From Learner to Innovator: Knowledge Transfer from a Parent MNE and Foreign Subsidiaries’ Local Innovation

Nan Zhou (), Jiatao Li (), Changhong Bai () and Dan Zhang ()
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Nan Zhou: Tongji University
Jiatao Li: Hong Kong University of Science and Technology
Changhong Bai: Nankai University
Dan Zhang: Patent Examination Cooperation (Beijing), CNIPA

Management International Review, 2024, vol. 64, issue 1, No 5, 89-128

Abstract: Abstract Knowledge transfer from a parent multinational to a foreign subsidiary does not automatically lead to innovation in a host country. To develop from a learner into an innovator, a foreign subsidiary must develop sufficient absorptive capacity. But too much reliance on knowledge transferred from a multinational could hinder local innovation by generating resource constraints and organizational rigidity. We thus predict an inverted U-shaped relationship between knowledge transfer from a parent multinational and local innovation. Moreover, factors which influence the transition from learner to innovator were investigated using data on patent applications by foreign subsidiaries of 75 large multinationals in China between 2008 and 2016. The number of research and development centers the subsidiary maintains was found to be influential, as is hiring a local executive as the subsidiary’s top manager. Greater institutional distance between the parent’s and the subsidiary’s economies was found to promote the transition, as do greater technological richness and more vigorous competition in the host country. The relationship between knowledge transfer from a parent multinational and local innovation is weaker, however, in older subsidiaries.

Keywords: Knowledge transfer; Local innovation; Foreign subsidiaries; China (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11575-023-00512-6

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