Sustaining competence creation in the multinational enterprise: The role of piloting in subsidiaries

While competence-creating subsidiaries have been widely acknowledged as a source of new capabilities for the multinational enterprise (MNE), less is known about how such subsidiaries continually renew their capabilities to sustain their competence-creating role over time. In this paper, we bring together theories of capability lifecycles and subsidiary capability to explore multiple case studies of competence-creating subsidiaries in the information and communications technologies (ICT) sector. We find that to sustain their competence creation over time, subsidiaries engage in what we call piloting: a fast-moving cycle of practices recognising opportunities and trends, innovating competences in response, and surrendering those competences that are expected to become ‘commoditised’ and obsolete to enable subsidiary repositioning and renewal. Our main contribution is to advance theory on competence-creating subsidiaries by revealing piloting as a mechanism for MNE strategic renewal. We also build on theories of subsidiary evolution by identifying how subsidiaries voluntarily surrender commoditising activities to allow resource flexibility for competence creation.