Innovation and Institutional Embeddedness of Multinational Companies
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Innovation and Institutional Embeddedness of Multinational Companies

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.
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Chapter 8: The Organizational Decomposition of Innovation and Territorial Knowledge Dynamics: Insights from the German Software Industry

Simone Strambach and Benjamin Klement


Simone Strambach and Benjamin Klement 8.1 INTRODUCTION In OECD countries, in particular, changes in the organization of innovation became obvious in the mid-1990s. Indicators are the internationalization of business R&D, which in itself is not a new phenomenon but seems to be occurring at a much faster pace and is becoming more widespread. Often discussed as the new dimension of globalization, one major change in the spatial distribution of innovation is the integration of non-OECD countries, including developing countries, in R&D investments, particularly in India and China to even larger extents (OECD, 2008; UNCTAD, 2005). A shift towards more open innovation environments and the growing importance of external knowledge in innovation processes have been observed in different strands of innovation research. MNCs are important actors that shape knowledge dynamics across spatial and cultural borders, contributing heavily to the internationalization of innovation along their global value chains. However, we shall not focus on them exclusively, but place the organizational decomposition of innovation processes (ODIP) and its spatial implications at the centre of our chapter by answering the question: how does the organizational decomposition of innovation in OECD countries influence territorial knowledge dynamics?1 The debate on this question is quite controversial. On the one hand, there seems to be a consensus in the literature that the major share of MNCs’ R&D in India and China comprises routine activities geared towards adapting existing designs or towards providing more standard parts in innovation processes that are transformed and integrated in...

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