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Subsidiaries’ dual embeddedness and innovation-related competitive advantage

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  • Tomasz Gołębiowski
  • Małgorzata Stefania Lewandowska
  • Małgorzata Rószkiewicz

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.

Suggested Citation

  • Tomasz Gołębiowski & Małgorzata Stefania Lewandowska & Małgorzata Rószkiewicz, 2019. "Subsidiaries’ dual embeddedness and innovation-related competitive advantage," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 5-30.
    • Handle: RePEc:sgh:gosnar:y:2019:i:3:p:5-30
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    More about this item

    Keywords

    dual embeddedness; subsidiaries; CEE (post)-transition economies; competitive advantage; path analysis;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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