Latin America has been less successful on average in improving economic performance compared to other emerging markets (Blejer, 2006; López-Claros et al., 2006). As a result, stimulating innovationand entrepreneurship has become a priority in many Latin American countries. At the foundation of many of innovation policies is the hope that the value created will benefit the home country. At the same time, though, multinationals increasingly seek out country contexts in which to source knowledge e.g., Barlett & Ghoshal, 1989, Dunning, 1994; Hedlund, 1994; Zander, 1997; Almeida et al., 2002; Almeida and Phene, 2004). Where, then, do the benefits from innovations in these countries go?

Building on research related to the idea that knowledge can be geographically localized, or “sticky” (Jaffe, Trajtenberg & Henderson, 1993) and that technology sector development across countries can be distinct (Cantwell, 1989; Patel and Pavitt, 1991), we hypothesize that local invention (compared to inventions by multi-nationals from outside the host country) will be positively related to relative local value appropriation (H1).

For knowledge stocks that are more “sticky”, we hypothesize that there will be a positive moderation of the above relationship. Specifically, the degree to which an invention draws on applied (rather than basic) knowledge (H2) and the extent to which there are country level relevant knowledge stocks (H5) will positive moderate this relationship, while the internationalization of the inventive team (H3) and the technological scope of the invention (H4) will negatively moderate this relationship.