Scandinavian Working Papers in Business Administration

Working Papers,
Copenhagen Business School, Department of International Economics and Management

No 13-1999: How Foreign Subsidiaries Develop into Integrated Competence Centres

Jens Gammelgaard
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Jens Gammelgaard: Department of International Economics and Management, Copenhagen Business School, Postal: Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, 2nd floor , DK-2200 Copenhagen N, Denmark

Abstract: Foreign subsidiaries acting as "integrated competence centres" is an organizational design that improves the building of capabilities in multinational corporations. In this knowledge-creating process the headquarter uses a bottom-to-top strategy, where the initial competence-building starts in independent and autonomous subsidiaries, exploiting their internal learning processes and relations to local advanced customers and science centres. The purpose of the subsidiary is to develop basic designs of future competitive products. The headquarter assigns mandates and resources for further development of the competence so it qualifies for global sales exploitation. After gaining a mandate the subsidiary concentrates its R&D within a focused area. Central monitoring systems and corporate socialization mechanisms secure the possibility of intra-organizational integration and utilization of competences. Further, knowledge transfers within the corporation help the competence centre with its product development. A case study of two foreign-owned Danish high technology subsidiaries test the approach. Both companies build up competence in focus areas, and use intra-organisational instruments to integrate knowledge. However, they differ in their historical background and how they gain the mandate for further competence development.

Keywords: subsidiaries; competence; organizational design; multinational corporations; knowledge; learning; R&D; Denmark

28 pages, May 30, 1999

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