Innovativeness of MNC subsidiaries in Brazil: The effects of global and local integration

Abstract

Abstract Recent evidence coming from the spillover literature convincingly shows that only innovative subsidiaries generate positive effects in host emerging economies. However, we know little about what encourages multinational subsidiaries to become innovative in these types of contexts. In this article, we shed light on this question by exploring how different degrees of subsidiaries’ integration into the host economy and their corporation, and changes over time regarding these two types of integration, are associated with the intensity of innovative activity of subsidiaries in Brazil. Our findings indicate that local integration by itself is not associated with high innovative intensity. Indeed, only subsidiaries that are simultaneously integrated into their global corporation as well as into the host economy are highly innovative. Furthermore, when dynamic effects are added to the analysis, we find that substantial improvements in subsidiaries’ innovative behaviour occur in subsidiaries which have moved over time towards higher levels of local and corporate integration.