Innovation capabilities for global R&D projects in subsidiaries

Is the development of local innovation capabilities enough for foreign subsidiaries in emerging markets to be able to integrate into global R&D projects? The authors argue that it is not. The purpose of this paper is to show the central role of R&D capacities when it comes to inserting foreign subsidiaries in emerging markets into global R&D projects.

The study investigated 131 foreign multinational subsidiaries operating in Brazil. For each subsidiary, the authors surveyed two to five directors or C-level executives from innovation, R&D, engineering, product development and projects. the authors used structural equation modeling for analysis.

The results indicate that product and process innovations alone do not guarantee the insertion of the emerging market subsidiaries into global innovation projects. Such insertion depends on the subsidiary’s accumulation of R&D capacities.

The results reinforce the central issue of building product and process innovation capabilities as the first step toward a blueprint for global projects. However, the effort is not limited to these initiatives. Product and process innovation efforts need be reverted in headquarters’ eyes in order for subsidiaries to gain R&D center status. To achieve this, subsidiaries must align their technological innovations with multinational corporations’ innovation strategies.

In authors’ view, this study contributes to the literature in three main areas: the evolutionary process of innovation capability in subsidiaries, the reverse innovation debate and the discussion of subsidiaries’ initiatives.