Strategic Management Journal, vol.26(12), pp.1109-1128, 2005.

MNE Competence-Creating Subsidiary Mandates

John Cantwell*

and

Ram Mudambi**

Abstract

The determinants of R&D-intensity differ between subsidiaries in a multinational enterprise (MNE). Previous literature suggests that whether a subsidiary achieves a competence-creating output mandate depends on the qualities of its location. R&D strategies in competence-creating subsidiaries are supply-driven while those in purely competence-exploiting subsidiaries are demand-driven.  Using data on UK subsidiaries of non-UK MNEs, we find that the level of subsidiary R&D depends on MNE group-level and subsidiary-level characteristics as well as locational factors. The R&D of mandated subsidiaries rises with acquisition, but for non-mandated subsidiaries R&D falls upon acquisition. MNEs that grow through acquisition have more inter-subsidiary R&D diversity.

Short title: MNE Competence-Creating Subsidiary Mandates.

Keywords: MNEs, Competence, R&D, Subsidiary entrepreneurship, Mandates, Acquisition.

Acknowledgements:  We would like to thank Bruce Kogut, Steve Kobrin, discussants at the European International Business Academy meetings in Maastricht as well as seminar participants at Wharton, Tsukuba, Kyoto and Paris for helpful comments.  Perceptive comments of two anonymous referees were extremely helpful.  The usual disclaimer applies.

*    John Cantwell is Professor of International Business at Rutgers University and Professor of International Economics at the University of Reading.

**  Ram Mudambi is Associate Professor of Strategic Management at Temple University and Reader in International Business at the University of Reading.

Address for correspondence:

Ram Mudambi

Department of General & Strategic Management

Fox School of Business & Management

Speakman Hall (006-00)

Temple University

Philadelphia PA 19122, USA

Phone: 1-215-204-2099

FAX : 1-215-204-8029

Email: ram.mudambi@temple.edu