Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities
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Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities Anupama Phene1 and Paul Almeida2 1 David Eccles School of Business, University of Utah, Salt Lake City, USA; 2McDonough School of Business, Georgetown University, Washington DC, USA
Correspondence: A Phene, David Eccles School of Business, University of Utah, 1645 East Campus Center Drive, Salt Lake City, UT 84112, USA. Tel: þ 1 801 587 9055; Fax: þ 1 801 585 5966; E-mail: [email protected]
Abstract Subsidiaries of multinational firms play an important role in the globalization of innovation, yet we have an incomplete idea of the influences on their innovative activity. Drawing on prior research in international business and strategy, we identify two sets of factors that influence the absorption and utilization of knowledge in multinational corporation subsidiaries: (a) the range of external and internal knowledge sources available; and (b) the subsidiary capabilities associated with knowledge absorption and utilization. We find that knowledge absorbed from the host country is useful to subsidiary innovation. We also find support for the role of subsidiary capabilities: both sourcing capability and combinative capability have a significant influence on the scale and quality of innovation. Journal of International Business Studies (2008) 39, 901–919. doi:10.1057/palgrave.jibs.8400383 Keywords: knowledge; capabilities; multinationals; subsidiaries; innovation
Received: 14 February 2005 Revised: 18 July 2007 Accepted: 25 September 2007 Online publication date: 3 April 2008
INTRODUCTION A common focus of research in the field of international business has been the globalization of firms across a wide spectrum of industries, and the strategies adopted by these firms to create a global competitive advantage. One aspect of these strategies involves the globalization of the innovative activities of multinational corporations (MNCs), particularly in high-technology industries (Almeida & Phene, 2004; Frost & Zhou, 2005). After all, a popular perspective of the MNC is that of a globally distributed innovation network, with its success linked to the capacity to assimilate, generate, and integrate knowledge on a worldwide basis (Bartlett & Ghoshal, 1989; Hedlund, 1994). While there has been significant work on knowledge integration within the MNC (Ghoshal, Korine, & Szulanski, 1994; Gupta & Govindrajan, 2000), and in spite of recent contributions to the role played by subsidiaries in MNC innovation (Kotabe, Dunlap-Hinkler, Parente, & Mishra, 2007; Rugman & Verbeke, 2001), the ability of the MNC (and its subsidiaries) to assimilate external knowledge and use it for innovation is incompletely understood. This understanding is important, as recent research suggests that subsidiaries are playing an increasingly important role in MNC innovation (Venaik,
Innovation in multinational subsidiaries
Anupama Phene and Paul Almeida
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