Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence

We explore the determinants of MNE subsidiaries decisions to set-up own R&D laboratories drawing on evidence from UK regions. In this context, we also test for the interaction between firm's internal and external environments. We also integrate extant IB and strategic management literatures and incorporate recent debates in New Economic Geography (NEG) in specifying the 'external environment'. We find support for the role of firm's 'productive opportunity' and predictions of the NEG on the basis of an analysis of primary data. We discuss implications for managerial practice and government regional policies.MNE subsidiaries, R&D laboratory, internal and external environment, productive opportunity

The Multinational Corporation and the Global Sourcing of Knowledge: Remodeling Absorptive Capacity

We build on extant theory of the MNC, MNC subsidiaries, absorptive capacity and Penrose's concept of 'productive opportunity' to develop a framework on the MNC and absorptive capacity (AC) that allows us to explore the role of subsidiaries in the global sourcing of knowledge. We develop and test hypotheses using primary questionnaire-collected data. Our results support the idea that subsidiaries' realized AC can be improved by the realized and potential AC of the MNC group and the subsidiary and in turn may improve the performance of the subsidiaries and the group as a whole.Multinational Corporation, absorptive capacity, subsidiaries, knowledge

Choice of Location and the Roles of Foreign Subsidiaries: Evidence from UK Regions

In this paper we investigate the location determinants of inward foreign direct investment (FDI) in the UK at a regional level. The paper focuses on a relatively under investigated field, that of the linkage between choice of regional location- within a particular host countryand subsidiary roles. The key contribution steaming from this analysis is that we provide, for the first time, detailed support of the location factors affecting distinctive types of subsidiaries. The external environment affects differently the two types of subsidiaries under investigation with agglomeration features playing the most significant role. At the same time idiosyncratic FDI factors do seem to play the most important role for both types of subsidiaries. Important policy implications are then raised, regarding the design of welltargeted FDI promoting policies aiming both at upgrading regional potential as well as specific sectors and companies.UK Regions, subsidiaries, agglomeration, location choice

The internationalization of innovation towards the South:A historical case study of a global pharmaceutical corporation in China (1993–2017)

Intensified competition means that multinational enterprises (MNEs) are increasingly concerned with locating innovation activities in the most appropriate locations. This had led to emerging economies in the South becoming an important destination of R&D-related foreign direct investment (FDI), departing from their traditional role as low-cost production sites. Thus far, however, our understanding of this transformation process is limited. The purpose of this article is therefore to explore the process by which foreign MNEs’ low-value-adding operations in the South are transformed into high-value- adding R&D operations. Drawing on the current literature, we construct a framework of evolution consisting of four major waves of R&D internationalization and corresponding R&D objectives. To better understand how these waves have evolved over time, we focus on the South and trace the process of change using a single historical case study: AstraZeneca in China between 1993 and 2017. We find evidence of idiosyncratic location-bound conditions offering both opportunities and resources. The gradual development of these favourable conditions, along with AstraZeneca’s deepening local knowledge, triggered a transformation process in their operations in China. Our study thus offers important historical insights, which present a platform for future research providing more nuanced theoretical explanations of the four waves of R&D internationalization

Multinationals and Domestic TFP: Market Shares, Agglomerations Gains and Foreign Ownership

We revisit the puzzle regarding the role of Multinational Enterprises (MNEs) on Total Factor Productivity (TFP) of domestic firms by drawing attention to foreign ownership structure. First, we differentiate between market share (MS) due to competition effects and knowledge agglomeration gains (AG). The former induces market pressure, due to foreign presence, and makes domestic firms to charge lower price mark-ups. Second, we investigate whether intra-industry (horizontal) and inter-industry (vertical) spillovers vary with the degree of foreign control. Using a sample of manufacturing firms from six European countries, we find that higher presence of MNEs in the domestic market makes domestic firms to charge lower mark-ups. Only majority and wholly-owned MNEs generate statistically significant horizontal spillovers. The economic size of these spillovers is low. We also detect backward spillovers from MNEs in downstream industries. However, forward spillovers from MNEs in upstream industries are negative. When we control for absorptive capacity, direct linkages with MNEs, scope of product differentiation and geographical proximity, the economic size of AG increases substantially

Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms

This paper explores the relative effects of Multinational Enterprises’ (MNEs) subsidiaries to domestic firms (DOMS) on regional productivity growth in the UK. We combine regional and firm level data to explore the relative importance of three key characteristics of Multinational Enterprises’ subsidiaries: R&D, intangible assets and exports. Our main results indicate that MNE subsidiaries are on average more R&D intensive and have a higher level of investment in intangibles which impact significantly on regional productivity growth. The results are shown not to be symmetric when we take into account the country of origin of MNE subsidiaries, the role of R&D, intangibles and exports depending on the country of origin of the parental MNE. Two key implications can be derived from our findings: (a) DOMS can sometimes be more advantageous for local development; (b) the contribution of MNEs subsidiaries to the regional economy depends on its degree of embeddedness in the local economy. These two findings can provide a large scope for regional policy making

The Impact of Multinational and Domestic Enterprises on Regional Productivity: Evidence from the UK

The paper explores the effects of Multinational Enterprises (MNEs) and Domestic Enterprises (DOMEs), respectively, on regional productivity in the case of UK regions. Our empirical evidence shows that the more intensive in terms of R&D and intangibles MNEs, have a stronger effect on regional productivity than DOMEs. However, when we control for the origin of the MNEs, we find that DOMEs can outperform MNEs from certain countries. We submit that regions that lag behind can absorb the intangible assets of DOMEs more readily; and that MNE strategies may not be always aligned to the needs of host regions

Choosing a Growth Path: Internationalization, Product Diversification or Both? Working paper

SUMMARY While both internationalization and product diversification are associated with firm growth, the choice between these two growth strategies has remained obscured. In this paper we argue that the development of specific capabilities leads to dominancy of one growth strategy over the other. Resources that are scarce, specific and indivisible create capabilities that lead to learning, scale and scope economies when either strategy takes dominancy. Hence, we expect firms to choose either internationalization or product diversification as their dominant growth path rather than pursuing both strategies. Moreover, such choice is expected to lead to superior performance. Analysis of the extent and process of internationalization and product diversification of leading food & beverage MNEs in the period 1996-2000 mostly supports these expectations