How do firms evolve? The patterns of technological evolution of semiconductor subsidiaries

This study draws on concepts from international strategy and evolutionary economics to investigate the development of innovative ability within multinational subsidiaries. The paper develops hypotheses regarding the evolution of subsidiary innovative abilities, and the changes across time of their knowledge sourcing and sharing patterns with other parts of the multinational enterprise and host country firms. The paper analyzes patent data pertaining to foreign subsidiaries of US semiconductor firms and finds support for subsidiary technological development--there are positive changes in the scale and scope of innovative activity across time. The results also suggest that subsidiaries are increasingly embedded in host country knowledge networks--as they mature, subsidiaries increasingly learn and share knowledge locally. Evidence of increasing integration with other firms within the multinational enterprise is weaker.