Abstract
The amount and the nature of the innovative activity of multinational corporation (MNC) subunits have changed over time. Historically, subunits innovated mainly to adapt for local conditions products or processes developed in the home country of the MNC parent company. Thus, subunit creative activity in new fields little explored earlier by their parent was driven mainly by their own local system of innovation. However, MNC subunits evolved over successive decades, increasingly gaining a more internationally integrated creative role. Hence, the availability of a wider array of knowledge through the international connectedness of firms in the relevant industry in the country in which the subunit is located, has gained in importance. Within this context, the role of the parent company in subunit creative activity has also become more important, since combining core company knowledge with new discoveries requires a closer integration of subunit creative activities with those of the MNC group. We provide evidence on these historical changes by analyzing a panel data set of innovative activities conducted abroad by 244 among the world's largest industrial firms, in 2276 foreign subunits, from 1940 to 1995.