Innovation capability building in subsidiaries of multinational companies in emerging economies: Insights from the wind turbine industry

Research on the catching up of latecomer firms has generally overlooked whether, and how, subsidiaries of multinational companies (MNC) operating in emerging economies have developed innovation capabilities. Existing research on innovation capability building in MNC subsidiaries mainly employs quantitative research designs, comprising large samples of MNC subsidiaries using patent statistics to generate insights at a highly aggregated level of analyses. Accordingly, the existing research fails to capture the micro-level dynamics of learning and innovation capability development over time within individual MNC subsidiaries. To overcome this knowledge gap, we pursue a case study approach in this paper, drawing on qualitative data in order to generate an in-depth analysis of the processes underlying innovation capability building within a single MNC subsidiary. We examine the innovation capability development trajectory of a local Indian subsidiary of a Danish first-tier supplier of wind turbine blades. We adopt an analytical framework based on the literature on innovation capability building in latecomer firms, which is combined with insights from the literature on MNC subsidiary capability evolution. The paper points to the key role of the parent company and internal learning in the subsidiary as the basis for the advanced level of innovation capabilities achieved by the subsidiary, enabling it to become a supplier of innovations to its parent company. Contributions to the literature on innovation capability building in latecomer firms are presented and discussed.