Lecture 5 - International Innovation

Question 1

What is Kuemmerle (2997) view on MNEs R&D practices (“Building effective R&D capabilities abroad”)

Answer 1

MNEs move from centralized R&D in the home country towards international networks of foreign R&D laboratories

2 main reasons:
- Need to move quickly from innovation to market (output side) –> integrate R&D and manufacturing locally
- Need for presence in knowledge and innovation clusters (input side) –> acquire new knowledge

The location of R&D matters!

Question 2

Why does the location of R&D matter?

Answer 2

It is not possible (or very hard) to transfer tacit knowledge, while it may be needed to share the information
- Tacit knowledge (uncodified): knowledge that is personal
- Explicit knowledge (codified): knowledge which is possible to write down

The importance of face-to-face communication is crucial (e.g. feedback)

Question 3

Explain the internationalization of R&D

Answer 3

Home-base exploiting sites:
- Support manufacturing facilities in foreign countries or adapt standard products to local demand
- Information flows from HQ to subsidiary

Home-base augmenting sites:
- Develop knowledge for the entire MNE
- Information flows from subsidiary to HQ

Question 4

Explain home-base exploiting labs (internationalization of R&D)

Answer 4

Close to key markets and MNEs foreign manufacturing units
Initial leadership in the hands of “highly regarded managers from within the company”
Bounded rationality problem reduced

Example: Eli Lilly’s home-base exploiting lab in Kobe, Japan:
Senior research manager with extensive knowledge of both production and marketing activities was selected as leader
Existing R&D scientists assigned to the new location and new staff visiting other labs (staff transfer programs)

Question 5

Explain home-base augmenting operations (internationalization of R&D)

Answer 5

In critical knowledge clusters
Initial senior managers > should be prominent local scientists
Solves the main bounded rationality problem

Example: Xerox’s home-base augmenting site in Grenoble, France:
Xerox hired a renowned French scientist instrumental to recombining the firm’s existing FSAs with complementary resources in the French environment
New staff visited other company R&D centres to expedite the lab’s integration (facilitated the transfer of NLB FSAs across borders)

Question 6

Explain Birkinshaw & Fry’s (Subsidiary initiatives to develop new markets) complementary perspective on the international innovation

Answer 6

Roles of subsidiaries change over time due to charter change and subsidiary initiative
- Charter change: change in the “shared understanding between the subsidiary and the HQ regarding the subsidiary’s scope of responsibilities”
- Subsidiary initiative: “the proactive and deliberate pursuit of a new business opportunity by a subsidiary company, undertaken with a view to expand the subsidiary’s scope of responsibility, in a manner consistent with the MNEs strategic goals”

Changes in subsidiary capabilities and subsidiary charter (among other things) is influenced by:
- Parent company factors:

Question 7

Explain Inkpen’s (Learning through alliances) complementary perspective on international innovation

Answer 7

Distant knowledge can sometimes be accessed in the home-base itself, through collaboration with foreign firms (JVs or alliances)
codified and tacit knowledge come together and can be shared in a synergetic environment