The Conundrum of Home-country Political Embeddedness : Impact on Reverse Knowledge Transfer in Emerging-market Multinationals

Emerging-market multinational corporations (EMNCs), particularly state-owned ones, have been increasingly active players in the global arena and have become a significant feature of the global business landscape. Research on EMNCs has focused on their distinctive features, particularly on their politically embedded nature in home institutions. Another important feature in this field is the aim of knowledge-related asset augmentation overseas via strategic asset-seeking investments, conceptualized as a springboard perspective. In this vein, reverse knowledge transfer from subsidiaries to home-country organizations becomes critically significant in order for EMNCs to achieve the innovation catch-up. In response to the rise of EMNCs, this thesis focuses on the two above-mentioned core features of EMNCs by looking specifically at the impact of the home-country political embeddedness of EMNCs on reverse knowledge transfer. The empirical investigation uses a sequential mixed-method approach that is comprised of qualitative research via a single case study of one Chinese state-owned multinational and quantitative research via a survey of 99 Chinese multinationals and their 177 overseas subsidiaries. The findings, based on empirical data, show, on one hand, that headquarters’ strong political embeddedness triggers strong intentions to seek and acquire knowledge from subsidiaries, particularly in advanced markets, through aligning with government objectives or shaping organizational distance between headquarters and subsidiaries. On the other hand, headquarters’ strong political embeddedness hampers reverse knowledge transfer practices in EMNCs by engendering a number of organizational barriers, including a low level of headquarters’ absorptive capacity, inferior performance of headquarters’ entrepreneurial role, less willingness of subsidiaries to transfer knowledge, and larger organizational distance between headquarters and subsidiaries. Consequently, headquarters’ political embeddedness acts as both a driver and a barrier to reverse knowledge transfer, which creates a paradox. This finding contrasts with those of most prior studies, where political relations were found to be a source of competitive advantage for international expansion. By stressing the importance of home-country political embeddedness in reverse knowledge transfer, this thesis extends the literature on the subject and advances the conceptualizations of the differentiated network multinationals and the embedded multinationals, which have focused almost exclusively on subsidiary embeddedness and ignored headquarters’ embeddedness in a home context. The present thesis also contributes to the literature on the parenting role of headquarters by providing evidence in support of a pessimistic view of headquarters’ parenting advantage and identifying political embeddedness as an important element that contributes to the value-creating/destroying role of headquarters in the EMNC context