Multinational Firms, Innovation and Productivity

Multinational Firms, Innovation and Productivity

Davide Castellani and Antonello Zanfei

This book gets to the root of how and why multinational firms differ in the cross-border creation, transfer and diffusion of technology, and provides fresh evidence on the effects that these differences have on productivity and innovation in the economic systems in which they are active.

Chapter 1: Views on Multinational Firms and Innovation

Davide Castellani and Antonello Zanfei

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


1. Views on multinational firms and innovation 1.1 INTRODUCTION This chapter introduces our analysis of the two-way link between innovation and internationalisation. On the one hand innovation is a key engine of internationalisation as it largely contributes to make it profitable to compete in foreign markets. On the other hand, internationalisation creates important innovation opportunities. In this context, multinationals play a key role in the international exploitation and generation of innovative advantages. A crucial distinction in this respect is between international operations aimed at utilising pre-existing advantages of MNFs (asset exploiting FDIs) and those aimed at gaining access to local sources of knowledge and competitiveness (asset seeking FDIs). We argue that: (a) technological and institutional factors have contributed to increasing the importance of asset seeking strategies, and (b) the latter largely overlap and co-exist with asset exploiting in most circumstances. This evolution has important implications for the organisation of innovative activities of MNFs. In particular, the combination of traditional asset exploiting objectives with increasing asset seeking activities entails a transition of multinationals towards a double network structure. On the one hand MNFs are more and more characterised by the interconnection of a large number of internal units that are deeply involved in the company’s use, generation and absorption of knowledge. On the other hand, units belonging to the internal network tend to develop external networks with other firms and institutions that are located outside the boundaries of the MNF, in order to increase the potential for use, generation and...

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