The roles of external embeddedness and institutional distance in the subsidiary product/process innovation and R&D capacity

This study aims to look at the relationship of external embeddedness and institutional distance (governance aspects) with the foreign subsidiary research and development (RD and institutional distance and subsidiary R&D capacity, such that the relationship is positive in case of the former and negative in case of the latter. The relationship between subsidiary product and process innovation and R&D capacity is positive and stronger at lower levels of institutional distance.,The research ignores the underlying mechanisms of the external embeddedness and institutional distance relationship with subsidiary R&D capacity. Furthermore, institutional distance based on formal governance aspects and their impacts on subsidiary innovation and R&D capacity are rarely investigated. This paper contributes with regard to these aspects.