How do multinational companies leverage technological competencies?

de Morten T. Hansen

To gain a more complete understanding of how multinational companies leverage technological competencies, this paper explores the relationships among four fundamental determinants of intra-firm competence transfers that have hitherto been analyzed only separately--formal organization structure, informal linkages, geographical distance, and relatedness of competencies across subsidiaries. Using a data set consisting of 4,840 dyads between new product development teams and subsidiaries that were potential targets for competence transfers in a high-technology multinational company, we find support for the importance of the four determinants but also that they interact in surprising ways to explain different patterns of transfers. Results revealed that teams not only steered away from spatially distant subsidiaries that had related competencies but also preferred to approach people they knew rather than people who knew the technologies well. They also showed that informal and formal organizational mechanisms operated differently in steering teams to subsidiaries that provided competencies. These findings indicate that studying one of the determinants separately can yield biased results, as their net effect may change when the moderating effects of the other determinants are considered, and that more integrative studies of technological competence transfers are needed.