MNE Subsidiaries’ Outsourcing and InSourcing of R&D: The Role of Local Institutions

Abstract

Plain language summary The rules for business vary not only between countries, but within countries. Subsidiaries of multinational enterprises (MNEs), thus, have to consider both the national level and the local context when designing their business practices. To examine this impact, we study R&D outsourcing in four Eastern member states of the European Union and find that local R&D outsourcing is used more frequently where local institutions are strong. However, this local impact depends on the MNE's overall knowledge sourcing practice and is weaker when MNE subsidiaries’ knowledge management prioritizes external sources of knowledge. Technical summary Multinational enterprises (MNEs) face multiple institutional contexts across and within countries. We analyze subnational institutions in the local environment of MNE subsidiaries to investigate their impact on subsidiaries’ knowledge sourcing‐strategies. Drawing on institutional and transaction cost economics, we argue that the degree of local R&D outsourcing is greater in high quality subnational institutional contexts. However, the quality of local institutions has less impact on the degree of R&D outsourcing by subsidiaries that are more open to external knowledge. These subsidiaries are more experienced in collaborating with external partners and, thus, have developed internal mechanisms to protect their intellectual property even in low quality institutional contexts. We test our arguments on a survey of MNE subsidiaries in four Eastern member states of the European Union. Copyright © 2016 Strategic Management Society.

Innovation Collaborations of Firms: the Case of Hungarian Multinational Companies

“…Interestingly, funding was not a factor that influenced subsidiaries' collaborations within the enterprise group. Our results substantiates similar studies by [39,48].…”

Location, collocation and innovation by multinational enterprises: a research agenda

“…Embeddedness in multiple local contexts creates opportunities, but also raises challenges, particularly in terms of stressing the bandwidth of managers who must handle the increasingly technological and institutional complexity (Meyer, Mudambi, and Narula 2011;Santangelo, Meyer, and Jindra 2016). Therefore, on the one hand, multinationals may wish to collocate with unaffiliated firms (e.g.…”

Estratégias de offshoring em empresas multinacionais

“…A principal contribuição acadêmica da tese é a aproximação da discussão do offshoring de atividades de inovação (Lewin et al, 2009;Santangelo et al, 2016) e dual embeddedness (Meyer et al, 2011) mostrando que, o offshoring outsourcing se configura como uma resposta para as pressões divergentes do dual embeddedness e o captive offshoring outsourcing decorre do captive offshoring que é efeito de situações de dual embeddedness das subsidiárias. De maneira mais ampla, os resultados contribuem para as pesquisas que procuram entender melhor a questão do embeddedness nas multinacionais (Athreye, Batsakis, & Singh, 2016;Ferraris, 2014), assim como, mostra como as estratégias de offshoring nos ajudam entender melhor as configurações de empresas multinacionais (Doh, 2005;Doz & Wilson, 2012) perante um cenário de maior conectividade do conhecimento global (Cano-Kollmann, Cantwell, Hannigan, Mudambi, & Song, 2016).…”

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