Skip to main content
Log in

Foreign subsidiaries’ internal and external R&D cooperation in South Korea: Explanatory factors and interaction

  • Original Article
  • Published:
Asian Business & Management Aims and scope Submit manuscript

Abstract

This article analyses R&D cooperation strategies by foreign subsidiaries of MNEs located in South Korea. It differentiates between foreign subsidiaries with no R&D cooperation and those which favour internal or external R&D cooperation. Providing country-specific discussion in the context of South Korea, this enables comparison and contrast of the importance of innovation networks developed by MNE subsidiaries. Using various models, the results show that foreign subsidiaries in South Korea adopt complementary internal and external R&D cooperation strategies. Knowledge sourcing is found to be a key determinant of R&D cooperation, and government policies act as a strong incentive for inter-firm collaboration.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

References

  • Alcácer, J. and Chung, W. (2007) Location strategies and knowledge spillovers. Management Science 53 (5): 760–776.

    Article  Google Scholar 

  • Almeida, P. and Phene, A. (2004) Subsidiaries and knowledge creation: The influence of the MNC and host country on innovation. Strategic Management Journal 25 (8/9): 847–864.

    Article  Google Scholar 

  • Ambos, B. and Schlegelmilch, B.B. (2007) Innovation and control in the multinational firm: A comparison of political and contingency approaches. Strategic Management Journal 28 (5): 473–486.

    Article  Google Scholar 

  • Andersson, U., Forsgren, M. and Holm, U. (2001) Subsidiary embeddedness and competence development in MNCs – A multilevel analysis. Organization Studies 22 (6): 1013–1034.

    Article  Google Scholar 

  • Andersson, U., Forsgren, M. and Holm, U. (2002) The strategic impact of external networks: Subsidiary performance and competence development in the multinational corporation. Strategic Management Journal 23 (11): 979–996.

    Article  Google Scholar 

  • Andersson, U., Forsgren, M. and Holm, U. (2007) Balancing subsidiary influence in the federative MNC: A business network view. Journal of International Business Studies 38 (5): 802–818.

    Article  Google Scholar 

  • Asmussen, C.G., Pedersen, T. and Dhanaraj, C. (2008) Host-country environment and subsidiary competence: Extending the diamond network model. Journal of International Business Studies 40 (1): 42–57.

    Article  Google Scholar 

  • Bartlett, C.A. and Ghoshal, S. (1986) Tap your subsidiaries for global reach. Harvard Business Review 64 (6): 87–94.

    Google Scholar 

  • Bartzokas, A. (2008) Country Review: Korea. Maastricht, the Netherlands: United Nations University-MERIT.

    Google Scholar 

  • Belderbos, R., Martin, C. and Boris, L. (2006) Complementarity in R&D Cooperation Strategies. Review of Industrial Organization 28 (4): 401–426.

    Article  Google Scholar 

  • Belderbos, R., Carree, M., Diederen, B., Lokshin, B. and Veugelers, R. (2004a) Heterogeneity in R&D cooperation strategies. International Journal of Industrial Organization 22 (8–9): 1237–1263.

    Article  Google Scholar 

  • Belderbos, R., Carree, M. and Lokshin, B. (2004b) Cooperative R&D and firm performance. Research Policy 33 (10): 1477–1492.

    Article  Google Scholar 

  • Bergek, A. and Bruzelius, M. (2010) Are patents with multiple inventors from different countries a good indicator of international R&D collaboration? The case of ABB. Research Policy 39 (10): 1321–1334.

    Article  Google Scholar 

  • Birkinshaw, J. and Fey, C. (2003) Organization of research and development in large multinational firms. Management International Review 43 (3): 27–46.

    Google Scholar 

  • Birkinshaw, J. and Hood, N. (1998) Multinational subsidiary development: Capability evolution and charter change in foreign-owned subsidiary companies. Academy of Management Review 23 (4): 773–795.

    Google Scholar 

  • Brouthers, K.D. and Hennart, J.-F. (2007) Boundaries of the firm: Insights from international entry mode research. Journal of Management 33 (3): 395–425.

    Article  Google Scholar 

  • Buckley, P.J. (2009) The impact of the global factory on economic development. Journal of World Business 44 (2): 131–143.

    Article  Google Scholar 

  • Cantwell, J.A. and Mudambi, R. (2000) The location of MNE R&D activity: The role of investment incentives. Management International Review 40 (1): 127–148.

    Google Scholar 

  • Cantwell, J. and Mudambi, R. (2005) MNE competence-creating subsidiary mandates. Strategic Management Journal 26 (12): 1109–1128.

    Article  Google Scholar 

  • Carboni, O.A. (2013) Heterogeneity in R&D collaboration: An empirical investigation. Structural Change and Economic Dynamics 25 (C): 48–59.

    Article  Google Scholar 

  • Cassiman, B. and Veugelers, R. (2006) In search of complementarity in innovation strategy: Internal R&D and external knowledge acquisition. Management Science 52 (1): 68–82.

    Article  Google Scholar 

  • Casson, M. (2007) Multinational enterprises: Their private and social benefits and costs. The World Economy 30 (2): 308–328.

    Article  Google Scholar 

  • Castellani, D. and Zanfei, A. (2006) Multinational Firms, Innovation and Productivity. Cheltenham, UK: Edward Elgar.

    Book  Google Scholar 

  • Chang, S.-J., van Witteloostuijn, A. and Eden, L. (2010) From the editors: Common method variance in international business research. Journal of International Business Studies 41 (2): 178–184.

    Article  Google Scholar 

  • Choi, H., Park, S. and Lee, J.-d. (2011) Government-driven knowledge networks as precursors to emerging sectors: A case of the hydrogen energy sector in Korea. Industrial and Corporate Change 20 (3): 751–787.

    Article  Google Scholar 

  • Chung, W. and Yeaple, S. (2008) International knowledge sourcing: Evidence from U.S. firms expanding abroad. Strategic Management Journal 29 (11): 1207–1224.

    Article  Google Scholar 

  • Ciabuschi, F., Forsgren, M. and Martín Martín, O. (2012) Headquarters involvement and efficiency of innovation development and transfer in multinationals: A matter of sheer ignorance? International Business Review 21 (2): 130–144.

    Article  Google Scholar 

  • Cohen, W.M. and Levinthal, D.A. (1990) Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly 35 (1): 128–152.

    Article  Google Scholar 

  • de Faria, P. and Sofka, W. (2010) Knowledge protection strategies of multinational firms: A cross-country comparison. Research Policy 39 (7): 956–968.

    Article  Google Scholar 

  • Dunning, J.H. and Lundan, S.M. (2008) Multinational Enterprises and the Global Economy, 2nd edn. Cheltenham, UK: Edward Elgar.

    Google Scholar 

  • Figueiredo, P.N. (2011) The role of dual embeddedness in the innovative performance of MNE subsidiaries: Evidence from Brazil. Journal of Management Studies 48 (2): 418–440.

    Google Scholar 

  • Forsgren, M., Holm, U. and Johanson, J. (2005) Managing the Embedded Multinational. Cheltenham, UK: Edward Elgar.

    Book  Google Scholar 

  • Foss, N.J. and Dos Santos, J.F.P. (2011) A knowledge system approach to the multinational company: Conceptual grounding and implications for research. In: C.G. Asmussen, T. Pedersen, T.M. Devinney and L. Tohanyi (eds.) Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness? Bingley, UK: Emerald Group Publishing, pp. 425–454.

    Chapter  Google Scholar 

  • Fritsch, M. and Lukas, R. (2001) Who cooperates on R&D? Research Policy 30 (2): 297–312.

    Article  Google Scholar 

  • Gassman, O. and von Zedtwitz, M. (2003) Trends and determinants of managing virtual R&D teams. R&D Management 33 (3): 243–262.

    Article  Google Scholar 

  • Giroud, A. (2012) Mind the gap: How linkages strengthen understanding of spillovers. European Journal of Development Research 24 (1): 20–25.

    Article  Google Scholar 

  • Giroud, A., Ha, Y.J., Yamin, M. and Ghauri, P.N. (2012) Innovation policy, competence creation and innovation performance of foreign subsidiaries. Asian Business & Management 11 (1): 56–78.

    Article  Google Scholar 

  • Giroud, A. and Tucci, C.L. (2012) Technology, innovation and knowledge: An Asian perspective. Asian Business & Management 11 (1): 5–7.

    Article  Google Scholar 

  • Gujarati, D.N. (2003) Basic Econometrics, 4th edn. London: McGraw-Hill/Irwin.

    Google Scholar 

  • Gupta, A.K. and Govindarajan, V. (2000) Knowledge flows within multinational corporations. Strategic Management Journal 21 (4): 473–496.

    Article  Google Scholar 

  • Hagedoorn, J. (2002) Inter-firm R&D partnerships: An overview of major trends and patterns since 1960. Research Policy 31 (4): 477–492.

    Article  Google Scholar 

  • Hedlund, G. and Rolander, D. (1990) Action in heterarchies: New approaches to managing MNCs. In: C.A. Bartlett, Y. Doz and G. Hedlund (eds.) Managing the Global Firm. London: Routledge, pp. 15–46.

    Google Scholar 

  • Hemmert, M. (2012) Tiger Management: Korean Companies on World Markets. London and New York: Routledge.

    Google Scholar 

  • Ito, B. and Wakasugi, R. (2007) What factors determine the mode of overseas R&D by multinationals? Empirical evidence. Research Policy 36 (8): 1275–1287.

    Article  Google Scholar 

  • Kafouros, M.I. (2008) Economic returns to industrial research. Journal of Business Research 61 (8): 868–876.

    Article  Google Scholar 

  • Kappen, P. (2011) Competence-creating overlaps and subsidiary technological evolution in the multinational corporation. Research Policy 40 (5): 673–686.

    Article  Google Scholar 

  • Kogut, B. and Zander, U. (1993) Knowledge of the firm and the evolutionary theory of the multinational operation. Journal of International Business Studies 24 (4): 625–645.

    Article  Google Scholar 

  • Lee, I.H. and Rugman, A.M. (2009) Multinationals and public policy in Korea. Asian Business & Management 8 (1): 59–82.

    Article  Google Scholar 

  • Manolopoulos, D., Dimitratos, P., Young, S. and Lioukas, S. (2009) Technology sourcing and performance of foreign subsidiaries in Greece: The impact of MNE and local environmental contexts. Management International Review 49 (1): 43–94.

    Article  Google Scholar 

  • Manolopoulos, D., Papanastassiou, M. and Pearce, R. (2007) Knowledge-related competitiveness and the roles of multinationals’ R&D in a peripheral European economy: Survey analysis of Greece. Management International Review 47 (5): 661–682.

    Article  Google Scholar 

  • March, J.G. (1991) Exploration and exploitation in organizational learning. Organization Science 2 (1): 71–87.

    Article  Google Scholar 

  • Marin, A. and Sasidharan, S. (2010) Heterogeneous MNC subsidiaries and technological spillovers: Explaining positive and negative effects in India. Research Policy 39 (9): 1227–1241.

    Article  Google Scholar 

  • Meyer, K.E., Mudambi, R. and Narula, R. (2011) Multinational enterprises and local contexts: The opportunities and challenges of multiple embeddedness. Journal of Management Studies 48 (2): 235–252.

    Google Scholar 

  • Mudambi, R. and Mudambi, S.M. (2005) Multinational enterprise knowledge flows: The effect of government inward investment policy. Management International Review 45 (2): 155–178.

    Google Scholar 

  • Mudambi, R., Mudambi, S.M. and Navarra, P. (2007) Global innovation in MNCs: The effects of subsidiary self-determination and teamwork. Journal of Product Innovation Management 24 (5): 442–455.

    Article  Google Scholar 

  • Mudambi, R. and Navarra, P. (2004) Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs. Journal of International Business Studies 35 (5): 385–426.

    Article  Google Scholar 

  • Najafi-Tavani, Z., Giroud, A. and Sinkovics, R.R. (2012) Knowledge-intensive business services: Does dual embeddedness matter? Service Industries Journal 32 (10): 1691–1705.

    Article  Google Scholar 

  • Narula, R. and Dunning, J.H. (2010) Multinational enterprises, development and globalization: Some clarifications and a research agenda. Oxford Development Studies 38 (3): 263–287.

    Article  Google Scholar 

  • Narula, R. and Hagedoorn, J. (1999) Innovating through strategic alliances: Moving towards international partnerships and contractual agreements. Technovation 19 (5): 283–294.

    Article  Google Scholar 

  • Nicolas, F., Thomsen, S. and Gang, M.-H. (2013) Lessons from investment policy reform in Korea. OECD Working Papers on International Investment, Paris, 2013/02.

  • Nummela, N. (2003) Looking through a prism: Multiple perspectives to commitment to international R&D collaboration. Journal of High Technology Management Research 14 (1): 135–148.

    Article  Google Scholar 

  • OECD (2009) OECD Reviews of Innovation Policy: Korea. Paris, France: OECD.

  • OECD (2012) OECD Science, Technology and Industry Outlook 2012. Paris, France: OECD.

  • Papanastassiou, M. and Pearce, R. (2009) The Strategic Development of Multinationals: Subsidiaries and Innovation. Basingstoke, UK: Palgrave Macmillan.

    Book  Google Scholar 

  • Pearce, R. (1999) The evolution of technology in multinational enterprises: The role of creative subsidiaries. International Business Review 8 (2): 125–148.

    Article  Google Scholar 

  • Pearce, R.D. (1989) The Internationalisation of Research and Development by Multinational Enterprises. London: Palgrave Macmillan.

    Book  Google Scholar 

  • Pearce, R. and Papanastassiou, M. (1996) R&D networks and innovation: Decentralised product development in multinational enterprises. R&D Management 26 (4): 315–333.

    Article  Google Scholar 

  • Pederson, T., Soo, C. and Devinney, T.M. (2011) The importance of internal and external knowledge sourcing and firm performance: A latent class estimation. In: C.G. Asmussen, T. Pedersen, T.M. Devinney and L. Tohanyi (eds.) Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness? Bingley, UK: Emerald Group Publishing, pp. 389–423.

    Chapter  Google Scholar 

  • Pfeffer, J. and Salancik, G.R. (1978) The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row.

    Google Scholar 

  • Phene, A. and Almeida, P. (2008) Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities. Journal of International Business Studies 39 (5): 901–919.

    Article  Google Scholar 

  • Podsakoff, P.M., MacKenzie, S.B. and Lee, J.-Y. (2003) Common method biases in behavioural research: A critical review of the literature and recommended remedies. Journal of Applied Psychology 88 (5): 879–903.

    Article  Google Scholar 

  • Richardson, H.A., Simmering, M.J. and Sturman, M.C. (2009) A tale of three perspectives: Examining post hoc statistical techniques for detection and correction of common method variance. Organizational Research Methods 12 (4): 762–800.

    Article  Google Scholar 

  • Rugman, A., Verbeke, A. and Yuan, W. (2011) Re-conceptualizing Bartlett and Ghoshal’s classification of national subsidiary roles in the multinational enterprise. Journal of Management Studies 48 (2): 253–277.

    Google Scholar 

  • Ryoo, J. (2012) Technology sourcing decision-making for new technology development projects: An empirical study of South Korean high-tech small firms. Asian Business & Management 11 (4): 445–469.

    Article  Google Scholar 

  • Sadowski, B.M. and Sadowski-Rasters, G. (2006) On the innovativeness of foreign affiliates: Evidence from companies in The Netherlands. Research Policy 35 (3): 447–462.

    Article  Google Scholar 

  • Santangelo, G.D. (2009) MNCs and linkages creation: Evidence from a peripheral area. Journal of World Business 44 (2): 192–205.

    Article  Google Scholar 

  • Teece, D.J. (1977) Technology transfer by multinational firms: The resource cost of transferring technological know-how. Economic Journal 87: 242–261.

    Article  Google Scholar 

  • Tether, B.S. (2002) Who co-operates for innovation, and why: An empirical analysis. Research Policy 31 (6): 947–967.

    Article  Google Scholar 

  • Tyler, B.B. and Steensma, H.K. (1995) Evaluating technological collaborative opportunities: A cognitive modeling perspective. Strategic Management Journal 16 (S1): 43–70.

    Article  Google Scholar 

  • UNCTAD (2013) World Investment Report 2013. New York; Geneva, Switzerland: UNCTAD.

  • Vega-Jurado, J., Gutiérrez-Gracia, A. and Fernández-de-Lucio, I. (2009) Does external knowledge sourcing matter for innovation? Evidence from the Spanish manufacturing industry. Industrial and Corporate Change 18 (4): 637–670.

    Article  Google Scholar 

  • Veugelers, A. (1997) International R&D expenditures and external technology sourcing. Research Policy 26 (3): 303–315.

    Article  Google Scholar 

  • Veugelers, R. and Cassiman, B. (2004) Foreign subsidiaries as a channel of international technology diffusion: Some direct firm-level evidence from Belgium. European Economic Review 48 (2): 455–476.

    Article  Google Scholar 

  • Wang, C. and Kafouros, M.I. (2009) What factors determine innovation performance in emerging economies? Evidence from China. International Business Review 18 (6): 606–616.

    Article  Google Scholar 

  • White, R.E. and Poynter, T. (1990) Organization for world-wide advantage. In: C.A. Bartlett, Y. Doz and G. Hedlund (eds.) Managing the Global Firm. London: Routledge, pp. 95–113.

    Google Scholar 

  • Williamson, O.E. (1985) The Economic Institutions of Capitalism. New York: Free Press.

    Google Scholar 

  • World Economic Forum (2013) The Global Competitiveness Report. Geneva: World Economic Forum.

  • Witt, M.A. (2012) East Asian business systems in transition. In: M. Warner (ed.) Managing Across Diverse Cultures in East Asia: Issues and Challenges in a Changing Globalized World. London: Routledge, pp. 183–195.

    Google Scholar 

  • Witt, M.A. and Redding, G. (2013) Asian business systems: Institutional comparison, clusters and implications for varieties of capitalism and business systems theory. Socio-Economic Review 11 (2): 265–300.

    Article  Google Scholar 

  • Yamin, M. and Andersson, U. (2011) Subsidiary importance in the MNC: What role does internal embeddedness play? International Business Review 20 (2): 151–162.

    Article  Google Scholar 

  • Yamin, M. and Otto, J. (2004) Patterns of knowledge flows and MNE innovative performance. Journal of International Management 10 (2): 239–258.

    Article  Google Scholar 

  • Yoo, T. and Rhee, M. (2013) Agency theory and the context for R&D investment: Evidence from Korea. Asian Business & Management 12 (2): 227–252.

    Article  Google Scholar 

Download references

Acknowledgements

The authors wish to thank the Special Issue Editors for their suggestions, support and professional support through the review process, as well as the anonymous reviewers for their insightful comments. Drafts of this article were presented at conferences in the Academy of Economic Studies, Romania, and in the National University of Singapore. The authors also wish to thank the Science and Technology Policy Institute, South Korea, for allowing access to the KIS data.

Author information

Authors and Affiliations

Authors

Appendix

Appendix

Table A1

Table A1 Knowledge sourcing

Table A2

Table A2 Subsidiary’s heterogeneity: Type of technological activity

Table A3

Table A3 Types of innovation policy

Table A4

Table A4 Descriptive statistics

Table A5

Table A5 Correlation matrix

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Giroud, A., Jung Ha, Y. & Yamin, M. Foreign subsidiaries’ internal and external R&D cooperation in South Korea: Explanatory factors and interaction. Asian Bus Manage 13, 227–256 (2014). https://doi.org/10.1057/abm.2014.8

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/abm.2014.8

Keywords

Navigation