Examining the drivers and boundary conditions of social innovation: Evidence from MNE subsidiaries in a developing economy

Abstract

Although social innovation can help multinational enterprise (MNE) subsidiaries create social value for developing countries, they often encounter significant challenges in successfully implementing social innovation projects. This research applies the knowledge-based perspective to propose and test a theoretical framework to explain why MNE subsidiaries differ in their ability to pursue social innovation successfully in a developing country. The framework contends that MNEs’ relationship learning contributes to social innovation variability under varying levels of subsidiary autonomy and mode of entry. Analysis of primary data collected from 207 subsidiaries of MNEs operating in Ghana shows that relationship learning has a positive relationship with social innovation. Further analysis reveals that subsidiary autonomy enhances the positive association between relationship learning and social innovation, and that this moderating effect is stronger for subsidiaries with equity entry mode as opposed to non-equity entry mode. These insights advance the limited understanding of the antecedents of MNEs’ social innovation in developing countries and offer guidance on how MNE subsidiaries can successfully pursue social innovation interventions in a developing country.