The geography of knowledge sourcing by Multinational Corporation subsidiaries, with special reference to the pharmaceutical industry

Multinational Corporations (MNCs) are increasingly adopting internationally integrated systems of knowledge creation. Historically, MNCs have concentrated their most creative new competence-generating R&D operations within the parent firm in the home country. The decentralization of research activity in MNCs was directed primarily to the competence-exploiting activity associated with the local adaptation of products and processes. However, since the mid-1980s large MNCs have been continuously expanding some aspects of competence-creating R&D across international borders by establishing global networks of creative subsidiaries that in turn are embedded in their own local networks. Through subsidiaries MNCs are able to tap into foreign knowledge bases by networking with the local firms and non-profit research institutions in centers of technological excellence. The challenge facing the parent firm is to manage the interdependence of highly complex technological activities between network participants to ensure proper coordination for increased innovation. Despite widespread theoretical interest in this phenomenon, progress on empirical research on subsidiary innovation and knowledge-seeking FDI has left many unanswered questions about the geography of knowledge sourcing.;This dissertation examines international knowledge sourcing activity of foreign-owned subsidiaries in the pharmaceutical industry in the United States. This study primarily investigates the determinants of local and more distant knowledge sourcing activities by MNC (Multinational Corporation) subsidiaries in the pharmaceutical industry. The three main areas of study are the influence with which public research institutes have on foreign-owned subsidiaries in their knowledge creation activities; how foreign firms engage in knowledge exchanges between geographic clusters of technological activities; and the integration of local and international networks for knowledge exchanges between firms.;The results suggest that indeed foreign-owned subsidiaries tap into the knowledge base of local public research institutes as well as engaging in inter-organizational knowledge exchanges across geographic clusters of expertise. The findings show that foreign firms extend their knowledge seeking activities beyond their geographic locations to other clusters for technologies that are complementary to their existing research efforts. Also, this dissertation reveals that basic science knowledge is universal, as scientists across the world actively share results of new discoveries with their colleagues.;The data used in this study is obtained from files of the US patent documents of the US Patent and Trademark Office (USPTO) compiled by researchers at the National Bureau of Economic Research (NBER), and Rutgers University Patent Database.