A microfoundations approach to studying innovation in multinational subsidiaries

Abstract

Research Summary: We study antecedents of innovation performance for the subsidiaries of multinational enterprises (MNEs) using the microfoundations approach. Based on the upper echelon perspective, we argue that managers’ characteristics, such as prior MNE work experience and industry experience, affect subsidiary innovation. We tested our hypotheses on a sample of 228 MNE subsidiaries from 11 countries. Results indicate that managers’ industry experience serves as an external boundary‐spanning capability and, therefore, it has a greater effect on autonomous subsidiaries. In contrast, managers’ prior MNE work experience functions as an internal boundary‐spanning capability and, therefore, it has a smaller effect on subsidiaries that are less autonomous or engage in R&D. Managerial Summary: The success of an MNE now increasingly depends on its ability to generate knowledge anywhere in the world. Thus, the ability of foreign subsidiaries to generate innovation plays an increasingly important role in enhancing the performance of MNEs. In this regard, what factors determine the innovativeness of foreign subsidiaries is an important question for managers. Our study suggests that the international experience of the top management team (TMT) of a subsidiary and its CEO’s industry experience positively affect subsidiary innovation. Furthermore, the TMT’s international experience has a greater effect on the innovativeness of subsidiaries that remain dependent on their headquarters for knowledge transfer. In contrast, the CEO’s industry experience has a greater effect on the innovativeness of autonomous subsidiaries.

Subsidiary staffing, cultural friction, and subsidiary performance: Evidence from Korean subsidiaries in 63 countries

“…More research is needed to understand how the interaction between governance modes and staffing composition affects other subsidiary level outcomes. However, there is a clear need to minimize conflicts and enhance knowledge transfer (Nuruzzaman, Gaur, & Sambharya, ), facilitate interorganizational learning, and develop interpersonal trust to achieve synergistic goals. Our findings suggest the deployment of PCNs in JVs may further aggravate the cultural differences in managing international JVs.…”

Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda

“…At the level of individuals, top management team heterogeneity (Mu et al, 2007), along with industry and firm-specific experience of individual subsidiary managers, enhances subsidiary innovation, especially in highly autonomous subsidiaries (Nuruzzaman, Gaur, & Sambharya, 2019). Moreover, international experience and intra-firm mobility enhance innovation, as shown in studies of R&D personnel (Li, Wang, & Liu, 2013) and inventors (Choudhury, 2017).…”

“…For example, metacognitive and cognitive cultural intelligence held by expatriates are likely to enhance their innovativeness and hence their contribution to subsidiary knowledge creation (Lorenz, Ramsey & Richey, 2018). A microfoundations process perspective on expatriate managers that incorporates for example expatriate attitudes, specific capabilities, and actions, is likely to generate new insights on the drivers of subsidiary-level outcomes (e.g., Nuruzzaman et al, 2019).…”

Home country supportiveness/unfavorableness and outward foreign direct investment from China

“…through connections with foreign firms in domestic markets (Gu & Lu, 2011). They often engage with developed market MNCs in joint ventures, licensing, co-production, and other cooperative arrangements in their home markets (Welch & Luostarinen, 1993;Zhou, Wu, & Luo, 2007); MNCs engage with local firms to exploit the cost-factor differentials offered by emerging markets (Nuruzzaman, Gaur, & Sambharya, 2017). Local firms benefit from such arrangements by receiving regular sources of revenue, and sometimes even technology, to improve their production processes (Mathews & Zander, 2007).…”