RODRIGUES C. D.BORINI, F. M.RAZIQ, M.Roberto Carlos Bernardes2021-10-182021-10-182020-09-30RODRIGUES C. D.; BORINI, F. M.; RAZIQ, M.; BERNARDES, R. C. The roles of external embeddedness and institutional distance in the subsidiary product/process innovation and R&D capacity. Journal of Knowledge Management, v. 24, n, 10, p. 2513-2530, 2020.1367-3270https://repositorio.fei.edu.br/handle/FEI/3393Purpose – This study aims to look at the relationship of external embeddedness and institutional distance (governance aspects) with the foreign subsidiary research and development (R&D) capacity. Furthermore, it examines whether these relationships are mediated by subsidiary product and process innovation, and whether institutional distance plays a moderating role in the relationship between subsidiary innovation and R&D capacity. Design/methodology/approach – The authors draw on survey data from 130 foreign subsidiaries operating in Brazil and test their model using variance-based structural equation modeling. Findings – Results suggest that subsidiary (product and process) innovation fully mediates the relationships between: subsidiary external embeddedness and R&D capacity; and institutional distance and subsidiary R&D capacity, such that the relationship is positive in case of the former and negative in case of the latter. The relationship between subsidiary product and process innovation and R&D capacity is positive and stronger at lower levels of institutional distance. Originality/value – The research ignores the underlying mechanisms of the external embeddedness and institutional distance relationship with subsidiary R&D capacity. Furthermore, institutional distance based on formal governance aspects and their impacts on subsidiary innovation and R&D capacity are rarely investigated. This paper contributes with regard to these aspects.Acesso Restritoinstitutional distanceexternal embeddedness,product and process innovationR&D capacityArtigo10.1108/JKM-02-2020-0083