Reverse innovation transfer in Chinese MNCs: The role of political ties and headquarters

Abstract

Innovation augmentation via internationalization is motivated by headquarters entrepreneurial role in Chinese multinationals. Drawing on the parenting theory, this paper investigates the effects of headquarters' political ties and the degree of internationalization on headquarters competence contribution to subsidiary and the extent of reverse innovation transfer. Based on a survey of 177 subsidiaries in 99 Chinese multinationals via two questionnaires, the empirical results show that, while the degree of internationalization enhances both the headquarters' entrepreneurial role in providing competence to subsidiary, and subsidiary reverse innovation transfer efforts, the strength of headquarters' political ties in the home country has detrimental effects on the degree of internationalization and on headquarters' competence contribution to subsidiaries, which eventually hinders reverse innovation transfer practices. This means that, although internationalization may unlock benefits for Chinese multinationals, their political ties may hinder their fulfillment. This study contributes to parenting theory and to research on firms' internationalization, particularly in the context of emerging-market multinationals.