Headquarter Services in the Global Integration of Production

This study examines knowledge management within multinational enterprises (MNEs) by analyzing whether greater interdependence of production between U.S. parent firms and their foreign subsidiaries increases the provision of headquarter (HQ) services from the home country. The findings suggest that U.S. parents provide more assistance to their foreign subsidiaries that are linked in a global value chain than to those that are not involved in production sharing. This study builds on the earlier studies of the relationship between intra-MNE product flows and knowledge flows in multiple ways. First, it separately examines the relationship for high-tech and low-tech manufacturing industries, and finds that knowledge services from HQ that could be combined with knowledge of the subsidiary, such as R&D services, are primarily associated with production sharing with subsidiaries in high-tech manufacturing industries, which are assumed to be more technologically capable. Likewise, it finds that knowledge services from HQ that might be considered to be more passively received from the parent, such as industrial-type maintenance and design, are primarily associated with subsidiaries in low-tech manufacturing industries, which are assumed to be less technologically capable. Second, this study is the first one, to our knowledge, that gauges intra-firm knowledge flows using dollar-denominated measures of HQ services provided by parents to their subsidiaries.     

How can MNEs benefit from internationalizing their R&D across countries with both weak and strong IPR protection?

Although MNEs internationalize their R&D not only in developed countries but also in emerging economies that typically feature weak protection of intellectual property rights (IPR), it remains unclear how this strategic decision affects their productivity performance. This limitation has resulted in a rather incomplete understanding of why some MNEs become more productive through R&D internationalization while others do not. This study develops a new explanation, suggesting that R&D internationalization does not affect the productivity of all MNEs equally because of differences in the idiosyncratic way in which MNEs geographically distribute their R&D units across weak and strong IPR protection countries. In advancing this explanation, the study challenges the view that weak IPR protection is disadvantageous for MNEs by showing that (and specifying how) it: 1) increases the efficacy of MNEs' internal R&D, 2) strengthens the advantages of accessing globally dispersed knowledge, and (3) improves MNEs' ability to exploit cross-country differences in IPR protection. The study enhances understanding of the complex role of IPR protection, shifts scholarly attention from the degree of R&D internationalization to how MNEs should internationalize their R&D, and clarifies how the IPR context of their location choices matters.     

Local and Global Knowledge Complementarity: R&D Collaborations and Innovation of Foreign and Domestic Firms

We analyze how research and development (R&D) collaborations affect product innovation for subsidiaries of foreign multinational firms and domestic firms. We build on the knowledge-based view to propose that subsidiaries and domestic firms differ in their ability to benefit from alternative R&D partners as a result of the variation in their knowledge complementarities. Specifically, we propose that subsidiaries may benefit more from undertaking R&D collaborations with customers and competitors, whose deeper knowledge of local conditions better complements the more global knowledge base of subsidiaries. In contrast, we argue that domestic firms may benefit more from engaging in R&D collaborations with suppliers and universities, whose more global nature of knowledge better complement the deeper local knowledge base of domestic firms.     

How MNE subsidiaries transfer HRM practices in distant environments: A tale of two IKEA subsidiaries

While most research in the international business field focuses on the impact of the national institutional environment on multinational enterprises (MNEs), this paper explores the opposite relationship—the role and impact of MNE subsidiaries on the host country institutional environment. I analyze the subsidiaries' agency in the transfer activities of human resource management (HRM) practices by bringing the case of IKEA subsidiaries in Korea and Japan and find that these subsidiaries not only adapted to pressures arising from an institutional distance but also played an important role in influencing the institutional arrangement for employment system of their host countries. With a contextualized agency model, this study finds that institutional and organizational contexts that these subsidiaries are embedded in shaped their agencies and strategic responses and co-evolved with their host institutional environments while transferring HRM practices. These findings have implications for the IB and IHRM field, as they highlight the potential of MNE subsidiaries as agents.     

Subsidiary power,cultural intelligence and interpersonal knowledge transfer between subsidiaries within the multinational enterprise

We propose that individual-level knowledge transfer between subsidiaries within a multinational enterprise depends on the perceived relative power of the subsidiary and the cultural intelligence of individuals. Using a sample of 333 research and development (R&D) subsidiary employees of foreign Multinational Enterprises (MNEs) in India, we find that the perceived subsidiary power has a direct positive significant effect on knowledge sharing, and an indirect significant effect, through organizational identification, on knowledge seeking. Further, cultural intelligence moderates the effect of organizational identification on knowledge seeking, and the indirect effect of the perceived subsidiary power on it. The findings highlight the role of organizational identification and cultural intelligence in explaining the impact of the perceived subsidiary power on interpersonal knowledge transfer within the MNE.     

Institutions and the Diversity and Prevalence of Multinationals’ Knowledge‐Augmenting Subsidiaries

Multinational corporations (MNCs) increasingly seek to gain access to, and exploit, locationally specific sources of advanced knowledge and technological capabilities, creating a need to explain (1) the diversity among these facilities and (2) how institutions influence MNCs’ abilities to invest in different subsidiary types. Extending debates on firms’ knowledge‐augmenting activities, the authors integrate institutions into their analytical framework to a greater extent than previous work has done. Moreover, existing contributions provide typologies of R&D subsidiaries. In contrast, the authors focus on a particular subset of subsidiaries, knowledge‐augmenting ones, and put forward a theory to explain their variety and their prevalence, enabling them to identify previously neglected subsidiary types that have important managerial and policy implications. By downplaying the diversity of these subsidiaries, existing work has not been able to capture the full range of managerial challenges as well as the costs and benefits of different subsidiary types to host countries. The authors, therefore, problematize firms’ abilities to gain access to foreign knowledge‐generating assets, highlight the importance of institutional environments, provide policy recommendations and identify areas for future research.     

R&D internationalization,product diversification and international performance for emerging market enterprises: An empirical study on Chinese enterprises

One motivation behind R&D internationalization for emerging market multinationals (EM MNEs) is to expand international markets. This paper analyzes whether the R&D internationalization of EM MNEs contributes to an improvement in international performance measured by foreign sales as a percentage of total sales (FSTS). Using panel data on China's listed companies, this paper introduces more scientific and normative indicators for measuring R&D internationalization in terms of geographic distribution (breadth) and overseas investment (depth). The results reveal an inverted U-shape relationship between R&D internationalization and international performance that is initially positive and eventually becomes negative. Product diversification has a significant moderating effect on the relationship between R&D internationalization breadth and international performance.     

Where Do We Go from Here?: Globalizing Subsidiaries Moving Up the Value Chain

This paper studies the international expansion of local subsidiaries of multinational enterprises (MNEs). The main questions asked are why and how MNEs' local subsidiaries in developing economies undertake international expansion. Drawing from the global value chain (GVC) perspective, I argue that local subsidiaries that were initially established to undertake production activities for export-oriented industries do not want to remain at the lowest-value-added position forever. They therefore undertake initiatives to get out of that position. The literature on initiative-taking subsidiary has predominantly focused on them becoming centers of excellence via R&D and innovation in the host country. I propose a different route of local subsidiary upgrading via foreign direct investment in more advanced countries. This strategy helps not only to gain internal prominence within the MNE network, but also to improve its external position within the GVC vis-à-vis the lead firms. The paper uses an in-depth case study of a Thai subsidiary of a Taiwanese electronic MNE to explore the transformation of the subsidiary from simply manufacturing for exports to becoming a strategic international expansion arm for the parent MNE.     

Equity sharing in international joint ventures: an empirical analysis of strategic and environmental determinants

Equity sharing in international joint ventures (IJVs) is a critical issue with implications for risk sharing, resource allocation, knowledge commitment, and organizational control. As a departure from previous research, this study aims to explore strategic antecedents and environmental dimensions underlying sharing arrangements. It argues that the structure of equity sharing controls the ex post degree of economic exposure or risk propensity, and boosts risk-adjusted returns earned from strategic resources or global integration. Analysis of data collected from IJVs in China suggests that strategic orientation, resource dependence, knowledge protection, and global integration as sought by MNEs are important antecedents of equity sharing. Equity sharing is an inverse function of host-country environmental complexity and hostility as perceived by MNE managers.     

The Determinants of Foreign Multinational Enterprise Firms' Board Governance in Caribbean Offshore Island Economies

Using a unique sample of 171 listed firms in the Caribbean region, this paper explores the influence of post-entry ownership of foreign MNEs on the board composition of subsidiaries. Our findings reveal higher ownership is a means of enhancing the security of property rights while simultaneously creating a liability of foreignness. This causes subsidiaries to externally contract for resources, leading to the hiring of more lawyers and fewer accountants. The opposite is true for progressively lower levels of foreign MNE ownership. Firms' adoption of shareholder rights governance amplifies these findings, while state formal institutional quality reverses them.     

Institutional voids and firms' resource commitment in emerging markets: A review and future research agenda

The impact of institutional environments on firms' strategic decisions has been examined in strategy and international business literature. Yet, the current state of knowledge about how institutional voids affect firms' resource commitment in emerging markets is equivocal. This paper reviews and develops an integrative framework that maps the key conceptualizations, theoretical frames, mechanisms, contingencies and outcomes in the institutional voids – resource commitment literature. Altogether, this paper structures institutional voids and resource commitment research into salient themes to help scholars scope the field and explore value-adding avenues to further our understanding of internationalization and resource commitment decisions in emerging markets.     

Towards a re-conceptualization of firm internationalization: Heterogeneous process,subsidiary roles and knowledge flow

This paper proposes a re-conceptualization of firm internationalization to understand and predict the rapid global expansion of firms since the 1990s, especially those from emerging markets. First, based on a review of existing literature, we re-conceptualize firm internationalization as a heterogeneous process of strategic development of subsidiaries in overseas countries or regions. This re-conceptualization captures the pluralistic character of the process of firm internationalization.Second, we delineate peculiar roles played by subsidiaries in pursuit of multinational enterprise (MNE) headquarters' internationalization strategies. We argue that the HQ's heterogeneous strategies toward overseas subsidiary development define the corresponding roles of subsidiaries, which in turn shape the knowledge-flow patterns within the MNEs. Finally, we link firms' internationalization strategies with different subsidiary roles to generate hypotheses concerning the effect of such links on subsidiary performance. We argue that the proper alignment of HQ's internationalization strategies with subsidiary roles will lead to success of the overseas subsidiaries; by contrast, a mismatch will lead to subsidiary failure. The paper thus contributes to the field of firm internationalization by linking its new conceptualization with the literature on subsidiary roles and knowledge flows in MNEs.     

Intra- and inter-regional diversification,subsidiary value chain activities and expatriate utilization

Although it is well established in the current staffing literature that why and how multinational enterprises (MNEs) allocate more or fewer expatriates in some subsidiaries than others, little is known about why and how some MNEs utilize more or fewer expatriates than other MNEs. This paper builds on regionalization theory to argue that intra- and inter-regional diversification has to do with the overall use of expatriates in MNEs. An empirical investigation of Korean MNEs demonstrates that the degree of intra- and inter-regional diversification has significant impacts on the level of expatriate utilization by MNEs. The results also reveal an interesting moderating influence of subsidiary value chain activities. MNEs tend to vigorously adjust their use of expatriates in downstream subsidiaries depending on the degree of intra- and inter-regional diversification. However, they do not adjust their use of expatriates in manufacturing subsidiaries upon the degree of international diversification. Overall, this study extends our understanding of how MNEs manage a geographically dispersed organization in a semi-globalized world.     

The international training of expatriates in Western subsidiaries of emerging multinational enterprises: A knowledge-based perspective

There is a considerable gap in academic theoretical literature about the international training of expatriates in multinational enterprises (MNEs). While the majority of research has focused on developed (Western) multinationals operating in developing countries, very limited research has been conducted on emerging multinational enterprises (EMNEs) operating in developed countries and the expatriates who work in them. In this study, we explore the international training of expatriates in Indian MNEs from the information technology industry operating in Australia to examine how they provide training to their expatriate staff who are sent on international assignments. We collected qualitative data in the form of multiple case studies via interviews with senior executives based in the Australian subsidiaries. Our findings reveal that Indian IT MNEs provide a variety of centralised training programmes for their managerial and technical expatriates and use training as a key instrument to leverage and transfer home country knowledge to their Australian subsidiaries. We also found that each stakeholder involved in the training process plays a distinct role in the knowledge transfer process, which allows Indian EMNEs to integrate the training with their people-centred business model to deliver IT services in host countries.     

The antecedents of new R&D collaborations with different partner types: On the dynamics of past R&D collaboration and innovative performance

We examine firms' propensity to adapt their R&D collaboration portfolio by establishing new types of R&D collaboration with different kinds of partners (suppliers, customers, competitors and universities & public research institutions). We argue that existing R&D collaboration with one of the two value chain partners (suppliers or customers) is associated with the formation of new R&D collaboration with the other value chain partner to ensure temporal alignment in innovation within the value chain. In contrast, issues related to governance and unintended knowledge spillovers suggest that ‘horizontal’ R&D collaboration with competitors only spurs R&D collaboration with other partner types if such competitor R&D collaboration has been discontinued earlier (‘delayed temporal alignment’). We posit that persistent prior R&D collaboration with institutional partners is an antecedent to the establishment of new R&D collaboration with industrial partners, and that discontinuation of a particular type of R&D collaboration is likely to lead to a restart of such R&D collaborative effort. Strong prior innovative performance is expected to increase the probability that firms establish R&D collaborations with new partner types, except for R&D collaboration with competitors, since the most innovative firms may fear leakage of proprietary knowledge to rivals. We find broad support for these predictions in a large panel of Spanish innovating firms (2004–2011). Our findings highlight that it is not just the configuration of R&D collaborations with existing partner types that predicts tie formation with new partner types, but also the intertemporal pattern of prior R&D collaboration and managerial discretion provided by past innovation success.     

Frontiers of research in international business

Multinational enterprises (MNEs) are networked firms whose subsidiaries act as nodes embedded in a variety of local contexts. This allows them to tap into many local systems of innovation to access diverse knowledge bases and integrate them to create new competencies. Currently technology is altering our conception of space and forcing us to recognize that it is a multi-dimensional concept, incorporating geographic space, technological space and personal network space. At the corporate level, MNE managers need to understand comparative strategic management, constantly looking for arbitrage opportunities that arise due to differences in resources, capabilities and institutions across the local contexts. At the functional level, in order for the MNE to integrate knowledge from diverse geographic locations, managers must recognize that valuable knowledge resides in invisible communities of practice where narrow technological specializations, personal connections and information sharing are critical means of access.     

Impacts of institutional pressures and the strength of market supporting institutions in the host country on the ownership strategy of multinational enterprises: theoretical discussion and propositions

The ownership strategy of multinational enterprises (MNEs) i.e. the choice between wholly owned subsidiary (WOS) or international joint venture (IJV) is an extensively studied topic in international business studies. Many past studies concentrated on transactional, economic, location attraction, resource seeking and learning rationales for the ownership strategy of MNEs. However, it is important to note that MNEs enter a new institutional environment also when they enter new international markets. Therefore, the ownership strategy of MNEs is also influenced by the external as well as internal institutions. This paper attempts to address the impacts of different institutional pressures on ownership strategy of MNEs using the arguments from institutional theory. The paper also includes discussion about the strength of market supporting institutions in the host country and its impacts on the ownership strategy of MNEs. On the basis of the theoretical discussion, several propositions are developed in this paper. These propositions relate the ownership strategy of MNEs with the impacts of internal and external institutional pressures on it. It is also proposed to consider the impact of strength of market supporting institutions in the host country on the ownership strategy specifically. When the host country has well developed institutions supporting market conforming values, they can moderate the impacts of coercive and normative pressures from external institutions on the MNEs.     

R&D alliance portfolio and innovation in an emerging market: The role of business group affiliation and institutional reforms

The role of institutional factors in shaping the outcomes of research and development (R&D) alliance portfolios (APs) is underexplored in the extant literature. This study examines how institutional contingencies in an emerging market context affect the relationship between R&D AP composition (i.e., size and diversity) and firm innovation performance. This study draws on institutional perspective to suggest that business group affiliation (BGA) and institutional reforms positively moderate the relationship between R&D AP composition and innovation performance. A longitudinal empirical investigation conducted on a sample of 185 firms from Indian high-tech sectors, for the period 2003–2015, broadly supports our arguments. This study contributes to the AP and emerging markets literature by highlighting the effects of institutional contingencies of emerging markets on the outcomes of R&D APs.     

Contextual influences on international subsidiaries' product technology strategy

We seek to test a broad range of factors that influence the technology sourcing decision of international subsidiaries in acquiring product technology from outside the firm (i.e., outsourcing) versus internal development. A regression model, used to analyze data from 187 international subsidiaries in six industries and with parents based in 14 countries, identifies the environmental, strategic, configurational, and resource endowment factors that influence the technology sourcing decision. Specifically, the level of product dynamism in the subsidiary's industry and the distance between the subsidiary's primary marketing and R&D operations are associated with a greater reliance on outsourcing. A differentiation goal, a low-cost goal, along with the level of the subsidiary's human and financial resources are associated with a greater reliance on internal development.     

Network Embeddedness in Exploration and Exploitation of Joint R&D Projects: A Structural Approach

This paper analyses how network embeddedness affects the exploration and exploitation of R&D project performance. By developing joint projects, partners and projects are linked to one another and form a network that generates social capital. We examine how the location, which determines the access to information and knowledge within a network of relationships, affects the performance of projects. We consider this question in the setup of exploration and exploitation projects, using a database built from an EU framework. We find that each of the structural embeddedness dimensions (degree, betweenness and eigenvector centrality) have a different impact on the exploration and exploitation project performance. Our empirical analysis extends to project management literature and social capital theory, by including the effect that the acquisition of external knowledge has on the performance of the project.