In Search of MNC Competitive Advantage : The Role of Foreign Subsidiaries as Creators and Disseminators of Knowledge

Abstract: Research on the multinational corporation (MNC) has highlighted the development of knowledge that occurs in geographically dispersed subsidiaries, and several scholars have emphasized the significance of subsidiary knowledge for the success of the MNC. This thesis contributes to the understanding of how knowledge is developed within MNC subsidiaries and how the development of subsidiary knowledge is related to the transfer of subsidiary knowledge and subsidiary impact on the performance of the larger MNC.The empirical setting consists of a combination of quantitative and qualitative data. The results of the empirical studies suggest that the development of subsidiary knowledge is contingent upon the business conditions within the local environment and, in particularly, interactive learning within relationships with important business actors external to the organization. Furthermore, the findings show that the development of knowledge within these subsidiaries is driven not only by external actors, but also by business relationships within the corporation. The results reveal that, whether a subsidiary learns and develops knowledge from external or internal sources has direct implications on how the knowledge can be used and applied by other units within the MNC, which in turn affects the extent to which the subsidiary can contribute to the performance of the MNC. It is also revealed that the barriers to transfer are especially manifest in situations in which a subsidiary is deeply embedded in relationships with demanding customers or suppliers. Thus, the embeddedness of subsidiaries in external relationships is a constraining factor for knowledge transfer. In situations in which the subsidiary is deeply embedded in its local market, the headquarters can influence the transfer across subsidiaries through the use of means such as centres of excellence.