Management Innovation in MNEs’ Subsidiaries:

A Comparative Case Study.

Abstract

This research analyzes three cases of management innovation (MI) generated and implemented in the production sites of Japanese and German automobile parts makers. MI is a new type of organization innovation explained as the introduction of new management practice, process, and structures to achieve higher organization goals. This is described as a five-step-process starting from dissatisfaction of the status quo to the diffusion to the other organizations. While it is expected that MNEs’ foreign subsidiaries should generate MI for their advancement, few studies analyze subsidiary-level MI; how and why subsidiaries generate and implement MI and how and by whom they are validated in the MNE still remain unclear. This research shows two findings through the comparative case analysis of subsidiary-level MI. First, unlike the MI process made by Birkinshaw and Mol (2006), the process of subsidiary-level MI from invention to internal validation is not sequential but interactive, so that the stage of invention and that of validation move together. Second, subsidiary-level MI should be described as a rational process reflecting subsidiary’s strategy. These findings differentiate subsidiary-level MI from firm-level MI and from intra-organizational knowledge transfer from the headquarter to subsidiaries.