Lost in Translation or Lost in Your Neighbor's Yard: The Moderating Role of Leverage and Protection Mechanisms for the MNC Subsidiary Technology Sourcing–Performance Relationship

The MNC subsidiary technology development process involves the interplay among three components; sourcing, leverage and protection. Subsidiaries source technology from headquarters, local collaborators and their own R&D activity. Research has focused on the performance impact of sourcing, but has overlooked how leverage and protection mechanisms contribute to the creation and capture of value from sourced technology. Adopting a configuration-based lens grounded in the resource and knowledge-based perspectives, we conceptualize subsidiary sourcing along two dimensions: organizational boundaries making technology more or less difficult to protect and geographical country boundaries making technology more or less difficult to leverage. When a sourced technology is matched with appropriate leverage or protection mechanisms, subsidiaries are better able to create or capture value. Using a survey panel dataset of 1971 Taiwanese subsidiaries our conjectures were supported. Sourcing from local collaborators which occurs across organizational boundaries was most highly associated with profitability when protection mechanisms were in place, while sourcing from headquarters which occurs across geographical boundaries was most highly associated with profitability when leverage mechanisms were developed. We contribute to the subsidiary technology sourcing and performance management literatures by theorizing how the interplay among components of the technology development process contributes to creating and capturing value.