This paper explores the MNC capabilities in a foreign country that allow the firm to transfer and integrate its innovations from knowledge clusters to other firm operations. Adopting a frictions perspective, we focus on which institutional contexts create stronger needs for recombination capabilities and relational capital. We propose that cultural distance to other firm operations introduces stable and predictable frictions, making recombination capabilities and relational capital particularly salient for the integration of knowledge to other firm locations. Conversely, in host countries with high political frictions, firm capabilities are less adept at addressing the institutional context. Our findings, based on a sample of 1620 MNCs in high technology industries from 33 countries from 1994 to 2019 and their patenting behavior, generally support these hypotheses.
