Table of Contents

Innovation and Institutional Embeddedness of Multinational Companies

Innovation and Institutional Embeddedness of Multinational Companies

New Horizons in International Business series

Edited by Martin Heidenreich

Multinational companies are crucial actors in a global knowledge-based economy, combining the advantages of global and locally coordinated production and innovation strategies with specific regional and national factors. This book questions how MNCs can best exploit institutionally embedded knowledge, explores the utilization of external institutionally embedded knowledge in corporate innovation processes, and addresses the challenges of embeddedness.

Chapter 6: Simulating the Role of MNCs for Knowledge and Capital Dynamics in Networks of Innovation

Petra Ahrweiler, Michel Schilperoord, Nigel Gilbert and Andreas Pyka

Subjects: business and management, international business, organisational innovation, economics and finance, international business, innovation and technology, organisational innovation


Petra Ahrweiler, Michel Schilperoord, Nigel Gilbert and Andreas Pyka In this chapter we investigate the effects of the presence and embeddedness of multinational corporations (MNCs) in networks of innovation. New products and processes can result from the ongoing interactions of innovative organizations such as universities, research institutes, firms such as MNCs and small and medium-sized enterprises (SMEs), government agencies, venture capitalists and others. These organizations generate and exchange knowledge, financial capital and other resources in networks of relationships, which are embedded in institutional frameworks on the local, regional, national and international level (Ahrweiler, 2010). Innovation is an emergent property from these interactions on the micro level, providing the combination of actors and organizations, their capabilities and their cooperative behaviours match. By looking at knowledge flows and capital stocks, we investigate whether the mere presence of MNCs is beneficial for innovation networks and whether there is an additional advantage if these MNCs are engaged in collaborative R&D with other players in the network. We examine the role of MNCs for innovation networks from the perspective of their subsidiaries’ host countries by applying the agent-based SKIN model (Simulating Knowledge Dynamics in Innovation Networks; see Ahrweiler et al., 2011). The simulation is grounded in the empirical example of Ireland, enabling us to analyse the role of MNCs in the Irish indigenous industry. Before Ireland was particularly hard hit by the economic and financial crisis, foreign direct investment (FDI) in the country produced a very high GDP growth rate. Since the 1970s there...

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