From Arbitrage to Global Innovation: Evolution of Multinational R&D in Emerging Markets
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Our inductive study of nine European multinational enterprises (MNEs) and their R&D units in India uncovers a distinct trajectory of overseas R&D evolution in emerging markets. In contrast to the well-established trajectory of foreign R&D evolution that begins by adapting existing MNE products to the local market, this alternative trajectory begins by leveraging cost arbitrage and progresses through three unique configurations towards a global product mandate. Our study also unravels how the R&D units build embeddedness within the MNE network and with the local ecosystem, and how such embeddedness influences the evolution of their R&D mandate. We present a stylized taxonomy of R&D configurations and integrate this into an evolutionary model of emerging market R&D and suggest that research on MNE R&D in emerging markets must shift from focusing on the macro environment to exploring the dynamics of embeddedness. The study also provides useful insights to practitioners on managing R&D in emerging markets.
KeywordsMultinational R&D Emerging markets Innovation Embeddedness Cost arbitrage Competence creation
This study was partly funded by European Community’s Seventh Framework Programme under Grant Agreement Number 217296 (GlobInn: The changing nature of Internationalization of Innovation in Europe: impact on firms and the implications for innovation policy in the EU). We are thankful for this support.
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