Innovation capabilities for global R&D projects in subsidiaries

Abstract

Purpose Is the development of local innovation capabilities enough for foreign subsidiaries in emerging markets to be able to integrate into global R&D projects? The authors argue that it is not. The purpose of this paper is to show the central role of R&D capacities when it comes to inserting foreign subsidiaries in emerging markets into global R&D projects. Design/methodology/approach The study investigated 131 foreign multinational subsidiaries operating in Brazil. For each subsidiary, the authors surveyed two to five directors or C-level executives from innovation, R&D, engineering, product development and projects. the authors used structural equation modeling for analysis. Findings The results indicate that product and process innovations alone do not guarantee the insertion of the emerging market subsidiaries into global innovation projects. Such insertion depends on the subsidiary’s accumulation of R&D capacities. Practical implications The results reinforce the central issue of building product and process innovation capabilities as the first step toward a blueprint for global projects. However, the effort is not limited to these initiatives. Product and process innovation efforts need be reverted in headquarters’ eyes in order for subsidiaries to gain R&D center status. To achieve this, subsidiaries must align their technological innovations with multinational corporations’ innovation strategies. Originality/value In authors’ view, this study contributes to the literature in three main areas: the evolutionary process of innovation capability in subsidiaries, the reverse innovation debate and the discussion of subsidiaries’ initiatives.

The roles of external embeddedness and institutional distance in the subsidiary product/process innovation and R&D capacity

“…Second, concerning the Brazilian institutional environment, the instability of the Brazilian business environment is viewed as an experimental laboratory for training executives of multinational companies to assume future management positions at their respective headquarters (Ibusuki et al, 2015). The high volatility and legal insecurity of the institutional environmentassociated with resource constraints and the institutional distance from headquartersseem to induce foreign subsidiaries to explore internal/in-house and local/ out-of-house sources of knowledge to develop innovation (Tarraço et al, 2019;Isaac et al, 2019). A large number of foreign subsidiaries with innovative projects and global products develop their technological capabilities exploring opportunities, resources and restrictions driven by the institutional distance from the headquarters (Verbeke et al, 2017).…”

“…It is not clear how a transformation of subsidiary innovation capacity from routine to advanced R&D occurs, particularly when the subsidiary faces a host environment that is significantly different from its home country. With a few exceptions (Duan et al, 2020), studies on the accumulation of technological capacities within subsidiaries have ignored the issue of institutional distance as a contingent factor in this evolutionary process (Isaac et al, 2019;Tarraço et al, 2019;Figueiredo, 2014). It can be argued that the greater the institutional distance between the headquarters and the subsidiary, the more difficult it is to accumulate or transform technology capacity from the basic to the advanced level.…”

Evaluation of innovation activities and innovation management model of selected innovative companies

“…One approach is the "New game strategy," which it describes as a set of new activities that create or add value to the customer, in particular by reworking the events carried out within the value chain [13]. It is also emphasized that companies can now benefit from experience from external suppliers and an external knowledge base [14][15][16][17]. They recommend implementing an open innovation strategy.…”

A closer look at determinants of organizational capability to innovate (OCI)

“…Organizational capability to innovate (OCI) is considered as one of the key drivers of organizational performance and is, today more than ever, a valuable asset in maintaining a competitive advantage in an unstable environment (Calantone et al , 2002; Crossan and Apaydin, 2010; Mone et al , 1998; Shahzad et al , 2017). Scholars and practitioners have become increasingly interested in OCI, since the rise of more complex innovation, the context of fast-changing economies, the rapidly unfolding industry disruption make a major need for organizations to have capabilities that allow them to be adaptive and innovative (De Martino and Magnotti, 2018; Tarraço et al , 2019). Despite its central role in the sustainability of organizational survival and the increasing attention towards this critical capability, few studies have attempted to identify the main levers of OCI (e.g.…”