Examining multinational corporations R&D subsidiaries embeddedness in multiple networks of knowledge

Abstract

This research study elaborates on one of the most important features of the modern International Business (IB) area; the multinational R&D subsidiary. Taking into consideration the strategic importance and the particular role the R&D subsidiary plays, this study sheds light on the multiple forms of knowledge networks in which the R&D subsidiary is embedded. Accordingly, based on the two already known dichotomies of subsidiary knowledge networks (external home vs. external host and external host vs. internal) this thesis draws on the existing theory and empirical evidence and proposes a triangular view (i.e. external home, external host and internal) between the R&D subsidiary and its embeddedness within the surrounding knowledge networks. Accordingly, based on three major theories of the management in the IB area, Social Network Theory (SNT), Resource Dependency Theory (RDT) and Agency Theory (AT), this study provides answers on a number of under researched questions. First, what are the determinants of each type of R&D subsidiary embeddedness in each of the three available knowledge networks? Second, considering the relative costs influencing R&D subsidiaries to rely more or less on one form of embeddedness compared to another, what sort of relationship exists (i.e. complementary or substitutive) between the aforementioned forms of R&D subsidiary embeddedness? Finally, considering the contextual- and HQ-specific factors that impact the overall functioning of the R&D subsidiary, what sort of effect do the multiple forms of R&D subsidiary embeddedness have on the latter’s innovative performance? This study adopts a quantitative approach and employs appropriate econometric methods in order to provide answers to the aforementioned research questions. Furthermore, data from three different sources are amalgamated. First, a unique survey questionnaire is utilised. This instrument was originally developed in the University of Reading and corresponds to both subsidiaries and the HQ. The sample covers Fortune 500 Multinational Enterprises (MNEs). Second, and in order to augment the information derived from the survey, supplementary information on patent characteristics is sourced from the United States Patent and Trademark Office (USPTO) database. Third, a range of aggregate-level (secondary) data enriches the existing dataset. The findings reveal that each form of R&D subsidiary embeddedness is determined by a set of different predictors. Precisely, it is found that host location’s macroeconomic uncertainty positively influences subsidiary’s embeddedness in the home location’s knowledge network. Being an R&D subsidiary and having an adaptation and support-oriented profile, as well as being highly centralised to the HQ, negatively influences the R&D subsidiary’s embeddedness in the host location’s knowledge network. On the other hand, having a more research intensive and internationally integrated R&D role positively influences the R&D subsidiary’s embeddedness in the internal knowledge network of the MNE. The findings also indicate that a complementary relationship exists between external home and external host, as well as among external host and internal knowledge networks. On the contrary, a substitutive relationship is indicated between external home and internal networks under which the R&D subsidiary is embedded. Finally, as regards the last research question the results indicate that only internal embeddedness has a positive and significant impact on innovative performance, while scientific and research endowment of the host locations is also found to positively influence the innovative output of the R&D subsidiary. Implications for academics and practitioners (both managers and policy makers) are widely discussed and suggest that the three-dimensional view of embeddedness is useful in understanding and explaining the way MNEs’ foreign R&D subsidiaries operate.