Knowledge Breadth of MNC Subsidiaries and the Duration of Host-Country Firmss Search

Abstract

The aim of this paper is to investigate the factors influencing the speed at which knowledge flows from foreign to domestic firms. The focus is not on whether a knowledge spillover occurs, but on the time it takes to spread the MNC subsidiary knowledge in the local area. Filling the gap about spillover speed in International Business by means of the insights from Innovation Studies – specifically, the literature on search and NK modelling, we propose a conceptual model where the speed of local knowledge diffusion is influenced by subsidiaries’ technology sourcing strategies. We then test our model using a database covering 1336 US patents from the semiconductors sector. We find that not only the breadth of the set of subsidiaries’ knowledge sources slows down local knowledge diffusion, but that the delay is mainly related to the diversity of global and internal sources used by the subsidiary, hinting at strategies that MNCs can use to further protect their knowledge.