Abstract
Given the trend of internalization of R&D, many countries have taken the initiatives to attract MNEs to establish R&D centers to bring in more advanced and diversified innovative R&D capacities. The Taiwan government also takes proactive steps in this aspect and has launched the “Encouraging Multinational Enterprises to Set up R&D Centers in Taiwan (MRDC) program since 2002 to encourage more MNEs to set up R&D centers in Taiwan. Under this context, this study bases on Eclectic Paradigm to explore the relationship between location advantage-internalizing (LA-I) capability, ownership advantage-internalizing (OA-I) capability, and innovation performance of MNE R&D subsidiaries in Taiwan. The data for analysis are collected from the MOEA program database, and an Ordinary Least Squares (OLS) regression analysis is conducted to explore the relationships mainly from the perspective of the R&D subsidiary. The results indicate that both the government subsidy and collaborative R&D project are essential to facilitate innovation performance. The innovation performance of R&D subsidiaries in Taiwan may rely more on the LA-I capability in the host country than the OA-I capability from the home country in the initial stage. Moreover, it also indicates the room for the local subsidiary or government to improve the quality of local hire as well as the efforts needed to better internalize the capabilities of foreign expatriate and technology transfer to enhance the overall innovation performance.