Chapter 5 Creating Worldwide Innovation and Learning:

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Chapter 5 Creating Worldwide Innovation and Learning:
Exploiting Cross-Border Knowledge Management
Focus on one of the most important current challenges facing MNE management-how to develop and diffuse knowledge to support effective worldwide innovation and learning

Central, Local and Transnational Innovation
Two classic processes dominate MNE’s innovative capabilities (traditional) * Centre-for-global innovation model–(International/global) * New opportunity sensed in home country
* Centralized resources & capabilities of parent company brought to create new product/process (the main R&D center) * Implement through subsidiaries whose role is to introduce that innovation to their local market Examples of this model: Pfizer’s develop Viagra; Intel create Pentium processors * Local-for-local innovation model–(multinational strategic) * Subsidiary-based knowledge- sense local opportunities

* Subsidiaries use own resources &capabilities to create innovative responses * Subsidiaries then implement that in the local market
Examples of this model:Unilever develop a detergent bar in response to Indian market’s need for a product suitable for stream washing; Philippines-based Jollibee’s strategy of adapting its fast-food products to the local market preferences of each country it entered Two new transnational innovation processes

* Locally leveraged innovation model
* Special resources &capabilities of each national subsidiary available not only to local entity but to other MNE units worldwide Examples : p393
* Globally linked innovation model
* Pool resources &capabilities of many different units - both parent company &subsidiaries * Create and manage innovative activity jointly
* Allow company to take market intelligence developed in one part of the organization, perhaps linking to specialized expertise in a second entity and a scarce resource in a third, then diffuse the new product/proposal worldwide eventually (illustrate joint concept ) Examples: p394

Challenge: build an organization that can simultaneously facilitate all four processes of innovation and learning, which requires the understanding of the power/limitations of each

Making Central Innovations Effective
Key to manage the center-for-global process (3 important capabilities) 1. Multiple linkages: gaining the input of subsidiaries into centralized activities Problems: (with highly centralized operations)

* Center not understand market needs
* Subsidiaries required to implement the central innovation not committed to it Solutions:
* Building multiple linkages between headquarters and overseas subsidiaries –giving headquarters managers a better understanding of country-level needs & opportunities also subsidiary managers greater access to & involvement in centralized decisions &tasks Example: Matsushita, preserve the different perspectives, priorities, and even prejudices of its diverse groups worldwide 2. Market mechanisms: ensuring that all functional tasks are responding to market(national) needs Problems:

* Headquarters managers sheltered from the constraints& demands felt by managers on the front lines of the operations Solutions:
* Create an integrative process- ensure headquarters managers responsible for R&D, manufacturing& marketing * Use internal ‘market mechanisms’ to direct & regulate central activities Example:

3. Personnel flow: integrating value chain functions such as development, production, and marketing by managing responsibilities transfer Problems:
* Hard to integrate different tasks
* Hard to assign responsibility for cross-functional activity Solutions:
* integrative system rely heavily on transfer of people,
* identify the manager who will head the productioin task for new product and make him join the research & product design stage-->facilitate transfer of the project after...
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