New Venturesʼ Technology Search Through Overseas R&D Subsidiaries

What motivates new ventures to establish R&D subsidiaries in host countries? This paper analyzes the joint effects of industry newness and the existence of local knowledge clusters on the new venturesʼ propensity to locate R&D activities abroad. In emerging industries, new ventures have strong motives to explore technological knowledge from other countries in order to differentiate themselves from domestic incumbents in the competition for dominant technological designs. Therefore, new ventures are more likely to establish R&D subsidiaries abroad to access geographically localized, technological knowledge within foreign clusters when the home country has no relevant local knowledge cluster. In addition, by incorporating firm-specific, technological knowledge requirements, this paper explains the circumstances under which new ventures prefer establishing R&D subsidiaries to pursuing international market diversity for technological learning. New ventures are more likely to establish R&D subsidiaries abroad if required knowledge for a technology search is closely dependent on other relevant knowledge sets.