IBUS 412:Special Topic

1
IBUS 412 Special Topic
Topic 8 Multinational enterprises Reading
Welge, M.K./Borghoff, T. Innovation processes
in local and global networks
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IBUS 412 Special Topic

• Historical process of globalisation
• Liquefaction of competition
• Emergence of global network competition
• Competence-creation and innovation process
  increasingly embedded in global and local
  networks within and across organisational
  boundaries
• Innovation has become networking process
• Strong ties facilitate knowledge production
• Weak ties are important for knowledge diffusion

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IBUS 412 Special Topic

• Innovation in dynamic industries is
  increasingly generated in interorganisational
  networks (fluid, evolving community)
• Liability of unconnectedness
• Dynamic network positioning becomes critical
• New dialectic of local and global

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IBUS 412 Special Topic

• Innovation contexts of SMEs and MNEs
• SMEs spend less on RD but produce twice as
  many innovations per employee
• SMEs are superior in generation of new
  knowledge, inferior in transfer capabilities,
  international exploitation and diffusion
• SMEs better in autonomous, radical innovation
• Systemic, architectural innovation easier to
  implement by MNEs (specialised, co-specialised
  assets, global dispersion)

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IBUS 412 Special Topic

• Innovation in local networks
• Differential competencies in organisational
  co-ordination and technological innovation in
  firms and local contexts
• Properties of local networks
• Network linkages shape and constrain
  opportunities
• Embeddedness in social relationships, rules,
  institutions
• Path-dependent learning and accumulation
• Local specificity in organising principles
  and routines
• Dialectic of local innovation (SMEs,
  subsidiaries) and global diffusion (MNEs,
  interorganisational networks)

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IBUS 412 Special Topic

• Local milieux
• ? Network of social relationships on a limited
  geographical area enhances local innovative
  capability through synergetic and collective
  learning
• Innovative capacity of local milieux based on
• Embeddedness
• Social capital (network resources)
• Trust
• Structural coupling
• Path/dependent evolution of specialised
  knowledge
• Stickiness of knowledge (embedded in social
  capital)

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IBUS 412 Special Topic

• ? Local milieux are generators of innovative
  behaviour
• collective learning processes, creativity,
  and synergy
• processes of reduction of dynamic uncertainty
• Fluidity of knowledge enhanced by common
  codes of communication and interaction
• Agglomeration economies promote (incremental)
  innovation
• Diffusion of knowledge rapid within, slow
  between local milieux
• External linkages should provide momentum for
  change

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IBUS 412 Special Topic

• Clusters
• Geographical concentration and sectoral
  specialisation
• Development due to economies of scale,
  specialised labour market, geographical factors,
  historical events, institutional factors
• Cluster economies or external agglomeration
  economies
• result from externalities from larger number
  of firms
• Localised knowledge spill overs (particularly
  tacit knowledge)
• Firms in knowledge-intensive industries locate
  in leading clusters
• Dispersed subsidiaries as antennae and
  isomorphic ventilators

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IBUS 412 Special Topic

• Industrial districts
• sizeable and spatially delimited area of
  trade-oriented economic activity, which has a
  distinctive economic specialisation
• Characteristics large number of specialised
  SMEs
• wide-ranging, integrated competencies
• relational system
• collective identity
• Minimise communication barriers and sunk costs
  in specialisation
• Processes of interactive communication and
  co-operation are self- organising
• IDs self-generate resources required for
  reproduction

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IBUS 412 Special Topic

• Innovation networks in MNEs
• Ideal type of MNE Dispersion
• Interdependence
• Tight coupling of subunits
• Cross-unit learning
• Structural flexibility
• Global relay strategies to exploit economies
  of diachronic scope or time zone economies
• Global absorptive capacity to exploit
  diversity of environment

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IBUS 412 Special Topic

• MNEs as integrators of dispersed local milieux
• Structure and content of location portfolio
  becomes more critical
• Complementary foreign assets and capabilities
  for development of new competitive advantages
  and exploitation of firm-specific advantages
• Optimal combination of ownership and
  locational advantages
• MNEs as intermediaries in cross-fertilisation
  of localised knowledge clusters
• MNEs can increase foreign knowledge absorption
  capacity of local clusters, contribute to global
  diffusion of knowledge
• Integrated network of subsidiaries facilitates
  complementary paths of innovation

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IBUS 412 Special Topic

• Bridging innovation in local networks and MNEs
• Dynamic dispersion and co-ordination of ideas,
  innovation
• New, dispersed knowledge has to be integrated
  in existing stream of innovation
• Subsidiaries in locations with high innovative
  capacity generate innovations based on local
  resources
• Increased role of locationally dispersed
  sourcing
• Traditionally, cross-border technology flows in
  MNEs
• Increasingly, co-operative firms (high-tech
  industries)
• Trend augmented by technology fusion

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IBUS 412 Special Topic

• Innovation in MNE networks
• Critical
• Skill to transfer specialised knowledge,
  network-building
• Institutional and cultural context that
  fosters innovation
• Main leverage in enhancing communication
  densities within and across organisations
  boundaries
• Importance of feedback-seeking behaviour
• Obstacles heterogeneity across countries,
  charters, consensus
• In dual structure, differences are drivers for
  action and learning
• Critical development of consensual domains,
  structural coupling
• Subsidiaries as isomorphic ventilators

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IBUS 412 Special Topic

• Knowledge in innovation networks
• MNEs as multi-point learning organisations
• Processing of knowledge influenced by cultural
  context
• Global absorptive capacity critical for MNEs
• Advantages of MNEs in global knowledge creation
  innovation
• Variety MNEs as global scanners
• Selection MNEs as global selection regimes
• Retention MNEs as global retention
  mechanisms
• Obstacles egoism of units, core rigidities
• Balance of sustaining innovative robustness and
  danger of core rigidities
• Dymanic routines, capabilities

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IBUS 412 Special Topic

• Knowledge in innovation networks
• Dynamic complementarities of network partners
• Combinative capability
• Timely responsiveness
• Understanding of the growth rhythm of innovation