The role of university-industry research centers in embedding foreign subsidiaries: Insights from automotive research and development in Ontario

Abstract

Regionally embedded foreign subsidiaries have an advantage over disembedded ones. The ability to draw on local knowledge networks to create differentiating capabilities can enhance the subsidiary's influence within the multinational enterprise. A subsidiary's power is shaped by its control over external resources or skills the parent company depends on to develop new products. These local relationships are then used to bargain for further mandates, sometimes in competition with sister subsidiaries. One way in which foreign subsidiaries can deepen their connections with the local context is by collaborating in their innovative efforts with university-based collaborative research centers (CRCs). I argue that CRCs are not a panacea when it comes to embedding the subsidiaries of foreign multinational enterprises (MNEs). A review of the literature helps identify the subsidiary-parent relationship and industry-academia conflicts of interest as obstacles to the development of productive relationships between subsidiaries and academia. I draw on evidence from three Ontario CRCs, with different scientific focus and stakeholders and analyze how these factors shape their behavior. The study shows that long-term CRCs-subsidiary relationships can be challenging to establish. This is because subsidiaries remain tightly controlled by their parent companies and cannot get access to the resources necessary to pursue ambitious innovation projects. It is also challenging for subsidiaries to form long-term relationships with CRC researchers, who prioritize other goals such as training skilled personnel and continuing their research agenda. CRCs where 1) subsidiaries have a strong bargaining position within the MNE, and 2) academic expertise is aligned with industry needs have a greater chance to contribute to future MNE embeddedness.