Building R&D Capabilities Abroad and the Role of Reverse Knowledge Transfer in Explaining MNCs' Productivity

Abstract

Although MNCs are increasingly globalizing their R&D, we have an incomplete and inconsistent understanding of whether, and under what conditions, the knowledge accumulated from foreign R&D centers can improve the productivity of the parent firm. We address this issue by examining the factors that influence the extent to which reverse knowledge transfer (RKT) enhances the productivity of the MNC at home. Our contribution lies in showing that the productivity benefits of RKT depend on the idiosyncratic characteristics of MNCs' parent and R&D affiliates. We show that RKT has a stronger effect on the productivity of the parent MNC when foreign R&D units are charged with a knowledge seeking role. These effects further increase when R&D affiliates are well embedded in host countries. Surprisingly, the productivity enhancing effects of RKT do not differ across acquired and greenfield affiliates.