Introduction.
| Posten | Multinational enterprises on acquiring technological knowledge |
1 Introduction
Multinational enterprises (MNEs) identify significant technology innovation opportunities from host countries and attempt to learn through overseas subsidiaries to improve their technological capabilities (Awate et al., 2015; Govindarajan & Ramamurti, 2011). Given the centrality of technological learning for the success of MNEs, scholars continuously seek to understand how knowledge flows occur through the help of networks of overseas subsidiaries.
Extant scholarship indicates that the host country environment of the subsidiary matters. This scholarship mostly focused on host countries' national innovation capabilities. Simply put, scholars have emphasized that firms can learn more technological knowledge from advanced host countries than emerging markets (Ambos et al., 2006; Frost, 2001; Govindarajan & Ramamurti, 2011; Li & Bathelt, 2020; Nair et al., 2015). Along this line of thought, there has been an asymmetric focus of scholarship on how firms learn in major advanced host countries such as the United States, but there is a burgeoning research stream that has investigated learning opportunities from emerging host countries like China (Huang & Li, 2019; Li et al., 2010; Wei et al., 2008; Zhao et al., 2020). This reflects a wider absence of comparative research across two distinct host country contexts even though there are the potential benefits of using a comparative lens to conduct empirical or theoretical research focusing on knowledge flows and learning opportunities from emerging host countries.
We assert that comparative examination on technological learning outcomes from two distinct host countries (e.g. an advanced context and an emerging context) is needed because each host country is marked by different qualities of infrastructure and institutions for technology diffusion and technology potentials across domains that may result in distinct technological learning outcomes. While knowledge transfer and learning has been studied, there is marked gap in understanding the connection between host country environments and distinct types of learning outcomes.
Thus to address this gap, we focus on overseas subsidiaries that have a wide range of host country connections (Gupta & Govindarajan, 2000). Existing literature has examined the characteristics of technological learning channels between home and host countries. It indicates that a conventional knowledge transfer and learning channel is a formal alliance by which MNEs acquire valuable host country knowledge from partners such as suppliers and research institutes (Choi & Contractor, 2016; Lavie & Miller, 2008). Moreover, MNEs recruit employees who once studied in different host countries and have returned home with host country knowledge (Mahroum, 2000). This labor mobility could be another channel of knowledge transfer.
While these channels have been studied, it is critical to add context (e.g. host country context) to our existing understanding, particularly as MNEs continue to enter into both advanced and emerging markets though the establishment of overseas subsidiaries. Prior research has highlighted the importance of the network involvement of MNEs in increasing the potential for spillover effects through overseas subsidiaries (Alcacer & Zhao, 2012; Ghoshal & Bartlett, 1990; Minbaeva, 2007; Monteiro et al., 2008). For example, Almeida and Phene (2004) stated that overseas subsidiaries with more connections to the host country increase the subsidiaries' innovation outcomes. We use the number of overseas subsidiaries as a key indicator to determine how involved and connected the MNE is a particular host country. Accordingly, our research is better positioned to understand how host country environments, and MNEs' host country connections through overseas subsidiaries, enable (or constrain) knowledge flows across borders by linking host country environments into distinct technological learning outcome types, which previous research has not explained adequately.
The purpose of this paper is to examine how Korean MNEs with more connections to host countries through their overseas subsidiaries learn technological knowledge differently based on distinctive host country location advantages. Specifically, we compare technology learning outcomes of Korean firms at the firm-level in two distinct host country contexts: China and the United States between 2000 and 2012 using the United States Patent and Trademark Office (USPTO)'s patent and citation data. We focus on two distinctive technological learning outcomes: usage of existing knowledge (Andersson et al., 2016; Asakawa & Lehrer, 2003) and new knowledge co-production (Berry, 2014; Frost & Zhou, 2005). The former refers to discovering and understanding the existing knowledge unilaterally (Hargadon & Sutton, 1997) and the latter refers to generating new knowledge based on interactive learning from multiple entities (Berry, 2014). From the perspective of knowledge transfer in patents, usage of existing technological knowledge of host countries corresponds to citing prior patents of host countries while technological knowledge co-production between host and home country researchers corresponds to new technological knowledge development by co-patenting.
Our research demonstrates that the higher number of overseas subsidiaries in China has a positive effect on usage of existing technological knowledge, which is valuable but not diffused due to its weak infrastructure and institutions. In contrast, the higher number of overseas subsidiaries in the United States increases new technological knowledge co-production across borders because MNEs can explore promising technological frontiers that meet lead market customers' latent needs and ease complex co-production processes through the help of overseas subsidiaries.
By using a comparative lens to analyze differences in learning opportunities in advanced and emerging markets we contribute to the literature in two critical ways. First, we break down learning outcomes of MNEs from distinct host countries. On the one hand, when MNEs use existing host country technological knowledge, they need to discover and identify valuable knowledge sources. In this process, MNEs can benefit from overseas subsidiaries that reduce searching costs. On the other hand, when MNEs co-produce technological knowledge with host country researchers, they need to handle high risk and cost arising from deep interactions that are necessary technological knowledge co-production (Kale & Singh, 2009). Overseas subsidiaries can help MNEs to cultivate strong interactions by generating formal and informal connections with host country R&D organizations and researchers.
Second, we link location advantages of host countries to technological learning outcomes of MNEs from host countries. China, which represents an emerging host [Text incomplete in original source.]
[Text incomplete in original source.] knowledge is a challenging step as it requires MNEs to be aware of who knows what, and who can do what--namely, 'know-who' information (Antal, 2000; Lundvall, 1994; Phene & Almeida, 2008).
MNEs' technological knowledge co-production with host country researchers refers to generating innovations between home and host country researchers through their cross-border interactions (Berry, 2014; Frost & Zhou, 2005). The process of technological knowledge co-production involves internalization of embedded knowledge in the host countries; e.g. it entails a transfer of tacit (Jiang et al., 2011) and 'know-how' knowledge (Antal, 2000) between the home and host countries. In addition, technological knowledge co-production requires firms to understand how the process of technological knowledge generation works across both countries. Despite the benefits, it is challenging as it requires repeated and deep interactions among collaboration participants (Kale & Singh, 2009). As a result, technological knowledge co-production involves high risks and costs and faces many obstacles and barriers. These barriers, however, are also contingent on the particular host country location where costs and risks may be influenced by country characteristics.
In sum, we assert that MNEs learn technological knowledge differently through overseas subsidiaries at the firm level. MNEs can acquire host country knowledge through overseas subsidiaries, but the outcome types of technological learning differ by host country environments. Below, we develop hypotheses to claim that the distinctive host country environments result in two different technological learning outcomes.
3 Hypotheses
3.1 Usage of Existing Technological Knowledge of Host Countries
MNEs have generally relocated their manufacturing facilities to emerging countries like China to take advantage of low production costs (Dunning, 1988). MNEs seek quality suppliers in host countries. Thus, it is necessary for MNEs to secure the best supply partners and quality inputs at low prices. To seek quality suppliers, MNEs need to scrutinize and examine potential local partners' knowledge and check the technological capability of suppliers (Agarwal et al., 2019; Li et al., 2010). Without this vetting process, MNEs could be left with low quality inputs that would decrease their competitiveness.
In this process, MNEs can increase their chances of using the existing technological knowledge of host countries by leveraging contacts with quality host country suppliers of overseas subsidiaries. The existing technological knowledge from emerging host countries may not contain the technological breakthroughs that drive innovations in advanced countries. However, emerging countries' technological knowledge usually...
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