Multinational R&D decentralization in emerging markets: subsidiary evolution, autonomy, and influence in global innovation

Abstract

This study examined how multinational enterprises (MNEs) decentralized research and development (R&D) strategy impacts different evolution paths of R&D centers in emerging markets (EMs). We analyzed the centers' evolution paths in relation to subsidiary autonomy and influence in the MNE's global innovation. We conducted an inductive, in‐depth case study on the Volkswagen Group. We collected data from the headquarters and R&Ds centers of five subsidiaries in EMs. Our study revealed that Volkswagen adopted a decentralized R&D strategy, giving more autonomy to the EMs R&D centers, increasing the subsidiaries' innovation opportunities and their strategic role in the global innovation strategy. We compared two different evolution paths in EMs subsidiary R&D centers. The first path was a traditional one – found in Brazil, Mexico, and the Czech Republic – in which the R&D centers evolved from adapting products from the headquarters to launching innovative products for local markets and, later, becoming a global R&D center. In the second path, observed in China and India subsidiaries, the R&D centers evolved from offshoring units to technology units and finally to global R&D centers. This happened due to EMs' abundance of highly qualified, low‐cost labor and location‐specific technological capabilities. We advanced previous MNE R&D research by explaining how EMs R&D centers with different evolution paths gained more autonomy, increasing their sphere of influence in the multinational's global innovation strategy. We also provided insights on how to manage R&D in EMs.