Dual Embeddedness and Subsidiary-Originated Innovation: The Case of MNCS in China

From qualitative case studies of three China-based subsidiaries of MNCs, headquartered in the U.S.A., Japan and Europe, respectively, we developed a holistic model of the process of subsidiary-originated innovation, including the impact of various factors associated with external and internal embeddedness. Based on analysis of critical incidents, we identified sensing and owning as important stages that preceded the general processes of idea generation, implementation and dissemination. In addition, we identified four factors, i.e., disequilibrium, wherewithal (sufficient knowledge, autonomy, sponsorship and alignment), corporate-level communication architecture, and fair recognition, that served to enable and support different stages of subsidiary-originated innovation. Among these enabling/supporting factors, disequilibrium and wherewithal could reflect either internal or external embeddedness, while corporate-level communication architecture and fair recognition reflected internal embeddedness.