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The innovation performance of MNE subsidiaries and local embeddedness: evidence from an emerging economy

Abstract

We examine the innovation performance of MNE subsidiaries and their embeddedness in sources of local knowledge in a policy framework within the context of an emerging economy. Based on first-hand evidence from multiple case studies, we found that: (1) there was variability between the subsidiaries in terms of the cumulative manner and speed at which they improved their innovation performance over time, using progressively levels of accumulated capability as a proxy; (2) these differences in innovation performance improvement reflected heterogeneity between the subsidiaries in terms of the learning efforts made to acquire knowledge from local organizations; (3) the varied frequency in which the subsidiaries developed such local relationships reflects their differing responses to a common industrial policy that makes use of tax incentives to stimulate such links. The paper reveals the limitations of this conventional type of industrial policy in stimulating industrial development and the embeddedness of MNEs. It also suggests that a new direction for policy, which incorporates public–private negotiations and a focus on the firm-centred building of innovation capabilities, should be pursued in order to accelerate the innovation performance progress of latecomer firms.

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Notes

  1. 1.

    Indeed, in the broader study from which this paper derives, we have examined the role of both intra-corporate and local link in affecting the innovation performance improvement of subsidiaries.

  2. 2.

    This paper does not consider levels of innovation performance achieved by the case-study firms as a measure of success or failure. Our purpose is to explore heterogeneity across the cases in terms of the extent of and speed at which they have improved their innovation performance and the role embeddedness.

  3. 3.

    This is a method of digital wireless communications transmission allowing a large number of users to access a single radio-frequency channel without interference.

  4. 4.

    Indeed, Omega had started its relationships, based on joint education and training program, with research institutes (e.g. Cesar) and universities in North-eastern Brazil as early as 1999. Omega’s first approached neighboring universities in South-eastern Brazil, but its proposals to develop such kind of relationship were turned down.

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Acknowledgements

This paper forms one of the outcomes of a research project on the business strategies and competitive performance of MNE subsidiaries in the electronics industry in Brazil at EBAPE/FGV. An earlier version of this paper was presented at the 12th Conference of the International Joseph A. Schumpeter Society in Rio de Janeiro, Brazil, in July 2008. We thank the participants of the conference, two anonymous JEE reviewers and the editors of this Special Issue for their useful comments, and suggestions. We also thank Marcela Cohen for her assistance in carrying out this research. Any errors that remain are our own. We also gratefully acknowledge funding from the Brazilian Association for the Electro-electronics Industry (Abinee). All disclaimers apply.

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Correspondence to Paulo N. Figueiredo.

Appendix

Appendix

Table 6 Typology for levels of capability (condensed version)

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Figueiredo, P.N., Brito, K. The innovation performance of MNE subsidiaries and local embeddedness: evidence from an emerging economy. J Evol Econ 21, 141–165 (2011). https://doi.org/10.1007/s00191-010-0180-6

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Keywords

  • MNE-subsidiaries
  • Innovation performance
  • Capability accumulation
  • Local embeddedness
  • Learning links

JEL Classifications

  • F23
  • I23
  • L52
  • L63
  • O25
  • O30 014