NEW RESEARCH: The manager determines whether the subsidiary succeeds in innovation

When multinational companies invest in R&D (research and development) departments in their subsidiaries, the hope is often obvious: more innovation and stronger competitiveness. But a new doctoral thesis shows that innovation does not come automatically.

Today, many multinational companies are spreading their operations around the world to access local talent and knowledge. But to understand if and how these global ventures work, it is not enough to study the strategies of the parent company. You need to see what happens in the subsidiaries that act as a bridge between the global ambitions of the headquarters and the local environments where innovation actually happens. But even that perspective is too crude, according to Noushan Memar at Mälardalen University, who in her doctoral thesis studied what happens when a subsidiary receives an R&D mandate.

– Within the subsidiaries, we have the managers who build relationships, solve problems and draw in resources where they are needed. These are the people who turn a strategy into reality – not the mandate itself, she says.

Mandate no guarantee for innovation

An R&D mandate means big changes: new budget, staff and responsibilities. But results vary, despite similar conditions.

– Many companies assume that if you give an entity a mandate and budget, they will deliver. But this is not the case.

– I have studied data from 98 subsidiaries in eight Swedish multinationals. It shows that two subsidiaries with the same resources can perform very differently – simply because their managers act differently.

Relationships that help and hinder

One of the most surprising findings is about managers’ relationships. External relationships – with local partners, customers and knowledge communities – were found to contribute to innovation. But the effect came only after a time lag. At the same time, internal relationships within the group were often found to slow down innovation.

– Working internally with headquarters and sister units created inefficiencies and slowed down the ability to innovate, says Noushan Memar.

But the contradiction does not end there. Internal relations, on the other hand, were crucial for the subsidiaries to commercialize their innovations.

– They are the ones who help the company make money.

So the same relationships that can hold back innovation are also the ones that determine whether the innovation actually reaches the market.

Local skills strengthen positioning

Research also shows that managers with strong local ties are often more successful. They build relationships in the local environment, and these connections give them greater strategic influence within the group.

– They know how to build local partnerships and can therefore influence their position globally. Managers with a global orientation do not have the same positive effect in this particular environment.

For Noushan Memar, the conclusion is clear: the degree of innovation is determined by the relational and behavioral work that managers do on a daily basis. They don’t just implement strategies. They are the architects who make it happen in reality.

– Innovation is not just about resources or organizational structure. It’s about timing, priorities, networks – and managers asking the right questions: “What do we want to achieve? Where should we focus our attention? And what relationships do we need?”

Contact noushan.memar@mdu.se

More about the thesis
Noushan Memar will defend her thesis on December 19 at Mälardalen University. Title: IT’S SIMPLY COMPLICATED! Subsidiary Managers’ Activities and Performance after Gaining an R&D Mandate: A Modular Microfoundations Perspective .