Abstract
The idea that competence-creating subsidiaries from emerging nations can contribute to and possibly renew sources of competitive advantage is an appealing one for managerial practice and policy. Many mature MNEs can look to exploit the technological and market capabilities of their more capable subsidiaries in order to tap into new sources of growth. Based on a case study of Fiat and three of its emerging market R&D subsidiaries, we show that successfully developing competence-creating subsidiaries is a difficult task. Not only do parent and subsidiary managements have different ideas of what is involved, but subsidiary technological capability and local resources do not fully explain new technology creation mandates. The success of overall product market strategies and the mode of entry also exercise important effects. Furthermore, in our case study we find that internal embeddedness is more crucial than external embeddedness in distinguishing a successful new technology creation mandate.
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