Host location knowledge sourcing and subsidiary innovative performance: examining the moderating role of alternative sources of knowledge and IPR distance

Abstract

This study investigates the relationship between subsidiary’s external knowledge sourcing in the host network of operation and innovative performance, and the moderating role of i) alternative sources of knowledge (those related to the internal and external home knowledge network) and ii) Intellectual Property Rights (IPR) distance between the host and the home location of the Multinational Enterprise (MNE). Based on a dataset comprised of 170 R&D subsidiaries (classified by 57 parent companies and 23 host countries) it is shown that a curvilinear (inverted U-shaped) relationship exists between external host knowledge sourcing and innovative performance. In terms of the moderating effects, the findings reveal that the influence of alternative sources of knowledge affects the aforementioned relationship in a negative way. Finally, a stronger IPR protection regime in the host location weakens, rather than strengthens the relationship between external host knowledge sourcing and innovative performance.