Open innovation in multinational companies' subsidiaries: the role of internal and external knowledge

Abstract

The mainstream literature on innovation management has recognised that most organisations can and must innovate using both internal and external knowledge sources. The management of knowledge in multinational companies (MNCs) implies that subsidiaries should achieve centrality because they are in the unique position to tap into many different sources of knowledge from different cultural contexts. In this context, this paper aims to highlight the importance of 'openness' at the subsidiary level, combining both external and internal knowledge (within the MNC but outside the subsidiary). To do so, we test the single and joint effects of external and internal 'openness' on subsidiaries' innovation performance. Using Amadeus databases, 163 subsidiaries were selected and data were collected through a standardised questionnaire. Then, three hypotheses were tested through an OLS regression model. The results indicate that external and internal knowledge openness positively affects subsidiaries' innovation performance. Moreover, the inclusion of the interaction term shows that a high level of both leads to a multiplicative and positive effect. The findings are discussed in the light of the extant literature, and several implications for future research and MNC and subsidiary managers are highlighted.