Disruptive innovation in multinational enterprises

Purpose – This paper aims to address the link between the internationalization of the MNC and its location choices and the discovery of disruptive innovations among the dispersed network of subsidiaries. Design/methodology/approach – A recent categorization of innovation suggests that not all innovations can be treated the same. Distinguishing between the various innovation typologies, this paper focuses on disruptive innovation within an international context. Many researchers have found that large incumbent firms tend to have issues with developing disruptive innovation, and are often disrupted by new entrants. However, there are cases of MNEs being successful with disruptive innovation and this paper sets out to theoretically explain where MNEs find ideas for disruption to aid in the incumbent's curse. Specifically, this paper asks, where do disruptive innovations originate in a MNE? Findings – Using a transaction cost approach and resource-based view, along with other seminal pieces in international business, it is proposed that disruptive ideas start in subsidiaries. It further proposes the characteristics of these subsidiaries that should increase the likelihood of discovering disruption. Originality/value – This paper not only expands the boundary conditions of disruptive innovation, but also expands on the “where” question for knowledge acquisition and long-term performance in MNEs.