Managing Innovation

By: Prithwiraj Choudhury

Since the mid-1990s, a large number of multinational enterprises (MNEs) have set up R&D centres in China, India and other emerging markets. Such MNEs face constraints in expanding their “geography of innovation” — that of producing and transferring knowledge across borders — because the MNE knowledge is likely to be localised within larger, more established centres of knowledge production.

How do MNEs in emerging markets circumvent this constraint? In this paper, we use data from a Fortune 50technology firm and study the role of return migrants in facilitating patenting at the emerging market R&D centre. We also study on-the-job learning of knowledge production by local employees who report to return migrants at an emergingmarket R&D setting.

The findings generate insights into the functioning of “internal labour markets” of MNEs. The results are important for managers: given the many Fortune 500 MNE R&D centres in countries such as China and India, and the large fraction of these centres managed by return migrants, the findings may assist those who set up and manage current and future MNE R&D centres.

We find that return migrants and their direct reports file more patents than other local employees. Patents that have return migrants as inventors exhibit high patent citation rates, indicating that return migration is related to cross border knowledge transfer.

From “Return Migration & Geography of Innovation in MNEs”