Local or global innovation? The impact of R&D investments and training

What the paper says

Purpose This study aims to explore means for promoting local and global innovation, where two mechanisms play a key role: R&D investments and training. The authors suggest that, given their different purposes, R&D investments and training moderate the relationships between knowledge sourcing and both local and global innovation in different ways. Design/methodology/approach The authors test the hypotheses on a sample of multinational corporations (MNCs) (headquarters of Brazilian multinationals and subsidiaries of foreign multinationals) operating in Brazil, an emerging market. Respondent companies were sourced from the Bovespa Stock Exchange list and a local Best Companies Ranking. Roughly 1,000 companies were invited to participate in an annual survey over an eight-year period (2012–2019) via an online questionnaire. The final sample comprises 108 observations from 87 companies. Hypotheses were tested using a hierarchical linear model in the software R. By measuring the variables at two points in time with a five-year gap, the authors can infer cause and effect relationships. Findings The results confirm all of the hypotheses. R&D investments positively moderate the relationship between knowledge sourcing and local innovation (H1) and negatively moderate the relationship between knowledge sourcing and global innovation (H2). Training has a positive moderating effect on the relationship between knowledge sourcing and global innovation (H3) and a negative moderating effect on the relationship between knowledge sourcing and local innovation (H4). Practical implications No one practice can enhance the effect of knowledge sourcing on both local innovation and global innovation. Firms looking to foster local innovation should concentrate on increasing R&D investments, while firms wishing to foster global innovation should focus on providing training to their employees. Originality/value This study contributes to the literature by discussing the particularities of local and global innovation and exploring mechanisms (i.e. R&D investments and training) that can foster or hinder local and global innovation. The authors advance the extant literature on location choices for R&D activities by exploring the mechanisms that affect the type of market targeted by such innovation (local or global), thereby addressing calls for more studies on how local knowledge activities affect overall MNC innovation. The authors also respond to calls for more studies on the role of human resource management (HRM) practices, such as training, in fostering innovation, especially in emerging markets.