International Knowledge Sourcing by Foreign MNE Subunits: Competence Creating vs. Exploiting

Abstract

This paper examines the patterns of international knowledge sourcing in competence- creating (CC) vs competence-exploiting (CE) types of innovative activity by foreign-located MNE subunits in the pharmaceutical industry. We use backward patent citations to establish the structure of the knowledge sources on which foreign- located subunits rely in developing new inventions. For the period 1976-2015 we examine the effects on international knowledge search for foreign subunits of their capacity to draw upon different types of organizational ties in a relational system, and show the relative significance of local, diverse knowledge sourcing of CC subunits vs the more international, application focus of CE subunits. To further understand the knowledge landscape, we provide a descriptive investigation of the changing structure of CC vs CE knowledge networks over time, and compare the change in composition of sources. We discuss the organizational affiliations and differentiated networks within which foreign subunits source knowledge to develop innovative activity. Our findings shed light on the conditions under which foreign-located subunits source knowledge internationally and the impact external knowledge sources have on this trend.