Critically discuss the models to manage innovation in multinational enterprises (MNEs)

Models of innovation in GVCs: • Linear and closed • Interactive and closed (chain-link model) • Interactive and open 1) According to these studies, innovation takes place in the MNE’s home country, while foreign subsidiaries mostly adapt the product and process technology to the local context. Foreign subsidiaries are categorized as ‘Home-Base-Exploiting’ (Kuemmerle, 1999) or ‘Competence-Exploiting’ (Cantwell & Mudambi, 2005) since they mainly receive knowledge developed in the MNE’s domestic R&D centre and only carry out the final adaptation steps of the innovation process prior to commercialization. Over time MNEs’ foreign subsidiaries moved away from being mere “replicators” of their parent companies’ activities abroad, whose R&D efforts are limited to the adaptation of central units’ products and services to local needs. Rather, foreign units can engage in creative tasks. 2) Innovation can be conceived as the result of interactions between various actors at different stages of the innovation process. Interaction between: Production and R&D and Sales/Marketing and R&D. 60% of all international R&D FDI (foreign direct investment) by MNEs are concentrated in just the top 5% of cities. Why do firms co-locate different value-chain activities in the same place? The need/advantage from co-location can be very heterogeneous: - Across sectors - degree of modularity and maturity of technologies - Based on the importance of tacit vs. codified knowledge - Based on firm sensitivity to coordination and control costs 3) Technological knowledge is no longer considered to be solely sourced within the intra-organizational network. External organizations along with different types of knowledge acquisition practices gain a prominent role in the firm innovation process.