Innovation-receiving subsidiaries and dual embeddedness: impact on business performance

Purpose – The purpose of this paper is to investigate the relationship between the degree of subsidiary’s external and internal embeddedness and the contribution on subsidiary’s business performance of a received innovation. In particular it focusses on dual embeddedness of the subsidiary that receives an innovation from the rest of the MNC’s network. Design/methodology/approach – Using Amadeus databases were selected 93 CEE subsidiaries located in six countries. Data were collected through a standardized questionnaire and three hypothesis were tested through an OLS regression model. Findings – The results indicate that the two types of embeddedness positively affect the received innovation’s contribution on business performance. Moreover, the inclusion of the interaction term shows how a simultaneously high level of embeddedness in both external and internal business networks lead to a multiplicative and positive effect on subsidiary’s business performance. This means that external and internal embeddedness are not mutually exclusive suggesting, at the same time, the presence of interdependencies between the two networks that leads the “dual embedded” subsidiary to better received innovation performance. Research limitations/implications – The results are limited due to the sample characteristics and the conceptual focus of network theory. Regarding the first point, the results are derived from MNC coming from developed European countries that are geographically proximate. Regarding the second point, this approach neglects the limitations of networks. Practical implications – These results, therefore, propose to management the need to force the subsidiary toward a dual embeddedness in order to achieve better performance when an innovation has been received. Social implications – This study puts in evidence how Eastern European policy makers should increase the knowledge sharing and accumulation in the local clusters between all the stakeholders with the aim at increasing the “appeal” of this area. Originality/value – The specific contest in which the embedddedness component is analyzed is the main contribution of the paper because most of the previous research have been focussed on subsidiaries that develop and transfer the innovation. Moreover, the specific area where subsidiaries are located (Central and East Europe) may be another important contribution.