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New Competence Creation in Multinational Company Subunits: The Role of International Knowledge
Author(s) -
Cantwell John,
Piscitello Lucia
Publication year - 2015
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12175
Subject(s) - multinational corporation , competence (human resources) , business , industrial organization , international business , economic geography , protein subunit , marketing , international trade , knowledge management , economics , management , computer science , gene , biology , genetics , finance
It has been demonstrated that more creative innovative activities of subunits of multinational companies ( MNC s) rely upon the munificence of local knowledge in the host country. Here, we argue that the strength of international business network connections of a host location influences the potential accessibility of international knowledge and hence tends to widen the domain of new knowledge search that can be successfully undertaken by an MNC subunit. This in turn increases the likelihood of an MNC subunit building new areas of competencies, that is, in fields of competencies which are relatively new to the MNC . Specifically, we suggest that the relevant international business network connections are those involving local actors in the MNC subunit's relevant industry. Moreover, geographical proximity between MNC subunits and their parent company has an inverse U‐shaped relationship with new competence creation by subunits. Using a balanced panel data set on innovative activities conducted abroad by 194 of the world's largest industrial firms from 1975 to 1995, we find support for our expectations.