Harnessing Power Through External Collaborative Innovation: How Incumbent Inventors Navigate Rising Talent Influx in Developed‐country MNE Subsidiaries

Abstract This paper examines how, and under what conditions, the increasing presence of highly skilled local employees (HSLEs) within subsidiaries of developed‐country multinational enterprises (DCMNEs) influences incumbent local inventors’ external collaborative innovation. Adopting a power dependence perspective, we propose that incumbent local inventors are more likely to engage in external than internal collaborative innovation in response to the increasing presence of HSLEs. Successful external collaborative innovation enhances incumbent local inventors’ bargaining power by enabling them to gain stronger positions within external networks critical to DCMNEs’ innovation and to access alternative employment opportunities. We further contend that the positive relationship between the increasing presence of HSLEs and incumbent local inventors’ external collaborative innovation is strengthened by the boundary‐spanning characteristics of the management hierarchies, such as cross‐cultural CEOs and interlocking directors. Our analysis of DCMNE subsidiaries operating in China provides empirical support for these predictions. This research offers novel and important insights into collaborating‐by‐hiring, highlighting the increasing presence of HSLEs as a competitive mechanism for interorganizational collaborative innovation and emphasizing the strategic importance of externally leveraging the knowledge and expertise of incumbent inventors.