International Association for Management of Technology – IAMOT 2014 Proceedings ROLE OF FOREIGN SUBSIDIARIES IN MNC’S TECHNOLOGY INNOVATION AND BUSINESS INTERNATIONALIZATION: EVIDENCES FROM THE AUTOMOTIVE INDUSTRY IN BRAZIL RENATO MACHADO COSTA School of Economics, Management and Accounting, University of São Paulo (FEA/USP) Av. Prof. Luciano Gualberto, 908, 05508-900, São Paulo, Brazil rmcosta@usp.br MARCOS A. C. BRUNO SDA Bocconi School of Management, Università Bocconi and FEA/USP Via Bocconi, 8, 20136 Milano, Italia marcos.acbruno@gmail.com EDUARDO VASCONCELLOS FEA/USP – epgdvasc@gmail.com LUIZ ANTONIO BLOEM DA SILVEIRA JUNIOR FEA/USP and Magneti Marelli Cofap luiz.bloem@magnetimarelli.com JOSUÉ OSWALDO MONTEROSSI Wahler Metalúrgica Ltda Av. Com. Leopoldo Dedini, 310, 13422-210, Piracicaba, SP, Brazil josue.monterossi@wahler.com.br Abstract In recent years, new roles have been observed for a foreign subsidiary, as when it takes part on technology innovation, or on a business expansion process to another country, indicating its bigger strategic relevance for the multinational corporation (MNC). In these cases, rather than taking a conventional role, the subsidiary actively participates in a new internationalization step of the company or in the development of innovations, sometimes even leading the processes. The phenomenon becomes even more distinctive (and more instigating) if the MNC is from a developed country, and a subsidiary located in an emerging country assumes such a role in these processes. Considering this context, the main goal of this research is to investigate the role of subsidiaries in Brazil, when they participate in the MNC innovation and internationalization processes, a phenomenon still little explored by literature. We aim to provide insights into the emerging knowledge flows in MNCs, presenting some reflections as how to leverage on the potential of the so called reverse innovation, and suggesting also the existence of a reverse internationalization. Our study focuses on the automotive industry, investigating the dynamics of such processes in two MNCs, one of Italian origin and the other German, whose focal subsidiaries are located in Brazil. The case method was selected, due to the complexity of the phenomenon, which calls for in-depth analysis. Primary data were collected by means of semi- structured interviews with executives of the selected companies, directly involved with innovation and internationalization. The motivating, facilitators and inhibitors factors, which impacted the participation of the Brazilian subsidiary in each case, were identified and analyzed, as well as its roles and responsibilities in such processes, and the key management practices