Knowledge Flows within Multinationals—Estimating Relative Influence of Headquarters and Host Context Using a Gravity Model

By: Prithwiraj Choudhury, Mike Horia Teodorescu and Tarun Khanna

Format:Print
| Language:English

Abstract

From the perspective of a multinational subsidiary, we employ the classic gravity equation in economics to model and compare knowledge flows to the subsidiary from the MNC headquarters and from the host country context. We also generalize traditional economics gravity models to include new distance measures and a similarity measure novel to the management literature and test our theoretical predictions using a hand collected dataset of U.S. patents filed by the top 25 patenting multinational firms headquartered in the US. We find that as the size of the subsidiary grows, the host country’s influence onto knowledge flows into the subsidiary grows faster than the influence of the headquarters. We also present some evidence that immigration policy positively affects knowledge flows.

Keywords

Multinationals; Knowledge Flows; Cosine Similarity; Gravity Model; Multinational Firms and Management; Knowledge Dissemination; Business Headquarters; Immigration

Citation

Choudhury, Prithwiraj, Mike Horia Teodorescu, and Tarun Khanna. "Knowledge Flows within Multinationals—Estimating Relative Influence of Headquarters and Host Context Using a Gravity Model." Working Paper, July 2017.