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Knowledge search versus knowledge deployment: How foreignness can be both an asset and a liability for firms

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Abstract
Many modern firms compete globally. However, research into whether foreignness is an asset or a liability in competition with domestic firms is inconclusive. We argue that foreign MNC subsidiaries are not per se advantaged or disadvantaged. We suggest that the distinction originates from the nature of the subsidiarys activity in the host country. We focus on two activities: knowledge search and knowledge deployment. We predict theoretically that domestic firms have advantages when they search for knowledge due to their embeddedness in the host country. However, this increased embeddedness reduces the degree of novelty of their knowledge pool. Foreign MNC subsidiaries therefore have advantages in knowledge deployment because they draw from a richer, international knowledge pool. However, these advantages accrue to both foreign and domestic MNCs. We test and support these predictions for a longitudinal dataset of 2900 firm observations in Spain. We develop recommendations for research and practice based on these findings.

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  • Jörg Zimmermann & Wolfgang Sofka, 2013. "Knowledge search versus knowledge deployment: How foreignness can be both an asset and a liability for firms," JRC Working Papers on Corporate R&D and Innovation 2013-03, Joint Research Centre.
    • Handle: RePEc:ipt:wpaper:201303
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    More about this item

    Keywords

    Liability of foreignness; foreignness as an asset; knowledge search; deployment;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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