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Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs

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  • Ram Mudambi

    ([1] Institute of Global Management Studies, Temple University, Philadelphia, USA [2] The ISMA Centre, University of Reading, UK)

  • Pietro Navarra

    ([1] 3Institute of Economics and Finance, University of Messina, Italy [2] 4London School of Economics and Political Science, UK)

Abstract

In recent years, as multinational corporation (MNC) subsidiaries have become more closely linked to international networks, their knowledge intensity has risen, and some of their R&D has gained a more creative role. Simultaneously, and often connectedly, many subsidiaries have acquired considerable strategic independence in all aspects of their operations, and therefore are able to exercise considerable intra-firm bargaining power to influence the distribution of the firm's resources. In this context, we suggest that intra-MNC knowledge flows are a key determinant of subsidiary bargaining power. We argue that subsidiary managers can exploit such power to pursue their own ends. Such rent-seeking behavior is implicit in much of the literature on managerialism, but our analysis suggests that such behavior can now occur in headquarters–subsidiary and subsidiary–subsidiary relations. Thus subsidiary strategic independence, designed to enhance the competitiveness of outputs (market knowledge) and inputs (asset-seeking and learning), can be corroded when the pursuit of subsidiary objectives encourages rent-seeking. Empirical analysis of a sample of high-technology subsidiaries in the UK provides strong support for the theory. We examine several avenues whereby the incentives of units within the MNC can be aligned. Journal of International Business Studies (2004) 35, 385–406. doi:10.1057/palgrave.jibs.8400093

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

Volume (Year): 35 (2004)
Issue (Month): 5 (September)
Pages: 385-406

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Handle: RePEc:pal:jintbs:v:35:y:2004:i:5:p:385-406

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Citations

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Cited by:
  1. Alvaro CUERVO-CAZURRA & Luis Alfonso DAU, 2008. "Structural Reform And Firm Profitability In Developing Countries," William Davidson Institute Working Papers Series wp940, William Davidson Institute at the University of Michigan.
  2. Kappen, Philip, 2011. "Competence-creating overlaps and subsidiary technological evolution in the multinational corporation," Research Policy, Elsevier, vol. 40(5), pages 673-686, June.
  3. Narula, Rajneesh & Michel, Julie, 2009. "Reverse knowledge transfer and its implications for European policy," UNU-MERIT Working Paper Series 035, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  4. Keupp, Marcus Matthias & Gassmann, Oliver, 2009. "Why do transnational approaches to international innovation fail?," Research in International Business and Finance, Elsevier, vol. 23(2), pages 206-222, June.
  5. Saliola, Federica & Zanfei, Antonello, 2009. "Multinational firms, global value chains and the organization of knowledge transfer," Research Policy, Elsevier, vol. 38(2), pages 369-381, March.
  6. Kottaridi, Constantina & Papanastassiou, Marina & Pitelis, Christos, 2009. "Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence," Papers DYNREG38, Economic and Social Research Institute (ESRI).
  7. Shenxue Li & Hugh Scullion, 2006. "Bridging the distance: Managing cross-border knowledge holders," Asia Pacific Journal of Management, Springer, vol. 23(1), pages 71-92, March.
  8. Smeets, Roger & Bosker, E.M., 2011. "Leaders, laggards and technology seeking strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 481-497.
  9. Mudambi, Ram & Swift, Tim, 2009. "Professional guilds, tension and knowledge management," Research Policy, Elsevier, vol. 38(5), pages 736-745, June.
  10. Ram Mudambi & Mike Peng & David Weng, 2008. "Research rankings of Asia Pacific business schools: Global versus local knowledge strategies," Asia Pacific Journal of Management, Springer, vol. 25(2), pages 171-188, June.
  11. Alessandra Perri & Ulf Andersson, 2012. "Knowledge outflows from foreign subsidiaries: The tension between knowledge creation and knowledge protection," Working Papers 18, Department of Management, Università Ca' Foscari Venezia.

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