EMNC technological competence creation: key mechanisms and innovative performance

Abstract

PurposeConsiderable attention has been paid to the motives and process of idiosyncratic internationalization trajectory of Multinational Corporations from emerging economies (EMNCs). Yet, the ability to undertake strategic asset-seeking foreign direct investments (FDIs) is not the same as the ability to achieve subsequent investment success (Buckley, 2018). Since an ultimate goal of strategic asset-seeking FDIs is to tap advanced knowledge in host locations to accelerate EMNC competence creation, and the current study aims to shed light on the question of whether, and if so how, EMNCs have been able to build competences after strategic asset-seeking motivated FDIs.Design/methodology/approachThis study tests the US patent and citation data from 2000 to 2014 of leading innovation-oriented MNCs from China and India, complemented with data from LexisNexis Directory of Corporate Affiliations and Mergent Online databases. Wilcoxon rank sum test is employed to compare EMNCs with control group MNCs from mature industrialized countries to identify key technological competence creation mechanisms of EMNCs. Negative binomial regression technique is then employed to test the relationship between the key mechanisms and EMNC innovative performance in terms of quantity and quality of patented inventions.FindingsIn contrast to the extant EMNC literature, the author finds that EMNC parents adopt a hands-on and less of an orchestrating approach. They are playing critical roles in accessing and transferring knowledge from international host locations. The empirical analyses indicate an absence of reverse transfers of knowledge from subsidiaries to the parent. Instead, EMNC parents directly access and absorb explicit knowledge from external sources in subsidiary host locations, which significantly contributes to EMNC innovative performance. Meanwhile, the author finds that the employment of intra-firm and inter-unit inventor teams and associated internal tacit knowledge access and transfer significantly contribute to EMNC innovative performance.Originality/valueThis study investigates the post-internationalization performance of EMNCs and contributes to the reconciliation of theoretical debates, as well as the generation of a comprehensive understanding of the MNC. Managerial implications are also discussed.