MNC strategies to limit spillovers: How subsidiaries manage knowledge breadth to decrease spillovers

The aim of this paper is to investigate the factors influencing the speed at which knowledge flows from foreign to domestic firms. The focus is not on whether a knowledge spillover occurs, but on the time an MNC subsidiary’s knowledge takes to spread in the surroundings. Filling the gap in the literature regarding spillover speed in International Business by means of the insights from Innovation Studies, with particular reference to the literature on search, we propose a conceptual model where the speed of local knowledge diffusion is influenced by the technology sourcing strategies of subsidiaries. We then test our model using a database covering 1394 US patents from foreign MNC subsidiaries in the semiconductors sector. We find that not only does the breadth of the set of subsidiary knowledge sources slow down local knowledge diffusion, but the delay is mainly related to the diversity of global and internal sources used by the subsidiary, hinting at strategies that MNCs can use to further protect their knowledge