Subsidiary driven innovation within shifting MNC structures: Identifying new challenges and research directions

• The multinational (MNC) is established as an arena primed for innovation.
• We examine the role of subsidiaries in the generation and diffusion of MNC innovations.
• Behavioural and structural facilitators of subsidiary driven innovation are identified.
• Structural change in the MNC now creates new challenges for subsidiaries to innovate.
• Suggestions for future research are identified and advanced.

The multinational (MNC) is well established as an arena primed for the creation and sharing of innovations. Within this arena, the creation of innovations is borne from leveraging the unique knowledge and opportunities of its globally dispersed subsidiaries.The recent emergence of more transactional and cost focused approaches to the allocation of organisational activities within the MNC, under what is termed a ‘global factory’ structure, now challenges this dominant view whilst also providing a good vantage point to look back at research to date and to project the future impact of these changes. In the absence of research which hybridises recent literature on innovation with current insights from the international business domain this review paper contributes to our understanding of the impact of this shift by identifying the implications of narrower subsidiary roles, increased monitoring and constraints on combinative capabilities for managing innovation across the MNC.A key contribution is presented via the modelling of current inhibitors of subsidiary innovation, advancing new and compelling insight into how a shift towards the fine slicing of value chain activities across the organisation threatens not only subsidiary driven innovation but also has longer term implications for MNC competitive advantage. We conclude the paper by highlighting critical issues for management in this emerging MNC landscape and by identifying the rich opportunities for relevant and responsive research presented by these new challenges.