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From Arbitrage to Global Innovation: Evolution of Multinational R&D in Emerging Markets

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Abstract

Our inductive study of nine European multinational enterprises (MNEs) and their R&D units in India uncovers a distinct trajectory of overseas R&D evolution in emerging markets. In contrast to the well-established trajectory of foreign R&D evolution that begins by adapting existing MNE products to the local market, this alternative trajectory begins by leveraging cost arbitrage and progresses through three unique configurations towards a global product mandate. Our study also unravels how the R&D units build embeddedness within the MNE network and with the local ecosystem, and how such embeddedness influences the evolution of their R&D mandate. We present a stylized taxonomy of R&D configurations and integrate this into an evolutionary model of emerging market R&D and suggest that research on MNE R&D in emerging markets must shift from focusing on the macro environment to exploring the dynamics of embeddedness. The study also provides useful insights to practitioners on managing R&D in emerging markets.

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Notes

  1. This study was part of a larger effort commissioned and funded by the European Commission to understand the nature of innovation within European Union (EU) firms, and the nature of EU MNE R&D in India.

  2. Unless an OU evolves into an FTU, it has little chance of surviving, since the nature of work undertaken by an OU can easily be substituted with an arm’s-length outsourcing arrangement or consolidated within another subsidiary. Therefore, any unit that fails to move beyond OU to take on a more strategic role is unlikely to survive.

  3. We thank one of the anonymous reviewers for pointing this out.

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Acknowledgements

This study was partly funded by European Community’s Seventh Framework Programme under Grant Agreement Number 217296 (GlobInn: The changing nature of Internationalization of Innovation in Europe: impact on firms and the implications for innovation policy in the EU). We are thankful for this support.

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  1. Indian Institute of Management Bangalore, Bangalore, India

    Srivardhini K. Jha

  2. Fox School of Business, Temple University, Philadelphia, USA

    Charles Dhanaraj

  3. Indian Institute of Management Indore, Indore, India

    Rishikesha T. Krishnan

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  1. Srivardhini K. Jha
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Correspondence to Srivardhini K. Jha.

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Jha, S.K., Dhanaraj, C. & Krishnan, R.T. From Arbitrage to Global Innovation: Evolution of Multinational R&D in Emerging Markets. Manag Int Rev 58, 633–661 (2018). https://doi.org/10.1007/s11575-018-0353-3

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