Internationalization and the Mimetic Establishment of R&D Operations by Foreign Subsidiaries

Abstract

With this study, we examine the conditions that promote mimetic internationalization. Multinational corporations (MNCs) respond to uncertainty associated with internationalization by imitating each other’s foreign direct investments. Prior research suggests that having operational experience in a host country reduces the likelihood that an MNC will mimic other MNCs’ foreign direct investments in that host country because such experience reduces the uncertainty of the investments. In contrast, we argue that general internationalization experience facilitates subsequent mimetic internationalization. While having general internationalization experience does not reduce region- specific uncertainties, it does generally make others’ foreign direct investments more observable and imitable. Our Cox regression analysis of R&D function establishments by the foreign subsidiaries of 1,834 Chinese corporations suggests that foreign subsidiaries imitate the establishment of R&D operations by other foreign subsidiaries, and that an MNC’s internationalization – foreign operations, owners and managers - facilitates such mimicry by its foreign subsidiaries. Together these results contribute to the literature on mimetic internationalization by highlighting the importance of considering the specificity of prior related experience.