Abstract
This chapter is intended as a contribution to the understanding of the role of subsidiaries in the development of technological capability in the multinational enterprise (MNE). The analysis is evolutionary in that technological development and innovation are viewed as largely incremental and localized processes. From this position, it is argued that autonomous innovative activities by subsidiaries, even though of necessity largely oriented towards the domestic markets of particular host countries, nevertheless constitute major building blocks in the technological development of the MNE as a whole.
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Notes
This view of technological development within the MNE is a parallel to new conceptualizations that suggest organizations need to be developed and managed on a principle of ‘proliferation and subsequent aggregation of small independent entrepreneurial units from the bottom up rather than one of division and devolution from the top down’ (Bartlett and Ghoshal, 1993 emphasis added; see also Hedlund 1994 for a distinction between combination vs division as organizational principles).
There is some evidence that Japanese subsidiaries in the UK are significantly less innovative compared to US and European subsidiaries (Pearce, 1994). De Meyer (1993) has suggested that recent growth of foreign R&D by Japanese MNEs may be largely motivated as an antidote to the high degree of organizational replication that has characterized internationalization of Japanese companies. Thus, he notes that Japanese companies have used internationalization of R&D in order to counteract the internal isomorphism which exists in Japanese companies.
All UK companies with at least one US subsidiary were sent a questionnaire in June 1995. A full description of the sample and the questionnaire is available as an appendix from the author.
The intent of the question is thus to isolate technology ‘creation’ from mere `adoption’ (see Ghoshal and Bartlett, 1988). Additionally, the focus of the question is on product rather than process innovations.
If firms had more than one US subsidiary, respondents were asked to provide information on the largest subsidiary.
Only two subsidiary innovations were transferred to units outside the UK.
It is noteworthy that the number of subsidiaries is not a proxy for size of the MNE. When direct measures of size (sales or total employees) were entered in the above equation, they had a negative and marginally significant influence, but the number of subsidiaries remained highly significant.
A number of respondents who had not transferred subsidiary innovations refused to answer this question. A few respondents indicated ‘other’ reasons, such as legal restrictions in the case of defence-related innovations.
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© 1999 Academy of International Business, UK Chapter
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Yamin, M. (1999). An Evolutionary Analysis of Subsidiary Innovation and ‘Reverse’ Transfer in Multinational Companies. In: Burton, F., Chapman, M., Cross, A. (eds) International Business Organization. The Academy of International Business. Palgrave Macmillan, London. https://doi.org/10.1057/9780230377851_6
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DOI: https://doi.org/10.1057/9780230377851_6
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