Adapting innovation capabilities in emerging economies: the role of learning and cultural and institutional distance in MNC subsidiaries in Korea
Abstract
Purpose
The rise of emerging economies in the innovation landscape has often been attributed to the positive spillovers of innovation capabilities from multinational corporations (MNCs). However, it is less certain that their innovative capabilities imported from the home country function effectively in the host country from the outset. This study examines the performance of the innovation capabilities of MNC subsidiaries in emerging economies over time by considering the gradual process of their learning about host countries.
Design/methodology/approach
We employed stochastic frontier analysis to measure innovation capabilities, our focal construct. For regression analysis, we applied the Mundlak estimator, a variant of the fixed-effects panel estimator, to a sample comprising subsidiaries of MNCs from technologically advanced nations operating in Korea between 2006 and 2016.
Findings
Our results indicate that the innovation capabilities of MNC subsidiaries initially underperform those of local firms but improve over time, eventually surpassing the capabilities of their local counterparts. Furthermore, our findings reveal that institutional distance amplifies the underperformance of the innovation capabilities of MNC subsidiaries.
Originality/value
This study contributes to the literature by extending both theoretical development and empirical measurement of innovation capabilities in cross-national settings. Additionally, it deepens our understanding of whether and how MNC subsidiaries adapt their innovation capabilities to the local market environment.
Keywords
Acknowledgements
The authors would like to thank the Guest Editor, Byung Il Park, and the anonymous reviewers for their constructive and thoughtful feedback. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2022S1A5A8052803) and GIST Research Institute (GRI) grant funded by the GIST in 2023.
Citation
Park, C. and Jin, K. (2024), "Adapting innovation capabilities in emerging economies: the role of learning and cultural and institutional distance in MNC subsidiaries in Korea", Cross Cultural & Strategic Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CCSM-09-2023-0200
Publisher
:Emerald Publishing Limited
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