UNU-MERIT Working Papers Series
Exploring the paradox of competence-creating subsidiaries: balancing bandwidth and dispersion in MNEs
Rajneesh Narula #2013-046This paper seeks to synthesise the various contributions to the special
issue of Long Range Planningon competence-creating subsidiaries (CCS),
and identifies avenues for future research. Effective
competence-creation through a network of subsidiaries requires an
appropriate balance between internal and external embeddedness. There
are multiple types of firm-specific advantages (FSAs) essential to
achieve this. In addition, wide-bandwidth pathways are needed with
collaborators, suppliers, customers as well as internally within the
MNE. Paradoxically, there is a natural tendency for bandwidth to shrink
as dispersion increases. As distances (technological, organisational,
and physical) become greater, there may be decreasing returns to MNE
spread. Greater resources for knowledge integration and coordination are
needed as intra- and inter-firm R&D cooperation becomes more intensive
and extensive. MNEs need to invest in mechanisms to promote
wide-bandwidth knowledge flows, without which widely dispersed and
networked MNEs can suffer from internal market failures.
Keywords: R&D, globalization, dispersion, embeddedness, knowledge flows
JEL Classification: F23, Z13, M21
Download the working paper (PDF)
