TY - JOUR
AU1 - Blomkvist,, Katarina
AU2 - Kappen,, Philip
AU3 - Zander,, Ivo
AB - Abstract This article concerns the integration of technological knowledge within multinational corporations (MNCs). We empirically investigate the degree of technological knowledge integration of competence-creating subsidiaries with headquarters and sister subsidiaries and explore the effects of intersubsidiary differentiation. Data on the complete US patenting activity of 22 Swedish multinationals from 1893 to 2008 reveal significant differences in degrees of technological knowledge integration. As expected, the results show that greenfield subsidiaries are more integrated with headquarters and other greenfield subsidiaries than with acquired subsidiaries. In contrast, acquired subsidiaries do not appear to be as easily integrated into the MNC, and for this group the empirical evidence shows very little integration of technological knowledge. The findings provide extended insights into the role of competence-creating subsidiaries as providers of technological knowledge to headquarters and other MNC subsidiaries, and suggest a distinct pattern of subsidiary knowledge integration, ordered by what appears to be in-groups and out-groups, that has been overlooked in the prior MNC literature. 1. Introduction According to the vast literature on multinational corporations (MNCs), the internal development, transfer, and integration of technological knowledge1 represent one of its most important policies and sources of competitive advantage (Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 1991; Nohria and Ghoshal, 1997; Argote and Ingram, 2000; Piscitello, 2004; Fosfuri and Giarratana, 2010; Mudambi et al., 2014). In that process, autonomous innovation initiatives by foreign subsidiaries have come to serve as important sources of new and impactful technological knowledge (Cantwell, 1989; Pearce, 1989; Håkanson and Nobel, 1993; Nobel and Birkinshaw, 1998; Frost, 2001; Almeida and Phene, 2004; Blomkvist et al., 2010). Among many MNCs, the participation of foreign subsidiaries in overall research and development activities has become well established over time (UNCTAD, 2005). The nature of foreign subsidiaries’ international research and development has also shifted from adapting to local markets toward contributing to the MNC’s global technological portfolio (Cantwell, 1995; Zander, 1997; Blomkvist et al., 2010). As a corollary, some foreign subsidiaries have evolved from principally being recipients of technological knowledge from MNC headquarters to being developers of strategically important technological knowledge that benefits the entire multinational group (Forsgren, 1989; Forsgren et al., 1992). This shift has resulted in the rise of so-called competence-creating subsidiaries (Cantwell and Mudambi, 2005; Kappen, 2011). These technologically advanced units are specialized and unique within the multinational group and in their exploration of new technological knowledge over time, which pulls the group onto new technological trajectories. In some cases, such competence-creating subsidiaries have come to assume critical roles for the advancement of technological knowledge and profitability of the entire MNC group (Blomkvist et al., 2012). The emergence of competence-creating subsidiaries coincides with the notion that the MNC’s sustained performance and competitive advantage depend on its ability to integrate knowledge across geographically dispersed subsidiaries (Hedlund, 1986; Bartlett and Ghoshal, 1989; Nohria and Ghoshal, 1997; Gupta and Govindarajan, 2000; Zander and Sölvell, 2000; Piscitello, 2004). In other words, technological knowledge in one location may enhance the competitiveness of headquarters or other subsidiaries in the multinational group, if it is integrated with operations elsewhere. For instance, research has shown that MNC integration of knowledge experiences, capabilities, and best practices positively impacts product quality, productivity gains, and cost efficiency (Darr et al., 1995; Tsai, 2001). Moreover, the speed at which technological knowledge is replicated and re-used within the organization would be expected to significantly affect firm growth and competitiveness (Kogut and Zander, 1992, 1993). Drawing on Dosi and Marengo (1995), Grant (1996) and Tell (2011), we view technological knowledge integration as a process in which technological knowledge is transferred and used within the MNC. Thus, integration is related to both replication and usage of technological knowledge and underlines the notion that integration depends on the degree to which firm units are connected to one another (Frost and Zhou, 2005). Despite the increasing strategic importance of knowledge management in MNCs, relatively little is known about the integration of subsidiary technological knowledge, and whether there are systematic differences between types of subsidiaries regarding the degree and pace of technological knowledge integration. Foreign greenfield and acquired subsidiaries are both important sources of new and impactful technological knowledge (Mudambi and Navarra, 2004; Blomkvist, Kappen and Zander, 2014); however, how these types of foreign investment influence knowledge integration within the MNC has remained relatively unknown. The present article attempts to shed further light on the importance of technological knowledge integration within the MNC and the possible differences in the integration of such knowledge between greenfield and acquired competence-creating subsidiaries. The remainder of the article is organized as follows. The next section starts with an overview of the emergence and evolution of competence-creating subsidiaries. We then discuss the factors that foster knowledge exchange within MNCs, followed by a discussion of expected patterns of technological knowledge integration among different types of foreign subsidiaries as formalized in a set of hypotheses. A section on the sample, data collection and the main variables of interest is followed by a presentation of the results from the empirical analyses. The results show that patterns of technological knowledge integration, specifically between headquarters and other subsidiaries of the MNC network, are indeed distinct and differ across the two groups greenfield and acquired units. We draw upon these findings to discuss the presence of in-groups and out-groups of the MNC, specifically MNC units that, in terms of knowledge and knowledge integration, progress together and those that evolve more independently and in isolation. The final section contains a summary of the main findings and a discussion of avenues for future research. 2. The emergence and evolution of competence-creating subsidiaries Although subsidiary roles vary substantially within the MNC network (Ronstadt, 1978; Håkanson and Nobel, 1993; Kuemmerle, 1997; Nobel and Birkinshaw, 1998; Blomkvist et al., 2012), the literature has identified a growing number of competence-creating subsidiaries that are able to make significant contributions to the overall technological portfolio and competitive advantage of the MNC (Pearce and Papanastassiou, 1997; Zander, 1997; Cantwell and Mudambi, 2005). Competence-creating subsidiaries are characterized by their high degree of exploratory R&D and persistent introduction of new and overlapping knowledge, which has potential firm-wide importance. These subsidiaries are typically located in regional centers of technological excellence, indicating that their technological knowledge can be transferred and utilized by other subsidiaries as well as by the parent firm (Cantwell and Piscitello, 2005; Cantwell and Mudambi, 2005). In the generic scenario, the creation of competence-creating subsidiaries in the MNC is the result of two major and conceptually distinct processes or events: the evolution of greenfield investments and the pursuit of foreign acquisitions. Although the two processes are likely to shape somewhat different subsidiary characteristics, these potential differences have received scant attention in the current discussion about MNC knowledge management and, in particular, the formation and integration of technological knowledge. The following sections explore the nature and effects of greenfield investments and foreign acquisitions in greater detail. 2.1 Greenfield investments Greenfield investments involve starting up a completely new organizational unit in a foreign country. Such investments frequently start on a relatively limited scale (Johanson and Vahlne, 1977), are managed by expatriates who select and hire employees from the local environment (Hofstede, 1991; Barkema and Vermeulen, 1998), and depend heavily on the parent company during their early development stages (Schmid and Schurig, 2003). Technological knowledge transferred from the home country and headquarters represents the initial platform from which the subsidiary is able to operate and become more embedded in its local business environment. Generally, the subsidiary receives investments as well as products and/or technical support from headquarters, indicating that, initially, the parent company strongly influences the knowledge held by a greenfield investment. Over time, however, greenfield subsidiaries are likely to develop locally embedded operations and more advanced capabilities through strengthened local ties and spillovers (Jaffe et al., 1993; Mudambi, 1998; Frost, 2001). Generally, the process of establishing local business relationships is costly, incremental, and dependent on the munificence of the local environment, resulting in some greenfield subsidiaries developing strong ties to their local business contexts and others developing relatively fewer and weaker ties. Accordingly, only a select number of greenfield subsidiaries will be pulled into increasingly sophisticated technological roles (Ronstadt, 1978; Pearce, 1994; Frost, 2001), which, in a limited number of cases, can result in the formation of “superstar subsidiaries” (Blomkvist et al., 2010, 2012). These greenfield subsidiaries are able to develop and introduce technological knowledge that is new to the multinational group (Almeida and Phene, 2004; Cantwell and Mudambi, 2005) and exchange that knowledge with other MNC units (Hedlund, 1986; Bartlett and Ghoshal, 1989; Sölvell and Zander, 1998). Equally important in the context of the present study, increasingly sophisticated roles come with a strengthened capacity to detect and rapidly explore any new technological knowledge gleaned or received from other units of the MNC (Lane and Lubatkin, 1998; Cohen and Levinthal, 1990). Whereas cumulative embedding processes foster the greenfield subsidiary’s ability to combine locally discovered new combinations, enhanced integration with other units of the MNC network extends the same process to the global level (Cantwell, 1995; Cantwell and Piscitello, 2000; Johanson and Vahlne, 2003). 2.2 Acquisition investments Acquisitions became the preferred mode of international expansion during the early 1960s (Hood and Young, 1979), with the original motivation for acquisitions having typically been to enhance market share. In more recent times, asset-seeking investments have become increasingly common (Dunning and Narula, 1995; Cantwell and Narula, 2001). The extant literature provides two main explanations for the increasing relative importance of acquired foreign subsidiaries. First, foreign acquisitions strengthen the MNC’s competitive advantage through enhanced economies of scale or diversification of foreign operations (Zander and Sölvell, 2002; Bergek and Berggren, 2004). Second, whenever foreign acquisitions target firms with a long-standing presence in local markets, and sometimes also own affiliates in foreign countries, they offer the acquiring MNC access to “instant local embeddedness” and rapid accumulation of advanced technological capabilities (Doz and Prahalad, 1991; Hitt et al., 1996).2 Whatever the drivers behind acquisitions, acquired foreign subsidiaries have a considerable effect on the MNC’s overall technological portfolio in terms of the scope and profile of foreign R&D (Håkanson and Nobel, 1993; Zander, 1999; Blomkvist et al., 2014). In some foreign acquisitions, access to new technological knowledge can be endogenous to the choice of foreign market entry mode. In these cases, subsequent technological performance and contributions to the MNC group can be expected to be even greater. Some of the acquired technological knowledge may duplicate knowledge that already exists elsewhere within the MNC (Zander, 1998; Zander and Sölvell, 2002; Kappen, 2011). Therefore, a number of these acquired subsidiaries may experience subsequent reductions in resources and activities (Håkanson & Kappen, 2016). However, when an acquired subsidiary is purchased specifically for its novel and unique technological knowledge, it is more likely to retain its advanced status and the resources it needs to sustain its mandate and local R&D activities (Cantwell and Mudambi, 2005). In the generic scenario, at the time of acquisition acquired subsidiaries possess a high degree of external embeddedness and no internal embeddedness within the MNC group. Previous studies have indicated that the integration of acquisitions might be costly and arduous because of differences in values and beliefs between the MNC and the acquired subsidiary (Bresman et al., 1999). As a result, while some of the acquired entities tend to become integrated and serve as sources of new technological knowledge for the MNC group, others remain isolated. 3. Integration of technological knowledge in the MNC Technological knowledge does not add value in isolation, and to continuously enhance its competitive advantage the MNC must efficiently integrate such knowledge within its boundaries (Kogut and Zander, 1992, 1993). In the present study, knowledge integration is defined as the extent to which technological knowledge is shared or transferred within the MNC, and also how the knowledge that is transferred is subsequently used by units within the MNC network (Frost and Zhou, 2005; cf. Tell, 2011). The use of technological knowledge implies that any MNC unit not only receives the knowledge but is also able to extend that knowledge into related areas and thereby make novel contributions to the MNC’s technological portfolio. Nevertheless, it is well known that the integration of technological knowledge across units of the MNC is a time-consuming and costly process with a high degree of uncertainty in outcomes, particularly when knowledge encompasses significant tacit elements (Cantwell and Santangelo, 1999). For effective and efficient integration of technological knowledge to occur, it must be seen as relevant (Schulz, 2003; Yang et al., 2008). Relevance is a concept that describes how pertinent, connected, or applicable a piece of information or knowledge is to a given situation and, among foreign subsidiaries, denotes ‘the degree to which external knowledge has the potential to connect to local knowledge’ (Schulz, 2003: 442). Within the MNC hierarchy, the units below headquarters that control the most unique, valuable, and—on these accounts—relevant technological knowledge are the competence-creating subsidiaries. The formation of competence-creating subsidiaries and knowledge integration is inter-linked with changes in the innovation processes of MNCs. Initially, local-for-local or local-for-global innovation processes among foreign subsidiaries entailed the local development of new technology for use in local or international/global markets (Ghoshal and Bartlett, 1988). In other words, each foreign subsidiary was responsible for technology development in the local market in which it operated. Over time, however, global-for-global innovation processes have introduced internationally integrated innovation efforts, drawing together the collective technological knowledge residing in the multinational network to develop new and potentially path-breaking technology (Hedlund and Rolander, 1990). Whenever such global-for-global innovation processes have emerged, they are bound to have increased the extent to which technological knowledge is exchanged and integrated within the MNC. In this increasingly inter-connected organizational environment, subsidiaries develop the capacity and need to serve and be recognized as providers of strategically important knowledge (Holm and Pedersen, 2000; Najafi-Tavani et al., 2015). Subsidiaries evolve over time, and this development can proceed in different directions; certain subsidiaries gain mandates and prominence, while others see their roles within the organization being reduced or even eliminated (Birkinshaw and Hood, 1998; Birkinshaw and Fry, 1998; Foss and Pedersen, 2002). Therefore, and as a reflection of ongoing competition for resources among subsidiaries (Kappen, 2011), it is necessary for a subsidiary to serve as a source of strategically important knowledge in order for it to sustain a specific position or mandate within the MNC (Forsgren and Pedersen, 2000; Gupta and Govindarajan, 2000; Mudambi and Navarra, 2004). There is, for example, evidence suggesting that the furthering of a subsidiary’s own agenda at the expense of group-wide integration has a negative influence on its position within the MNC (Forsgren et al., 2000). Apart from changing innovation processes and organizational dynamics, MNC managerial attitudes have shifted over time toward a more geocentric approach, fostering a desire among managers to integrate useful knowledge and collaborate to solve problems that occur anywhere in the firm (Perlmutter, 1969). Accordingly, the geocentric attitudes of more evolved MNC coincide with more balanced two-way communication between headquarters and foreign subsidiaries. One significant characteristic of the geocentric MNC is the movement from parochial attitudes and interests toward the perception that any activity carried out in the MNC is for the good of the entire corporation. To paraphrase Perlmutter (1969: 14), there is a sense of a duty to share useful knowledge and help solve problems anywhere in the world. This duty also implies the rotation of personnel throughout the MNC and, consequently, the potential diffusion of knowledge and practices throughout the international organization. Similarly, Doz et al. (2001) emphasize that the modern or metanational MNC should reward contributions to global innovation, and that senior management ‘must demonstrate that knowledge hoarding is the route to a stalled career, not a means to promotion’ (ibid., 189). This shift in thinking contrasts sharply with the ethnocentric attitudes that prevailed in the early internationalization and development phases of the MNC, in which the general perception among managers was to ‘manufacture the complex products in our country and keep the secrets among our trusted home-country nationals’ (Perlmutter, 1969: 11). 3.1 Pathways of technological knowledge integration: headquarters and subsidiaries Throughout the MNC’s early development, technological knowledge is generally transferred from headquarters to foreign subsidiaries, a process that is often referred to as conventional technology or knowledge transfer (Mudambi and Navarra, 2004). Yet, with the development of competence-creating subsidiaries, which have the ability to contribute to the MNC’s overall technological portfolio, the reverse transfer of technological knowledge—from foreign subsidiaries to headquarters—has become increasingly common (Yamin, 1999; Mudambi, 2002; Yang et al., 2008; Ambos, 2016; Nair et al., 2015). This form of knowledge transfer is a process that signifies ‘subsidiary experiences that are transferred to parent companies’ (Mudambi et al., 2014: 49). Transfers of technological knowledge from foreign subsidiaries to headquarters allow headquarters to exploit local capabilities, act as intermediaries for knowledge replication within the multinational group (Yang et al., 2008), and serve as a mechanism through which the MNC can realize technological knowledge integration throughout its geographically dispersed network (Ghoshal and Bartlett, 1988). Reverse transfer of technological knowledge is more complex than conventional knowledge transfer (Yang et al., 2008). Headquarters’ dedication to learn from their subsidiaries is typically weaker than subsidiaries’ obligation to learn from their parent firm (Kogut and Zander, 1993; Gupta and Govindarajan, 2000). Hence, reverse integration of technological knowledge frequently involves the delicate issue of mandate-seeking subsidiaries needing to convince headquarters that they will contribute positively to the operations of headquarters or other units of the MNC, whereas headquarters may be interested only in specific areas of knowledge that are useful from their own perspective (Gupta and Govindarajan, 2000; McDonald et al., 2005). Previous research has suggested that certain factors might ease and foster reverse knowledge transfer. Shared values between headquarters and subsidiaries positively influence knowledge exchange; typically, subsidiaries that share the MNC’s overall strategy, goals, and values will display higher degrees of integration of technological knowledge (Ghoshal and Bartlett, 1988; Mudambi et al., 2014). Moreover, knowledge relevance also has a positive influence on knowledge integration (Schulz, 2003; Yang et al., 2008); a larger knowledge overlap between a subsidiary and its headquarters implies a greater likelihood that headquarters will take an interest in, understand, and make use of the subsidiary’s knowledge. In addition, intense communication between headquarters and subsidiaries promotes the reverse integration of technological knowledge (Ghoshal and Bartlett, 1988) because consistent communication patterns build effectiveness in innovation and knowledge replication (Cohen, 1969; Allen, 1977). 3.2 Pathways of technological knowledge integration: between subsidiaries One of the generally recognized characteristics of the well-established MNC is its initial dependence on technological and other advantages created at home and the gradual embedding processes that result in increasing knowledge creation and integration throughout the multinational group. Over time, as subsidiaries became more important and sophisticated, a number of factors contributed to the tendency to locate an increasing share of research and development in foreign subsidiaries. The ability of foreign subsidiaries to tap into localized knowledge and capabilities (Porter 1990; Cantwell, 1995; Kuemmerle, 1997; Cantwell and Piscitello, 2005) and, over time, global-for-global innovation projects have created more extensive interlinkages across otherwise separate foreign subsidiaries. As competence-creating subsidiaries come to serve as sources of new technological knowledge for one another and are expected to transfer that knowledge to other units of the MNC network (Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 1991, 2000), knowledge integration among subsidiaries increases, thus replicating and adding to the conventional transfer from headquarters to foreign subsidiaries that dominated the MNC’s early development (Mudambi and Navarra, 2004). Nevertheless, lateral integration of technological knowledge within the MNC depends on the characteristics of and relationships among its different subsidiaries. The abilities of subsidiaries to receive, adopt, and integrate technological knowledge—in other words, their absorptive capacity—vary. As Cohen and Levinthal (1990) explained, absorptive capacity is path-dependent and builds on previous knowledge—a highly significant determinant of the receiving subsidiary’s ability to integrate new technological knowledge (Gupta and Govindarajan, 2000). Accordingly, the transfer of technological knowledge among foreign subsidiaries is more easily accomplished when subsidiaries share a common technological portfolio (Zander, 1999) and have a relatively high degree of knowledge relatedness (Yang et al., 2008). Two other factors that influence the integration of technological knowledge among subsidiaries are social ties and networks (Nahapiet and Ghoshal, 1998). Knowledge is more likely to be integrated when managerial relationships are built on trust, values, and norms that are similar across MNC units (Gupta and Govindarajan, 2000; O’Donnell, 2000). Hence, social relationships and networks that incorporate trust serve as an efficient tool for knowledge integration between subsidiaries (Tsai, 2002). 4. Hypothesis development—expected patterns of technological knowledge integration in the MNC The nature and evolution of competence-creating subsidiaries, together with the development of more integrated activities and innovation processes within the MNC (Ghoshal and Bartlett, 1988), are likely to have increased the integration of technological knowledge among headquarters and foreign subsidiaries. Although such developments probably have observable effects at a more aggregate level, we contend that the evolutionary processes of greenfield and acquired subsidiaries differ and that this is mirrored in their patterns of technological knowledge integration. The current article represents an initial attempt to longitudinally assess and analyze expected patterns of technological knowledge integration across competence-creating subsidiaries and headquarters; that is, we argue and test for potential heterogeneity in the degree and pace of technological knowledge integration (see Table 1). Table 1. Technological integration of greenfield and acquired advanced foreign subsidiaries to headquarters and other foreign subsidiaries of the MNC Type of subsidiary Technological integration with headquarters Technological integration with greenfield or acquired subsidiaries Greenfield Hypothesis 1a Hypothesis 1b Acquired Hypothesis 2a Hypothesis 2b Type of subsidiary Technological integration with headquarters Technological integration with greenfield or acquired subsidiaries Greenfield Hypothesis 1a Hypothesis 1b Acquired Hypothesis 2a Hypothesis 2b View Large Table 1. Technological integration of greenfield and acquired advanced foreign subsidiaries to headquarters and other foreign subsidiaries of the MNC Type of subsidiary Technological integration with headquarters Technological integration with greenfield or acquired subsidiaries Greenfield Hypothesis 1a Hypothesis 1b Acquired Hypothesis 2a Hypothesis 2b Type of subsidiary Technological integration with headquarters Technological integration with greenfield or acquired subsidiaries Greenfield Hypothesis 1a Hypothesis 1b Acquired Hypothesis 2a Hypothesis 2b View Large 4.1 Technological knowledge integration of competence-creating greenfield subsidiaries Once started as mini-replicas of headquarters, greenfield subsidiaries generally share the same technological platform, norms, and culture as headquarters (White and Poynter, 1984). Technological knowledge transferred from headquarters to the subsidiary represents the initial platform that may be used when responding to business opportunities that emerge in the local business context. The subsidiary receives investments, products, and/or technical support from headquarters, and the knowledge that develops within a greenfield investment is strongly influenced by the parent firm (Schmid and Schurig, 2003). Generally, through the use of expatriates, organizational heritage in terms of routines, practices, and norms is also transferred, resulting in high degrees of knowledge relatedness and relevance, absorptive capacity, and technology integration between greenfield subsidiaries and headquarters (Cohen and Levinthal, 1990; Schulz, 2003; Yang et al., 2008). Although the process is initially driven by headquarters, a scenario in which the greenfield subsidiaries start seeking to gain lateral recognition or to achieve more central network positions and organizational influence is likely to develop (Birkinshaw and Hood, 1998; Mudambi et al., 2014). Accordingly, social and technological knowledge integration between headquarters and greenfield subsidiaries is likely to be stronger compared to relations with other subsidiaries of the MNC. Hypothesis 1a: Among greenfield competence-creating subsidiaries, the degree and pace of technological knowledge integration are higher with headquarters than with other foreign subsidiaries. Because knowledge sharing is critical for subsidiary development, the maintenance of a mandate, and the ultimate survival of a subsidiary is almost axiomatic (Astley and Zajac, 1990; Forsgren and Pedersen, 2000; Gupta and Govindarajan, 2000; Mudambi and Navarra, 2004; Cantwell and Mudambi, 2005). Nevertheless, the literature on embeddedness has argued that some subsidiaries are more deeply embedded within the organization, whereas others remain outsiders or operate as isolated islands within the MNC group (Bouquet and Birkinshaw, 2008; Monteiro et al., 2008). Distinguishing among different types of subsidiaries and drawing on the recognition that normative integration, consistent communication patterns, and social ties positively contribute to technological knowledge integration (Burns and Stalker, 1961; Allen and Cohen, 1969; Van Maanen and Schein, 1979; Van de Ven, 1986) lead to the expectation that greenfield subsidiaries are more connected insiders of the organization than acquired subsidiaries. Because of its historical evolution, a greenfield subsidiary not only shares the technological base of the MNC but also has a well-developed intra-MNC network with other units in similar organzational positions. In other words, greenfield subsidiaries typically have managers who are well embedded within the MNC organization and therefore exhibit relatively high degrees of internal legitimacy (Cantwell and Mudambi, 2005). In contrast, the identity and social networks of managers and executives of acquired subsidiaries are typically related to some former parent group (Sambharya, 1996; Mudambi et al., 2014). Although the degree of the internal embeddedness of acquired subsidiaries is likely to increase over time, recent research suggests that the outsider effect can be long-lasting (Blomkvist et al., 2014). At the time of acquisition, acquired subsidiaries have no organizational or social ties to other parts of the MNC, as their technological knowledge was developed in isolation from the acquiring MNC (Kogut and Zander, 1993; Bresman et al., 1999; Yamin, 1999). Whereas acquired subsidiaries may become more like greenfield subsidiaries over time, the long-term dynamics of technological trajectories suggest, on average, that the subsidiaries will remain technologically different from and less prone to integration with the greenfield units for extensive periods of time. Hypothesis 1b: Among greenfield competence-creating subsidiaries, the degree and pace of technological knowledge integration are higher with other greenfield subsidiaries than with acquired subsidiaries. 4.2 Technological knowledge integration of acquired competence-creating subsidiaries In the MNC, headquarters serve as the main decision makers in terms of acquiring operations and diversifying the firm’s overall technological portfolio. Headquarters often have a special interest in the technological knowledge developed by acquired competence-creating subsidiaries because they are likely to contribute technological knowledge that is new to the overall MNC and promise future growth potential (Doz and Prahalad, 1991; Hitt et al., 1996; Gupta and Govindarajan, 2000; Björkman et al., 2004; Blomkvist et al., 2014). However, the attractiveness of acquired units that contribute with new technological knowledge and growth options also functions as a barrier to knowledge exchange. Given their differences in technological bases and organizational routines, the integration of acquisitions within the entire multinational network can be expected to be a costly, complex, and long-term process (Kogut and Zander, 1993; Bresman et al., 1999; Yamin, 1999). At the time of the acquisition, the acquired subsidiary has few if any internal links within the MNC and will therefore find it difficult to share and absorb technological knowledge. The main link within the organization is with headquarters, which have first-hand information about the technological portfolio of the acquired subsidiary and a potential interest in assimilating this knowledge, if it is found to be relevant (Bartlett and Ghoshal, 1989; Zander and Zander, 1996; Björkman et al., 2004). Among other foreign units, newly acquired subsidiaries may be seen as unwanted competition for scarce resources. Whenever this is the case, it will result in restricted contacts and concerted efforts to protect what is seen as proprietary technological knowledge. Thus, knowledge integration of acquired subsidiaries is expected to be greater with headquarters than with other subsidiaries of the MNC. Hypothesis 2a: Among acquired competence-creating subsidiaries, the degree and pace of technological knowledge integration are higher with headquarters than with foreign subsidiaries. As indicated, the degree to which the technological knowledge of acquired subsidiaries is integrated with other subsidiaries of the MNC—both greenfield and other acquired units—is likely to be more limited than it is with headquarters. Acquired subsidiaries initially lack intra-organizational ties, and prior studies have suggested that such ties are difficult to establish, even over time (Kogut and Zander, 1993). Additionally, differences in technological bases make knowledge integration more difficult. Nevertheless, we expect a differentiation in the degree and pace of integration of technological knowledge of acquired foreign subsidiaries with the two types of subsidiaries. The basic argument is that because acquired competence-creating subsidiaries have a relatively high innovative output (Mudambi and Navarra, 2004; Blomkvist et al., 2014), there are more options for recombination and higher degrees of internal legitimacy, and, therefore, a greater likelihood of integration with other acquired subsidiaries. It is also likely that although acquired subsidiaries generally lack intra-organizational ties, they actively seek to establish collaborations and networks within the MNC organization and, as ‘outsiders’, may find it easier to attract the attention and support from similar types of units in the organization. Thus, in the case of acquired subsidiaries the selection processes that connect units within the MNC may favor the systematic grouping of acquired ‘outsiders’. Therefore, the integration of technological knowledge of acquired competence-creating subsidiaries is expected to be stronger with other acquired subsidiaries than with greenfield subsidiaries. Hypothesis 2b: Among acquired competence-creating subsidiaries, the degree and pace of technological knowledge integration are higher with other acquired subsidiaries than with greenfield subsidiaries. 5. Research design 5.1 Data and data collection To test the hypotheses and explore patterns of technological knowledge integration across units of the MNC, the article examines the US patenting activity of 22 Swedish multinationals from 1893–2008. These multinationals represent a significant number of inventions and R&D expenditures in Swedish industry (Wallmark and McQueen, 1986; Håkanson and Nobel, 1993). Together, the sample firms represent a broad variety of industries, including pulp and paper, motor vehicles, pharmaceuticals, and telecommunications equipment (Appendix). Although they are not necessarily representative of firms in other countries, all of the sample firms have been significantly exposed to international markets and international business, and should therefore serve as a useful testing ground for identifying patterns of technological knowledge integration in geographically dispersed organizations. To be able to identify the sample firms and subsidiaries in a way that allows for longitudinal comparisons, a historical examination of each individual firm was conducted, controlling for possible name changes and changes in ownership through mergers and acquisitions. The subsidiaries were identified through a systematic review of the history of each individual sample firm using the publications Svenska Aktiebolag–Handbok för Affärsvärlden, Koncernregistret–KCR, and Who Owns Whom–Continental Europe. Complementary publications on company histories and the corporate trees offered by the Thomson Innovation database were also used in the consolidation process. Following previous practice, we use patents within specific patent classes as an indicator of technological knowledge (Jaffe, 1986; Archibugi and Pianta, 1992; Almeida and Phene, 2004; Feinberg and Gupta, 2004; Blomkvist et al., 2010). An advantage of patents is that they provide consistent and comparable information over extended periods, which makes them suitable for longitudinal studies. Patent activity correlates highly with other measures of technological activity and innovative performance, such as research and development expenditures and new product introductions. R&D inputs, patent counts, patent citations, and new product announcements may all be used for studying technology development and integration (Hagedoorn and Cloodt, 2003). Importantly, the data only include competence-creating subsidiaries, which in terms of knowledge origins means including only foreign subsidiaries that were awarded a US patent in a patent class in which the overall MNC was not previously active. Following Blomkvist et al. (2010, 2014), entry into new technologies was measured at the level of approximately 475 technology classes, as defined by the US Patent Office. These ‘new’ patents were subsequently followed over time to observe potential integration of technological knowledge between MNC units. The data solely include all new patenting by first-order, majority-owned subsidiaries for the periods during which they belonged to the parent companies. Thus, the insights from this article are limited to MNC integration of competence-creating subsidiaries, and the article does not account for the potentially wide range of minor technological advancements and knowledge replications that may have occurred at the same time in the multinational network.3 More specifically, the study relies on Swedish firms’ patenting activity in the United States, and thus covers patents that are considered to be of high quality and/or commercial value. The completion of a US patent application requires that the location of the inventor be recorded (rather than the location of the research unit). Assuming that the location of the inventor usually matches the geographical location of invention, it is possible to identify the location of the research and development activities underlying the invention. Thus, for every US patent registered under the name of any of the sample firms and their subsidiaries, the country where the patent originated is known.4 This knowledge is an important advantage because company-specific patenting policies (for example, involving the registration of patents under the name of the parent company rather than that of the inventing subsidiary) could otherwise conceal the correct geographical distribution of technological activity and invention. Although the use of patent data is an established and commonly used method for capturing technological capabilities in firms, it has limitations. A patent is an indicator of technological knowledge and excludes other types of improvements across different stages of the value chain that are as important for firm performance and success (Phene and Almeida, 2008). Moreover, patents only capture elements of knowledge that are codifiable and disregard tacit knowledge, particularly in the context of strongly networked firms such as a MNC (Mudambi and Navarra, 2004). On the positive side, the majority of the sample firms operated in medium- to high-tech industries, in which patenting is seen as important for sustained competitiveness. Additionally, and although differences in the patenting propensity among the sample firms may cause variation in the number of patents recorded for each firm, this difference should not in itself affect the overall patterns of knowledge integration. 5.2 Main variable As a typical outcome of competence-creating subsidiaries, we were interested in technological knowledge that, at the time it was first leveraged, made a new contribution to the entire multinational group (Blomkvist et al., 2010, 2014; Cantwell and Mudambi, 2005). We then followed this technological knowledge over time to observe potential integration with other units of the MNC. The main variable of interest is integration of technological knowledge, which is detected whenever a greenfield or acquired subsidiary is awarded a patent in a technology that is new to the entire multinational group, and patenting activity in the same technology then follows either at headquarters or in another type of foreign subsidiary.5 Whenever this happens, we assume that some form of technological knowledge integration has occurred; that is, that technological knowledge has been transferred, and then put into use by the receiving unit. Although the empirical investigation reveals patterns in technological knowledge integration in the MNC, it should be emphasized that the mechanisms behind integration remain unknown. The integration of technological knowledge could have resulted through several different and possibly overlapping ways (Wilkins, 1974), including technology transfer between subsidiaries of the multinational group, the international mobility of individuals within the multinational group, knowledge exchange as part of collaboration or internationally coordinated research and development projects, or acquisitions that add to the acquiring company’s existing stock of knowledge. It is also possible that, in some cases, technological knowledge integration is the outcome of independent research efforts by two or more units of the multinational network (for example, drawing on strictly local knowledge sourcing, enhanced access to globally available information, or publicly available patent databases). Typically, however, the intra-corporate environment is expected to play the most decisive role in producing and explaining patterns of technological knowledge integration in the MNC (cf. Reddy and Zhao, 1990; Kogut and Zander, 1993; Almeida et al., 2002; Saggi, 2002). 5.3 Statistical method To investigate potential differences in integration patterns among greenfield and acquired subsidiaries, we employed nonparametric maximum likelihood Kaplan–Meier estimates. Kaplan–Meier survival analysis is a method that generates tables and plots of survival or hazard functions for event history data, thereby serving as a descriptive tool for time-to-event variables. More specifically, the survivor function shows the probability that an event time is greater than t, where t can take the value of any non-negative number. In the case of no censoring—that is, all observations experience an event—the survivor function simply reveals the proportion of observations with event times greater than t. The method makes it possible to test the null hypothesis that survivor functions for two or more groups are identical, which in the present case means testing for different patterns in technological knowledge integration between greenfield and acquired competence-creating subsidiaries. 6. Findings The descriptive data indicate that, during the window of observation, a total of 469 new technologies were introduced and patented by the subsidiaries under investigation. In 209 of these cases, additional patenting in the same classes was subsequently observed elsewhere in the MNC, suggesting that technological knowledge had been transferred and used by other than the originating units.6 The geographical distribution of invention shows that a majority of the technologies emerged and were subsequently integrated by units in Western countries. Interestingly, headquarters seem to dominate technological knowledge integration, accounting for 119 (57%) of all cases where the same technologies were observed in more than one location (see Table 2). This phenomenon compares well with the logic that headquarters have the possibility and the resources to integrate new technological knowledge from their foreign subsidiaries (Kogut and Zander, 1993; Yang et al., 2008). Table 2. Technological integration: spatial distribution Country Number of new technologies emerging Country Number of new technologies integrated The United States 261 Sweden 148 Germany 87 The United States 36 The UK 39 Germany 20 The Netherlands 21 France 13 Switzerland 18 The Netherlands 11 France 16 The UK 11 Finland 15 Italy 8 Denmark 14 Canada 6 Italy 11 Finland 6 Norway 11 Belgium 5 Canada 10 Denmark 5 Australia 8 Austria 4 Japan 7 South Korea 4 Belgium 4 Norway 3 Ireland 2 Czech Republic 1 South Korea 2 New Zealand 1 Other Africa 2 Portugal 1 Argentina 1 Switzerland 1 Austria 1 Spain 1 New Zealand 1 Russia 1 Spain 1 Serbia 1 Other Asia 1 Country Number of new technologies emerging Country Number of new technologies integrated The United States 261 Sweden 148 Germany 87 The United States 36 The UK 39 Germany 20 The Netherlands 21 France 13 Switzerland 18 The Netherlands 11 France 16 The UK 11 Finland 15 Italy 8 Denmark 14 Canada 6 Italy 11 Finland 6 Norway 11 Belgium 5 Canada 10 Denmark 5 Australia 8 Austria 4 Japan 7 South Korea 4 Belgium 4 Norway 3 Ireland 2 Czech Republic 1 South Korea 2 New Zealand 1 Other Africa 2 Portugal 1 Argentina 1 Switzerland 1 Austria 1 Spain 1 New Zealand 1 Russia 1 Spain 1 Serbia 1 Other Asia 1 View Large Table 2. Technological integration: spatial distribution Country Number of new technologies emerging Country Number of new technologies integrated The United States 261 Sweden 148 Germany 87 The United States 36 The UK 39 Germany 20 The Netherlands 21 France 13 Switzerland 18 The Netherlands 11 France 16 The UK 11 Finland 15 Italy 8 Denmark 14 Canada 6 Italy 11 Finland 6 Norway 11 Belgium 5 Canada 10 Denmark 5 Australia 8 Austria 4 Japan 7 South Korea 4 Belgium 4 Norway 3 Ireland 2 Czech Republic 1 South Korea 2 New Zealand 1 Other Africa 2 Portugal 1 Argentina 1 Switzerland 1 Austria 1 Spain 1 New Zealand 1 Russia 1 Spain 1 Serbia 1 Other Asia 1 Country Number of new technologies emerging Country Number of new technologies integrated The United States 261 Sweden 148 Germany 87 The United States 36 The UK 39 Germany 20 The Netherlands 21 France 13 Switzerland 18 The Netherlands 11 France 16 The UK 11 Finland 15 Italy 8 Denmark 14 Canada 6 Italy 11 Finland 6 Norway 11 Belgium 5 Canada 10 Denmark 5 Australia 8 Austria 4 Japan 7 South Korea 4 Belgium 4 Norway 3 Ireland 2 Czech Republic 1 South Korea 2 New Zealand 1 Other Africa 2 Portugal 1 Argentina 1 Switzerland 1 Austria 1 Spain 1 New Zealand 1 Russia 1 Spain 1 Serbia 1 Other Asia 1 View Large Our first statistical model addressed technological knowledge integration of greenfield subsidiaries or, more specifically, the extent to which they were integrated with headquarters, other greenfield subsidiaries, and acquired subsidiaries. The data show a distinct pattern in which the technological knowledge of greenfield competence-creating subsidiaries was integrated with other greenfield subsidiaries and headquarters to a greater extent than it was with acquired subsidiaries. The mean estimated survival time for technological knowledge that emerged in a greenfield foreign subsidiary until integration with headquarters was 30 years, compared to 36 years in the case of greenfield subsidiaries and 47 years in the case of acquired subsidiaries.7 The likelihood ratio test rejects the null hypothesis of no difference between the groups (P < 0.0001). This result is illustrated graphically and, perhaps, more intuitively observed in Figure 1, which shows the observed difference in the survivor functions for the three groups. Figure 1. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. Figure 1. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. Figure 2 shows that Hypothesis 1a, which suggests that technological knowledge integration of greenfield subsidiaries is faster with headquarters than with other foreign subsidiaries, is clearly supported (P < 0.005). The mean estimated survival time for technological knowledge that was first leveraged in a greenfield foreign subsidiary until integration with headquarters was 30 years, compared to 38 years in the case of other foreign subsidiaries. Hypothesis 1b, which suggests that greenfield subsidiaries are integrated to a greater extent with other greenfield subsidiaries than with acquired subsidiaries, is also supported (P < 0.0001, Figure 3). In other words, acquired subsidiaries are slower to replicate and integrate technological knowledge developed by greenfield subsidiaries. Figure 2. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. Figure 2. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. Figure 3. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. Figure 3. View largeDownload slide From greenfield subsidiaries. DF, degrees of freedom. The second set of statistical models addressed the integration of technological knowledge leveraged by acquired subsidiaries with headquarters, greenfield subsidiaries, and acquired subsidiaries. The results show only slight differences in estimated survival rates between the three groups as observed from mean survival times; hence, nothing more than an indicative pattern exists in the pace of integration of technological knowledge from acquired subsidiaries. The mean estimated time for knowledge integration with headquarters was 13 years versus 31 years for integration with greenfield subsidiaries and 9 years for integration with acquired subsidiaries. However, the likelihood ratio test does not reject the null hypothesis of no integration differences between the groups (Figure 4). Figure 4. View largeDownload slide From acquired subsidiaries. DF, degrees of freedom. Figure 4. View largeDownload slide From acquired subsidiaries. DF, degrees of freedom. The results lend no support for Hypothesis 2a, which predicted that among acquired subsidiaries, the degree and pace of technological knowledge integration are higher with headquarters than with other foreign subsidiaries (Figure 5). Contrary to expectations, the degree of technological knowledge integration tends to be higher with other subsidiaries than with headquarters. There is no statistical difference in the mean paces of technological knowledge integration, which were 13 years for headquarters and 28 years for foreign subsidiaries. Figure 5. View largeDownload slide From acquired subsidiaries. Figure 5. View largeDownload slide From acquired subsidiaries. Hypothesis 2b, which posited that the degree and pace of technological knowledge integration are greater with acquired subsidiaries than with greenfield subsidiaries, was not supported. The tendency is for the degree of integration to be more extensive with greenfield subsidiaries, but also for the pace of integration to be faster with acquired subsidiaries. The results show an estimated mean survival time of technological knowledge developed by acquired subsidiaries of 9 years for acquired subsidiaries and 31 years for greenfield subsidiaries (Figure 6). The results indicate that a certain dynamic may be at play in the integration of technological knowledge originating in acquired subsidiaries, but statistical insignificance (partly due to the small number of observations) means that such conclusions are only tentative. Figure 6. View largeDownload slide From acquired subsidiaries. Figure 6. View largeDownload slide From acquired subsidiaries. 6.1 Additional tests The integration of technological knowledge may have become stronger in more recent times; in other words, the regimes of integration of subsidiaries with the rest of the MNC group may have changed over time. It is generally acknowledged that foreign subsidiaries have come to account for an increasing share of all technological activities of the MNC (Cantwell, 1989; Dunning, 1994; Reger, 2002; UNCTAD, 2005; Blomkvist et al., 2012) and, over time, the emergence of global-for-global innovation processes should have enhanced inter-connectedness and innovation quality within the MNC network (Ghoshal and Bartlett, 1988; Hedlund and Ridderstråle, 1995). Throughout the years, technology development has also evolved to become a more fine-grained and complex process, drawing upon several technological knowledge bases and crossovers, and often demanding greater interdependence and inter-unit collaboration (Granstrand et al., 1997). Such integrated innovation efforts would put geographically dispersed units into stronger contact with one another, thus facilitating both planned and accidental knowledge integration. To address the issue of whether and how integration has evolved over time, the sample was split into several time increments and all of the life-table analyses were re-estimated. First, the sample was restricted to include only technological knowledge that emerged after 1945. The results were qualitatively the same as those for the complete sample, which in large part reflects the structure of the data, in which most of the registered technological activity occurred after the Second World War. Second, the sample was restricted to include only (i) knowledge that emerged after 1970, and (ii) knowledge that emerged after 1990. Again, the patterns were similar to those of the unrestricted sample. Nevertheless, restricting the sample in this manner involved certain limitations. For instance, the number of acquired subsidiaries monotonically declined, making it generally difficult to draw inferences about this group of subsidiaries. Additionally, the issue of right-censoring became more critical with a shorter window of observation; that is, the technological knowledge that emerged during later years did not have as much time to become integrated within the MNC group before the closing of the window of observation. Although life-table analyses are useful for exploring overall trends and patterns, the number of variables that can be included in addition to the treatment variable is limited. Under these circumstances, sample slitting is useful for further investigation of the data. Whereas the sample firms were selected using criteria that included both firm size (in terms of annual turnover) and technological activity (in terms of patenting), and excluded firms in industries with relatively low patenting propensities (such as banking, insurances, mining, power generation, and shipbuilding), the sample still comprises firms from a broad spectrum of industries. As such, it would be of interest to conduct a preliminary check of the observed integration patterns by controlling for industry type. However, assigning the sample firms to a fine-grained industry cohort structure proved infeasible because of the limited number of sample firms. Instead, the firms were split into two cohorts according to the Organisation for Economic Co-operation and Development standards of industry technology intensity (OECD, 2003), corresponding to firms in so-called high- and medium-high-technology industries on the one hand and firms in medium-low- and low-technology industries on the other.8 The results from these estimations produced some interesting preliminary observations. For greenfield subsidiaries, the trend was robust in the high-technology cohort but weaker in the low-technology cohort. For acquired subsidiaries, the results were the opposite. That is, the results were consistent with the unrestricted sample for the low-technology cohort but even weaker (but still similar) for the high-technology cohort. To take a closer look at integration dynamics, we further explored whether technological knowledge integration would proceed faster if a specific dyad of units—for example, a greenfield subsidiary in Country A and a sister greenfield subsidiary in Country B—had already been involved in the integration of technological knowledge (or already started the process of integrating knowledge that would become shared by the two units). The underlying expectation was that any prior instances of integration of technological knowledge would speed up subsequent integration processes, on account of more efficient exchange and the formation of stronger social ties and trust across the dyad units. As the analyses draw exclusively upon the information provided by confirmed cases of technological knowledge integration, the results can only give an initial indication of integration dynamics among the sample firms. For greenfield subsidiaries, the results show that, for the first cases of technological knowledge integration within specific dyads with other greenfield subsidiaries, the average time between the first case of knowledge emergence and reappearance is 9.5 years (median of 5 years). For subsequently recorded integrations of technological knowledge within the specific dyads, the time is significantly shorter, at 4.1 years (median 3 years). The corresponding figures for technological knowledge integration within dyads that involve acquired subsidiaries are 15.1 years (median 9.5) for the first recorded instance of integration, and 2.5 years (median 2.5) for subsequent integrations.9 The observed dynamics of both greenfield-to-greenfield and greenfield-to-acquired unit dyads are statically significant at the 5% level. For integration with headquarters, the first recorded integration of technological knowledge occurs within 13.4 years (median 6.5), whereas subsequent cases of integration occur within an average of 12.4 years (median 7).10 For acquired subsidiaries, the generally smaller number of observations makes it difficult to assess integration dynamics in the different groups of dyads.11 Within specific dyads of acquired and greenfield subsidiaries, the time between knowledge emergence and reappearance is shorter for cases of repeat technological knowledge integration (down from 8.4 years to 1 year). There is no observable difference between first and subsequent cases of technological knowledge integration within dyads that involve acquired units (average times between technological knowledge emergence and reappearance are 4.8 and 5.5 years, respectively). As in the case of greenfield subsidiaries, there are no indications of increasing speed in the integration of technological knowledge with headquarters (the average time between technological knowledge emergence and reappearance is 5.4 years for first-time integrations and 4.0 years for subsequent integrations). These results underline the particularly strong technological knowledge integration between foreign greenfield subsidiaries and how, in integration terms, the acquired units tend to remain comparatively unconnected within the MNC network. The absence of indications of a cumulative dynamic in the integration of technological knowledge with headquarters is noteworthy. Overall, and especially in comparison to developments across dyads of foreign subsidiaries, the figures suggest that beyond original vertical transfers of technology the integration of technological knowledge between foreign units and headquarters proceeds at a relatively slow pace. It is only possible to speculate why this is the case, but the observed patterns could be an indication that any virtuous cycles of subsidiary–headquarters interaction and integration are relatively rare or hard to come by. Although the data do not allow us to get at any of the underlying mechanisms, and the numbers of observation are limited for some of the combinations of greenfield and acquired units, the findings do suggest that the dynamics of technological knowledge integration across different units of the MNC network deserves some further and more in-depth examinations in future research. In sum, the evidence from the additional tests supports the main conclusion that intersubsidiary differentiation matters for technological knowledge integration patterns. However, because contingencies may have an effect on or alter observed patterns, further investigations that systematically account for contingencies such as time period or industry characteristics would be worthwhile. 7. Discussion and conclusions This study set out to develop our understanding of technological knowledge integration within MNCs and add to the current literature about knowledge management in the MNC. By highlighting distinctly different integration patterns among greenfield and acquired competence-creating subsidiaries, the article complements prior work that has emphasized the direct influence of diverse foreign investment strategies on technological activities (Håkanson and Nobel, 2001; Anand, 2011; Blomkvist et al., 2014). Prior research has also underlined the influence of subsidiary roles on capability development and the integration of knowledge with other parts of the MNC network. Generally, competence-creating subsidiaries have been found to be more innovative than competence-exploiting subsidiaries (Mudambi and Navarra, 2004) and to serve as sources of technological knowledge for other units of the MNC to a greater extent than competence-exploiting subsidiaries (Mudambi et al., 2014). However, less emphasis has been placed on differences between greenfield and acquired competence-creating subsidiaries, and relatively little is known about different types of subsidiaries’ influence on technological knowledge integration within the MNC. The present study provides some first-hand empirical evidence in this respect, as the findings demonstrate that the type of subsidiary has a significant influence on the integration of technological knowledge and, therefore, how knowledge emerges and is subsequently leveraged throughout the MNC. Apart from revealing distinctive patters of technological knowledge integration across greenfield and acquired competence-creating subsidiaries, the results also suggest that headquarters play a special role in intra-MNC knowledge integration. Whatever the underlying reasons, in terms of technological knowledge integration headquarters do not act like any of the foreign subsidiaries in the MNC network, and there are indications that, in relative terms, the approach to technological knowledge integration differs with regard to greenfield and acquired competence-creating subsidiaries (Figures 2 and 5). Potential explanations could be found in a relatively high level of absorptive capacity (Cohen and Levinthal, 1990; Lane and Lubatkin, 1998), differentiated levels of control and integration across subsidiary types, or ‘cherry picking’ when it comes to accessing and integrating the knowledge assets of foreign units. Unfortunately, the nature of the data at hand does not allow for a more penetrating analysis of these different and probably overlapping possibilities. These findings and notions raise important questions for future research. First, additional research is needed to document the mechanisms of technological knowledge integration and gain a better understanding of the different processes through which foreign subsidiaries function as sources and integrators of technological knowledge. Second, further research is needed into which factors may influence and drive the integration of technological knowledge from competence-creating subsidiaries to headquarters and other subsidiaries. Controlling for the effect of different control and incentive mechanisms and for the effect of more specific subsidiary characteristics, such as age (Rabbiosi and Santangelo, 2013), location (Driffield et al., 2016), size, R&D budget, and performance, would be interesting in terms of developing a deeper understanding of the drivers of technological knowledge integration. Although it is beyond the scope of the present article to explore heterogeneity at the firm level, how and why patterns of technological knowledge integration may differ across MNCs is another issue worthy of further investigation (Belderbos et al., 2013). One could hypothesize that the patterns observed in the present study apply to other MNCs, particularly those originating in smaller economies; however, caution should be taken when making far-reaching generalizations. The current sample contains only Swedish MNCs with potentially particular paths of internationalization, organizational structures and processes, and acquisition targets. Therefore, additional studies incorporating larger samples and MNCs of different countries of origin are needed to confirm and elaborate on the results. Also, it should be emphasized that the current study has focused on the historical development of now well-established MNCs, some of which have operated in foreign locations for more than a century. The research and empirical findings do not capture the development of MNCs of more recent date, specifically those referred to as international new ventures or born globals with rapid and often unconventional internationalization processes (Oviatt and McDougall, 1994; Knight and Cavusgil, 2004). Additionally, the specific integration mechanisms cannot be fully assessed using the current data. Although there are reasons to believe that internal transfers and knowledge exchange play an important role in the international integration of technological knowledge within the MNC (Reddy and Zhao, 1990; Kogut and Zander, 1993; Gupta and Govindarajan, 2000), the influence from other mechanisms of integration such as independent knowledge assimilation and research endeavors that draw upon external knowledge exchange remains unknown. The main managerial implication is that the integration of competence-creating subsidiaries should be handled as a strategic issue. By contemplating the different integration patterns that have been found, managers may become more attentive to how their portfolio of different types of subsidiaries integrates technological knowledge within the MNC. They could thereby discover and develop new and refined approaches to the global coordination and exploitation of technological knowledge in the MNC. Second, the observed integration patterns may alert managers to differentiated targeting of subsidiaries for enhanced integration of technological knowledge, and serve as a starting point for designing the appropriate control and incentive systems. Exactly what these control and incentive systems would look like depends on firm-specific circumstances; this issue has not been explored in detail in the present study. On a final and more speculative note, the empirical observations appear to question the established notion that the formation of shared values and norms and uniform corporate cultures have permitted the MNC to achieve maximum inter-unit interaction and innovation output throughout its organization (cf. Hedlund, 1986; Bartlett and Ghoshal, 1989). According to the tendencies revealed by the data, technological knowledge integration is easier across units that are more alike, suggesting that the creation of general between-unit-type coherence is difficult, perhaps because of issues related to insider and outsider groups within the MNC organization (Mudambi et al., 2014). Alternatively, attempts to instill shared values, norms, and a uniform corporate culture across different types of units in the MNC may have been limited. If this is the case, management practices and their potentially positive influences on inter-unit integration of technological knowledge appear to be awaiting a more forceful and widespread introduction. Footnotes 1 Technological knowledge refers to knowledge that deals with the creation and use of technical means, specifically, new production processes or products and services developed and commercialized by business firms. 2 Foreign acquisitions contribute more than just technological knowledge when they become part of a multinational group. According to the strategy literature, their influence on and contribution to the entire MNC and its operations include the ability to fulfil various functions in globally integrated manufacturing and sales networks (Dunning and Lundan, 2008; Buckley, 2011). This point is not emphasized in the present article. 3 Further, note that not all patents were necessarily commercialized and that equal commercialization propensities were given to greenfield and acquired subsidiaries. The results should still reveal baseline tendencies in their relative importance for the technological and strategic renewal of the parent corporations. 4 A small proportion of all patents in the current dataset were associated with several inventors of different nationalities. In those cases, the recorded geographical location of invention was coded as that of the first inventor. 5 We are only concerned with the first instance of technological knowledge integration and whether it occurs at headquarters or in a greenfield or acquired subsidiary. Moreover, headquarters are viewed as synonymous with any identified patenting units in the home country (except for acquired units), which are typically but not always R&D units adjacent to headquarters. 6 To maintain the distinction between headquarters and foreign units, these numbers, as well as the empirical analyses, exclude any competence-creating units that were acquired in the home country of Sweden. They include a limited number of technologies that were introduced simultaneously by two or more units (all parallel introductions were included in the count), and for these cases the analyses accounted for all possible sequences of integration by other units. 7 The mean survival time is underestimated because the largest observation is censored and the estimation restricted to the largest event time. However, it should be pointed out that the estimated mean survival times include right-censored observations. Within the group of technologies where integration could be observed, times to integration were substantially shorter. 8 The sample firms were grouped into either the high- and medium-high-technology industry cohorts (AGA, Alfa Laval, ASEA, Astra, Atlas Copco, Electrolux, Ericsson, Perstorp, Pharmacia, Saab-Scania, SKF, and Volvo) or the medium-low- and low-technology industry cohort (ESAB, Esselte, Fagersta, MoDo, PLM, Sandvik, SCA, Stora, Tetra Pak, and Trelleborg). 9 There were only two cases of repeat intra-dyad cases of technological knowledge that emerged among greenfield subsidiaries and subsequently appeared among acquired units. 10 For technological knowledge integration between greenfield subsidiaries and headquarters, and in line with expectations, in the majority of cases the first instance of knowledge integration originally emerged at headquarters (71% of all cases). 11 Limited numbers of observations were found among repeat intra-dyad cases of technological knowledge that emerged among acquired subsidiaries and subsequently appeared among greenfield units (one observation), and repeat intra-dyad cases of technological knowledge that emerged among acquired subsidiaries and subsequently appeared among acquired units (two observations). 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Appendix The sample firms Firma Industry Founding year Total number of technologies represented at subsidiary level AGA Industrial gases 1904 12 Alfa Laval Separators, agricultural equipment 1878 57 ASEA Power generation and distribution equipment 1883 14 Astra Pharmaceuticals 1913 8 Atlas Copco Pneumatic and hydraulic equipment 1873 31 Electrolux White goods, home appliances 1910 57 Ericsson Telecommunication equipment 1876 39 ESAB Welding equipment 1904 10 Esselte Office equipment 1913 20 Fagersta Specialty steel and metals, rock drills 1873 1 MoDo Pulp and paper 1873 2 Perstorp Chemicals, conglomerate 1880 6 Pharmacia Pharmaceuticals 1911 6 PLM Packaging material 1919 3 Saab-Scania Automotive products, aircraft 1891 3 Sandvik Specialty steel and metals, hard materials 1862 57 SCA Pulp and paper 1929 29 SKF Ball- and roller bearings 1907 65 Stora Pulp and paper 1888 10 Tetra Pak Liquid packaging machinery 1946 8 Trelleborg Rubber products, conglomerate 1905 14 Volvo Automotive products, food 1927 22 The sample firms Firma Industry Founding year Total number of technologies represented at subsidiary level AGA Industrial gases 1904 12 Alfa Laval Separators, agricultural equipment 1878 57 ASEA Power generation and distribution equipment 1883 14 Astra Pharmaceuticals 1913 8 Atlas Copco Pneumatic and hydraulic equipment 1873 31 Electrolux White goods, home appliances 1910 57 Ericsson Telecommunication equipment 1876 39 ESAB Welding equipment 1904 10 Esselte Office equipment 1913 20 Fagersta Specialty steel and metals, rock drills 1873 1 MoDo Pulp and paper 1873 2 Perstorp Chemicals, conglomerate 1880 6 Pharmacia Pharmaceuticals 1911 6 PLM Packaging material 1919 3 Saab-Scania Automotive products, aircraft 1891 3 Sandvik Specialty steel and metals, hard materials 1862 57 SCA Pulp and paper 1929 29 SKF Ball- and roller bearings 1907 65 Stora Pulp and paper 1888 10 Tetra Pak Liquid packaging machinery 1946 8 Trelleborg Rubber products, conglomerate 1905 14 Volvo Automotive products, food 1927 22 a Some firms experienced large-scale organisational changes during our window of observation. In those cases, we truncated the observations in that year. Firms that were influenced by truncation were AGA (2000, acquired by Linde), ASEA (1988, merged with Swiss Brown Boveri et Cie.), Alfa Laval (1993, acquired by Tetra Pak), Astra (1999, merged with Zeneca Group), ESAB (1994, acquired by Charter), MoDo (2000, acquired by Metsä), Perstorp (2001, acquired by Sydsvenska Kemi), Pharmacia (1990, merged with Kabi Vitrum), PLM (1999, acquired by Rexam), Scania (1990, car division acquired by GM), Stora (1998, merged with Enso), Tetra Pak (1993, acquired Alfa Laval), and Volvo (1999, car division acquired by Ford). View Large The sample firms Firma Industry Founding year Total number of technologies represented at subsidiary level AGA Industrial gases 1904 12 Alfa Laval Separators, agricultural equipment 1878 57 ASEA Power generation and distribution equipment 1883 14 Astra Pharmaceuticals 1913 8 Atlas Copco Pneumatic and hydraulic equipment 1873 31 Electrolux White goods, home appliances 1910 57 Ericsson Telecommunication equipment 1876 39 ESAB Welding equipment 1904 10 Esselte Office equipment 1913 20 Fagersta Specialty steel and metals, rock drills 1873 1 MoDo Pulp and paper 1873 2 Perstorp Chemicals, conglomerate 1880 6 Pharmacia Pharmaceuticals 1911 6 PLM Packaging material 1919 3 Saab-Scania Automotive products, aircraft 1891 3 Sandvik Specialty steel and metals, hard materials 1862 57 SCA Pulp and paper 1929 29 SKF Ball- and roller bearings 1907 65 Stora Pulp and paper 1888 10 Tetra Pak Liquid packaging machinery 1946 8 Trelleborg Rubber products, conglomerate 1905 14 Volvo Automotive products, food 1927 22 The sample firms Firma Industry Founding year Total number of technologies represented at subsidiary level AGA Industrial gases 1904 12 Alfa Laval Separators, agricultural equipment 1878 57 ASEA Power generation and distribution equipment 1883 14 Astra Pharmaceuticals 1913 8 Atlas Copco Pneumatic and hydraulic equipment 1873 31 Electrolux White goods, home appliances 1910 57 Ericsson Telecommunication equipment 1876 39 ESAB Welding equipment 1904 10 Esselte Office equipment 1913 20 Fagersta Specialty steel and metals, rock drills 1873 1 MoDo Pulp and paper 1873 2 Perstorp Chemicals, conglomerate 1880 6 Pharmacia Pharmaceuticals 1911 6 PLM Packaging material 1919 3 Saab-Scania Automotive products, aircraft 1891 3 Sandvik Specialty steel and metals, hard materials 1862 57 SCA Pulp and paper 1929 29 SKF Ball- and roller bearings 1907 65 Stora Pulp and paper 1888 10 Tetra Pak Liquid packaging machinery 1946 8 Trelleborg Rubber products, conglomerate 1905 14 Volvo Automotive products, food 1927 22 a Some firms experienced large-scale organisational changes during our window of observation. In those cases, we truncated the observations in that year. Firms that were influenced by truncation were AGA (2000, acquired by Linde), ASEA (1988, merged with Swiss Brown Boveri et Cie.), Alfa Laval (1993, acquired by Tetra Pak), Astra (1999, merged with Zeneca Group), ESAB (1994, acquired by Charter), MoDo (2000, acquired by Metsä), Perstorp (2001, acquired by Sydsvenska Kemi), Pharmacia (1990, merged with Kabi Vitrum), PLM (1999, acquired by Rexam), Scania (1990, car division acquired by GM), Stora (1998, merged with Enso), Tetra Pak (1993, acquired Alfa Laval), and Volvo (1999, car division acquired by Ford). View Large © The Author(s) 2018. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - Who is in and who is out? Integration of technological knowledge in the multinational corporation
JF - Industrial and Corporate Change
DO - 10.1093/icc/dty024
DA - 2019-06-01
UR - https://www.deepdyve.com/lp/oxford-university-press/who-is-in-and-who-is-out-integration-of-technological-knowledge-in-the-x58RZI0Tmk
SP - 437
VL - 28
IS - 3
DP - DeepDyve
ER -