Headquarters-Subsidiary Relationship and Foreign Subsidiary Innovation in Emerging Multinationals: A Loose Coupling Perspective

While it is widely recognized that an asset-augmentation rather than asset-exploitation intent drives the internationalization of emerging multinational enterprises (EMNEs), what remains unclear is how EMNEs and their subsidiaries are able to engage in innovation activities in host countries. Conjoining the loose coupling perspective and institutional theory, this study investigates how EMNEs enhance subsidiary innovation performance through developing and adjusting headquarter-subsidiary (HQS) coupling structure. Drawing upon the data from 426 foreign subsidiaries of Chinese manufacturing firms, this study adopts polynomial quadratic regression with response surface analysis to examine the impact of HQS structure on subsidiary innovation and the contingent mechanisms within this process. The results demonstrate support for the positive effect of HQS loosely coupled structure on subsidiary innovation performance, and the moderating roles of subsidiary external and internal legitimacy are also confirmed. From the perspective of loose coupling, this study makes an effort to inform on the key mechanisms of EMNEs’ global innovation at subsidiary level, and provides practical enlightenment for their internationalization behaviors.