Unleash innovation in foreign subsidiaries

Area of Science:

• Business Strategy
• Innovation Management
• International Business

Background:

• Growth-triggering innovation in multinational corporations often originates in foreign subsidiaries.
• Procedures and politeness from the home office can stifle local enthusiasm and good ideas.
• Current responses from headquarters frequently suppress innovation and lead to talent loss.

Purpose of the Study:

• To investigate how multinational corporations can better encourage innovation in foreign subsidiaries.
• To propose a shift in perspective, viewing subsidiaries as integral extensions rather than isolated units.
• To identify practices that facilitate the flow of innovative ideas from the periphery to the corporate center.

Main Methods:

• Research based on over 50 multinational corporations.
• Analysis of examples illustrating "innovation at the edges."
• Examination of communication channels and subsidiary authority.

Main Results:

• Viewing foreign subsidiaries as "peninsulas" rather than "islands" promotes idea flow.
• Improved communication channels and increased subsidiary authority are crucial for innovation.
• Four approaches are suggested: seed funding, formal requests for proposals, incubator programs, and international networks.
• Creating "idea brokers" can link subsidiary entrepreneurs with the wider company.

Conclusions:

• Multinational corporations must liberalize internal systems and delegate more authority to local subsidiaries.
• Incentives and support systems are necessary to facilitate subsidiary innovation efforts.
• Encouraging "innovation at the edges" requires a strategic shift in management attitude and practices.