The Influence of Coordination Mechanisms on New Product Development in MNC Subsidiaries

This paper investigates the relationship between [MNC] coordination mechanisms and subsidiary new product development [NPD] activities. We focus on two essentially different coordination mechanisms, internal markets and global decision-making autonomy, and argue that both mechanisms are likely to increase a subsidiary’s exposure to market forces which, in turn, provides different kinds of incentives for a subsidiary’s in-house NPD and NPD outsourcing. We tested our hypotheses using structural equations modeling. The results suggest that internal markets have a positive effect on NPD outsourcing while global autonomy has a positive effect on in-house NPD. Thus, this study contributes to integrating the internal market construct with the coordination mechanism stream of literature. Key words: multinational corporations [MNC]; global strategy; subsidiary coordination; internal markets; outsourcing