The evolution of MNCs' R&D foreign units: the case of Swedish MNCs in India

Abstract

PurposeThe article aims to explain how the drivers of subsidiary evolution influence a multinational company's (MNC) research and development (R&D) subsidiary's evolution over time.Design/methodology/approachThe article draws on insights from a longitudinal comparative case study of three Swedish MNCs' Indian R&D units.FindingsThe study shows that the evolution of R&D units is a triangular showdown among headquarter assignments, local market constraints, and opportunities, and that subsidiary choice is an important driver of both mandated extension and stagnation. We summarize our findings in various propositions that emphasize different drivers over time and that highlight the strong impact of a subsidiary's understanding of the corporate immune system on the evolution of that subsidiary's R&D mandate.Research limitations/implicationsDrawing on the common limitations of a case study approach, further research is needed to test the suggested propositions with larger samples, ideally with subsidiaries in other emerging and developed markets.Practical implicationsThe study illustrates the risks involved for subsidiary managers when pushing an R&D mandate-related initiative too far and provoking the corporate immune system. For headquarters management, the study highlights the importance of understanding that the development of R&D competence and capability at a subsidiary cannot be guided solely by headquarter assignments and local market characteristics; rather, the subsidiary's initiatives also need to be considered.Originality/valueThe study contributes to the literature on R&D internationalization by showing how the drivers of subsidiary evolution influence a subsidiary's R&D mandates over time and that subsidiary choice is an important driver of both mandated extension and stagnation.

Building R&D capability in subsidiaries – conceptualization of a process perspective

“…Gathering support and resources is, further, not a onetime decision, but rather an ongoing negotiation process between the subsidiary and headquarters. In the third phase, we underlined that the efforts are concentrated towards acquiring the necessary resources to build R&D capability, most importantly, personnel possessing the relevant knowledge and skills (Awate et al, 2015;Schweizer et al, 2016). These human resources are often scarce and demand further development (accumulation).…”

“…To give an example accentuating the importance of the subsidiary manager, when Volvo Buses headquarters made the decision in 2009 to support the R&D activities necessary for developing a bus for the Asian markets at the subsidiary in Bangalore, India, it was the subsidiary manager together with his closest team that drove the initiative. This was backed by their market knowledge and a prior success in the Indian market (Schweizer et al, 2016). Interestingly to note is that subsidiary managers experience intrinsic motivation from the tension that emerges from a wish to be part of the global organization and self-determination of taking one's own initiatives (Ambos et al, 2010).…”

“…Birkinshaw and Ridderstråle (1999) use the metaphor of a corporate immune system that exists within many MNCs to describe the actions taken by headquarters to kills off intruding believed to infect the rest of the firm. In a study of Volvo AB and its subsidiaries in India, it was evident that mixed attitudes towards ideas coming from the subsidiaries existed at headquarters that partially hindered the development of initiatives and the subsequent building of R&D capabilities (Schweizer et al, 2016).…”

“…The work is strictly monitored and evaluated, and then only when performance is adequate in relation to, for example, quality and delivery time, the complexity of the tasks assigned are increased. This "work package" approach has been successfully used both by SKF and Volvo IT to build up their R&D competence in India (Schweizer et al, 2016). Through such an approach, the subsidiary not only accumulates R&D competence but also increasingly can gain R&D capability in subsidiaries acceptance and legitimacy within the MNCnot the least from other already established R&D units (Jakobsson, 2015).…”

The diffusion of management ideas within the MNC: under the sway of the corporate immune system

“…Birkinshaw and Ridderstråle (1999) suggest various strategies for subsidiaries to pursue to overcome the CIS, including persistently selling the initiative, using personal relationships with corporate managers, and avoiding initial attention from and cooperation with HQ prior to proof of concept or market acceptance. In recent years the CIS concept has been applied in studies to explore the evolution of MNCs' foreign research and R&D units (Schweizer et al, 2020), team formation and the performance of innovation labs in the financial industry (Fecher et al, 2020), internationalization of R&D among multinational companies (Lagerström et al, 2019), constant opposition towards subsidiary initiative opportunities (Ahworegba and Colovic, 2019), and HQ-subsidiary interaction during the introduction of a value product as an subsidiary initiatives in India . Rövik (2011) also using an immunology metaphorpresents six viral features that can afflict organizations when confronted with popular management ideas: infectiousness, immunity, replication, incubation, mutation and dormancy.…”