| Summary: | The article analyzes how innovation generation occurs in subsidiaries of Brazilian multinational corporations acting in Portugal, specifically the role of customers in the process and the knowledge dynamics. A multiple case study approach was conducted in four subsidiaries operating in the Portuguese market for at least one year. Firms came from different activity sectors and sizes. Results identify permanent knowledge exchange flows between subsidiaries and headquarters, while the largest pour is from the later ones (in Brazil) to their wings in Portugal. There are frequent innovations taking place in Portuguese subsidiaries. Such innovation processes are typically incremental in nature and occur predominantly in only some areas of the organization, where greater specialization and expertise are located. The most relevant results regard the existing strong interaction between subsidiaries and markets, especially with the larger customers that contribute with suggestions and are able to influence the new products creation in the subsidiaries.
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