil |
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Abstract: | We examine the innovation performance of MNE subsidiaries and their embeddedness in sources of local knowledge in a policy
framework within the context of an emerging economy. Based on first-hand evidence from multiple case studies, we found that:
(1) there was variability between the subsidiaries in terms of the cumulative manner and speed at which they improved their
innovation performance over time, using progressively levels of accumulated capability as a proxy; (2) these differences in
innovation performance improvement reflected heterogeneity between the subsidiaries in terms of the learning efforts made to acquire knowledge from local organizations; (3) the varied frequency in which the subsidiaries developed such local
relationships reflects their differing responses to a common industrial policy that makes use of tax incentives to stimulate
such links. The paper reveals the limitations of this conventional type of industrial policy in stimulating industrial development
and the embeddedness of MNEs. It also suggests that a new direction for policy, which incorporates public–private negotiations
and a focus on the firm-centred building of innovation capabilities, should be pursued in order to accelerate the innovation
performance progress of latecomer firms. |
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Keywords: | |
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