The New Typology and Evolution of Multinational Corporation Subunit Roles: An Explorative Study

Abstract

This paper conducts an explorative study to examine the evolution of Multinational Corporation (MNC) subunit roles based on the characteristics of its competence creating (CC) activities. The study focuses on the heterogeneity of firm-specific evolutionary paths in the patterns of knowledge accumulation that support competence creating (CC) activities. Using continuous variables instead of creating categorization of subunit roles, we create a model to examine the strategic roles of MNC subunits, based upon the evolutionary trajectory of a subunit’s CC activities and its technological distance from its parent company. We identify and measure subunit CC intensity and subunit technological distance as the two determining dimensions that characterize an MNC subunit’s pattern of innovation in terms of competence-creating. The innovative activity was observed from large firms of the general chemical industry, with data that covers an over thirty-year window, to explore the characteristics of competence creation activities, and to examine the proposed typologies. Using the longitudinal observation, we further examine the evolution of MNC subunit roles based on the characteristics of their competence creating activities, and demonstrate several real world business examples of subunit typologies. This research makes both theoretical and methodological contributions to the literature of MNC innovation and subunit strategic roles by presenting a continuous model to examine competence-creating activities of MNC subunits. A connection between statistical data analysis and individual firm examples is made in the discussion of subunit evolutionary trajectories, which can lend itself to possibilities of in-depth case studies. Using the typology designed in this study, we can further examine the relationship between MNC strategy and subunit role evolution, using the continuous variables to describe a subunit’s innovative activities rather than categorizing subunits as a CC or CE type, which in turn allows for a more realistic understanding of MNC subunit behavior – as innovative firms should always have a combination of CC and CE innovations.