Absorptive Capability of MNCs: Balance between Autonomy and Control of Foreign R&D Subsidiaries

This paper analyzes the capability of Japanese and European multinational companies (MNCs) to absorb technological knowledge from the United States through their R&D operation in the US. Employing the notion of "absorptive capacity", we define the capability of a firm to absorb technological knowledge from abroad as "absorptive capability (AC)." We examine the components of AC and their interrelationships using patent and sales data in the context of R&D management of Japanese and European MNCs at home and in the US.