The advantage of foreignness in innovation

Abstract

I argue that subsidiaries of foreign multinational enterprises (MNEs) enjoy an advantage of foreignness in innovation, that is, they are more innovative than domestic firms. To explain this, I present the subsidy and the incentive arguments. The subsidy argument proposes that subsidiaries are subsidized in their innovation effort by the MNE, which results in subsidiaries having more innovations than domestic firms, because they belong to a foreign MNE. The incentive argument posits that subsidiaries are subject to two sets of unique and converging pressures, one at the MNE level in the corporate factor market and another at the host country level in the consumer market. These pressures drive subsidiaries to become more successful at transforming their research and development investments into innovations. Copyright © 2011 John Wiley & Sons, Ltd.

Institutional Outsiders and Insiders: The Response of Foreign and Domestic Inventors to the Quality of Intellectual Property Rights Protection

“…Foreign and domestic firms differ markedly in their innovation strategies (Un, 2011;Un and Cuervo-Cazurra, 2008). Foreign and domestic firms differ markedly in their innovation strategies (Un, 2011;Un and Cuervo-Cazurra, 2008).…”

Role of Dynamic Capabilities in Innovation Output of High‐Technology Firms

“…Finally, the interaction effect variables were entered. The improvement in the model chi‐square values, as well as the individual significance of the interaction term, was measured to analyze the effect of moderation (Ang, ; Chung and Yeaple, ; Rothaermel and Backer, 2008; Un, ).…”

“…Research has identified a time lag of two years between the time of sensing the stimulus in the environment and innovation output (Ernst, ; Kolaskar et al ., ; Miller and del Carmen, ). To take into account the time lag encountered between the stimulus created from change in technological intensity and innovation by the firm, the variables were measured at different time frames (Ernst, ; Ahuja et al ., ; Ethiraj, ; Kolaskar et al ., ; Puranam and Srikanth, ; Durand et al ., ; Miller and del Carmen, ; Makri et al ., ; Soh, ; Kostopoulos et al ., ; Lee et al ., ; Un, ).…”

“…In case of moderation and mediation analysis, where research and development center and research and development intensity were the dependent variables, the model was tested using GLM ordinal logistic regression and GLM gamma log, respectively. For all other dependent variables, where the variable was count data, GLM negative binomial regression was used (Penner‐Hahn and Shaver, ; Phene et al ., 2006; Ang, ; Chung and Yeaple, ; Keil et al ., 2008; Adegbesan and Higgins, ; Clarkson and Toh, 2010; Salomon and Jin, ; Soh, ; Un, ). The data was analyzed with the help of SPSS software's GLM analysis techniques.…”

“…Exposure to the developed markets is also an important source of technologically advanced knowledge, as it enables the firm to test and develop product platforms before they are actually launched in the emerging markets by competing developed‐market firms (Guan et al ., ; Hermelo and Vassolo, ; Salomon and Jin, ; Mihalache et al ., ). The knowledge regarding technologies, capital assets, scientific inventions, and product developments obtained from the developed markets enables a firm to combine this knowledge with the existing knowledge to innovate (Chung and Yeaple, ; Greve, ; Salomon and Jin, ; Un, ).

Hypothesis 7: Firms which possess absorptive capacity are better able to utilize their innovation capability to generate innovation output .

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