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9 - Reverse Innovation and the Role of Local Partners in Emerging Markets

The Experience of Foreign Subsidiaries in Brazil

from Part II - Types of Innovation in Emerging Markets

Published online by Cambridge University Press:  15 March 2021

By
Victor Ragazzi Isaac ,
Felipe Borini  and
Moacir de Miranda Oliveira
Edited by
Fernanda Cahen ,
Lourdes Casanova  and
Anne Miroux
Fernanda Cahen
Affiliation:
Centro Universitario FEI, Brazil
Lourdes Casanova
Affiliation:
Cornell University, New York
Anne Miroux
Affiliation:
Cornell University, New York
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Summary

The purpose of this chapter is to analyze the relationship of subsidiaries of multinational companies with local partners. The focus is on MNCs from advanced markets and their influence on the development of reverse innovations in emerging markets. Unlike the regular flow, reverse innovations consist of the development of new products, processes, and services created initially to meet the local demands of EMs, but that are later understood as fundamental by the multinational for generating gains of global competitive advantage, only to be disseminated to the headquarters and applied in developed markets. Through the use of statistical techniques in 113 subsidiaries of foreign multinationals operating in Brazil, we found that the quality of the relationship with local partners is significant, as it offers subsidiaries access to both local resources and the knowledge acquired by local partners. In addition, we found that innovations developed by subsidiaries were not restricted to them, thanks to the gains in competitive advantage they provide to headquarters and other units operating in developed markets. Finally, we point out that it is not only subsidiaries but also local partners who enjoy gains from such access, an indication of the strategic importance of quality relationships between local partners and subsidiaries in emerging markets for competitive gains on both ends.

Keywords

Reverse InnovationForeign SubsidiaryEmerging MarketsRelational Embeddedness
Type
Chapter
Information
Innovation from Emerging Markets
From Copycats to Leaders
 , pp. 256 - 277
Publisher: Cambridge University Press
Print publication year: 2021

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