Foreign knowledge sources and innovation: Differences across large and small and medium-size multinational enterprises (MNEs)

Multinational enterprises (MNEs) can take advantage of cross-border knowledge sourcing and internationalisation spillovers. Nevertheless, the influence of these two foreign knowledge sources on innovation has been scarcely analysed in the MNEs. The purpose of this paper is three-fold. First, to apply multilevel modelling in the study of MNEs' innovation. Second, to analyse how the region's foreign knowledge sources affect innovation based on R&D in MNEs. Third, to explore whether this influence differs between large and small and medium-size MNEs (SM-MNEs). We used multilevel panel data analysis in a sample of 1471 Spanish MNEs over the period 2009 to 2016. The results indicate that the firm-level factors have a stronger relationship with the propensity to innovate in MNEs than the region's foreign knowledge sources. Nevertheless, the effect of these region's knowledge sources in explaining the differences across MNEs in innovation is more substantive in large MNEs than in SM-MNEs.