MNE Competence-Creating Subsidiary Mandates : An Empirical Investigation

The determinants of R&D-intensity differ between subsidiaries in an MNE. The qualitative nature of R&D behavior (and hence also the extent of investment in R&D) differs, depending upon whether a subsidiary achieves a competence-creating output mandate. Using data on UK subsidiaries of non-UK MNEs, we find that the R&D investments of subsidiaries with mandates is both qualitatively and quantitatively different from that of subsidiaries that do not. The R&D of mandated subsidiaries depends upon local infrastructure, subsidiary strategic independence and product diversification; but for non-mandated subsidiaries R&D depends instead upon entry mode, and local demand conditions. A revised version of this paper has appeared in the Strategic Management Journal, Vol.26, No. 12, pp. 1109-1128, 2005