Institutions and the Diversity and Prevalence of Multinationals’ Knowledge-Augmenting Subsidiaries

Allen, M, Allen, M and Lange, K (2018) Institutions and the Diversity and Prevalence of Multinationals’ Knowledge-Augmenting Subsidiaries. British Journal of Management, 29 (3). pp. 483-496. ISSN 1045-3172

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Abstract

Multinational corporations (MNCs) increasingly seek to gain access to, and exploit, loca-tionally specific sources of advanced knowledge and technological capabilities, creatinga need to explain (1) the diversity among these facilities and (2) how institutions influ-ence MNCs’ abilities to invest in dierent subsidiary types. Extending debates on firms’knowledge-augmenting activities, the authors integrate institutions into their analyticalframework to a greater extent than previous work has done. Moreover, existing contri-butions provide typologies of R&D subsidiaries. In contrast, the authors focus on a par-ticular subset of subsidiaries, knowledge-augmenting ones, and put forward a theory toexplain their variety and their prevalence, enabling them to identify previously neglectedsubsidiary types that have important managerial and policy implications. By downplayingthe diversity of these s ubsidiaries, existing work has not been able to capture the full rangeof managerial challenges as well as the costs and benefits of dierent subsidiary types tohost countries. The authors, therefore, problematize fir ms’ abilities to gain access to for-eign knowledge-generating assets, highlight the importance of institutional environments,provide policy recommendations and identify areas for future research.