What factors determine the subsidiary mode of overseas R&D by developing-country MNEs? Empirical evidence from Chinese subsidiaries abroad

This study examines the determinants of the subsidiary modes of overseas research and development (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technological resources have different effects on the selection of overseas R&D subsidiary modes, which are competence-exploiting mode or competence-creating mode. This is supported by the empirical results in this paper using data from a survey of 40 Chinese overseas R&D subsidiaries. The results demonstrate that the parent firms with richer financial resources and more R&D expenses prefer the competence-exploiting mode, while the parent firms with more R&D personnel favor the competence-creating mode. Additionally, this study finds that firms matching our mode choice model tend to enjoy a higher level of innovative performance.