Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202147 
Year of Publication: 
2013
Series/Report no.: 
IPTS Working Papers on Corporate R&D and Innovation No. 03/2013
Publisher: 
European Commission, Joint Research Centre (JRC), Seville
Abstract: 
Many modern firms compete globally. However, research into whether foreignness is an asset or a liability in competition with domestic firms is inconclusive. We argue that foreign MNC subsidiaries are not per se advantaged or disadvantaged. We suggest that the distinction originates from the nature of the subsidiary’s activity in the host country. We focus on two activities: knowledge search and knowledge deployment. We predict theoretically that domestic firms have advantages when they search for knowledge due to their embeddedness in the host country. However, this increased embeddedness reduces the degree of novelty of their knowledge pool. Foreign MNC subsidiaries therefore have advantages in knowledge deployment because they draw from a richer, international knowledge pool. However, these advantages accrue to both foreign and domestic MNCs. We test and support these predictions for a longitudinal dataset of 2900 firm observations in Spain. We develop recommendations for research and practice based on these findings.
Subjects: 
Liability of foreignness
foreignness as an asset
knowledge search
deployment
JEL: 
F23
A14
C23
L15
Persistent Identifier of the first edition: 
ISBN: 
978-92-79-34524-1
Document Type: 
Working Paper

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