Geographic ambidexterity: how reverse innovation can help multinational enterprises to balance exploration and exploitation

This thesis investigates how multinational enterprises (MNEs) organise geographically to enable an ambidextrous approach to innovation across developing and advanced economies. Three studies were conducted, each forming a chapter of this thesis.

The first study is a systematic literature review on organisational ambidexterity in a geographic context. Despite the globalised nature of today’s innovation environment, research on organisational ambidexterity’s geographic dimension is scarce and largely fragmented. A systematic literature review of 107 selected academic articles was conducted to take stock of what is understood about the geographic implications of ambidexterity and map out critical research gaps. The results propose a conceptual framework that brings the dispersed body of literature closer together to focus the future academic discussion. The findings show how three main interconnected areas—strategic approach, entry mode, and environmental factors—determine and influence exploration and exploitation activities in an international geographic context. Finally, future research avenues are identified to support and guide scholars and researchers in their pursuit of advancing the discussion on the geographic dimension of ambidexterity.

The second study builds on the concept of geographic ambidexterity and argues that reverse innovation (RI) (i.e., innovation flowing from developing to advanced economies) can be leveraged to achieve it. In the globally competitive environment of MNEs, characterised by dispersed knowledge and diversified markets, ambidexterity assumes an increasingly important connotation from a geographic perspective. In this context, economic actors in developing economies have played a growing role as innovators and market disruptors. This development has resulted in the emerging phenomenon of RI and the rethinking of firms’ international research & development (R&D) and innovation strategies. The second paper, thus, aims to answer the question of how RI can be incorporated into multinational R&D strategies to optimise organisational ambidexterity internationally by balancing explorative and exploitative innovative activities across advanced and developing economies. Primary data was collected through semi-structured interviews with thirty R&D executives and senior managers. The findings show that RI can occur in the form of complete products and smaller innovative contributions toward the development of new products. RIs, thereby, arise from the multinational collaboration between the headquarters of organisations, their subsidiaries, and partners. The study also argues that multinational enterprises use exploration and exploitation in developing economies as the foundation for RI. Finally, a distinction between four types of explorative and exploitative RI has been proposed that MNEs can pursue to balance their ambidextrous activities across geographies. These four types of innovation comprise reverse product innovations and reverse flows of innovative contributions, each of explorative and exploitative nature. The results draw attention to the global impact potential of developing economy R&D resources that have previously received limited attention in innovation theory.

The third study builds on ambidextrous RI to focus on its strategic implementation. R&D is increasingly globalised, and recent research attributes a growing global innovative power to R&D activities in developing economies. In the meantime, researchers have recognised important benefits to the resulting opportunities of RI. Namely, benefits from the commercialisation of RI in advanced markets and the innovative contributions developing economy-based R&D activities can hold for MNEs. However, despite the increasing theoretical and practical relevance of RI, academic literature has failed to provide systematic approaches that MNEs can adopt to manage the inversion of the flow of innovation effectively. The third paper fills that gap by adopting the knowledge-based view (KBV). Specifically, the study investigates how MNEs manage their knowledge-sharing processes and knowledge infrastructures across developing and advanced economies to enable explorative and exploitative RI strategically. For that, an abductive research approach was adopted. In so doing, interview data were collected from twenty-nine R&D executives of MNEs that operate in both developing and advanced economies. In correspondence to each phase of the RI process (von Zedtwitz et al., 2015), the third paper contributes to the RI literature by identifying the processes and infrastructures that are crucial for the systematic execution of it. It also extends the understanding of the KBV to the context of cross-border knowledge flows from developing to advanced economies.