Does a foreign subsidiary’s network status affect its innovation activity? Evidence from postsocialist economies

Jože P. Damijan, Črt Kostevc, Matija Rojec

Abstract


Questionnaire survey among 809 foreign subsidiaries in five post-socialist economies (East Germany, Poland, Romania, Slovenia and Croatia) is used to study determinants of innovation activity of foreign subsidiaries. Findings demonstrate that foreign subsidiaries are relatively independent as far as innovation activity is concerned, while at the same time subsidiaries with better access to foreign parent companies R&D results are more likely to innovate. Important differences are found in factors that determine product and process innovation: subsidiaries that invest more in R&D exhibit higher probability for product but not for process innovation; transfer of responsibilities from headquarters to subsidiaries is conducive to process innovation; market-seeking motivation of foreign investors has a negative impact on product innovation status.


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