Impact of subsidiaries' cross-border knowledge tacitness shared and social capital on MNCs' explorative and exploitative innovation capability

• Published in: Journal of international management 2019-12, Vol.25 (4), p.100705, Article 100705
• Main Authors: Sheng, Margaret L., Hartmann, Nathaniel N.
• Format: Article
• Language: English
• Subjects: Cross-border knowledge tacitness shared; Dynamic capabilities; Explorative and exploitative innovation capability; Multinational corporation subsidiaries management; Resource-based theory; Social capital theory
• ISSN: 1075-4253; 1873-0620
• DOI: 10.1016/j.intman.2019.100705

As subsidiaries' cross-border knowledge increases in tacitness, it becomes more difficult for subsidiaries to articulate and for multinational corporations' (MNCs') headquarters to integrate and apply. Herein, dynamic capabilities and social capital theory frame structural and relational social capital as capabilities that improve the productivity of subsidiaries' cross-border knowledge tacitness shared on MNCs' headquarters explorative and exploitative innovation capability. The hypotheses are tested on a data set consisting of survey data collected from 220 senior managers or executives at the headquarters of Taiwan-based MNCs. Interestingly, structural social capital between headquarters and subsidiaries strengthens the negative association between subsidiaries' cross-border knowledge tacitness shared and explorative innovation capability; relational social capital attenuates the negative association between subsidiaries' cross-border knowledge tacitness shared and both explorative and exploitative innovation capability. Stated differently, different types of social capital can facilitate (i.e., relational social capital) or impede (i.e., structural social capital) innovation capability when cross-border knowledge tacitness is high. The validity and managerial implications of these findings are explored through interviews with senior managers or executives of MNCs headquarters or subsidiaries. Theoretically, this study emphasizes the importance of understanding relationships between subsidiaries and MNCs' headquarters to understand the association between subsidiaries' resources and MNCs' headquarters innovation capability.