Specifically, we note that prior IB research has overlooked how institutional factors, both formal and informal, influence a DMNE's strategic decision to undertake a HBKA (versus HBKE) implementation when offshoring innovation to a given emerging country.
First, both HBKA and HBKE implementations involve knowledge-intensive activities.
In the context of our study, we examine DMNEs' decision to undertake a HBKA versus HBKE implementation.
Hypothesis 1: The stronger the IP protection in the emerging host country, the higher the likelihood for a DMNE to undertake a HBKA implementation.
3.2 HBKA and Cultural Differences in Emerging Countries
Building on this stream of studies, in view of the fact that in the specific context of offshoring innovation HBKA implementations have as their main objective to generate new knowledge through activities requiring exploration and involving creativity, we expect that the greater the cultural differences between the developed home country and the emerging host country, the more likely a DMNE undertakes a HBKA implementation in such country.
As discussed in the previous paragraph, our argument is based on the different premise that cultural differences can have positive effects, especially in the context of activities aimed at creating new knowledge such as the ones involved in HBKA implementations.
Hypothesis 2: The greater the cultural differences between the emerging host country and the developed home country, the higher the likelihood for a DMNE to undertake a HBKA implementation.
Specifically, in relation to the positive effect of IP protection on the likelihood to undertake a HBKA implementation (hypothesis 1), we argue that as the number of offshoring innovation implementations grows, a DMNE is likely to have had greater opportunities and therefore greater experience at creating organizational routines, structures, and procedures that can alleviate the risks associated with a weak IP protection (Zhao 2006).
As a result, our expectation is that as a DMNE's offshoring innovation experience grows, the positive effect of greater cultural differences on the likelihood to undertake a HBKA implementation in a given emerging host country is reinforced.
Hypothesis 3: The greater a DMNE's offshoring innovation experience, the weaker the relationship between IP protection and the likelihood to undertake a HBKA implementation.
Hypothesis 4: The greater a DMNE's offshoring innovation experience, the stronger the relationship between cultural differences and the likelihood to undertake a HBKA implementation.