The Local/Global Integration of MNC subsidiaries and their Technological Behaviour: Argentina in the Late 1990s

This paper examines reasons for differences in the innovative activity of MNC subsidiaries in the context of a late industrialising host economy, Argentina in the late 1990s. It builds on our earlier work which demonstrated that local spillovers from FDI did arise, but not as a generalised consequence of all kinds of FDI-mediated technology transfer from parent companies. Instead spillovers were associated with the existence of significant knowledgecreation and related innovative activity undertaken by the local subsidiaries themselves. That local technological behaviour varied widely between subsidiaries. We have provisionally explored reasons for this variability, highlighting the possible significance of locationspecific factors. In this paper we examine the importance of the subsidiaries’ functional integration within (a) their global corporations and (b) the host economy. The results show that functional integration into the local economy is on its own associated with low levels of local innovative activity. In contrast, close corporate integration has positive effects on local innovative activity under particular conditions when subsidiaries also functionally integrated into the local economy or when they are integrated into global markets as well as the global corporation.