Knowledge transfer and home-market innovativeness: A comparison of emerging and advanced economy multinationals

Emerging market multinational enterprises (EMNEs) increasingly access foreign technology and knowledge by internationalizing their R&D activities. Since technological laggardness hinders efficient knowledge transfer, a successful catch-up with advanced-economy multinational enterprises (AMNEs) requires EMNEs to transfer foreign knowledge across national boundaries more effectively. However, we lack a clear understanding of how EMNEs manage this knowledge transfer and integration and to what extent the employment and effectiveness of corresponding facilitation mechanisms may differ from AMNEs. Adopting a sender-recipient model and drawing on arguments from learning theory and transaction costs economics, we suggest that EMNEs benefit more from and, consequently, are more likely to engage in mechanisms to increase recipient capabilities and sender motivation. In a comparative analysis of Chinese, Indian, German, and U.S. MNEs and focusing on frequent international exchange of R&D personnel regarding recipient capabilities and the governance of foreign R&D activities regarding sender motivation, we observe positive relationships with home-market innovation for EMNEs, but not for AMNEs. Moreover, we observe that EMNEs exploit this positive effect and are more likely to use these mechanisms when focusing on technology- than on market-seeking.