The coevolution of international scope and technological knowledge in MNCs

Abstract

We explore coevolution in the growth of technological knowledge and international scope in multinational corporations (MNCs). We focus on technological knowledge and international scope because they are core to the performance of MNCs and because research has found that technological knowledge stimulates international growth, while internationalization stimulates technological growth. We address this seeming paradox by consolidating arguments about their growth under the coevolutionary umbrella. In so doing, we advance a novel coevolutionary argument: technological knowledge and international scope are both outcomes of interdependent, long-term strategic decisions aimed at optimizing the complementary effects of both dimensions on MNC performance. Accordingly, we develop a formal model of the dynamic processes by which technological knowledge and international scope coevolve. Our dynamic optimization model identifies four coevolutionary trajectories: (1) a trajectory in which growth in technological knowledge and international scope occur simultaneously; (2) a trajectory that has simultaneous reductions in both; (3) a trajectory in which technologically rich but domestically oriented firms expand international scope but reduce technological knowledge; and (4) a trajectory in which highly internationalized but technologically lagging firms expand technological knowledge but reduce international scope.