Institutions and the Diversity and Prevalence of Multinationals’ Knowledge‐Augmenting Subsidiaries
| Author | Knut Lange,Maria L. Allen,Matthew M. C. Allen |
| Date | 01 July 2018 |
| Published date | 01 July 2018 |
| DOI | http://doi.org/10.1111/1467-8551.12242 |
British Journal of Management, Vol. 29, 483–496 (2018)
DOI: 10.1111/1467-8551.12242
Institutions and the Diversity and Prevalence
of Multinationals’ Knowledge-Augmenting
Subsidiaries
Matthew M. C. Allen , Maria L. Allen1and Knut Lange2
Alliance Manchester Business School, The University of Manchester. Booth Street East, Manchester, M13 9SS,
UK, 1Manchester Metropolitan University Business School, All Saints Campus, OxfordRoad, Manchester M15
6BH, UK, and 2School of Management, Royal Holloway, University of London, Egham,
Surrey, TW20 0EX, UK
Corresponding author email: Matthew.allen@manchester.ac.uk
Multinational corporations (MNCs) increasinglyseek to gain access to, and exploit, loca-
tionally specific sources of advanced knowledge and technological capabilities, creating
a need to explain (1) the diversity among these facilities and (2) how institutions influ-
ence MNCs’ abilities to invest in dierent subsidiary types. Extending debates on firms’
knowledge-augmenting activities, the authors integrate institutions into their analytical
framework to a greater extent than previous work has done. Moreover, existing contri-
butions provide typologies of R&D subsidiaries. In contrast, the authors focus on a par-
ticular subset of subsidiaries, knowledge-augmenting ones, and put forward a theory to
explain their variety and their prevalence, enabling them to identify previouslyneglected
subsidiary types that haveimportant managerial and policy implications. B y downplaying
the diversity of these subsidiaries, existingwork has not been able to capture the full range
of managerial challenges as well as the costs and benefits of dierent subsidiary types to
host countries. The authors, therefore, problematize firms’ abilities to gain access to for-
eign knowledge-generating assets, highlight the importance of institutional environments,
provide policy recommendations and identify areas for futureresearch.
Introduction
Companies’ desire to gain access to, and exploit,
superior sources of knowledge generation, in-
cluding research centres and talented individuals,
that are unavailable elsewhere increasingly drives
the establishment of knowledge-production fa-
cilities abroad (Chiva, Ghauri and Alegre, 2014;
Kristensen, 2016). Existing typologies of these
subsidiaries usually encompass facilities that
exploit as well as those that augment the multina-
tional corporation’s (MNC’s)current R&D knowl-
edge (Kuemmerle, 1999a,1999b; Manolopoulos,
We are grateful to Richard Whitley and the anonymous
referees for comments on earlier versions of this paper.
Any errors are, of course, ours.
S¨
oderquist and Pearce, 2011). Consequently, there
is a need to distinguish further between, and
to explain, the increasing number and types of
knowledge-augmenting subsidiary. We develop a
theory to explain the diversity and prevalence of
this group of subsidiaries.
Building on Kuemmerle (1999a), we define
knowledge-augmenting subsidiaries as firms’
investments abroad to access and develop unique
or rare knowledge-generating resources that are
locationally specific and that can provide technical
and/or research-related knowledge that is new
to the firm and is likely to be tacit in nature.
Although the subsidiary may combine local re-
sources with existing knowledge from other parts
of the company, such subsidiaries do not primarily
exploit existing firm capabilities.
© 2017 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
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