RESEARCH PAPER
Subsidiaries’ dual embeddedness and innovation-related competitive advantage
 
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Collegium of World Economy, SGH Warsaw School of Economics
2
Collegium of Economic Analysis, SGH Warsaw School of Economics
CORRESPONDING AUTHOR
Małgorzata Stefania Lewandowska   

Collegium of World Economy, SGH Warsaw School of Economics, Madalińskiego 6/8, 02-513, Warsaw, Polska
Publish date: 2019-09-30
Submission date: 2019-03-07
Final revision date: 2019-05-27
Acceptance date: 2019-07-31
 
Gospodarka Narodowa 2019;299(3):5–30
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
The foreign subsidiaries of multinational enterprises are involved in two types of networks: an internal (corporate) network within the company including the headquarters and sister subsidiaries, and an external (inter-organizational) network of cooperating partners. Based on the concept of “dual embeddedness,” this paper proposes a model explaining the role of internal and external relationships in developing innovation-related competitive advantages. A path analysis was conducted based on data from the Community Innovation Survey’s 2010–2012 sample of enterprises – members of capital groups from 10 EU member states, mostly CEE (post-transition countries). The results show the positive influence of dual embeddedness on subsidiaries’ innovation, leading to competitive advantages based on cost and on differentiation. A mediating role for external knowledge in the link of internal integration and competitive advantage is posited. External and internal relationships are not mutually exclusive; on the contrary, together they reinforce each other’s impact on innovation performance. Internal integration plays a decisive role in building innovation-related competitive advantages based on cost, whereas external relationships have stronger influence on differentiation-based advantages. Therefore, the management of such firms should promote both types of relationships, considering their distinct roles in the process of building competitive advantages.
FUNDING
This paper was prepared as part of the research project “Innovation performance of a foreign subsidiary and its position in the network of a multinational enterprise – the perspective of foreign subsidiaries established in Poland” (“Sprawność innowacyjna filii zagranicznej a jej pozycja w sieci przedsiębiorstwa międzynarodowego – perspektywa filii utworzonych w Polsce”), No 2016/21/B/HS4/03030, supervised and sponsored by the National Science Center in Poland.
 
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