Handbook of Institutional Approaches to International Business
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Handbook of Institutional Approaches to International Business

Edited by Geoffrey Wood and Mehmet Demirbag

Expertly written by leading scholars from a range of different starting points, this compendium presents a synthesis of recent work relating to institutionally-informed accounts from transitional and emerging markets, as well as from mature economies. It specifically focuses on the linkage between institutions and what goes on inside firms, and the relationship between setting, strategic choice and systemic outcomes.
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Chapter 12: The Role of the MNE Headquarters in Subsidiary Innovation: An Institutional Perspective

Kieran M. Conroy and David G. Collings


Kieran M. Conroy and David G. Collings 12.1 INTRODUCTION In the dynamic and turbulent environment which characterizes the modern business world, the capability to identify innovations within the multinational enterprise (MNE) and transfer these across its international operations is considered central to the competitive positioning of the MNE (Gammelgaard et al. 2004; Gupta and Govindarajan 1991). As Taylor et al. (2007, 337) note: ‘leveraging internal knowledge and innovation enables the firm to take advantage of its worldwide access to information, learning and creativity to improve its competitive offerings in products or services’. A key question that emerges in this regard however concerns the relationship between the multinational headquarters (HQ) and the focal subsidiary in the subsidiary innovation process. More specifically, what is the role of the HQ in subsidiary innovation processes? This question has heretofore not been a major concern in mainstream theories of the MNE (Ciabuschi et al. 2011). This chapter engages with this important question, drawing insights largely from the institutional perspective. It is now commonly recognized that MNE innovation processes are largely context-specific, diversified activities carried out by different units in distinct institutional environments (Almeida and Phene 2004, 2008; Andersson et al. 2007; Asakawa 2001; Birkinshaw and Hood 1998; Doz and Prahalad 1981; Frost 2001; Ghoshal and Bartlett 1988; Hedlund 1986; Mudambi and Navarra 2004; Rugman and Verbeke 2001). In order for value creation to take place through subsidiary innovation we argue that knowledge absorbed from the subsidiary’s local host environment must be combined or balanced with...

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