Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes?: The Role of Local Institutions

    Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review

    Abstract

    Research on international knowledge sourcing has investigated the seemingly puzzling situation of multinational enterprises (MNEs) conducting research and development (R&D) in countries where intellectual property rights (IPR) protection is weaker than in their home country, and concluded that MNEs mitigate the appropriability hazards in these countries by resorting to internal mechanisms involving the entire MNE network. These studies have mainly focused on captive R&D units and identified specific internal mechanisms which may not be generalized to other governance modes. In particular, MNE subsidiaries increasingly outsource R&D to local contractors in weaker IPR countries. Drawing on institutional and transaction costs economics, we address this gap and argue that the quality of subnational institutions plays a contractual hazard-mitigating role that may at least partially compensate for the appropriability hazards of a relatively weak national IPR regime and, hence, positively influence the subsidiary decisions to rely more or less extensively on local external (versus internal) R&D partners. However, subsidiaries that strategically prioritize external knowledge sourcing in their innovative activity are less sensitive to the quality of sub-national institutions as these subsidiaries commonly adopt a set of appropriability mechanisms that help protecting their knowledge.
    Research on international knowledge sourcing has investigated the seemingly puzzling situation of multinational enterprises (MNEs) conducting research and development (R&D) in countries where intellectual property rights (IPR) protection is weaker than in their home country, and concluded that MNEs mitigate the appropriability hazards in these countries by resorting to internal mechanisms involving the entire MNE network. These studies have mainly focused on captive R&D units and identified specific internal mechanisms which may not be generalized to other governance modes. In particular, MNE subsidiaries increasingly outsource R&D to local contractors in weaker IPR countries. Drawing on institutional and transaction costs economics, we address this gap and argue that the quality of subnational institutions plays a contractual hazard-mitigating role that may at least partially compensate for the appropriability hazards of a relatively weak national IPR regime and, hence, positively influence the subsidiary decisions to rely more or less extensively on local external (versus internal) R&D partners. However, subsidiaries that strategically prioritize external knowledge sourcing in their innovative activity are less sensitive to the quality of sub-national institutions as these subsidiaries commonly adopt a set of appropriability mechanisms that help protecting their knowledge.
    LanguageEnglish
    Title of host publicationProceedings of the 56th Annual Meeting of the Academy of International Business : Local Contexts in Global Business
    EditorsKlaus Meyer, Tunga Kiyak
    Place of PublicationEast Lansing, MI
    PublisherAcademy of International Business
    Date2014
    Pages253-254
    StatePublished - 2014
    EventAIB 2014 Annual Meeting : Local Context in Global Business - Westin Bayshore, Vancouver, Canada
    Duration: 23 Jun 201426 Jun 2014
    Conference number: 56
    http://aib.msu.edu/events/2014/

    Conference

    ConferenceAIB 2014 Annual Meeting
    Number56
    LocationWestin Bayshore
    CountryCanada
    CityVancouver
    Period23/06/201426/06/2014
    Internet address
    SeriesAcademy of International Business. Annual Meeting. Proceedings
    Volume2014
    ISSN2078-4430

    Cite this

    Santangelo, G. D., Meyer, K., & Jindra, B. (2014). Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes? The Role of Local Institutions. In K. Meyer, & T. Kiyak (Eds.), Proceedings of the 56th Annual Meeting of the Academy of International Business: Local Contexts in Global Business (pp. 253-254). East Lansing, MI: Academy of International Business. Academy of International Business. Annual Meeting. Proceedings, Vol.. 2014
    Santangelo, Grazia D. ; Meyer, Klaus ; Jindra, Björn . / Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes? The Role of Local Institutions. Proceedings of the 56th Annual Meeting of the Academy of International Business: Local Contexts in Global Business. editor / Klaus Meyer ; Tunga Kiyak. East Lansing, MI : Academy of International Business, 2014. pp. 253-254 (Academy of International Business. Annual Meeting. Proceedings, ???volume??? 2014).
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    title = "Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes?: The Role of Local Institutions",
    abstract = "Research on international knowledge sourcing has investigated the seemingly puzzling situation of multinational enterprises (MNEs) conducting research and development (R&D) in countries where intellectual property rights (IPR) protection is weaker than in their home country, and concluded that MNEs mitigate the appropriability hazards in these countries by resorting to internal mechanisms involving the entire MNE network. These studies have mainly focused on captive R&D units and identified specific internal mechanisms which may not be generalized to other governance modes. In particular, MNE subsidiaries increasingly outsource R&D to local contractors in weaker IPR countries. Drawing on institutional and transaction costs economics, we address this gap and argue that the quality of subnational institutions plays a contractual hazard-mitigating role that may at least partially compensate for the appropriability hazards of a relatively weak national IPR regime and, hence, positively influence the subsidiary decisions to rely more or less extensively on local external (versus internal) R&D partners. However, subsidiaries that strategically prioritize external knowledge sourcing in their innovative activity are less sensitive to the quality of sub-national institutions as these subsidiaries commonly adopt a set of appropriability mechanisms that help protecting their knowledge.",
    author = "Santangelo, {Grazia D.} and Klaus Meyer and Bj{\"o}rn Jindra",
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    Santangelo, GD, Meyer, K & Jindra, B 2014, Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes? The Role of Local Institutions. in K Meyer & T Kiyak (eds), Proceedings of the 56th Annual Meeting of the Academy of International Business: Local Contexts in Global Business. Academy of International Business, East Lansing, MI, Academy of International Business. Annual Meeting. Proceedings, vol. 2014, pp. 253-254, Vancouver, Canada, 23/06/2014.

    Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes? The Role of Local Institutions. / Santangelo, Grazia D.; Meyer, Klaus; Jindra, Björn .

    Proceedings of the 56th Annual Meeting of the Academy of International Business: Local Contexts in Global Business. ed. / Klaus Meyer; Tunga Kiyak. East Lansing, MI : Academy of International Business, 2014. p. 253-254.

    Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review

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    T1 - Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes?

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    AU - Jindra,Björn

    PY - 2014

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    N2 - Research on international knowledge sourcing has investigated the seemingly puzzling situation of multinational enterprises (MNEs) conducting research and development (R&D) in countries where intellectual property rights (IPR) protection is weaker than in their home country, and concluded that MNEs mitigate the appropriability hazards in these countries by resorting to internal mechanisms involving the entire MNE network. These studies have mainly focused on captive R&D units and identified specific internal mechanisms which may not be generalized to other governance modes. In particular, MNE subsidiaries increasingly outsource R&D to local contractors in weaker IPR countries. Drawing on institutional and transaction costs economics, we address this gap and argue that the quality of subnational institutions plays a contractual hazard-mitigating role that may at least partially compensate for the appropriability hazards of a relatively weak national IPR regime and, hence, positively influence the subsidiary decisions to rely more or less extensively on local external (versus internal) R&D partners. However, subsidiaries that strategically prioritize external knowledge sourcing in their innovative activity are less sensitive to the quality of sub-national institutions as these subsidiaries commonly adopt a set of appropriability mechanisms that help protecting their knowledge.

    AB - Research on international knowledge sourcing has investigated the seemingly puzzling situation of multinational enterprises (MNEs) conducting research and development (R&D) in countries where intellectual property rights (IPR) protection is weaker than in their home country, and concluded that MNEs mitigate the appropriability hazards in these countries by resorting to internal mechanisms involving the entire MNE network. These studies have mainly focused on captive R&D units and identified specific internal mechanisms which may not be generalized to other governance modes. In particular, MNE subsidiaries increasingly outsource R&D to local contractors in weaker IPR countries. Drawing on institutional and transaction costs economics, we address this gap and argue that the quality of subnational institutions plays a contractual hazard-mitigating role that may at least partially compensate for the appropriability hazards of a relatively weak national IPR regime and, hence, positively influence the subsidiary decisions to rely more or less extensively on local external (versus internal) R&D partners. However, subsidiaries that strategically prioritize external knowledge sourcing in their innovative activity are less sensitive to the quality of sub-national institutions as these subsidiaries commonly adopt a set of appropriability mechanisms that help protecting their knowledge.

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    Santangelo GD, Meyer K, Jindra B. Why do MNE Subsidiaries Outsource R&D in Countries with Weaker National IPR Regimes? The Role of Local Institutions. In Meyer K, Kiyak T, editors, Proceedings of the 56th Annual Meeting of the Academy of International Business: Local Contexts in Global Business. East Lansing, MI: Academy of International Business. 2014. p. 253-254. (Academy of International Business. Annual Meeting. Proceedings, Vol. 2014).