The literature reviewed in this section may give some indications to the answer to the research questions.
What characterises innovation in a MNC?
According to Ghoshal and Bartlett (1988) innovation in MNCs is characterized by the tasks of creation, adoption and diffusion. These three innovation tasks are one factor that differentiates innovation in a MNC as opposed to innovation in a single national corporation.
Creation, adoption and diffusion of innovation are influenced by local resources and local autonomy, in which a higher degree of both these attributes may lead to a higher degree of creation and diffusion of innovation, but a lower degree of adoption of innovations.
Moreover, a higher degree of normative integration and internal communication is positively associated with all three innovation tasks.
Further, innovation in a MNC may be characterized by a combination of the structural positions of global integration and local responsiveness, which affect the innovation activity of the subsidiaries (Marin and Bell 2005). Thus, the innovation is characterized by a
combination of adopting standardizes product, services and solutions from headquarter, and creating and diffusing local innovations or changing adopted innovations to satisfy local market needs. It has been argued that it is a strong drive for the transnational strategy i.e.
combining high global integration and high local responsiveness, in the telecommunications
industry (Birkin 2007). Literature presented in this chapter maintain that the degree of global integration/local responsiveness is a result of decision-making at both headquarter and subsidiary level, subsequently increasing the chance of variations on these structural position across different locations (Meyer and Su 2010).
The literature may also give some indications on the answer to the second research question:
How and why does innovative activity vary across subsidiaries within the same MNC?
Considering the work of Ghoshal and Bartlett (1988) innovation across subsidiaries within the same MNC might vary by the performance on the three innovation tasks; creation, adoption and diffusion. Furthermore, to explain the variation in performance on the innovation tasks, one may look towards the four organizational attributes. Subsidiaries with a higher degree of local slack resources will to a larger extent create and diffuse innovation. However, a higher degree of local slack resources will decrease adoption of innovations due to the
“not-invented-here” syndrome. It will impede adoption of innovation because local resources may fund local market activities in which the subsidiary is likely to identify reasons and needs in their market for why innovation created elsewhere is not relevant for them. The same line of arguments is valid for local autonomy. A high level of local autonomy will increase creation and diffusion of innovation as freedom to experiment is considered a prerequisite for
innovation. Further, local creation of innovation is a prerequisite for a subsidiaries diffusion of innovation. However, local autonomy impedes adoption of innovation, if local autonomy is considered to obverse of centralization. Moreover, a higher degree of normative integration will increase the rate of all three innovation tasks. Likewise the density of internal
communication will positively affect the innovation tasks. Creation of innovation is
increasing by higher levels of communication with the parent company. In the same manner is adoption and diffusion of innovation increasing with a higher density of communication between the subsidiaries.
Marin and Bell’s (2005) research might also offer some suggestive theoretical answers to the second research question. Marin and Bell’s (2005; 2010) research has been an attempt to fill a gap in the existing literature concerning heterogeneity in subsidiaries innovative activities. A significant amount of previous research has focus on patterns particular to specific industries, not differentiation patterns within industries, or within corporations, in which this thesis makes a contribution.
Marin and Bell’s (2005) work suggest that the subsidiaries will vary in their innovative activity because of the structural position a subsidiary holds in a MNC. The variations in structural position further impact the degree of innovation activity in the subsidiaries. Marin and Bell’s (2005) study found that subsidiaries adhering to the different structural positions significantly differed in their innovative activity. These finding are supported by the earlier study by Bartlett and Ghoshal’s (1989) ‘transnational model’ which is a strategy matrix based on a subsidiaries degree of global integration and local responsiveness.
Lastly, this theoretical chapter has addressed the third research question: What are the implications of inter-subsidiary variation with regards to being an innovative MNC?
This chapter has discussed the implications for a MNC in terms of choosing one of the strategies derived from Bartlett and Ghoshal’s (1989) integration-responsiveness framework, over the other. The global structure is associated with cost-efficiency due to the potential of economies of scale. The multinational structure on the other hand is associated with higher innovativeness at the local subsidiary level. Lastly, the transnational model being a
combination of the other two structures is associated with cost-efficiency and a higher level of innovativeness.
The implications have also been discussed in terms of inter-subsidiary variation of the actual implemented strategy at subsidiary level. Such variation may imply that it becomes more challenging to enforce control mechanisms, and more challenging to implement a common strategic direction for the whole MNC, subsequently it may become harder to reach the goals for the parent company. Furthermore, an implication may be that variation in subsidiary strategy may disturb or stop a flow of products, services, people and information. Disturbing this flow might have a negative impact on the innovation tasks of creating, adopting and diffusing innovation throughout the MNC (Ghoshal and Bartlett 1988).
The next chapter will outline and discuss the methodology of this thesis.