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Innovative Capability In Mnc Subsidiaries: Evidence From Four European Transition Economies

  • Kokko, Ari

    ()

    (European Institute of Japanese Studies)

  • Kravtsova, Victoria

    (MERIT, Maastricht, Netherlands)

This paper explores the determinants of innovative capability in a sample of multinational company (MNC) subsidiaries in four transition economies: Estonia, Hungary, Poland, and Slovenia. It finds that capability in product and process technology appears to be determined by a different set of variables than capability related to marketing and management knowledge. The most independent affiliates – those that are diversified, oriented towards the local market, established through acquisitions rather than greenfield investments, and where the foreign MNCs’ only hold minority ownership – are also those that acquire the strongest innovative capability in product and process technology. For marketing and management capability, the pattern is nearly the opposite. The highest levels of capability are recorded in subsidiaries that are closely tied to the parent company, with high foreign ownership shares and substantial exports back to the parent company. These differences can be expected to have some impact on the kinds of spillovers different kinds of foreign direct investment (FDI) projects may generate.

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Paper provided by The European Institute of Japanese Studies in its series EIJS Working Paper Series with number 224.

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Length: 28 pages
Date of creation: 11 Apr 2006
Date of revision:
Publication status: Published in Post-Communist Economies, 2008, pages 57-75.
Handle: RePEc:hhs:eijswp:0224
Contact details of provider: Postal: The European Institute of Japanese Studies, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-8-7369360
Fax: +46-8-313017
Web page: http://www.hhs.se/en/Research/Institutes/EIJS/Email:


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  1. Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," CEPR Discussion Papers 3775, C.E.P.R. Discussion Papers.
  2. Ari Kokko, 1996. "Productivity spillovers from competition between local firms and foreign affiliates," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(4), pages 517-530.
  3. Nigel Driffield & James H. Love, 2003. "Foreign Direct Investment, Technology Sourcing and Reverse Spillovers," Manchester School, University of Manchester, vol. 71(6), pages 659-672, December.
  4. Lall, Sanjaya, 1992. "Technological capabilities and industrialization," World Development, Elsevier, vol. 20(2), pages 165-186, February.
  5. Görg, Holger & Greenaway, David, 2003. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," IZA Discussion Papers 944, Institute for the Study of Labor (IZA).
  6. Magnus Blomstrom & Jian-Ye Wang, 1992. "Foreign Investment and Technology Transfer: A Simple Model," NBER Working Papers 2958, National Bureau of Economic Research, Inc.
  7. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," SSE/EFI Working Paper Series in Economics and Finance 99, Stockholm School of Economics.
  8. Jozef Konings, 1999. "The Effect of Direct Foreign Investment on Domestic Firms: Evidence from Firm Level Panel Data in Emerging Economies," LICOS Discussion Papers 8699, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  9. Fredrik Sjoholm, 1999. "Technology gap, competition and spillovers from direct foreign investment: Evidence from establishment data," Journal of Development Studies, Taylor & Francis Journals, vol. 36(1), pages 53-73.
  10. Smarzynska Javorcik, Beata, 2004. "The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies," European Economic Review, Elsevier, vol. 48(1), pages 39-62, February.
  11. Nuno Crespo & Maria Paula Fontoura, 2005. "Determinant Factors of FDI Spillovers – What Do We Really Know?," Working Papers Department of Economics 2005/06, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  12. Katrin Männik & Helena Hannula & Urmas Varblane, 2004. "Country, Industry And Firm Size Effects On Foreign Subsidiary Strategy.An Example Of Five Cee Countries," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 27, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  13. Ulf Holm & Anders Malmberg & Orjan S–lvell, 2003. "Subsidiary impact on host-country economies--the case of foreign-owned subsidiaries attracting investment into sweden," Journal of Economic Geography, Oxford University Press, vol. 3(4), pages 389-408, October.
  14. N. De Liso & G. Filatrella, 1999. "On technology competition," Working Papers 337, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. Ksenia Yudaeva & Konstantin Kozlov & Natalia Melentieva & Natalia Ponomareva, 2003. "Does foreign ownership matter?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 383-409, 09.
  16. Lipsey, Robert E. & Sjoholm, Fredrik, 2004. "Foreign direct investment, education and wages in Indonesian manufacturing," Journal of Development Economics, Elsevier, vol. 73(1), pages 415-422, February.
  17. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  18. A Kokko & Ruben Tansini & Mario Zejan, 1995. "Trade regimes and effects of FDI: evidence from Uruguay," Documentos de Trabajo (working papers) 0695, Department of Economics - dECON.
  19. Ari Kokko & Mario Zejan & Ruben Tansini, 2001. "Trade regimes and spillover effects of FDI: Evidence from Uruguay," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(1), pages 124-149, March.
  20. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
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