Headquarters involvement and efficiency of innovation development and transfer in multinationals: A matter of sheer ignorance?

We compare two theoretical perspectives on the knowledge situation of headquarters (HQ) in multinational corporations: the bounded rationality perspective and the sheer ignorance perspective. We claim that these perspectives lead to different expectations when it comes to HQ's role and the effects of HQ involvement in innovation processes at the subsidiary level. More specifically, we examine the impact of HQ involvement on the efficiency of 71 subsidiary innovation projects. The findings show that HQ involvement in innovation development and transfer has a negative rather than a positive impact on efficiency in both processes. We contribute by showing and suggesting that the sheer ignorance perspective might provide a more accurate portrayal of the HQ knowledge situation than the bounded rationality perspective does. This study furthers understanding of the role of HQ in the contemporary, knowledge-creating multinational.

► We compare the bounded rationality and the sheer ignorance perspectives on the knowledge situation of HQ in MNCs.
► The two perspectives lead to different expectations about the effects of HQ involvement in innovation processes at the subsidiary level.
► We examine the impact of HQ involvement on the efficiency of subsidiary innovation projects.
► HQ involvement in innovation development and transfer has a negative impact on efficiency.
► The sheer ignorance perspective might provide a more accurate portrayal of the HQ knowledge situation.