New Competence Creation in Multinational Company Subunits: The Role of International Knowledge

24 Pages Posted: 10 Feb 2015

See all articles by John A. Cantwell

John A. Cantwell

Rutgers Business School - Newark and New Brunswick

Lucia Piscitello

Politecnico di Milano - Dipartimento di Ingegneria gestionale

Date Written: February 2015

Abstract

It has been demonstrated that more creative innovative activities of subunits of multinational companies (MNCs) rely upon the munificence of local knowledge in the host country. Here, we argue that the strength of international business network connections of a host location influences the potential accessibility of international knowledge and hence tends to widen the domain of new knowledge search that can be successfully undertaken by an MNC subunit. This in turn increases the likelihood of an MNC subunit building new areas of competencies, that is, in fields of competencies which are relatively new to the MNC. Specifically, we suggest that the relevant international business network connections are those involving local actors in the MNC subunit's relevant industry. Moreover, geographical proximity between MNC subunits and their parent company has an inverse U‐shaped relationship with new competence creation by subunits. Using a balanced panel data set on innovative activities conducted abroad by 194 of the world's largest industrial firms from 1975 to 1995, we find support for our expectations.

Suggested Citation

Cantwell, John A. and Piscitello, Lucia, New Competence Creation in Multinational Company Subunits: The Role of International Knowledge (February 2015). The World Economy, Vol. 38, Issue 2, pp. 231-254, 2015. Available at SSRN: https://ssrn.com/abstract=2562683 or http://dx.doi.org/10.1111/twec.12175

John A. Cantwell (Contact Author)

Rutgers Business School - Newark and New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

Lucia Piscitello

Politecnico di Milano - Dipartimento di Ingegneria gestionale ( email )

20113 Milan, Milano
Italy

HOME PAGE: http://www.dig.polimi.it/eng/comunita/cl.php?id=51

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