Emerging multinationals benefiting from subsidiaries located in more developed countries: drivers for the sharing of capabilities

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Two main mechanisms determine the extent to which the headquarters of multinational corporations (MNCs) from less developed countries gain useful capabilities from their subsidiaries in the developed world: learning mechanisms, and recognition by the parent. Because emerging MNCs are at an early stage of their evolution, informal learning mechanisms are more important than attempts to formalise learning. It also matters whether the parent recognises the capabilities of the subsidiary: learning mechanisms alone are not adequate. A parent that interacts frequently with the subsidiary, has high regard for the (internal) resources of its subsidiary and (external) resources of its environment is more likely to regard that subsidiary as a source of useful capabilities, and therefore more likely to benefit from informal learning exchanges. By using data gathered from subsidiaries of emerging MNCs in the US, the article documents the functioning of both learning mechanisms and the role of headquarter recognition in the sharing of useful capabilities with the parent. Prior literature strongly emphasises the importance of learning mechanisms; this article confirms the importance of capabilities, but also highlights the role played by headquarter recognition.