What factors moderate the relationship between the dual network tie strength of MNC’s foreign subsidiary in emerging markets and technological innovation?

Abstract

Purpose This study examines the moderating effects of cultural distance and the nationality of foreign subsidiaries’ CEOs on the relationship between internal/external network tie strength and technological innovation. This study focuses on foreign subsidiaries of Korean firms operating in emerging markets, based on the knowledge-based view. Design/methodology/approach To test the hypotheses, a survey was administered to 3,840 foreign subsidiaries of Korean firms in emerging markets. Questionnaires were distributed via phone and email, and 282 (7.34%) completed questionnaires were returned. Accordingly, an empirical analysis was conducted, and the hypotheses were tested. Findings First, internal network tie strength had a significant negative effect on foreign subsidiaries’ technological innovation. Second, external network tie strength had a significant positive effect on foreign subsidiaries’ technological innovation. Third, as for the moderating effect, cultural distance negatively moderates the significant negative effect of internal network tie strength on the technological innovation of foreign subsidiaries. Fourth, cultural distance positively moderates the positive effect of external network tie strength on foreign subsidiaries’ technological innovation. Fifth, foreign subsidiaries’ CEO nationality (parent country nationals) positively moderates the negative effect of internal network tie strength on foreign subsidiaries’ technological innovations. Sixth, foreign subsidiaries’ CEO nationality (parent country nationals) negatively moderates the positive effect of external network tie strength on foreign subsidiaries’ technological innovation. Originality/value Previous studies found a positive relationship between dual network tie strength and technological innovation in foreign subsidiaries from a knowledge-based view. This study’s significance lies in its finding that the varying strengths of foreign subsidiaries’ internal and external network connections can have different impacts on their technological innovation in the context of subsidiaries operating in emerging markets. Additionally, the moderating effects of cultural distance and the nationality of the foreign subsidiary’s CEO were examined. Therefore, this study is significant because it expands the literature on technological innovation in foreign subsidiaries.