Exploring the paradox of competence-creating subsidiaries: balancing bandwidth and dispersion in MNEs

Narula, R. ORCID: https://orcid.org/0000-0002-4266-2681 (2014) Exploring the paradox of competence-creating subsidiaries: balancing bandwidth and dispersion in MNEs. Long Range Planning, 47 (1-2). pp. 4-15. ISSN 0024-6301 doi: 10.1016/j.lrp.2013.10.006

Abstract/Summary

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