Quo vadis? The entry into new technologies in advanced foreign subsidiaries of the multinational...

Quo vadis? The entry into new technologies

in advanced foreign subsidiaries of the

multinational enterprise

Katarina Blomkvist,Philip Kappenand Ivo Zander

Uppsala University, Uppsala, Sweden

Correspondence:I Zander, Uppsala University, Box 513,751 20 Uppsala, Sweden.Tel: þ46 18 471 13 55;Fax: þ46 18 471 68 10;E-mail: [email protected]

Received: 27 January 2009Revised: 21 February 2010Accepted: 29 March 2010Online publication date: 3 June 2010

AbstractThe international business literature has identified the overall emergence of

technologically advanced foreign subsidiaries of the multinational enterprise(MNE), but little is known about the extent to which individual subsidiaries are

able to sustain their contribution to the technological and strategic renewal of

the multinational group. This paper takes on this neglected question byempirically investigating longitudinal patterns in advanced foreign subsidiaries’

entry into technologies that are new to the entire multinational group.

Repeated events analysis that draws upon the complete US patenting by 211greenfield subsidiaries of 21 Swedish multinationals over the period 1893–2008

reveals accelerated entry into new technologies, but at moderate hazard rates.

The results lend support for established theorizing about the evolution oftechnological capabilities in greenfield subsidiaries, but question extreme views

on their growing strategic importance for the MNE. It appears instead that

significant additions to the technological and strategic renewal of the

multinational group should be discussed in the context of a select number of‘‘superstar’’ subsidiaries, not necessarily what are believed to be general

developments across all subsidiaries of the MNE.

Journal of International Business Studies (2010) 41, 1525–1549.

doi:10.1057/jibs.2010.22

Keywords: multinational corporations (MNCs) and enterprises (MNEs); subsidiarydevelopment, expansion, and growth; subsidiary roles; innovation and R&D; longitudinal(or time-series) studies

INTRODUCTIONIn an article that marked the beginning of extensive research onforeign technological activity in the multinational enterprise(MNE), Robert Ronstadt (1978) suggested an evolutionary patternby which initial R&D investments in foreign subsidiaries expandinto significant capabilities in developing new and improvedproducts for foreign or even global markets. The prediction wasthe emergence of an increasing number of advanced foreignresearch and development subsidiaries in the MNE, capable ofmaking substantial contributions to the technological and strategicrenewal of the entire corporation. Now, some three decades later,it appears that Ronstadt’s overall prediction was essentiallycorrect. Research has confirmed an increase in the foreign part oftechnological capabilities in many MNEs, and accomplishedsubsidiaries with advanced technological capabilities have become

Journal of International Business Studies (2010) 41, 1525–1549& 2010 Academy of International Business All rights reserved 0047-2506

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common in the large and well-established MNE(Cantwell, 1989; Cantwell & Mudambi, 2005;Dunning, 1994; Reger, 2002).

Although it is known that, as a collective, foreignsubsidiaries of the MNE have come to make anincreasingly significant contribution to its techno-logical and strategic renewal, the literature on thesubject contains limited information about evolu-tionary paths and potential limits to the develop-ment of technological capabilities at the level ofindividual foreign subsidiaries. With few exceptions(Birkinshaw & Hood, 1998a; Cantwell & Mudambi,2005), the typical perception or ‘‘end of story’’ is theintroduction of advanced research and develop-ment capabilities and the associated granting ofa world product mandate to a foreign subsidiary,after which the subsidiary is implicitly assumedto reach a resting state in its most advanced form.Additional technologies and products may beintroduced, some of which represent new additionsto the entire multinational group, but the questionsof when and to what ultimate extent have been leftunanswered.

As a result, the ultimate expansion of the MNE’sinvolvement in technological activities in foreignsubsidiaries has remained largely unexplored, fromboth a theoretical and an empirical perspective.Consequently, an important aspect of the nature ofthe MNE has been left uncharted. Addressing theissue is also important from a managerial point ofview, especially in light of the increasing impor-tance attributed to innovation and technolo-gical renewal of the MNE (Bartlett & Ghoshal,1989; Dougherty & Hardy, 1996; Hamel & Prahalad,1994; Verbeke, Chrisman, & Yuan, 2007). To sustaininnovation and the competitive advantage of themodern MNE, managers must be able to estimatethe expected technological contribution from for-eign subsidiaries. Critical questions include whetherto establish new foreign subsidiaries or rely upon oldones for the generation of new technology, orwhether to secure technological renewal mainlythrough greenfield establishments or through othermodes of entering foreign markets.

The present paper addresses the lack of attentionto long-term, evolutionary developments in tech-nologically advanced foreign subsidiaries of theMNE. It explores the theoretical drivers behind theevolution of subsidiaries that have originated asgreenfield investments and at one point haveproven their capacity to contribute significantlyto the technological and strategic development ofthe multinational group (Cantwell & Mudambi,

2005). These advanced subsidiaries tend to have acomparatively long history in the MNE, therebyproviding fertile ground for testing theoreticalpredictions about longitudinal developments anduncovering what may be seen as fundamentaltendencies in the evolution of the MNE.

Drawing upon the complete US patenting historyof 211 greenfield subsidiaries of 21 Swedish multi-nationals in the 1893–2008 period, we use repeatedevents analysis to test for patterns in the timing ofthe subsidiaries’ entry into technologies that arenew to the entire multinational group. The resultsshow a statistically significant acceleration of entryinto new technologies among the subsidiaries, or,in other words, that a large number of prior entriesinto new technologies increases the likelihood of arapid entry into additional new technologies. Atthe same time, the results reveal small numbers ofentries into new technologies in most subsidiaries,and moderate hazard rates. Overall, the resultssupport theories that from various perspectivesaddress the evolution of technological capabilitiesin advanced greenfield subsidiaries, but cautionagainst extreme views on their growing technolo-gical and strategic importance for the MNE.

The paper is divided into six main sections. Thefirst section reviews the literature on the evolutionof technological capabilities in foreign subsidiariesof the MNE, with a specific emphasis on identi-fying the drivers or mechanisms that have beenassociated with the technological development ofadvanced greenfield subsidiaries. It is followed by asection that outlines possible patterns in the timingof entry into technologies that are new to the entiremultinational group, and develops the baselinehypothesis about accelerated entry that is empiri-cally tested in subsequent sections. The thirdsection describes the data and data collection,sample, and statistical method. The fourth sectionpresents the results, including additional investiga-tions into the possible existence of curvilinear entrypatterns. It is followed by a penultimate sectionthat discusses the observed patterns of entry intonew technologies. The sixth and final sectioncontains a summary of the main findings andcontributions of the paper, together with somereflections about their implications for views on thenature of the MNE and future research.

LITERATURE REVIEW AND MODELDEVELOPMENT

The internationalization of technological activityin the MNE and the nature of technological

Advanced MNE subsidiaries’ entry into new technologies Katarina Blomkvist et al

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Journal of International Business Studies

capabilities in foreign subsidiaries have been docu-mented in several related strands of research. Asignificant part of the literature has been concernedwith general trends in the internationalization oftechnological capabilities in the MNE, includingcategorizations of different types of foreign researchand development units. A more diverse body ofliterature has captured a set of external and internaldrivers that can explain the technological evolu-tion of foreign subsidiaries. The theoretical modeldeveloped in this paper draws together thosedrivers that can be expected to have persistent,cumulative, and long-term effects on foreign sub-sidiary innovation activity, and specifically entryinto technologies that are new to the entire multi-national group.

The Internationalization of TechnologicalCapabilities of the MNEToday there is a substantial body of literature on theinternationalization of technological activity with-in the MNE (e.g., Cantwell, 1989; Dunning, 1994;Pearce, 1989; Reger, 2002). Most empirical evidencedocuments increasing shares of foreign technologi-cal activity, although it has been emphasized thatthe rate of change should not be overestimated(Narula, 2002), particularly among firms originat-ing in large economies such as the United Statesand Japan (Patel, 1995; Patel & Pavitt, 1991, 1995).Additional empirical evidence shows that the over-all level of involvement in foreign research anddevelopment depends on factors such as industryand MNE country of origin (Cantwell & Santangelo,2000; UNCTAD, 2005), as well as differences withrespect to the geographical focus of internationa-lized research and development activities (Cantwell& Janne, 2000).

The general explanation for the internationaliza-tion of technological activity is the MNE’s initialneed to adapt products to local market needs,which in some cases leads on to more sophisticatedtechnological roles and responsibilities amongforeign subsidiaries (Cantwell & Piscitello, 2000;Hakanson & Nobel, 1993a; Papanastassiou, 1999;Patel & Pavitt, 1998; Pearce, 1999a; Wortmann,1990). Additional drivers include slackening supplyof new technology from the parent company orinadequate technology for the large foreign mar-kets, the need to provide more challenging work toretain skilled local employees, and the acquisitionof ‘‘incidental’’ R&D units (Hakanson & Zander,1986; Ronstadt, 1978). Over the past few decades,asset-seeking investments (Cantwell & Narula,

2001; Mudambi, 2008) and foreign acquisitionshave become a major contributor to the expansionof technological capabilities outside the MNE’scountry of origin (Zander, 1999).

In addition to the study of the internationaliza-tion of technological activities in the MNE, empiri-cal research has produced a number of typologiesof foreign research and development units (e.g.,Hakanson & Nobel, 1993b; Kuemmerle, 1997;Pearce, 1989; Ronstadt, 1978). These typologieshave been concerned primarily with differences inthe nature of technological capabilities and activ-ities across foreign subsidiaries. One end of thespectrum is occupied by subsidiaries that essentiallyhelp local manufacturing to assimilate and adaptmainstream technology supplied by the home-country organization, or what have been referredto as competence-exploiting subsidiaries (Cantwell& Mudambi, 2005). At the other end of the spect-rum we find the competence-creating subsidiaries,which actively contribute to the development ofthe group’s technological portfolio, influence thestrategic direction of the entire multinationalgroup, and can become part of globally coordinatedR&D programs (Cantwell, 1995; Cantwell &Piscitello, 2000; Gerybadze & Reger, 1999; Pearce,1999b; Pearce & Papanastassiou, 1999). These arethe technologically advanced subsidiaries that areof main concern in the present paper, and whosedevelopment patterns and ultimate limits haveremained comparatively unexplored in the extantliterature.

The Drivers Behind Advanced ForeignSubsidiaries’ Entry into New TechnologiesThe emergence of increasingly sophisticated tech-nological and strategic roles among foreign sub-sidiaries of the MNE is caused mainly by twodifferent types of processes and organizationalunits: (1) the establishment and evolution offoreign greenfield subsidiaries; and (2) the estab-lishment and evolution of foreign acquisitions.This paper focuses on greenfield subsidiaries, asthe mixing of greenfield and acquired units wouldconfound two fundamentally different evolution-ary paths, from both a theoretical and an empi-rical point of view (Bertrand & Zuniga, 2006;Hitt, Hoskisson, Ireland, & Harrison, 1991; Hitt,Hoskisson, Johnson, & Moesel, 1996).1 Greenfieldsubsidiaries have been the point of departure formost of the theorizing about subsidiary evolution,and because of their comparatively long history inMNEs they provide a good testing ground for


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predictions and hypotheses about longitudinaldevelopments.

Over time, greenfield subsidiaries tend to developcloser relationships with local firms and becomeincreasingly embedded in their local businessenvironments (Andersson, Forsgren, & Holm,2002). Those subsidiaries that for a number ofreasons come to attain a basic level of technologicalactivity will be able to access and take advantage oflocalized spillovers (Almeida, 1996; Feldman, 2000;Frost, 2001; Jaffe, Trajtenberg, & Henderson, 1993;Mudambi, 1998). Taking advantage of these localspillovers may lead the subsidiaries to developdistinct technological capabilities and ultimatelygain recognition as ‘‘centers of excellence’’ withinthe international organization (Chiesa, 1995; Holm& Pedersen, 2000). Improved technological cap-abilities and enhanced visibility in the local busi-ness environment are likely to further increase theirattractiveness as partners in local collaborativedevelopment work. As each local environmentoffers a unique set of technological and businessopportunities (Cantwell, 1991; Pavitt, 1988a;Porter, 1990), foreign subsidiaries reaching thisstage of development will tend to enter and exploitfields that represent new additions to the techno-logical portfolio of the multinational group.

Enhanced degrees of local embeddedness and aproven ability to respond to local business oppor-tunities can trigger virtuous cycles of technolo-gical and strategic initiatives at the subsidiarylevel (Delaney, 1998; Fratocchi & Holm, 1998).Birkinshaw (1999) shows that the formation ofdistinctive subsidiary capabilities promotes subsidi-ary initiatives, but he also suggests that accumulat-ing initiatives, however created, have an impact onthe formation of distinctive capabilities. In conclu-sion, it is argued that

[T]hese changes are the result of a development process, in

which subsidiary managers gradually build capabilities in

their subsidiary and relationships in the head office, which,

in turn, leads to a more receptive head-office audience for

their initiatives. (Birkinshaw, 1999: 29)2

Enhanced degrees of local embeddedness andvirtuous cycles of technological and strategicinitiatives are the initial drivers behind the sub-sidiary’s ability to contribute technologically andstrategically to the multinational group. This abilityis boosted further by the gradually enhancedcombinative capabilities that come with the sub-sidiary’s growing involvement in a number oftechnologies (Kogut & Zander, 1992). Over time,

increasing diversity in the stock of knowledge tendsto enhance the creative capability and innovative-ness of the subsidiary (Smith, Collins, & Clark,2005). In general terms, technological capabilitiestransferred from home-country and headquarterunits represent the initial resources that allowsubsidiaries to respond to business opportunitiesemerging in the local context. At later stages, whenthe scope of technological capabilities has beenenlarged, enhanced combinative capabilities at thelocal level will accelerate the subsidiary’s entry intonew technologies.

Whereas cumulative processes promote the sub-sidiary’s ability to locally recombine different ideasand resources into new products and services,enhanced interconnections and integration of thesubsidiary with the overall MNE extend the sameprocesses to the international level (Cantwell, 1995;Cantwell & Piscitello, 2000; Gerybadze & Reger,1999; Mudambi, 2008; Pearce, 1999b; Pearce &Papanastassiou, 1999). Successful initiatives createvisibility in the intra-corporate context and agrowing number of possibilities to link up withheadquarters and sister subsidiaries in internation-ally coordinated innovation projects (Ghoshal &Bartlett, 1988; Hedlund & Ridderstrale, 1995). Bothlocal and organization-wide combinative capabil-ities suggest enhanced abilities to draw upon andrecombine an increasingly diverse set of impulsesand resources, resulting in a multiplicative effect onthe subsidiary’s capability to introduce novelcombinations and technologies that are new tothe multinational group (Phene & Almeida, 2008).

Theoretical ModelThe three main drivers behind the evolution oftechnological capabilities in advanced greenfieldsubsidiaries of the MNE are summarized in Figure 1.Together, they have a persistent, cumulative, and

Increasing opportunities to recombinetechnological capabilities with other

units of the MNE

Increasing opportunities to recombine existing technological capabilities

within the subsidiary

Enhanced embeddedness inlocal business environments:

Virtuous cycles of technologicalinitiatives

Likelihood of entry intotechnologies that are newto the multinational group

+

+

+

Figure 1 The drivers behind greenfield subsidiary entry into

technologies that are new to the MNE group.


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long-term effect on the subsidiary’s likelihood ofentry into technologies that are new to the entiremultinational group.3 As suggested by the model,enhanced degrees of local embeddedness, and thevirtuous cycles of technological and strategicinitiatives they tend to generate, temporally pre-cede the other two factors, although once in placethe three components are expected to work inparallel and mutually reinforcing ways.

At the more fundamental level, a subsidiary’sinclination to enter into new technologies is drivenby profit motives and the need for continuousinnovation to keep pace with and stay ahead ofcompetition. It may also be explained by the questfor power and influence within the multinationalgroup. From the subsidiary’s perspective, power andinfluence translate into independence and freedomfrom what may be perceived as unwanted strategic,operational, or financial interference from head-quarters, or into the ability to influence impor-tant strategic decisions in the MNE (Andersson,Forsgren, & Holm, 2007; Forsgren, 2008). Eitherambition is supported by the development of localbusiness connections and strong and distinctivetechnological capabilities (Mudambi & Navarra,2004).

In the context of a longitudinal study that coversdecades of technological activity and new technol-ogy entry at the subsidiary level, it is difficult toaccumulate sufficient data to test the full theore-tical model. But it is possible to test the model’spredicted outcome, which concerns the pace atwhich foreign subsidiaries enter technologies thatare new to the entire multinational group. Thispaper deals specifically with the issue of rate ofentry into new technologies and what it revealsabout foreign subsidiaries’ longitudinal ability tocontribute to the strategic and technologicalrenewal of the multinational group. Expectationsabout typical patterns in the timing of entry intotechnologies that are new to the entire multi-national group are discussed in the following.

HYPOTHESISWhile the existing literature suggests an overalllongitudinal drift into more advanced technologi-cal capabilities and roles among foreign subsidi-aries, there have been few empirical investigationsof the rate of and ultimate limits to their techno-logical evolution. The literature has addressedgeneral subsidiary development up to and some-times through the advanced stages (Birkinshaw &Hood, 1998a, b; Cantwell & Mudambi, 2005; Holm

& Pedersen, 2000), but few studies have explicitlyexplored subsequent patterns in the entry intotechnologies that are new to the entire multi-national group.

Essentially, three alternative patterns in theadvanced greenfield subsidiary’s entry into tech-nologies that are new to the multinational groupcan be discerned: (1) constant, (2) accelerated, and(3) curvilinear patterns (Figure 2).

The constant pattern of entry into technologiesthat are new to the multinational group is repre-sentative of the lack of assumptions or statementsabout the ultimate limits to the technologicaldevelopment of advanced foreign subsidiaries. It isbased on the implicit notion that those foreignsubsidiaries that have managed to acquire a worldproduct mandate then reach a resting state in theirmost advanced and developed form. Although,according to this view, advanced foreign subsidi-aries may continue to generate entries into newtechnologies, these entries are expected to occur atregular intervals. Individual subsidiaries are thuscapable of contributing significantly to the tech-nological and strategic development of the multi-national group, but they show no tendency to pullit into new and previously unexplored areas at anincreasing pace.

While the constant pattern assumes unchangedintervals between entries into new technologies,the literature that from various perspectives dealswith the external and internal drivers behind thetechnological evolution of greenfield subsidiariespredicts an accelerated pattern, implying that, overtime, intervals become shorter and shorter. Predic-tions about accelerated entry into new technologiesrest on the three interrelated processes that havebeen outlined above:

(1) the process by which over time the foreignsubsidiary becomes more embedded in its local

t

Constant pattern

Accelerated pattern

Curvilinear pattern (inverted U-shape)

t

t

First entry into technology that is new to the entire multinational group.

Subsequent entries into technologies that are new to the entire multinational group.

Figure 2 Three alternative patterns in the advanced subsidi-

ary’s entry into new technologies.


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business environment, including virtuous cyclesof subsidiary initiatives;

(2) gradually enhanced combinative capabilities atthe subsidiary level; and

(3) the enhanced potential to utilize the intra-MNEnetwork for the production of new technology.

Together, these processes can be expected to havea persistent, cumulative, and long-term effect onforeign subsidiaries’ entry into technologies thatare new to the multinational group.

While accelerated entry into technologies thatare new to the multinational group accentuatesthe opportunities associated with an advancedsubsidiary’s development, curvilinear patterns em-phasize the possible constraints imposed by, forexample, over-embeddedness (Uzzi, 1997), strug-gles for power in the MNE (Asakawa, 2001; Yamin &Forsgren, 2006), or path dependency in technolo-gical development (Dosi, 1982; Sahal, 1985). Thesecurvilinear patterns may be of many shapes,although, in terms of the length between anysubsidiary’s entries into new technologies, gradu-ally diminishing or inverted U-shaped patternsare most in line with expectations from theseliteratures.

Compared with the drivers that predict acceler-ated patterns of entry into new technologies, thesystematic effects of those associated with curvi-linear patterns are more tentative. The literature onover-embeddedness does not involve clear-cutexpectations that ultimately over-embeddednessshould develop among all firms. In the case ofpower struggles in the MNE, there is yet to emergesystematic evidence that headquarters routinelyintervene when foreign subsidiaries take on moreprominent roles in the multinational network, orthat virtuous cycles of initiatives at some point willbe reversed.4 Indeed, an alternative response to theemergence of powerful foreign subsidiaries hasbeen the shifting of divisional headquarters abroad,rather than contraction back to the home-countryunits (Forsgren, Holm, & Johanson, 1995). Whilethe technology trajectory literature predicts thatindividual core technologies at some point will runout of steam, it is difficult to estimate the generallength of technological cycles at the subsidiarylevel, and the effect on subsidiaries’ ability toinstead enter into new areas of technology remainslargely unknown.5

The established literature on MNE and subsidiarydevelopment, as summarized in Figure 1, suggestsstrongest systematic support for accelerating effects

on greenfield subsidiaries’ entry into technologiesthat are new to the multinational group. Yet, as it isunlikely that accelerated patterns can be sustainedindefinitely, the time period over which acce-leration can be sustained is an issue that must beconsidered. Overall, the long-term process ofbecoming firmly embedded in local business envir-onments (Zaheer & Mosakowski, 1997), and head-quarters’ interest in continuously monitoring andbalancing power accumulated by foreign subsidi-aries, speak for relatively slowly evolving processes.Observations by Zander and Zander (1996) indicatethat in individual foreign subsidiaries cycles ofexpansion and contraction of technological activitymay extend over a period of 50 years or more. Forcurvilinear development patterns to be system-atically observable, the majority of units underobservation would then need to display historiesthat can be followed over at least those time periods.

Baseline expectations about patterns in theadvanced greenfield subsidiary’s entry into newtechnologies should thus take into account thelength of time periods under investigation. Theincremental nature of evolutionary processes,coupled with evidence that points to a relativelyrecent increase in the degree to which advancedR&D is performed outside the home country of theMNE (Cantwell, 1995; Hakanson & Nobel, 1993b;Ronstadt, 1978; Zander, 1999), suggests that for themajority of units under observation in the presentstudy accelerated entry patterns should be expectedto dominate.6 Accordingly, accelerated entry intonew technologies becomes the baseline hypothesisthat is empirically tested in this paper:

Hypothesis: Technologically advanced greenfieldsubsidiaries of the MNE display an acceleratingrate of entry into technologies that are new to theentire multinational group.

Yet it makes intuitive sense that acceleratingpatterns of entry into new technologies cannot besustained indefinitely, and that at some distantbut unknown point in time the subsidiary’s rate ofentry will decelerate or be reversed. As theoreticaland systematic empirical evidence on the curvili-nearity issue is scarce, additional analyses willalso explore the possible existence of an invertedU-shaped pattern in the subsidiaries’ rate of entryinto new technologies. The sample, data and datacollection, and statistical method employed to testthe hypothesis are presented in the section thatfollows.


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METHOD

SampleTo test for patterns in the entry into new technol-ogies in foreign subsidiaries of the MNE, the paperdraws on the complete US patenting history of alladvanced greenfield subsidiaries of 21 Swedishmultinationals over the 1893–2008 period. A totalof 211 subsidiaries with a patenting history wereidentified, out of which 147 were located in Europe(most importantly Germany, 19, Switzerland, 16,United Kingdom, 13, Netherlands, 13, Denmark,13, and Finland, 12), 19 in the United States, and 45in other countries (most importantly Canada, 9,Japan, 8, Australia, 6, New Zealand, 4, Mexico, 3,and South Africa, 3). Entry into the data set couldoccur at any time during the period examined (for adata set of similar structure, see Lawless, Wigg,Tuli, Drake, & Lamberti-Pasculli, 2001). The samplefirms represent a relatively broad spectrum ofindustries, including, for example, pulp and paper,motor vehicles, pharmaceuticals, and telecommu-nications equipment. Previous studies have shownthat these companies account for a significant andrepresentative number of inventions and R&Dexpenditure in Swedish industry (Hakanson &Nobel, 1993b; Wallmark & McQueen, 1986).

In order to define the sample firms and sub-sidiaries in a way that would allow for longitudinalcomparisons, a historical examination of eachindividual firm was conducted, identifying anypossible name changes as well as potential changesin ownership through mergers and acquisitions.The data consolidate any patenting by first-order,majority-owned subsidiaries for the periods duringwhich they belonged to the parent companies.These subsidiaries were identified through anextensive and systematic search into the historyof each individual sample firm, using the publica-tions Svenska Aktiebolag – Handbok for Affarsvarlden,Koncernregistret – KCR, and Who Owns Whom –Continental Europe. Complementary publications,such as publications on company histories,were also used in the consolidation process. Thesample firms were followed until 2008, or untilthey became involved in major internationalmergers or acquisitions (Appendix A). The organi-zational effects of these mergers or acquisitions,including the potential reorganization of interna-tional research and development activities, thus donot interfere with the current data and analyses.

The empirical analysis is concerned only withforeign subsidiaries that were originally established

as greenfield subsidiaries, thus excluding subsidi-aries that were added to the sample firms as a resultof foreign acquisitions (over the entire periodgreenfield as compared with acquired subsidiariesaccounted for the majority of all entries into newtechnologies among the sample firms). It shouldalso be re-emphasized that the data includeonly foreign subsidiaries that have once proventheir capacity to contribute significantly to thetechnological and strategic development of themultinational group. Proof of this capacity isthat the subsidiaries have been awarded at leastone US patent, which by definition requires thatinventions be novel, non-obvious, and usefuladditions to the existing stock of knowledge (foradditional methodological notes and comments,see Appendix B).

It is notable that some of the subsidiaries mayhave been awarded one or several US patents, butnever accomplished entry into a technology thatwas new to the entire multinational group (58% ofthe subsidiaries in the sample). Others are asso-ciated with single or multiple entries, but testingfor typical patterns in the entry into new technol-ogies requires the inclusion of subsidiaries of allthese types in the empirical tests. A stylizedrepresentation of the basic types, which alsoillustrates the different spells or time periodsbetween entries into new technologies that arecentral to the statistical analyses, is provided inFigure 3.

tX

2008

t

2008

Right-censoring,1st spell

Right-censoring,4th spell

1st spell

1st spell 4th spell

First entry into technology that is new to the entire multinational group.

Subsequent entries into technologies that are new to the entire multinational group.

First recorded patenting by subsidiary.X

X

t

2008

Right-censoring,2nd spell

1st spell

X

Multiple entries into new technologies

Single entry into new technology

No recorded entry into new technologies

3rd spell2nd spell

2nd spell

Figure 3 Basic types of subsidiaries in the sample.


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Data and Data CollectionThe study uses patents as an indicator of tech-nological capabilities and firms’ entry into newtechnologies. Patents are a frequently used indica-tor of technology and the geographical location oftechnological activity (e.g., Almeida & Phene, 2004;Archibugi & Pianta, 1992; Feinberg & Gupta, 2004;Jaffe, 1986; Singh, 2007). They possess a specificadvantage in that they provide access to consistentand comparable information over extended periodsof time. Patenting has been found to correlatehighly with alternative measures of technolo-gical activity and innovative performance, such asresearch and development expenditure and newproduct introductions. In a study comprising alarge number of companies in four high-techindustries, Hagedoorn and Cloodt (2003: 1375,1365) found ‘‘no major systematic disparityamongst R&D inputs, patent counts, patent cita-tions and new product announcements,’’ conclud-ing that ‘‘future research might also consider usingany of these indicators to measure the innovativeperformance of companies in high-tech industries.’’

The present study relies specifically on the firms’patenting in the United States. The completion of aUS patent application requires that the nationalityof the inventor be recorded (rather than thenationality of the research unit). Under theassumption that the nationality of the inventor inthe majority of cases coincides with the geographi-cal location of invention, it is therefore possible toidentify where the research and developmentunderlying the invention was carried out. Thus,for every US patent registered under the name ofany of the sample firms and their subsidiaries, it isknown whether the patent originated in, for exam-ple, Germany, the United Kingdom, the UnitedStates, or any other country.7 This is an importantadvantage, because company-specific patentingpolicies (for example, registering the patent underthe name of the parent company rather than theinventing subsidiary) could otherwise conceal thecorrect geographical distribution of technologicalactivity and invention.

One advantage of using US patenting data isthat the general attractiveness of the large USmarket encourages patenting of inventions thatare believed to be of relatively high quality andcommercial value. The use of US patenting datathereby reduces the risk that accidental or insignif-icant inventions will bias the results. It has beenfound that Swedish firms’ patenting in the UnitedStates does not differ significantly from patenting

in other large markets, such as Germany or France(Archibugi & Pianta, 1992). One potential drawbackof using US patenting data is that it tends to inflatethe patenting activity by US subsidiaries (becausethey have a relatively high propensity to patent inwhat is their home market). Although this increasesthe relative number of entries and observationsthat may be associated with US subsidiaries, itshould not affect the expected pattern in thetiming between new entries. In the current sample,US subsidiaries account for not more than 19 out ofthe 211 foreign subsidiaries, and they should nothave a disproportionate influence on the results.

Although information from patents must be trea-ted with some caution (Pavitt, 1988b; Schmookler,1950), no substantial biases are anticipated in thepresent study. Most of the sample firms are active inmedium to high-tech industries, where patentingis considered an important competitive device.Patenting propensity varies across the sample firms,causing variation in the number of patents asso-ciated with each firm, but this does not in itselfaffect patterns in the timing of entry into newtechnologies.

Variables

Dependent variable. The main variable of interest isthe timing of a subsidiary’s entry into technologiesthat are new to the multinational group. Entryoccurs when the subsidiary is awarded a patent in apatent class in which the multinational grouphas not been previously active. Time to entry ismeasured as the number of years between either thesubsidiary’s first recorded patenting and its firstentry into a technology that is new to the multi-national group or the number of years between anytwo successive entries (e.g., the number of yearsbetween the first and second entry into a newtechnology, or between the second and third entry,etc.). Entry is a distinct event (for subsidiaries thathave never entered any technologies that are newto the multinational group, no such event isrecorded), but any particular subsidiary may havebeen involved in several entries over time.

Entry into new technologies is measured at thelevel of about 400 classes of technology as definedby the US Patent Office.8 For matters of conve-nience, these classes of technology will be referredto as technologies throughout the paper. At thislevel of aggregation it is possible to distinguishbetween relatively narrowly defined technologies,such as resistors and electrical connectors. Other


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examples of patent classes include papermakingand fiber preparation, chemistry carbon com-pounds, liquid purification and separation pro-cesses, and pulse or digital communications. Forthe purposes of this paper, the classification shouldstrike a good balance between more aggregategroups (the use of which would result in feweridentified entries into new technologies) and finerlevels of aggregation.

Main covariate. The main covariate of interest is thenumber of prior entries into technologies that arenew to the multinational group. If high numbers ofprior entries are associated with a high likelihoodof entry into a new technology, this will supportthe hypothesized pattern of accelerated entry intonew technologies among foreign subsidiaries. Inpractical terms, the statistical models examinewhether the number of prior entries into newtechnologies influences the spell length or timebetween successive new entries.

Control variables. Although the data ideally shouldhave included several control variables capturing asubsidiary’s external and internal environment –for example the munificence and other aspects ofthe local business environment (Furu, 2000),changes in the overall degree of centralization ofthe MNE, or levels of competitive pressure – thelength of the time period under study in combi-nation with unavailability of data at the subsidiarylevel precludes the use of a comprehensive set ofcontrols. At the same time, the introduction ofcontrol variables on the basis of the existing data iscomplicated by the fact that many potentialmeasures are expected to evolve together with themain covariate, or the number of previous entriesinto new technologies by an individual subsidiary.

We nevertheless employed a number of controlvariables in the model specifications. We includedsize of the local market as a general proxy for themunificence of the local technological and businessenvironment, which is expected to influence thelocal subsidiary’s ability to branch out into apotentially broadened portfolio of business andtechnological activity. The size of the local marketwas measured annually in GDP expressed as the logof millions of US$ (constant 1990 terms), the databeing obtained from the GGDC Total EconomyDatabase (GGDC, 2008). It is expected that largemarkets will offer broader business and technolo-gical opportunities than small markets, creatingmore opportunities to identify and recombine

diverse ideas and resources within the localcontext.

Three industry dummy variables (coded 0 and 1)were introduced to control for industry-dependenteffects on the timing of entry into new technolo-gies. These dummy variables were expected toreflect different propensities to centralize R&Dactivities (Papanastassiou & Pearce, 1998) andexchange knowledge across individual subsidiariesof the multinational network (Randoy & Li, 1998).The first dummy variable captured firms in theautomotive industry (two firms), the second firms inprocessing industries such as pulp and paper andsteel (four firms), and the third firms involved inpharmaceuticals and chemicals (four firms). This left amixed group of sample firms active mainly inmechanical engineering industries, often with ahighly diversified product portfolio.

We also included a control variable capturingwhether individual subsidiaries entered the risk setduring early or late periods of the observationwindow. The expectation was that advanced for-eign subsidiaries that came into existence whenMNEs were presumably beginning to adopt moremodern organizational forms would experiencemore rapid entry into new technologies. Thismodernity variable distinguished between subsidi-aries that entered the risk set before 1980 and thosethat entered after 1980 (coded 0 and 1), which isthe time period when new trends in the manage-ment and organization of traditional MNEs beganto be observed and, through the business literature,may have had a reinforcing effect on manage-ment practices (Bartlett & Ghoshal, 1989; Doz &Prahalad, 1991; Hedlund, 1986). To a large extent,the modernity variable also gauges the increasinglyknowledge-based and competitive environmentin which MNEs operate, a trend that has beenparticularly accentuated from the 1980s andonward (Powell & Snellman, 2004).

Two control variables were introduced to capturethe extent to which individual subsidiaries coulddraw upon sister subsidiaries in developing newtechnologies. To control for general benefits fromtechnological cooperation within the multina-tional network (Bartlett & Ghoshal, 1990), weintroduced an internal network variable measuringthe number of additional subsidiaries with provenbut not necessarily unique technological capabil-ities at the time of each annual observation. Thevariable reflects the collective, accumulated tech-nological capabilities to which the subsidiary haspotential access, and which in various ways may


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support its own technological efforts. The variabletechnological diversity captures the extent to whichthe subsidiary has access to dispersed and differ-entiated knowledge that may be recombined in theinnovation process. For each annual observationthe technological diversity variable measures thenumber of other subsidiaries in the MNE that,according to the data, had produced entry intotechnologies that were new or unique to the multi-national group. These two control variables do notcapture or measure actual interaction betweensubsidiaries, but merely reflect the subsidiary’spotential for becoming engaged in inter-unitcollaborative efforts.

To control for the potential effects of nationalculture on the technological development offoreign subsidiaries, we included a cultural distancemeasure using Kogut and Singh’s (1988) index andthe scores of Hofstede’s (2001) cultural dimensions,with the exception of the Confucian dynamismdimension. The cultural distance measure capturescultural dissimilarities between a foreign countryand the MNE home country (which in the presentsample is Sweden), which could influence both theability and desirability to control the technologicalactivities in foreign subsidiaries.9

Statistical MethodThe statistical method is event history analysis.Since subsidiaries may be involved in a number ofsuccessive entries into new technologies, the spe-cific method is the analysis of repeated events,using the SAS statistical package (Allison, 1995).Each entry into new technologies represents adistinct event (the 1st, 2nd, y, xth entry into atechnology that is new to the multinational groupby any foreign subsidiary). The first spell is betweenthe subsidiary’s first recorded patenting and its firstentry into a new technology, although in somecases there is no entry at all over the observed timeperiod (resulting in a right-censored observation),and in a small number of cases the first recordedpatenting coincides with the entry into a newtechnology. The subsequent spells are between thesubsidiary’s successive entries into new technolo-gies. Since all observations end in 2008 (with somevariation across the sample firms), the last spell ofany sequence of entries into new technologies istypically right-censored.

With the development of repeated or recurrentevent analysis, there are now several basic modelsin use (e.g., Box-Steffensmeier & Zorn, 2002; Ezell,Land, & Cohen, 2003; Jiang, Landers, & Rhoads,

2006; Kelly & Lim, 2000; Therneau & Hamilton,1997), but the use of previous events as a covariatehas received limited attention (Beck, Katz, &Tucker, 1998). In the current paper, we appliedthe renewal or gap time specification of theAndersen–Gill model, or AG model, which isgenerally recommended in the literature (Box-Steffensmeier & Zorn, 2002; Ezell et al., 2003;Kelly & Lim, 2000; Jiang, Landers & Rhoads,2005).10 We did not apply the Prentice, Williams,and Peterson or PWP models, for the followingreasons: in the present data changes in the riskprocess are captured by the number of prior events,we did not expect the effect of the control variablesto change based on event number, event-specifichazards are not a main concern in the paper, andfew of the subsidiaries experienced a large numberof entries into new technologies.11

One limitation of the AG model, which it shareswith other repeated events approaches (Ezell et al.,2003), is that it does not account for or correct forunobserved heterogeneity.12 To a certain extent,the homogeneity of the sample firms in terms ofgeographical origin and organizational traitsshould have created similar conditions across firmsand individual subsidiaries. Also, a number ofcontrols that account for potential industry-depen-dent effects on the timing of entry into newtechnologies are used. Finally, all subsidiaries inthe sample have reached at least the stage ofdocumented capability to contribute significantlyto the technological and strategic development ofthe multinational group. This would exclude anumber of different types of subsidiaries from theanalysis, for example those representing only salessubsidiaries or those involved in minor adaptationsof existing products and services to local marketneeds.

The absence of a more extensive set of controlvariables and the possible existence of unobservedheterogeneity suggest caution in the interpretationof the results (Ezell et al., 2003). Accordingly, weexpect the findings to shed only preliminary lighton patterns in advanced subsidiaries’ entry intonew technologies, paving the way for further andmore comprehensive empirical investigations intostate-dependent and unobserved heterogeneityeffects.

RESULTSDescriptive statistics on the sample firms, includingentries into new technologies by firm and


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subsidiaries as well as average spell lengths, arepresented in Tables 1 and 2.

Table 1 shows that the numbers of advancedgreenfield subsidiaries and entries into new technol-ogies vary considerably across the sample firms. Thelargest number of foreign subsidiaries accountedfor by an individual firm was 53 (median 8). Whileall of these subsidiaries had proven their capacityto contribute significantly to the technologicaldevelopment of the multinational group, not allof them generated entry into new technologiesover the examined time period. The smallestnumber of entries into new technologies accountedfor by an individual subsidiary was 0 and thelargest was 41. The majority of advanced foreignsubsidiaries across all sample firms never enteredinto a new technology. Specifically, 89 out of 211subsidiaries entered into a new technology (themedian number of new entries in the formergroup was 2). The average age of a subsidiary as atechnologically advanced or fully developed unitwas 21.5 years.

Table 2 shows that the average spell length wasjust above 18 years for the first entry into a newtechnology, and generally shorter for subsequent

entries. It is noteworthy that the first spell includesa number of cases where the first recorded patent-ing by a subsidiary also represented entry into atechnology that was new to the multinationalgroup, and that it also includes a number of caseswhere patenting subsidiaries never generated entryinto new technologies (ending in a right-censoredobservation). After the first entry, event numbersfall off relatively rapidly, which is not uncommonin repeated events studies (e.g., Abu-Libdeh,Turnbull, & Clark, 1990).

The correlation matrix in Table 3 reveals mostlymodest correlations between the covariates.13 Thevariance inflation factor (VIF) was estimated tocheck for potential multicollinearity issues. Withno VIF scores above 3 (Hair, Anderson, Tatham, &Black, 1998), the risk of significant misinterpreta-tions of the results because of multicollinearityappears limited.

The results from the repeated events analyses arecontained in Table 4. The first model presents onlythe results for the control variables, whereas thesecond and third models add two alternativespecifications of the main covariate number ofprior entries.

Table 1 Descriptive statistics, entries into new technologies by sample firm and subsidiaries

Firm Number of

advanced subsidiaries

Total number of

entries into new

technologies

Largest number of entries

by any individual

subsidiary

Average age of

subsidiary

(years, in 2008)a

AGA 7 6 4 37.5

Alfa Laval 13 47 41 46

ASEA 14 8 6 27.5

Astra 18 13 5 20

Atlas Copco 13 26 7 35

Electrolux 17 28 7 29.5

Ericsson 25 29 20 32.5

ESAB 3 5 5 11

Fagersta 1 1 1 18

MoDo 4 2 1 25

Perstorp 9 5 2 14

Pharmacia 13 4 2 15.5

PLM 3 2 2 14

Saab-Scania 2 1 1 23

Sandvik 20 35 19 26

SCA 10 15 4 20

SKF 13 53 25 47

Stora 2 0 0 27

Tetra Pak 10 8 5 11

Trelleborg 5 6 2 22.5

Volvo 9 10 4 21.5

aAge of the subsidiary is measured from the time of first recorded patenting activity, and in a strict sense measures age as a technologically advancedsubsidiary. Last year of observation differs across firms.


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The first model shows statistically significanteffects for six of the control variables. Size of thelocal market shows a positive hazard ratio, suggest-ing that large and munificent local markets increasethe likelihood of a subsidiary’s entry into technol-ogies that are new to the multinational group. Theindustry dummies accounting for subsidiaries inthe automotive industry, processing industries, andpharmaceuticals and chemicals all show hazardratios below 1 (although the automotive dummy isnot significant at the 5% level). The figures suggestthat, compared with the general mechanical engi-neering industries, being part of the processingindustries or pharmaceuticals and chemicals lowersthe subsidiary’s likelihood of entry into newtechnologies by 26% and 50%, respectively.

The influence from the emergence of modernorganizational forms of the MNE or the modernityeffect is negative but not significant. The controlvariable measuring the potential influence frominternal network connections shows a negativeparameter estimate, suggesting that a large numberof advanced sister units decreases the likelihood ofa subsidiary’s entry into new technologies. For thetechnological diversity measure the reverse is true,as the existence of sister subsidiaries that havegenerated entry into unique technologies increasesthe likelihood of entry into new technologies.The cultural distance measure, finally, shows asignificant negative effect on the subsidiary’s like-lihood of entry into new technologies.

The second model introduces the main covariate,showing a significant and positive relationship

Table 2 Descriptive statistics, events, and spell lengths

Event

no.

No. of

events

Average spell

lengtha

Minimumb Maximum

1 211 18.06 0 99

2 86c 13.51 1 76

3 42 6.81 1 38

4 29 6.24 1 48

5 21 4.81 1 22

6 16 8.06 1 42

7 11 5.64 1 20

8 8 5.00 1 15

9 6 1.50 1 3

10 5 3.60 1 14

11 4 1.25 1 2

12 4 1.25 1 2

13 4 2.50 1 5

14 4 1.00 1 1

15 4 1.00 1 1

16 4 1.00 1 1

17 4 1.00 1 1

18 4 1.75 1 4

19 4 1.25 1 2

20 3 2.67 1 5

21 3 3.00 1 7

22 2 1.50 1 2

23 2 8.00 1 15

24 2 1.00 1 1

25 2 2.50 1 4

26+d 16 4.19 1 24

aAverage spell length (years) includes right-censored observations.bMinimum spell length for first spell is zero because in some cases thefirst patent by an individual subsidiary coincides with entry into a newtechnology.cThree observed entries occurred in a new location in the last year of theperiod of observation.dAll event numbers higher than 25 pertaining to Alfa Laval.

Table 3 Spearman correlation matrix and simple statisticsa

1 2 3 4 5 6 7 8 9

1. Prior entries 1.00

2. GDP 0.34 1.00

3. Automotive industry �0.08 �0.01 1.00

4. Processing industry 0.03 0.10 �0.06 1.00

5. Pharmaceuticals/chemicals �0.05 0.01 �0.09 �0.12 1.00

6. Modernity 0.07 0.20 0.04 0.10 0.05 1.00

7. Technological diversity 0.29 0.15 �0.23 �0.10 �0.11 0.49 1.00

8. Internal network 0.06 0.06 �0.18 �0.26 �0.12 0.53 0.75 1.00

9. Cultural distance 0.17 0.62 �0.05 0.03 �0.03 0.02 0.05 0.01 1.00

Mean 1.35 12.76 0.04 0.06 0.17 0.70 3.62 9.69 1.15

Std dev. 4.38 1.50 0.20 0.24 0.37 0.46 2.65 5.20 0.75

VIFb 1.15 1.55 1.15 1.25 1.13 1.71 2.16 2.49 1.35

aCorrelations greater than 0.03 significant at po0.05.bVariance inflation factor scores derived from Model 2, Table 4.


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between the number of prior entries and thelikelihood of entry into technologies that arenew to the multinational group. In other words,an increase in the number of prior entries speeds upentry into the next new technology, thus support-ing the baseline hypothesis. Yet, while the effect isstatistically significant, the hazard ratio reveals thatan increase in the number of prior entries by 1increases the likelihood of an additional entry bynot more than 3%. With the exception of thecultural distance variable, significance levels of allother covariates remained unchanged in the secondmodel, and results remain robust throughout arange of modifications of the underlying explana-tory model and of the sample firms included.14

The third model explores the possible existence ofa curvilinear entry pattern. It does so by introducingthe squared term of the main covariate number ofprior entries. The findings are initially consistent

with the fact that the number of prior events has asignificant, modest inverse U-shaped effect on thelikelihood of entry into technologies that are newto the multinational group (less than 1% in thedownward slope and 16% in the upward slope). Thegoodness of fit of the three models is satisfactoryand increasing, ranging from a likelihood ratio testscore of 151.02 for Model 1 to 170.14 for model 2and 194.69 for Model 3. In validating the curvilinearmodel’s superiority over the linear model, thegoodness of fit improved significantly when thesquare of prior entries was inserted.

However, robustness checks indicated that thecurvilinear effect was driven by one particular firm(Alfa Laval), and specifically the impact from its USsubsidiary. After an initial gestation period, thissubsidiary became technologically very active forseveral decades, after which technological activitydecreased (Zander & Zander, 1996; the descriptive

Table 4 Gap-time Andersen–Gill partial likelihood models showing the effects of the number of prior entries and control variables on the

hazard rate for entry into new technologiesa

Model 1 Model 2 Model 3

Estimate Hazard ratio Estimate Hazard ratio Estimate Hazard ratio

Covariate

GDP 0.44*** 1.55 0.39*** 1.47 0.33*** 1.40

(0.05) (0.05) (0.05)

Automotive industry �0.31 0.74 �0.19 0.83 �0.10 0.90

(0.33) (0.31) (0.30)

Processing industry �0.60* 0.55 �0.49* 0.61 �0.35 0.70

(0.27) (0.24) (0.22)

Pharmaceuticals/chemicals �0.69*** 0.50 �0.58** 0.56 �0.48** 0.61

(0.20) (0.19) (0.17)

Modernity �0.19 0.83 �0.06 0.94 �0.09 0.91

(0.16) (0.17) (0.18)

Technological diversity 0.14*** 1.15 0.14*** 1.15 0.10*** 1.11

(0.04) (0.03) (0.03)

Internal network �0.07** 0.93 �0.08** 0.92 �0.07*** 0.93

(0.03) (0.03) (0.02)

Cultural distance �0.29* 0.75 �0.25 0.78 �0.21 0.81

(0.14) (0.14) (0.14)

Prior entries 0.03*** 1.03 0.15*** 1.16

(0.01) (0.02)

Prior entries2 �0.00*** 0.99

(0.00)

Diagnostics

Annual obs. 5964 5964 5964

No. of events 304 304 304

LR test (d.f.)b 151.02*** 170.14*** 194.69***

(8) (9) (10)

aRobust standard errors in parentheses.bThe LR test statistic is a likelihood ratio test of the included covariates, with d.f. being the degrees of freedom.Estimates considered significant at po0.05, po0.01 and po0.001 levels are indicated with *, **, and ***, respectively (two-tailed).


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data of Table 2 suggest that for many of the firm’slate entries into new technologies the spell lengthincreased compared with previous periods). Whenexcluding this particular firm and subsidiary fromthe sample, the squared term of the number of priorentries lost its statistical significance (while priorentries remained significant at a hazard ratio of1.13). Despite the overall increase in fit in Model 3,this robustness check therefore suggests strongergeneral support for the accelerated than for thecurvilinear pattern.

DISCUSSIONThe objective of this paper is to explore patterns ofentry into new technologies in advanced greenfieldsubsidiaries of the MNE. The main results suggestthe presence of an accelerated pattern of entry intotechnologies that are new to the MNE, or, in otherwords, that the time between entries into newtechnologies tends to become shorter with eachsuccessive entry. The findings support establishedtheorizing about the evolution of technologicalcapabilities in greenfield subsidiaries, and remainrobust throughout a range of model specificationsand sample firms included in the analyses.

At the same time, the observed hazard ratessuggest that the ability of the investigated sub-sidiaries to increasingly contribute to the techno-logical and strategic renewal of the multinationalgroup is limited. Specifically, increasing the num-ber of prior entries by 1 increases the likelihood ofentry into an additional new technology by only afew percent. In light of the generally low numbersof entry into new technologies displayed bythe foreign subsidiaries in the sample, this doesnot seem to amount to a major influence on thestrategic development of the entire multinationalgroup. Yet there is significant variation in terms ofthe number of entries across individual subsidiaries,which may suggest that the strategic effects onthe multinational group should not be discussedin general terms, but rather in the context of aselect number of ‘‘superstar’’ foreign subsidiaries(Kappen, 2009).

The relatively slowly evolving process of green-field subsidiaries’ entry into new technologiesresonates with several prior findings in the inter-national business literature. It is known that inmany cases initial foreign investments are made ona relatively limited scale (Johanson & Vahlne, 1977,1990), and expanded by expatriates who over timeselect and hire employees from the local environ-ment (Barkema & Vermeulen, 1998). Greenfield

subsidiaries tend to draw upon and expand alreadyexisting firm-specific advantages (Belderbos, 2003),and the path dependency created by technologytransfer from home-country units will initially keepthem in the neighborhood of already establishedtechnological capabilities. Greenfield subsidiariesare also affected by liability of foreignness (Zaheer,1995), which has proven an enduring barrier tothe development of closer and embedded ties withlocal firms (Zaheer & Mosakowski, 1997).

Apart from the observed effect of the number ofprior entries, several of the control variablesshowed results that were in line with expectations.Large and munificent markets appear to offer betterconditions for subsidiaries to develop new innova-tive technologies, presumably because they givethe subsidiary more opportunities to identify andrecombine diverse ideas and resources within thelocal context. Possibly, large markets also comewith relatively high degrees of power and influencewithin the MNE network, and the granting ofautonomy, which is conducive to technologicaladvancements (Asakawa, 2001; Forsgren, 2008;Yamin, 2002). Results for the industry dummiesshowed comparatively low propensities to enternew technologies among subsidiaries belonging tothe processing industries and pharmaceuticals orchemicals. This result makes intuitive sense, asfirms in these industries depend on a few centra-lized plants and R&D operations, and are involvedin products that only to a limited extent aresensitive to the particular demands of local businessenvironments.

Two additional findings require some furthercomments. First, findings for the control variablesthat pick up potentially beneficial influences fromcooperation with other subsidiaries in the multi-national network suggest that a generally largernetwork of advanced sister units has a negativeeffect on the subsidiary’s likelihood of entry intonew technologies. This unexpected relationshipcould be explained by enhanced competitionfor resources as the number of technologicallyadvanced subsidiaries in the multinational networkgrows. A related explanation would be that overtime a growing number of advanced foreignsubsidiaries heightens headquarters’ awareness ofthe need to coordinate research activities and avoidduplication of effort throughout the multinationalnetwork (Zander, 1998). Tighter control of dis-persed technological activities would then narrowthe subsidiaries’ possibilities to become engagedin explorative efforts, thus slowing down entry


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into new technologies. In light of the absence of astatistically significant result for the modernityvariable, this suggests that, at least over the exa-mined time period, resource constraints and whatmay be termed ‘‘conventional paradigms’’ of MNEmanagement may have superseded the effects ofintra-MNE networking (Phene & Almeida, 2008;Verbeke & Kenworthy, 2008).

Second, results for the technological diversityvariable suggest that access to a large number ofsister subsidiaries that have experienced entryinto new or unique technologies increases thelikelihood of a subsidiary’s entry into new techno-logies. This could indicate that the ability torecombine geographically dispersed knowledgeinto novel technologies emerges only with theformation of specialized rather than generallyadvanced sister subsidiaries. Another interpretationwould be that while MNEs generally develop theneed to control dispersed research efforts whenthe number of advanced foreign subsidiaries grows,they remain benign toward the emergence ofunique technological initiatives in a select numberof foreign subsidiaries. Considering the limitednumber of subsidiaries in the sample that haveexperienced large numbers of entry into newtechnologies, there may be a parallel tendency toconcentrate these new technological initiatives to asmall group of ‘‘superstar’’ foreign subsidiaries.

This could suggest that MNEs are rationalizingtheir internationally dispersed knowledge struc-tures by allocating fewer but more extensivesubsidiary mandates. Yet the current analyses andresults are only indicative of this possibility, andmore detailed investigations and subsample ana-lyses would be required to confirm this suspicion.At least the strategy of allocating extensive man-dates to only a few highly active subsidiaries,whether through headquarter decisions or becauseof strategizing among competing subsidiaries, isnot entirely in line with the data. Excluding thosesample firms with the most prominent ‘‘superstar’’subsidiaries did not cause a reversal in the observedpattern of accelerated entry, suggesting that theextension of subsidiary mandates goes beyond onlythe most productive units.

Because few of the subsidiaries covered by thesample experienced a larger number of entries intonew technologies, there was no robust evidence ofcurvilinear entry patterns. To the extent that thesepatterns exist, they seem to be associated with asmall number of subsidiaries that have a longhistory in the MNE and have also experienced a

significantly larger number of entries than average.Because of the limited number of subsidiaries witha large number of entries, and their potentiallyunique histories, it is difficult to draw any firmconclusions on the basis of the present sample andresults. However, one general conclusion would bethat, among greenfield subsidiaries, patterns ofexpansion and contraction in terms of entry intonew technologies will be observable only overperiods that span several decades.

The observed findings have theoretical as well aspractical implications. The long-term evolution oftechnological capabilities in foreign subsidiarieshas received mostly implicit treatment in theextant literature, and the present paper connectsand supports the different theoretical discussionsthat have appeared in the international busi-ness literature. Specifically, the proposed theore-tical model identifies three main factors that canbe expected to have persistent, cumulative, andlong-term effects on advanced greenfield subsi-diaries’ entry into technologies that are new to theentire multinational group. With regard to practicalimplications, the baseline tendencies revealedby the empirical investigation could serve as ananchoring point for managers reflecting upon anddesigning desired policies for technological andstrategic renewal of the MNE. Yet exactly whatthese policies should involve remains firm andindustry dependent. While a faster and more broad-based entry into new technologies among foreignsubsidiaries in many cases would yield strategicbenefits (Dougherty & Hardy, 1996; Hamel &Prahalad, 1994), for some MNEs controlled andcautious approaches to technological renewal inthe multinational network might prove moredesirable.

Whatever approach is taken, the observed hazardrates suggest that managers should have moderateexpectations about foreign subsidiaries’ ability tocontribute to the strategic and technologicalrenewal of the entire multinational group. Espe-cially, the MNE’s own transplants in the form ofgreenfield establishments have at least historicallyhad, and presumably still have, a natural tendencyto evolve in an incremental manner. It may then bethat foreign subsidiaries and their capabilities havebeen significantly under-utilized in the evolutionof the multinational group, but accounting for thevarious measures that could be taken to improvethe generation of new technologies in the foreignsubsidiaries of the MNE is beyond the capacity ofthe current paper. It may be hypothesized that


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other ways to achieve technological and strategicrenewal are faster or more productive, but investi-gations of long-term, relative contributions fromalternative modes of entering foreign markets, suchas foreign acquisitions, joint ventures, or alliances,are yet to be carried out more systematically.

A Critical Evaluation of the FindingsSeveral important limitations must be kept in mindin evaluating the findings and conclusions. First, itmust be emphasized that the sample is restricted toa limited, non-random sample. While the firmsrepresent a large and representative proportion ofSwedish MNEs, they are not necessarily representa-tive of firms of other national origin. On thebalancing side, the sample includes corporationswith long and extensive exposure to internationalmarkets and international business. With thehistorically large degrees of operational freedomgranted to foreign subsidiaries of Swedish MNEs(Hedlund & Aman, 1984), they should offer a usefultesting ground for identifying basic tendenciesin the entry into new technologies by foreignsubsidiaries.

Second, while the connection between priorentries and spells between subsequent entries intonew technologies is robust across various modelspecifications, limited availability of longitudinaldata at the subsidiary level has allowed us to useonly crude proxies for factors such as munificenceof the local business environment and the numberof internal network linkages. Furthermore, controlvariables such as potential internal network lin-kages are positively correlated with the number ofprior events, primarily because few of the samplefirms would withdraw from individual countries(one of the underlying assumptions of the statis-tical tests is that the sample firms have not with-drawn from a country once a subsidiary has beenestablished there).

Third, moderate hazard rates at the chosen levelof aggregation may conceal more rapidly growinginvolvement within certain technological nichesthat are particularly important in the local businessand technological environments. Hence a foreignsubsidiary may not be registered for a high numberof entries into technologies that are new to themultinational group, yet it may produce contin-uous and possibly accelerated entries within nar-rowly defined areas of technology. Because a studyat the level of classes of technology as definedby the US Patent Office does not capture moreincremental development of technologies, the

temporal patterns of such advancements remainunknown. The results and conclusions must beseen against the applied aggregation of classes oftechnology, but we suggest that it strikes a reason-able balance between finer categorizations andmore aggregate groups. Arguably, the applied levelof aggregation corresponds to the types of innova-tions considered by the extant literature on thetechnological and strategic renewal of the MNE(e.g., Bartlett & Ghoshal, 1989; Doz & Prahalad,1991; Hedlund, 1986).

Fourth, it is important to re-emphasize that thepaper does not take into account the dynamicsassociated with foreign acquisitions and theirinfluence on the development of technologicalcapabilities in the MNE. Thus we have capturedonly part of the complete story of technologicaldevelopment in the multinational network of theMNE, albeit an important part that has receivedconsiderable attention in the prior literature. Tomeasure the full strategic impact of the internatio-nalization of technological capabilities in the MNE,foreign acquisitions must be added to the picture. Apreliminary test that was carried out neverthelesssuggests that longitudinal patterns in the techno-logical contribution from advanced acquired sub-sidiaries are not substantially different from thoseidentified among the greenfield subsidiaries.15

SUMMARY AND CONCLUSIONSThe ultimate limits to the technological activity ofadvanced foreign subsidiaries of the MNE are onlypartially understood, and the present paper is a firstattempt to identify longitudinal patterns inadvanced greenfield subsidiaries’ entry into tech-nologies that are new to the entire multinationalgroup. The results reveal statistically significantacceleration of entry into new technologies, butalso what must be considered moderate hazardrates. Overall, the findings support theories thatfrom various perspectives have addressed theevolution of technological capabilities in greenfieldsubsidiaries of the MNE, but question extremeviews on their growing technological and strategicimportance.

The paper makes three specific contributions tothe existing literature. By integrating severalbranches of research accounted for in the interna-tional business literature, it provides a theoreticalargument and model for the entry into newtechnologies in advanced greenfield subsidiaries ofthe MNE. From a theoretical point of view, werecognize that the model underlying the baseline


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hypothesis is only partial. We have focused onthose drivers and variables in the literature thatcome with expectations about persistent, cumula-tive, and long-term effects on greenfield subsidiaryentry into new technologies. At any given pointin time, a large number of additional but lessconsistent variables may influence the rate of entryinto new technologies, and further research mayproduce model amendments and refinements thatalso coincide with what is empirically measurableover extended periods of time.

The paper also provides novel empirical evidenceabout a hitherto neglected issue in the literature,specifically that of the rate of and ultimate limits tothe technological development of advanced foreignsubsidiaries of the MNE. The overall conclusion,which needs to be confirmed by additional studiesthat include a broader sample of MNEs of differentnational origin, is that advanced greenfield sub-sidiaries do tend to pull the MNE into new techno-logies at an accelerating pace, but that in most casesthis process is quite slow and of moderate signifi-cance. More significant contributions to the tech-nological portfolio of the multinational groupare reserved for a limited number of ‘‘superstar’’subsidiaries, but it may be the case that overextended periods of time these subsidiaries experi-ence growth, maturity, and ultimate decline in thesignificance of their technological contribution tothe multinational group.

Finally, the paper introduces the method ofrepeated or recurrent events to the field of interna-tional business and business studies more generally.It is a method that holds substantial promise forinvestigations of various phenomena that occurwith regular frequency, but which until now hasreceived only marginal attention in the literature. Areview and penetration of the technical literatureon repeated events is beyond the scope of the pre-sent paper, which nevertheless contains referencesto papers that offer useful guidance on the basicmethods that are available. Additionally, the paperprovides specific guidance for researchers interestedin analyzing the effects of prior events, particularlyin the context of the AG model.

It is always somewhat delicate to discuss orders ofmagnitude, and caution is advisable whenever dataare compared over long periods of time, but therelatively slow pace of entry into new technologiesidentified in the present paper suggests that formost advanced greenfield subsidiaries technologi-cal evolution is an incremental process. Despite theoverall acceleration of entry into new technologies

that is found among the foreign subsidiaries in thesample, limited average numbers of entry andmoderate hazard rates convey a picture of MNEsas keeping, as a default, tight control of individualforeign subsidiaries. While current observations donot offer any definitive proof of the true natureof the MNE, at least in the context of greenfieldsubsidiaries that are ‘‘close to home,’’ they speakagainst extreme views on the MNE’s inclination toengage in geographically dispersed knowledgedevelopment. Worldwide knowledge developmentmay come about through an increase in the merenumber of foreign investments, but perhaps not toan overwhelming extent through the developmentof individual foreign subsidiaries.

It appears instead that any significant additionsto the technological and strategic renewal of themultinational group should be discussed in thecontext of a select number of ‘‘superstar’’ subsidi-aries, not necessarily what are believed to begeneral developments across all subsidiaries ofthe multinational network. The origin, nature,and dynamics of such superstar subsidiaries seemto deserve particular attention in future research. Atleast among foreign subsidiaries of greenfieldorigin, these would be the ones that are really ableto influence and change the technological andstrategic profile of the MNE.

ACKNOWLEDGEMENTSWe would like to thank the three anonymous reviewersand the editors for insightful and very helpfulcomments and suggestions. Financial support fromHandelsbanken’s Research Foundations is gratefullyacknowledged.

NOTES1The focus on greenfield subsidiaries is partially

dictated by methodological considerations (see furtherthe section on data and data collection). Whereas thedocumentation of patterns of entry into new technol-ogies on the basis of patenting records is straightfor-ward in the case of greenfield subsidiaries, it becomescomplicated in the case of foreign acquisitions. Speci-fically, when the MNE acquires an ongoing operationit acquires a stock of existing technological capabilitiesand technologies (suggesting a sometimes very highnumber of added new technologies in the year ofacquisition), but some of this stock may go unde-tected, because the acquired unit may not havebeen awarded any patent(s) in the particular year ofacquisition. This biases observable patterns in thetiming of entry into new technologies, where the


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expectation is a high number of new entries in the yearof acquisition but uncertainty as to whether registeredentries into ‘‘new’’ technologies in the followingyears indeed represent new additions to the corporateportfolio. Mixing greenfield and acquired units in thesame type of empirical analysis would thereforeconfound two different evolutionary paths.

2The extant literature offers different interpretationsof cycles of subsidiary initiatives, but the effects ontechnological activities of subsidiaries and predictionsabout the timing of entry into new technologies aresimilar. Delaney (1998) and Birkinshaw (1999) suggestthat subsidiary initiatives initiate a process of integra-tion within the multinational group, and that well-developed relationships between subsidiaries andheadquarters in turn promote further technologicaladvancements and initiatives at the subsidiary level. Incontrast, Andersson and Forsgren (1996), Forsgren,Johanson, and Sharma (2000), Asakawa (2001), andForsgren (2008, Chapter 6) suggest that higherdegrees of local embeddedness lower the possibilityof executing corporate control and lead to higherdegrees of subsidiary autonomy. Nevertheless, suchautonomy has been associated with product mandatesand centers of excellence (Ensign, Birkinshaw, & Frost,2000; Forsgren & Pedersen, 2000), and withenhanced levels of technological activity and explora-tion of new fields of technology (Yamin, 2002).

3A large number of additional variables can beexpected to influence the subsidiary’s likelihood ofentering new technologies, for example subsidiarymanager profiles, overall approaches to organizingand managing the MNE, levels of research anddevelopment expenditure, and the intensity of com-petition. Yet many of these factors do not translateinto persistent effects and cumulative processes (sub-sidiary managers frequently change, as do overallapproaches to organizing and managing the MNE andlevels of competition). And while these factors mayhave an influence on general innovation activity, theydo not necessarily promote movements into technol-ogies that are new to entire multinational group.

4Birkinshaw and Hood (1998a) suggest that sub-sidiary initiatives work as a driver behind subsidiaryevolution, but add that a weakening relationshipbetween headquarters and the subsidiary can be thesource of a loss of charter and capability atrophy. Theirapproach does not address the extent to which charterlosses would be expected generally across subsidiaries.Zander and Zander (1996) provide case-based evi-dence of what appears to be the purposeful shifting oftechnological mandates from powerful subsidiaries toheadquarters within the multinational group. Yet, as in

the case of over-embeddedness, evidence of head-quarter intervention at a certain point in the foreignsubsidiary’s development is still to be systematicallydocumented.

5The literature on the path dependency of techno-logical development would suggest that advancedforeign subsidiaries may enter certain technologicaltrajectories, typically reflective of idiosyncratic localbusiness environments, which are then adhered toover an extended period of time. At a certain point,the established trajectory may then enter phases ofmaturity and decline, suggesting that ultimately thetime intervals between entries into new technologieswill stabilize or lengthen. However, the general lengthof technological cycles at the subsidiary level willdepend on the type of underlying core technologyand its technological potential. The fact that subsidiaryunits for a number of reasons may exit certain techno-logies, for example because of strategic re-orienta-tions, also makes it difficult to estimate when theultimate limits to increasing involvement in newtechnologies will be reached.

6To somewhat precede the empirical investigation,the average age of foreign subsidiaries in the presentsample ranges from 11 to 47 years (with a median of 23years). This refers to the age of the subsidiary as anadvanced foreign subsidiary, the count starting fromwhen it has proven its capacity to make significanttechnological contributions to the multinational group.

7A small proportion of all patents in the current dataset would be represented by several inventors ofdifferent nationalities. In those cases the geographicallocation of technological invention was recorded asthat of the first inventor.

8The US Patent Office classification is based primarilyon the nature and function of the inventions, not theirprimary adopters. The manual states that arts orinstruments having like functions, producing likeproducts, or achieving like effects, are classifiedtogether. The functions or effects that are chosen asa basis of classification must be proximate or essential,not remote or accidental (Manual of Classification,Revision No. 1, June 1993, US Department ofCommerce, Patent and Trademark Office).

9With the progress of cultural distance measures,indexes other than Hofstede’s have been developedand used, for example the Schwartz (1994) index,which has been found to at least partly overlapHofstede’s index (Drogendijk & Slangen, 2006), orthe approach of clustering countries based on attitu-dinal dimensions (Ronen & Shenkar, 1985). Althoughwe did not test the Schwartz index, we did test aEuclidian distance index based on Hofstede (2001)


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(see, e.g., Brouthers & Brouthers, 2001; Vermeulen &Barkema, 2001) and the binary approach of clusteringforeign subsidiaries, and found it to have no significantimpact on the observed results.

10The renewal or gap time specification waspreferred over the counting process specificationbecause of our interest in the number of prior entriesas the main covariate and the structure of the data.When prior events or entries are included in thestatistical model, the counting process specificationtends to associate long spells with high numbers ofprior entries, resulting in negative parameter estimatesand low hazard ratios for the covariate measuring priorentries, even in cases of strictly accelerated entryprocesses. Yet, and as is the case in the present data,this effect may be outweighed by a large number ofobservations with long spells and either one late entryor a right-censored observation. As the renewal or gaptime specification measures spell length as time fromthe last recorded event (or, for the first event, timefrom the subsidiary’s establishment as an advancedsubsidiary), it generates more direct and unambiguousresults concerning the hypothesized accelerated entrypatterns. For an extended discussion on the differentspecifications of the AG model see Kelly and Lim(2000) and Ezell et al. (2003).

11Ezell et al. (2003: 138) suggest that ‘‘the AGmodel is the preferred model when the substantiveinterest surrounds the overall rate of recurrencethrough the effect of common parameter estimates,especially when few subjects experience two or moreevents and when there is a substantive interest inknowing whether the hazard rate is increasing/decreasing with the unfolding of the event process.’’

12The control options available for repeated eventsanalyses are not applicable in the present study,because of the relatively large proportion of subsidi-aries that experienced no or only a single entry intonew technologies. Specifically, the FEPL methodsuggested by Allison (1995) requires that mostobservations have at least two events. It discards thoseobservations with no events (i.e., those with only asingle censored spell), and also those with oneuncensored spell and one censored spell, if thecensored spell is shorter than the uncensored spell.Moreover, Allison (1996) provided partial evidencethat the FEPL method may not perform very well in

predicting the effects of certain covariates. In parti-cular, covariates such as the number of prior entriestended to be biased downwards with regard to theirtrue hazard rates.

13The only exception to modest correlations is thatbetween the internal network and technologicaldiversity measures. For natural reasons, these two arebound to evolve together over time. In the analyses weran the models omitting one variable at a time, withno significant effects on the results and conclusions.

14We explored several different model specifica-tions, and also tested for the potential effect of outlierfirms and subsidiaries in the sample. The results stayedrobust when we checked for potential home-countryeffects by introducing a US dummy, as the data arebased on US patent filings. Further, we tested forshorter or longer periods of observation, and also triedthe exclusion of the four firms with subsidiaries thataccounted for large numbers of entries into newtechnologies (Alfa Laval, Ericsson, Sandvik and SKF),with no substantial changes to the results. Results fromusing a counting process specification of the AG modelshowed identical results in terms of statistical signifi-cance, with similar hazard ratios.

15A subsample analysis that also included foreignacquisitions was conducted to rule out the possibilitythat advanced acquired subsidiaries display patterns ofentry that differ substantially from those associatedwith the greenfield subsidiaries. As explained pre-viously, and while involving some conceptual compli-cations, this analysis had to be conducted at thelevel of foreign locations. A test covering the period1893–1990 included both greenfield and acquiredsubsidiaries, and used the same control variables asbefore (for the combined sample 40 acquired sub-sidiaries with confirmed US patenting activity wereidentified). Space limitations preclude a full presenta-tion of the results, but in the combined sample (and atthe location level) increasing the number of priorentries by one increased the likelihood of entry intonew technologies by 3%. The hazard rate for thenumber of prior entries had about the same con-fidence interval as that for greenfield subsidiaries only.This suggests that the current findings do not reflectsevere selection bias, but a closer examination ofpotential differences between greenfield and acquiredsubsidiaries remains to be undertaken.

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APPENDIX ASee Table A1.

APPENDIX B

Methodological Notes

Patents as proof of advanced technologicalcapabilitiesUsing US patents as proof of a subsidiary’s capacityto contribute significantly to the technologicaland strategic development of the multinationalgroup runs the risk of including subsidiariesin the sample that display only serendipitoustechnological discoveries. It has not been possibleto estimate the relative proportion of these sub-sidiaries in the current sample, but only a verysmall number of the identified subsidiaries wereresponsible for only one patent over the entireperiod.

Identification of foreign subsidiariesThe empirical analysis is based on the assumptionthat, over time, the sample firms have maintainedone subsidiary per country (an assumption sup-ported by the historical accounts and informationabout the international operations of the samplefirms presented in annual reports), although insome cases individual subsidiaries may haveincluded several legally separate entities. For manyof the observations it is known that the parent firmhas been awarded a US patent that has its origin ina foreign country (assumedly because of corporatepatenting policies), and the patenting records donot reveal the organizational identity of the sub-sidiary performing the actual research. In theanalyses it is assumed that the research underlyinga patent with, for example, UK inventors was alsocarried out at the local UK subsidiary.

Table A1 The sample of consolidated Swedish multinational firms

Firma Principal field of industrial activity Total number of subsidiaries at riskb

AGA (1904)c Industrial gases 7

Alfa Laval (1878) Separators, agricultural equipment 13

ASEA (1883) Power generation and distribution equipment 14

Astra (1913) Pharmaceuticals 18

Atlas Copco (1873) Pneumatic and hydraulic equipment 13

Electrolux (1910) White goods, home appliances 17

Ericsson (1876) Telecommunication equipment 25

ESAB (1904) Welding equipment 3

Fagersta (1873) Metals, rock drills 1

MoDo (1873) Pulp and paper 4

Perstorp (1880) Chemicals, conglomerate 9

Pharmacia (1911) Pharmaceuticals 13

PLM (1919) Packaging material 3

Saab-Scania (1891) Automotive products, aircraft 2

Sandvik (1862) Specialty steel and metals, hard materials 20

SCA (1925) Pulp and paper 10

SKF (1905) Ball and roller bearings 13

Stora (1888) Pulp and paper 2

Tetra Pak (1946) Liquid packaging machinery 10

Trelleborg (1905) Rubber products, conglomerate 5

Volvo (1915) Automotive products, food 9

aYears within parentheses indicate the year of establishment.bBeing at risk means that the subsidiaries in various foreign locations have proven their capacity to contribute significantly to the technologicaldevelopment of the multinational group by means of patenting, but they may or may not have been responsible for entries into new technologies.cAGA was acquired by Linde in 2000, and observations truncated in that year. Other sample firms with truncated observations include ASEA (1988,merged with Swiss Brown Boveri et Cie.), Alfa Laval (1993, acquired by Tetra Pak), Astra (1999, merged with Zeneca Group), ESAB (1994, acquired byCharter), MoDo (2000, acquired by Metsa), Perstorp (2001, acquired by Sydsvenska Kemi), Pharmacia (1995, merged with Upjohn), PLM (1999,acquired by Rexam), Scania (1990, car division acquired by GM), Stora (1998, merged with Enso), Tetra Pak (1993, acquired Alfa Laval), and Volvo(1999, car division acquired by Ford).


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Organizational developments of foreign subsidiariesBecause of the aggregate nature of the data and thelength of the time period under investigation, it hasnot been possible to account for all organizationalchanges and developments taking place in indivi-dual foreign subsidiaries. In some instances, andparticularly in the case of subsidiaries in largeforeign markets, locally acquired units may havebeen merged with the operations of the localsubsidiary and thus affected its technologicalcapabilities. Specifically, the ‘‘instant local embedd-edness’’ obtained through locally acquired unitsmay have introduced a mechanism of acceleratedentry into new technologies that was not consid-ered in the theoretical section of the paper.

It is also possible that some of the patenting bymajor acquired subsidiaries has been registeredunder the name of the parent firm rather than thatof the acquired organizational unit, which wouldmean that the data pick up some of the technolo-gical activity and new entries associated withacquired rather than greenfield subsidiaries. Whileit is not possible to know the extent to which thishas occurred in the present sample, the patentingrecords provide ample evidence of extensivepatenting by major acquired subsidiaries long afterthe point of acquisition (these units retain aseparate organizational code in the records of theUS Patent Office).

In the worst case, the obtained results wouldreflect the activities of subsidiaries originally estab-lished as greenfield units with an added influencefrom the technological activities of some acquiredunits. While this would question the study’spronounced focus on the evolution of greenfieldsubsidiaries, the potential effects may be judged tobe marginal. In any event, the results would stillreveal some fundamental dynamics of the techno-logical capabilities of foreign units of the MNE.

Period of investigationAlthough the data cover the period 1893–2008, themajority of entries into new technologies wererecorded after 1950 (more than 75% of the total). Itshould be expected that the reliability of the dataimproved over the measured time period, especiallyas for most firms the United States may have beenperceived as relatively distant in the early 20thcentury (and hence not prioritized as a country inwhich patents were sought). It is notable, however,that the firm that accounts for most of the observedUS patents before the Second World War –Alfa Laval – had already established large-scale

operations in the United States in the late 19thcentury.

Adjustments of the final data setA number of considerations had minor effects onthe construction of the final data set. Although infive cases the last recorded patents in a particulartechnology had occurred more than 25 years beforethe subsidiary registered a patent in the associatedtechnological class (in some cases, the last recordedpatent had occurred more than 50 years earlier),suggesting that subsidiaries may have been respon-sible for the re-entry into new technologies, theconservative approach was to exclude all such casesfrom the data.

In a very limited number of cases, entries intonew technologies were initiated by foreign sub-sidiaries, but in each of these cases the location wasdifferent from that of the home location of thesubsidiary in question (e.g., a German subsidiaryentered a new technology, but the nationality ofthe inventor(s) behind the patent suggested thatthe underlying research was carried out in theUnited States). These may be instances where alarge and fully developed foreign subsidiary carriedout some research-related activities in foreigncountries, but they could also be instances whereinternationally connected or mobile researchersdeveloped patents in units located outside theirpermanent country of residence. Because of thehistorically uncertain status of these observations,they were excluded from the data set.

ABOUT THE AUTHORSKatarina Blomkvist ([email protected])is an assistant professor of International Business atthe Department of Business Studies, Uppsala Uni-versity. Her main research interest is the develop-ment and transfer of knowledge and technologywithin MNEs, with a specific focus on the evolutionof subsidiary technological capabilities and thedrivers of innovation. Born in Stockholm and aSwedish citizen, she received her PhD from UppsalaUniversity.

Philip Kappen ([email protected]) is anassistant professor of International Business at theDepartment of Business Studies, Uppsala Univer-sity. His research focuses on subsidiary evolutionand the role of headquarters in MNEs, as well as themanagement of innovation. Born in Uppsala and aSwedish citizen, he received his PhD from UppsalaUniversity.


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Ivo Zander ([email protected]) received his PhDfrom the Institute of International Business, Stock-holm School of Economics. He currently holdsthe Anders Wall Chair of Entrepreneurship atthe Department of Business Studies, Uppsala

University. His research focuses on the technologi-cal evolution of foreign subsidiaries of the MNE,the entrepreneurial dynamics of internationali-zation, and corporate entrepreneurship. Born inStockholm, he is a citizen of Sweden.

Accepted by Alain Verbeke, Area Editor, 29 March 2010. This paper has been with the authors for two revisions.


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