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Knowledge sourcing: legitimacy deficits for MNC subsidiaries?

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Author Info
Schmidt, Tobias
Sofka, Wolfgang

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Abstract

Multinational corporations (MNC) search increasingly for lead market knowledge and technological expertise around the globe. We investigate whether their subsidiaries gain access to these valuable sources of host country knowledge to the same degree as domestic rivals. We develop a theoretical framework for ?why? and ?how? a lack of embeddedness and legitimacy (liability of foreignness) may translate into additional obstacles for foreign subsidiaries. We test these hypotheses empirically using a broad dataset of more than 1,000 innovative firms in Germany. We find that MNCs can compete on an equal footing with host country competitors when it comes to generating impulses for innovations from universities. They are significantly challenged by liabilities of foreignness, though, when host country customers are involved. The disadvantages are especially pronounced when the host country industry is at the technological forefront. We suggest that the disadvantages arising from liability of foreignness in the host country are particularly relevant when promising lead customers have to be identified and their tacit and often unarticulated impulses have to be transferred, understood and prioritized.

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Publisher Info
Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2009,09.

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Date of creation: 2009
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Handle: RePEc:zbw:bubdp1:7578

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Related research
Keywords: Liability of foreignness; knowledge spillover; globalization;

Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

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