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Journal of World Business 47 (2012) 383–396

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Subsidiary knowledge flows in multinational corporations: Research accomplishments, gaps, and opportunities Snejina Michailova *, Zaidah Mustaffa 1 Department of Management and International Business, The University of Auckland Business School, Owen G. Glenn Building, 12 Grafton Road, Auckland 1142, New Zealand

A R T I C L E I N F O

A B S T R A C T

Keywords: Multinational corporations Subsidiaries Knowledge flows Research accomplishments Research gaps Research directions

Research on knowledge flows in multinational corporations has grown considerably over the last 15 years or so. Part of the growth has resulted in the field becoming more ‘‘fluid’’ and thus prone to multiple definitions and measures of the same notions and constructs, as well as leading to contrary findings. We systematically and critically review the literature on knowledge flows in multinational corporations that has defined the subsidiary as the focal unit of analysis. We classify existing studies into four categories depending on the focus of examination: outcomes of knowledge flows, knowledge characteristics, actors involved in the knowledge flows, and relationships between these actors. On the basis of 92 articles published in 15 top management and international business journals from 1996 to 2009 inclusive we identify key accomplishments, existing gaps and future research directions. ß 2011 Elsevier Inc. All rights reserved.

1. Introduction Multinational corporations (MNCs) have long been conceptualized as organizations whose advantage is derived from their ability to acquire and utilize knowledge across borders (Almeida, Song, & Grant, 2002; Gupta & Govindarajan, 2000; Kogut & Zander, 1993; Mudambi, 2002) and which are superior to alternative organizational configurations in terms of transferring knowledge (Feinberg & Gupta, 2004; Hansen & Løva˚s, 2004; Kogut & Zander, 1992, 1993). In line with the traditional hierarchical structure of the MNC, numerous studies which examine knowledge flows in MNCs focus primarily on how headquarters (HQ) transfer knowledge to their subsidiaries. In other words, in the international business literature, HQs have long been the focal unit of analysis. Over the last 15 years, following changes from more traditional hierarchical structures to network-based and heterarchical configurations of the MNC, an increasing number of studies have shifted their attention to the subsidiary as the center point of examination. Often playing the role of Strategic Leader (Bartlett & Ghoshal, 1986), Global Innovator and Integrated Player (Gupta & Govindarajan, 1991) and World Mandate (Birkinshaw & Morrison, 1995), subsidiaries are increasingly acknowledged as sources of knowledge both for HQ and for peer subsidiaries. We refer to research on knowledge flows in MNCs where the

* Corresponding author. Tel.: +64 9 373 7599; fax: +64 9 373 7477. E-mail addresses: [email protected] (S. Michailova), [email protected] (Z. Mustaffa). 1 Tel.: +64 9 373 7599; fax: +64 9 373 7477. 1090-9516/$ – see front matter ß 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2011.05.006

subsidiary is the focus of analysis as ‘‘research on subsidiary knowledge flows in MNCs’’. As research on subsidiary knowledge flows in MNCs has grown considerably in recent years, it has become more ‘‘fluid’’, prone to multiple definitions and measures of the same constructs and exposed to differing (and often contrary) findings and conclusions. Such development is arguably a natural feature of any stream of literature or field that has not reached maturity in its development. Indeed, ambiguity and a lack of consensus and cohesiveness are only to be expected when a research field is growing. At the same time, there is potential danger in the possibility that diversity, variation and pluralistic tendencies may develop and increase at the expense of precision and extending existing knowledge. The literature on subsidiary knowledge flows has reached a stage in theory development and empirical testing that calls for systematic classification. This is both necessary and timely if scholars interested in this topic are to build on what has been achieved and generate new cumulative knowledge. There are features and trends in the subsidiary knowledge flows literature which require careful examination if we are to produce relevant and interesting knowledge rather than just publish articles. As we will demonstrate, there are some important discrepancies in the definitions and measurements of some antecedents and outcomes of subsidiary knowledge flows. The impressive variety in the theoretical foundations of the literature has provided a nuanced understanding of a number of phenomena associated with subsidiary flows, but it has also contributed to contrary findings. Methodologically, subsidiary knowledge flows research is clearly biased in favour of quantitative examinations. There is an under-representation of conceptual, qualitative and

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mixed methods studies. This lack seems to constrain the in-depth understanding of the studied phenomena. Subsidiary knowledge flows have been examined in a rather limited variety of geographical contexts and without a serious effort to analyze the impact of these contexts on the phenomena under investigation – yet another feature which might contribute to the inconsistent findings among studies from the same theoretical lenses or across similar variables. In order to understand these discrepancies and to make sense of the divergent explanations and findings, critically reviewing the existing literature on subsidiary knowledge flows within MNCs is a useful, and indeed crucial, exercise. We analyze what has been achieved so far, identify existing gaps and suggest future research directions. In order to present a comprehensive yet disciplined review of the research on subsidiary knowledge flows, we have narrowed the scope of our analysis in the following ways. First, while we acknowledge that there are studies on knowledge transfer from MNC subsidiaries to external firms and from host countries to subsidiaries, we only review research on knowledge flows within the MNC.2 This is a justifiable way to narrow down the focus of the review because (a) the very existence and competitiveness of the MNC has been attributed to internal knowledge flows (e.g., Bartlett & Ghoshal, 1987; Forsgren, 2008; Kogut & Zander, 1993), (b) the phenomena as well as the logic and objectives behind internal and external knowledge flows are different3 and (c) there are already different logics at play in the context of intra-MNC flows. In that sense, reviewing the intra-MNC knowledge flows literature is already an ambitious task. Second, we review research published only in top management and in international business journals. Top management journals apply strict quality selection criteria and provide good examples for future scholars. International business journals are important for our review as we specifically focus on MNCs. Third, we only review recent research, from 1996, when a number of highly influential studies on knowledge and knowledge processes were published (e.g., Grant, 1996; Spender, 1996; Spender & Grant, 1996; Szulanski, 1996), to 2009 inclusive. The rest of the paper is organized as follows. In the following section we describe the criteria used in selecting the journals and identifying the articles that comprise our review. We then present our analysis and discuss our findings in terms of key accomplishments and existing gaps. As our analysis and discussion have certain implications for knowledge development in the area of subsidiary knowledge flows, we propose a set of guidelines for future research. We conclude by summarizing the contributions of our study, discussing its limitations and addressing the issue of the managerial relevance of our analysis.

tional Dynamics, and Sloan Management Review. Besides Journal of International Business Studies, typically included among the top management journals, we also added the other main journals specializing in international business – International Business Review, International Studies of Management and Organization, Journal of International Management, Journal of World Business, and Management International Review. All these journals are widely recognized as major publication outlets in the field we examine. To identify the articles dealing with subsidiary knowledge flows in MNCs, we conducted computer-assisted (ProQuest, ABI/Inform, ScienceDirect, and OVID) searches for ‘‘knowledge’’ in conjunction with ‘‘subsidiary’’ and ‘‘knowledge’’ in conjunction with ‘‘MNC’’ in titles and abstracts of papers published from January 1996 to December 2009 inclusive. We then extended the search to also include the term ‘‘subunit’’ as a number of papers use this term instead of ‘‘subsidiary’’. Following our objective to study knowledge flows, we searched, both electronically and manually, all identified articles in order to select those that have used at least one of the following terms: ‘‘flows’’, ‘‘transfer’’, ‘‘sharing’’, ‘‘exchange’’, or ‘‘involvement’’. These are terms used in different articles or interchangeably in the same article to refer to knowledge flows. As a subsequent step, we conducted manual searches of articles in journals not available electronically over the entire search period. Finally, we checked the references of some of the latest articles on knowledge in MNCs to ensure our search was as complete as possible. The final result is 92 articles which deal with subsidiary knowledge flows in MNCs and which we analyze in the next sections. As summarized in Table 1, 62 articles are published in international business journals, with Management International Review, International Business Review, Journal of International Business Studies and Journal of International Management having published 10 or more articles each. The other 30 articles are published in management journals, with Academy of Management Journal, Organization Science and Strategic Management Journal having published 18 of the articles. A temporal analysis of the 92 articles suggests that research on subsidiary knowledge flows has been increasing steadily from 1996 to 2009. Publications steadily increased in the first five years but sharply increased in 2002, probably a result of the seminal article by Gupta and Govindarajan (2000) on subsidiary knowledge flows. After 2002, the publication trend within subsidiary knowledge flows in MNCs is slightly more volatile, but generally on the increase until 2009, with only minor temporal fluctuations. There are three papers which satisfied the technical selection criteria for inclusion in the review, but which we excluded from the

2. Journal selection and article identification

Table 1 List of journals and number of articles.

Our starting point in selecting the top-tier management journals was to look at the lists collated by Gomez-Mejia and Balkin (1992), Tahai and Meyer (1999), Werner (2002), and Podsakoff, MacKenzie, Bachrach, and Podsakoff (2005). These lists are comprehensive and have been consistently utilized and cited in subsequent reviews (e.g., Kirkman, Lowe, & Gibson, 2006; Tsui, Nifadkar, & Ou, 2007). Our initial list included all journals listed in the above rankings and contained 33 journals. Because we only review academic research, we excluded California Management Review, Harvard Business Review, Long Range Planning, Organiza2 Economics, innovation and sourcing literature have contributed a large number of studies examining various phenomena specifically related to the external knowledge flows of firms, including external knowledge flows of MNCs. 3 For instance, the very same attributes of a focal subsidiary (e.g. autonomy, attractiveness, etc.) can have very different meanings and weight depending on whether they are examined in the context of internal or external knowledge flows.

Journal Academy of Management Journal Academy of Management Review Administrative Science Quarterly International Business Review International Studies of Management and Organization Journal of International Business Studies Journal of International Management Journal of Management Journal of Management Studies Journal of Organizational Behavior Journal of World Business Management International Review Management Science Organization Science Strategic Management Journal Total

1996–2001

2002–2009

Total

3 1 1 1 1

3 3 0 12 2

6 4 1 13 3

1 0 0 0 0 0 3 0 0 2

11 10 2 2 1 9 12 2 6 4

12 10 2 2 1 9 15 2 6 6

13

79

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analysis because of their nature: an agenda for research on crossborder innovation in MNCs (Zander & Solvell, 2000), an introduction to a special issue in knowledge management in MNCs (Mudambi, 2002), and a broader review of International Management research (Werner, 2002). We also excluded four papers which use subsidiary knowledge flows to categorize subsidiary roles (Manea & Pearce, 2006; Manolopoulos, Papanastassiou, & Pearce, 2007; Papanastassiou & Pearce, 1997) and network types (Tseng, Yu, & Seetoo, 2002). Finally, we excluded the paper by Denrell, Arvidsson, and Zander (2004) because it examines the reliability of capability evaluations in MNC subsidiaries for effective knowledge management. 3. Analysis of the literature on subsidiary knowledge flows We organize the literature on subsidiary knowledge flows in two main clusters: studies that examine knowledge inflows and studies that focus on knowledge outflows. We group existing research as belonging to the literature on knowledge inflows as long as measures used suggest that MNC subsidiaries are the recipients of knowledge. When subsidiaries are the source of knowledge/technology/ organizational practices, this indicates knowledge outflows. Additionally, we group the articles in relation to four overall clusters of topics. Fig. 1 provides an illustrative overview of the topics and the number of studies that have been conducted in the period 1996 through 2009, with a more comprehensive summary of the review being presented in Appendix A. A key cluster in Fig. 1 is constituted by studies examining outcomes of knowledge flows. We place this group in the middle of Fig. 1 and illustrate that a substantial number of papers have treated outcomes as the dependent variable of knowledge flows. The other three clusters – knowledge characteristics, characteristics of actors involved in the intra-MNC knowledge flows and features of the relationships between the actors involved in the knowledge flows have investigated a number of variables related to explaining outcomes of knowledge flows. This is illustrated by the arrows in Fig. 1. A few important remarks need to be made at this point. First of all, several studies (e.g., Bjo¨rkman, Barner-Rasmussen, & Li, 2004;

Characteristics of Knowledge (47)

Holtbru¨gge & Berg, 2004; Minbaeva, Pedersen, Bjo¨rkman, Fey, & Park, 2003) refer to flows from and to ‘‘other units in the MNC’’ or from and to ‘‘the rest of the MNC’’ without specifying whether they include HQ, subsidiaries or both. In such cases we treat these studies as examining both horizontal (between subsidiaries) and vertical (from and to HQs) knowledge flows. Second, while some research solely focuses on knowledge inflows (e.g., Schulz, 2003) or on knowledge outflows (e.g., Schulz, 2001), other studies do not specify the direction of the flow. In the latter cases, we carefully examined the measures used to determine the direction of flows. Finally, when studies examined knowledge flows both within the MNC and with external actors in the host country (Almeida & Phene, 2004; Almeida et al., 2002; Holtbru¨gge & Berg, 2004; Yamin & Otto, 2004), we included only the examination of knowledge flows within MNCs. In the following four subsections we analyze each of the four clusters of themes dealing with subsidiary knowledge flows. 3.1. Outcomes of knowledge flows The literature has studied a variety of outcomes of knowledge flows. This variety can be reduced to three broad themes: the very occurrence of knowledge flows and the extent to which knowledge transfer has actually taken place, the effectiveness of the transfer and the impact of knowledge transfer on the subsidiary or on the entire MNC. Not surprisingly, the majority of the studies in this cluster have investigated whether knowledge transfer occurs and if so, to what extent this occurs within the subsidiary. This tendency is due to the traditional view of the subsidiary as knowledge recipient. Some studies focus solely on the actor at one end of the transfer process, either the source or the recipient. For instance, Sparkes and Miyake (2000), Wang, Tong, and Koh (2004), Vora and Kostova (2006), Lee and MacMillan (2008), and Yang, Mudambi, and Meyer (2008) examine vertical in- and outflows, while others look at horizontal in- and outflows (e.g., Cho & Lee, 2004; Luo, 2005; Phene, Madhok, & Liu, 2005; Tsai, 2002; Zhao & Luo, 2005). Other authors focus on the direction of flows and examine either inflows or outflows. For instance, Schulz (2001), Bjo¨rkman et al. (2004), Persson (2006), and Fey and Furu (2008) examine

Outcomes of Knowledge Flows (90)

Types of knowledge (8) Knowledge stock/ base (7)

Success/ effectiveness of knowledge flows (22)

Complexity and ambiguity (6) Knowledge distance/ linkage/ relevance (5) Changes to knowledge/ knowledge activity (5) Specialized knowledge (4)

Vertical and horizontal in- and outflows (9) Subsidiary learning/ innovation/ value creation (9) Vertical inflows (7) Horizontal in- and outflows (7) Subsidiary performance (7)

Sources of knowledge (2) Characteristics of Relationships between Actors (81) Qualities of networks/ relationships/ interaction (16) Dependence/ interdependence (12) Trust (8) Existence of tie/ networks (7) Cultural distance/ similarity (6) Shared vision (6) Commitment/ identification (4) Institutional distance (4) Integration/ embeddedness (3) Inter-unit competition (3) Teaching/ training programs (3) Control/ coordination/ socialization (3) Communication intensity/ frequency (2) Organizational distance (2) Product and process similarity (1) Geographical/ linguistic distance (1)

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Vertical in- and outflows (5) Vertical and horizontal outflows (5) MNC’s organizational structure, innovations and development (4) Vertical and horizontal inflows (3) Vertical outflows (2) Subsidiary evolutionary path/ centralization (2) Horizontal inflows (1) Horizontal outflows (1) Subsidiary isolation (1) Subsidiary role (1) Subsidiary tie effectiveness (1) Subsidiary’s bargaining power (1) Subsidiary’s HRM practices (1) Subsidiary’s development of critical capabilities (1)

Characteristics of Actors (95) Subsidiary level (77) Use/ involvement/ development/ richness of knowledge management (12) Absorptive capacity (9) Attractiveness (9) Motivation and willingness to learn (8) Subsidiary role/ mandate (7) Reward/ incentive/ compensation system (5) Ownership structure (5) Learning capacity/routine (4) Transfer/ subsidiary capabilities (4) Retentive/ receptive/disseminative capabilities (3) Subsidiary autonomy (3) Size & age (3) Subsidiary location (2) Subsidiary’s international orientation (1) Subsidiary’s social capital (1) Number of expatriates in subsidiary (1) MNC level (12) Organizational culture/context (4) International experience/ internationalization strategies (3) Intention/ willingness/ readiness/ capacity to learn/ transfer (2) Size (2) Absorptive capacity (1) Individual level (6) Behaviors/ attitudes/ competence/ cognitive styles/ career considerations (6)

Fig. 1. Overview of subsidiary knowledge flows in MNCs. Note: The numbers in brackets are the numbers of studies that examine the respective issue.

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knowledge outflows either only to HQ, or to both HQ and peer subsidiaries, while Kostova (1999), Kostova and Roth (2002), Szulanski, Cappetta, and Jensen (2004) focus on knowledge inflows either from only HQ or from HQ and peer subsidiaries. There is a relatively small number of studies that have examined subsidiary knowledge flows in relation to all four directions (knowledge inand outflows and both vertical and horizontal flows). Some of these are quantitative (Gupta & Govindarajan, 2000; Holtbru¨gge & Berg, 2004; Noorderhaven & Harzing, 2009), others qualitative (Hong & Nguyen, 2009) and yet others conceptual (Inkpen & Tsang, 2005; Welch & Welch, 2008). The initial trend of focusing on the occurrence of knowledge flows extends to the frequency of such flows (Johnston & Paladino, 2007; Zhao & Luo, 2005), the speed and scope of flows (Cho & Lee, 2004; Inkpen & Tsang, 2005; Luo, 2005; Madhok & Liu, 2006), and the importance of knowledge flows (Holtbru¨gge & Berg, 2004; Phene & Almeida, 2003). The second broad theme within the category of outcomes is the success and effectiveness of flows. Conceptualizations vary in terms of the definition of a successful transfer of knowledge. Questions such as whether the knowledge is implemented and internalized at the recipient end (Kostova, 1999; Kostova & Roth, 2002), speed of transfer (Hansen, 1999, 2002; Phene et al., 2005), costs of transfer (Hansen, Mors, & Løva˚s, 2005), perceived benefits and effectiveness of transfer (Ambos & Ambos, 2009; Ambos, Ambos, & Schlegelmilch, 2006; Bhagat, Kedia, Harveston, & Triandis, 2002; Schlegelmilch & Chini, 2005) and knowledge improvement/development or superiority of the subsidiary (Adenfelt & Lagerstro¨m, 2008; Almeida et al., 2002; Zhao & Anand, 2009) have been examined. The third broad theme refers to the impact of subsidiary knowledge flows on situations either in the subsidiary or the entire MNC. At the subsidiary level, issues include innovation (Almeida & Phene, 2004; Phene & Almeida, 2003, 2008; Tsai, 2001, 2002), bargaining power (Mudambi & Navarra, 2004), development of critical capabilities (Schmid & Schurig, 2003), HRM practices (Bjo¨rkman, Fey, & Park, 2007), role (Harzing & Noorderhaven, 2006b), isolation (Monteiro, Arvidsson, & Birkinshaw, 2008) and performance (Fang, Wade, Delios, & Beamish, 2007; Lee & MacMillan, 2008; Mahnke, Pedersen, & Venzin, 2005; Tsai, 2002). At the MNC level, themes are primarily innovation (Yamin & Otto, 2004) and technical development and performance (Holm & Sharma, 2006). Our review of the literature on the outcomes of subsidiary knowledge flows suggests that greater knowledge flows are generally treated as desirable within the MNC. Only one study (Monteiro et al., 2008) examines the phenomenon of subsidiary isolation, a less than desirable outcome of engagement in knowledge flows. Knowledge is an important source of power and prestige. For this reason, a focal subsidiary hoarding knowledge from other actors (be it individuals in peer subsidiaries, or at the HQ) can lead to this subsidiary’s increased prestige and/or bargaining power within the MNC network. While the literature over the last 14 years has accomplished a lot in explaining the various positive outcomes of subsidiary knowledge flows, it has not really examined whether knowledge flows can be harmful, or at least less desirable either to the focal subsidiary, or other units (i.e. HQ and peer subsidiaries) in the MNC. This remains an open research question. 3.2. Characteristics of knowledge Knowledge characteristics have mostly been examined in relation to knowledge inflows, mainly of the vertical kind. Interestingly, but in line with this observation, knowledge bases or knowledge repositories of the subsidiaries have been examined only in relation to knowledge outflows. We explain this peculiarity

with the fact that as subsidiaries have traditionally been treated as passive recipients of knowledge from HQ, the approach taken in many studies of knowledge base/repository tended to examine whether subsidiaries possess any stock of knowledge to be transferred to others within the MNC. Some studies go a bit further and examine whether the knowledge base or stock of subsidiaries are actually valuable to potential recipients within the MNC. The subsidiary knowledge flows literature has considered a number of knowledge characteristics, the tacit/explicit knowledge continuum being by far the most extensively examined (please refer to Fig. 1). This knowledge characteristic is best depicted as a continuum. At one end, tacit knowledge denotes that it is embedded in values, actions, practices and behaviors and is not readily accessible, available and transferable, while at the opposite end explicit knowledge is treated as codifiable in relatively easy to retrieve forms. Hansen (2002), Hansen et al. (2005), and Levin and Cross (2004) use measures developed initially in Hansen’s (1999) study where knowledge codifiability is measured by the extent to which the knowledge is fully documented, available in writing, and whether knowledge at the subsidiary end is primarily situated in individuals. Schulz (2001, 2003) on the other hand, measures codifiability in terms of the way knowledge is stored in the subsidiary, implying ease of retrieving knowledge by other actors in the subsidiary. We note that these two separate groups of studies agree on the fundamental notion of knowledge codifiability, i.e., how easy or difficult it is for others in the subsidiary to access knowledge. Despite this well accepted way of understanding the tacit/ explicit continuum, several studies have unnecessarily re-labeled it in various ways. Such ‘‘new’’ terms are articulability (Haka˚nson & Nobel, 2000), demonstrability (Sunaoshi, Kotabe, & Murray, 2005), and teachability (Riusala & Smale, 2007) of knowledge – all of them referring to the extent knowledge can be transformed into an explicit form to be articulated, demonstrated or taught to recipients. We note with no surprise that such terms and constructs have not been taken up in subsequent research and have remained empirically unexamined. We argue that instead of re-labeling the tacit/explicit continuum, efforts are better invested into examining it as a moderator when studying characteristics of actors involved in knowledge flows or relationships between these actors. The studies by Hansen (1999) and Levin and Cross (2004) are examples of promising directions for research in this respect. Another related aspect of knowledge is the knowledge distance/ knowledge link characteristic. This examines the extent to which the subsidiary knowledge stock is related, relevant and/or linked to the knowledge stock of the HQ and/or peer subsidiaries. The literature has also taken issue with changes to subsidiaries’ stock of knowledge. This particular characteristic stems from the recognition that knowledge that has been through some processes of exposure (Schulz, 2001), adaptation (Jensen & Szulanski, 2004), development (Gnyawali, Singal, & Mu, 2009), and situated in a certain practice or context (Gnyawali et al., 2009) generates novelty that is potentially considered valuable/sought after by other units in the MNC, and is thus likely to increase intra-MNC knowledge flows. Research has also examined how different types of knowledge can influence intra-MNC knowledge flows. While some studies have followed Gupta and Govindarajan’s (2000) all-inclusive notion of organizational knowledge (e.g., Ambos et al., 2006; Bjo¨rkman et al., 2004; Harzing & Noorderhaven, 2006a), others have specifically focused on the transfer of technological knowledge (e.g., Grosse, 1996; Haka˚nson & Nobel, 2000; Phene et al., 2005; Sunaoshi et al., 2005) or marketing knowledge (Holm & Sharma, 2006; Schlegelmilch & Chini, 2003). The specificity of the type of knowledge or practice has been related to either the focal subsidiary, the MNC or the host country.

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Scholars use or develop different typologies of knowledge. For instance, Bhagat et al. (2002) distinguish between human, structured and social knowledge, while Lee and MacMillan (2008) refer to procedural, coordinative and managerial knowledge and Hong and Nguyen (2009) categorize types of knowledge as technical, systemic, and strategic. Often the distinction between knowledge types and knowledge characteristics is blurred. Some authors refer to types of knowledge when they in fact discuss characteristics of knowledge. For instance, Almeida et al. (2002) refer to ‘‘types’’, not dimensions, of knowledge to distinguish between codified and experience-based tacit knowledge. Yet another group of authors examine transfer of organizational practices (Kostova, 1999; Kostova & Roth, 2002), organizational learning systems (Hong, Easterby-Smith, & Snell, 2006) and human resource practices (Sparkes & Miyake, 2000) and often use these terms interchangeably with knowledge transfer. These different treatments, classifications and interpretations may be helpful, but when authors examine the transfer of specific knowledge types, these types should be well defined and the focus on particular type(s) of knowledge needs to be well justified. We also propose that future research is more careful in defining types and dimensions and does not use the terms interchangeably. In general, the literature has provided sufficient support for the fact that knowledge characteristics influence knowledge flows in one way or another. We argue that in order to progress, research should move beyond examining the influence of knowledge characteristics alone on knowledge flows, but should rather examine knowledge characteristics in conjunction with characteristics of actors or of the relationships between them. There has been an identifiable, albeit relatively weak, trend in the literature suggesting that such combinations can provide meaningful insights into understanding subsidiary knowledge flows. A few studies – Hansen (1999), Levin and Cross (2004), Szulanski et al. (2004), and Hansen et al. (2005) – have examined such combinations and we see potential in pursuing this line of inquiry. Szulanski et al. (2004) examined and found support for the idea that causal ambiguity has a moderating effect on perceived trustworthiness (a characteristic of actors) and accuracy of knowledge transfer. Hansen (1999) examined tie strength and its influence on the transfer of codified and noncodified knowledge and found that weak ties are important in the transfer of codified knowledge while strong ties positively influence the transfer of non-codified knowledge. He argued that weaker ties are characterized by less frequent two-way interactions and the transfer parties ‘‘have not established a relationship-specific heuristic to communicate knowledge between them’’ (p. 88), making the transfer of codified knowledge relatively easier and of non-codified knowledge more difficult. In contrast, strong ties allow for a two-way interaction between the source and the recipient, motivate the source to invest more resources into articulating complex knowledge and facilitate the mutual understanding between the transfer parties and all this facilitates the transfer of more complex/non-codified knowledge. Levin and Cross (2004) concluded that the transfer of highly tacit knowledge is supported when competence-based trust between sender and receiver exists, and Hansen et al. (2005) found support for the idea that tacitness of knowledge adversely modifies transfer network tie strength and ultimately increases knowledge transfer costs. While some studies have incorporated knowledge characteristics, especially tacitness or codifiability of knowledge, as control variables (e.g., Bjo¨rkman et al., 2004; Hansen, 2002; Monteiro et al., 2008; Persson, 2006), we see great potential in examining how different characteristics of knowledge are transferred or treated in relation to different characteristics of actors and various kinds of relationships between transfer actors.

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3.3. Characteristics of actors As shown in Fig. 1, actors’ characteristics are the most examined theme in research on subsidiary knowledge flows. Among the different actors engaged in knowledge flows (i.e. the subsidiary, the MNC, individuals within the subsidiary/MNC), subsidiary characteristics are by far the most extensively studied. This seems to be at the expense of individual level studies and multi-level studies. Subsidiary characteristics that have been extensively examined include structural characteristics (autonomy, size, age, ownership structure), abilities, motivations, and practices. The construct of absorptive capacity presents a notable case in this cluster. Nine articles deal explicitly with the issue of absorptive capacity. What is interesting is the fact that while all nine studies adopt the same definition and conceptualization of absorptive capacity, they measure it in nine different ways. Absorptive capacity is the ability of a firm to ‘‘recognize the value of new information, assimilate it, and apply it to commercial ends’’ (Cohen & Levinthal, 1990, p. 128). This ability is critical to the innovative capabilities of the firm. Szulanski’s (1996) measurement of absorptive capacity includes the existence of a common language and a common vision to learn and benefit from the transfer, managerial competence to assimilate the information, and persons in the firm to exploit the new information. Subsequent studies measure absorptive capacity as the R&D intensity of a firm (R&D expenditure divided by sales) (Tsai, 2001), a firm’s mode of entry into the host country and the proportion of local nationals in the top management teams (Gupta & Govindarajan, 2000), and employees’ ability and motivation to assimilate knowledge (Minbaeva et al., 2003; Riusala & Smale, 2007). Mahnke et al. (2005) regard the absorptive capacity of a subsidiary as learning tools and infrastructure available to enhance the capacity of employees to create and share knowledge. Minbaeva et al. (2003) and Minbaeva (2007) examine the absorptive capacity of a subsidiary as the collective employees’ ability, motivation, and competencies. Zhao and Anand (2009) follow Szulanski (1996) in measuring members’ relevant prior knowledge, Szulanski (1996) measures, however, are far more comprehensive. We are unsure as to why authors opt for different measures, and emphasize that this is not an appropriate way to accumulate valuable knowledge on subsidiary knowledge flows in general, and on absorptive capacity in particular. Szulanski (1996) measures of absorptive capacity are solid and published earlier than many others. There is no need to invent new measures in every new study that examines this construct, particularly when these new measures do not reveal additional insights into the phenomenon. Other types of capacity, abilities or capabilities of a subsidiary have also been examined in relation to subsidiary knowledge flows. They include learning capacity (Hong et al., 2006; Pe´rezNordtvedt, Kedia, Datta, & Rasheed, 2008; Wang et al., 2004), retentive capacity (Lazarova & Tarique, 2005; Szulanski, 1996), disseminative capacity (Minbaeva, 2007), transfer capabilities (Schlegelmilch & Chini, 2003), perceived capabilities (Holtbru¨gge & Berg, 2004; Noorderhaven & Harzing, 2009) and rated capabilities (Monteiro et al., 2008). Some characteristics that are examined in terms of the ability to transfer or accept knowledge seem to overlap (disseminative capacity and transfer capabilities, learning capacity and use of knowledge management systems or infrastructure). This problem is likely to constrain a more systematic understanding of knowledge flows across units and borders. Motivational challenges to knowledge flows are one of the earliest characteristics of actors to be examined, starting with seminal articles by Szulanski (1996) and Gupta and Govindarajan (2000). As with the studies examining absorptive capacity, papers dealing with the motivation of the subsidiary to transfer or receive knowledge have measured motivation in different ways. Szulanski

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(1996) and Jensen and Szulanski (2004) measure motivational disposition to receive knowledge from others by the perceived benefits, understanding and the feasibility of receiving the knowledge being transferred. Gupta and Govindarajan (2000), on the other hand, measured the motivation of subsidiaries to accept knowledge from others using as yardsticks the focus of top management teams on incentives, the relative economic level of the host country and the extent to which there was HQ-subsidiary decentralization. Subsidiary motivation to transfer knowledge is not found to influence intra-MNC knowledge flows in Gupta and Govindarajan (2000) study, while it shows mixed results in the paper by Jensen and Szulanski (2004), both as a main and a moderating variable. The different measures of subsidiary motivation in relation to the transfer or reception of knowledge contribute to the mixed results regarding how motivation influences knowledge flows. As there is a lot to be learned from treating motivation at subsidiary level, the challenge remains as to how to accurately measure this characteristic. The literature’s over-emphasis on single-level studies, with a primary focus solely on the subsidiary level, seems to contribute to the inconclusive findings on the influence of motivation on subsidiary knowledge flows. We return to this point in the section that addresses the issue of levels of analysis. Conducting more research that contributes to the micro-foundations of the MNC in general and of subsidiary knowledge flows in particular needs attention. Another characteristic that has attracted substantial attention is the attractiveness of the subsidiary as a source of knowledge. The knowledge outflows literature has associated attractiveness of subsidiaries with their trustworthiness (Levin & Cross, 2004; Szulanski et al., 2004; Tsai & Ghoshal, 1998), level of international experience (Grosse, 1996), perceived reliability (Szulanski, 1996), and innovativeness (Haka˚nson & Nobel, 2001; Mu, Gnyawali, & Hatfield, 2007). Characteristics such as intention or willingness to engage in knowledge flows, capacity to transfer and absorptive capacity have been addressed not only as subsidiary characteristics, but also as characteristics of the MNC or the HQ, depending on who is the source and recipient in the transfer process. In the existing literature, conceptual and empirical studies of knowledge flows in subsidiaries remain under-developed (and indeed largely absent) in terms of analyzing phenomena at the individual level. We do not know much about how individual-level factors influence knowledge flows in teams or/and MNCs. Along with our earlier observation, research that can address this under-development has the potential to enrich the so far slim line of enquiry on the micro-foundations of the MNC. 3.4. Characteristics of relationships between actors A considerable portion of the subsidiary knowledge flows literature has viewed knowledge flows by focusing on the characteristics of the relationships between the actors involved in the transfer of knowledge and how these relationships influence the transfer process. Studies published in the 1990s examined mainly the level of subsidiary dependence on the HQ and the level of interdependence with peer subsidiaries and how this (inter)dependence influences knowledge flows. Over time, this focus gradually shifted to examining network relations and their characteristics. This trend probably stems from the conceptualization of the MNC as a differentiated network (Nohria & Ghoshal, 1997), and the utilization of network theory to explain MNC related phenomena. The network-related studies themselves shifted their emphasis from examining merely the existence of networks within the MNC (e.g., Schmid & Schurig, 2003; Tsai & Ghoshal, 1998) to the (generally positive) effects of size, length, strength and intensity of the networks on knowledge

flows (e.g., Gnyawali et al., 2009; Hansen et al., 2005; Minbaeva, 2007). As an increasing number of studies employed social capital theory (Nahapiet & Ghoshal, 1998) to examine knowledge flows, the literature extended from primarily investigating structural elements of networks (e.g., size, length, position and intensity) to also include relational elements (e.g., trust, norms, expectations, commitment to, and identification with other actors), and cognitive elements (e.g., shared vision, paradigms, goals, mindset, practices). Trust has received significant attention in subsidiary knowledge flows research and has been examined in HQsubsidiary and within subsidiary interpersonal relations. Although trust is argued to positively encourage knowledge flows both conceptually (Inkpen & Tsang, 2005; Kostova, 1999) and qualitatively (Buckley, Clegg, & Tan, 2006; Engelhard & Na¨gele, 2003), quantitative evidence on the role of trust has largely been mixed and contradictory (Kostova & Roth, 2002; Li, 2005; Riusala & Smale, 2007). The cognitive element shows a positive impact on knowledge flows conceptually (Inkpen & Tsang, 2005), qualitatively (Buckley et al., 2006) and quantitatively (Fey & Furu, 2008; Li, 2005; Tsai & Ghoshal, 1998; Williams, 2009). We note that not many studies have analyzed cognition, at least not in comparison with the structural and relational dimensions of social capital. Also, when a particular dimension of social capital is examined in the subsidiary knowledge flows literature, it is typically considered in conjunction with other variables, but not those belonging to social capital. In other words, the vast majority of papers which deal with trust in relation to knowledge flows integrate other relational variables, but do not consider structural and cognition dimensions. Another characteristic of the relationships between actors engaged in knowledge flows which has attracted research attention is the extent of distance or similarity between actors in the transfer process. Institutional, organizational, and cultural distance being the three most examined aspects. Kogut and Singh’s (1988) cultural distance index has been used to measure institutional distance (Jensen & Szulanski, 2004) and cultural distance (Ambos et al., 2006). Most of the studies that take issue with distance related factors are either conceptual or quantitative and their findings are mixed and inconclusive. Jensen and Szulanski (2004) found that institutional distance is positively associated with recipients’ motivation to transfer knowledge, but negatively associated with stickiness of knowledge transfer. Ambos et al. (2006) found no support for organizational and cultural distance to the perceived benefits of vertical knowledge outflows. More recent studies examine the use of various mechanisms, such as control, coordination, socialization, HRM training programs, and knowledge management infrastructure to facilitate knowledge flows. Some studies examine the richness of the transfer channels (Gupta & Govindarajan, 2000; Zhao & Luo, 2005), different types of transfer mechanisms (Ambos & Ambos, 2009; Johnston & Paladino, 2007) and knowledge management infrastructures (Kiessling, Richey, Meng, & Dabic, 2009; Zellmer-Bruhn & Gibson, 2006). We observe a shift in emphasis in the literature in the sense of moving away from examining the use of technology and ‘‘hard’’ knowledge management infrastructure to more informal mechanisms of knowledge flows such as social networks and socialization. What the literature has yet to explain in detail is how the ‘‘hard’’ and the ‘‘soft’’ mechanisms interact to influence knowledge flows. Along with the potential to provide in-depth understanding of the phenomenon, this line of research would have clear useful practical implications bearing in mind the massive cost of building integrated technology-based infrastructures and the uncertain benefits from investing in social capital and social networks. In sum, and in more general terms, our review reveals that characteristics of relationships between actors are indeed impor-

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tant in explaining subsidiary knowledge flows. These are probably more important than the consideration of actors’ characteristics. Relational characteristics, arguably associated with individuals, should continue to be considered at the subsidiary level and also at multiple levels of analysis. Such an examination has a lot of potential to provide a more nuanced understanding of subsidiary behaviors and knowledge flows. While we do not underestimate the importance of structural and cognitive dimensions, it is relational capital that facilitates social exchange in general and cooperative interaction in particular (Nahapiet & Ghoshal, 1998). Our review of the literature on subsidiary knowledge flows was organized according to four key clusters of themes. We have delineated what has been achieved to date in terms of examining outcome of knowledge flows, knowledge characteristics, characteristics of actors, and characteristics of relationships between actors engaged in knowledge flows. We have identified existing gaps, explained why these gaps persist and provided various explanations of differing, and often contrary findings. On this basis we now turn to developing a set of guidelines for future research. 4. Across the four clusters of themes: status quo and guidelines for future research When presenting and discussing the results of our review of the existing literature on subsidiary knowledge flows, we took the opportunity to outline a number of necessary directions and promising possibilities for future research related to the four main clusters of themes. We argued which issues we think future research should engage with, which ones it can safely avoid and why. In the following sections, we outline guidelines for future research which extend across the four categories that we have discussed so far, and formulate additional possible research directions. In doing this, we address the issue of research topics and their theoretical underpinnings, methods, levels of analysis, and geographical context. 4.1. Research topics and theoretical underpinnings Subsidiary knowledge inflows have received considerably more research attention than knowledge outflows. This trend prevails in all four clusters. The idea of subsidiaries as sources of knowledge for the entire MNC is still under-researched and less understood. Subsidiaries have traditionally been perceived as receivers of knowledge and theorized as inferior to HQ on several dimensions, including questioning the stock and value of the knowledge they possess. Only relatively recently have subsidiaries begun to be regarded as contributors of valuable knowledge for HQ and peer subsidiaries and as powerful players in the MNC network. We recommend that future research should examine outcomes of subsidiary knowledge flows beyond categorizations and typologies of subsidiaries and beyond treating the very occurrence of knowledge flows as the outcome of knowledge flows. Instead, the literature needs insights into how peer subsidiaries and HQ can benefit from subsidiary knowledge outflows, vertical as well as horizontal. It is striking and far from satisfying that many of the studies we have reviewed treat vertical and horizontal flows as if they were the same. To emphasize our point, six out of the 14 conceptual papers and 20 out of the 75 empirical papers do not distinguish between vertical and horizontal flows. Authors do not even acknowledge that flows can take place in different directions. This prevents researchers from accumulating findings that can assist in understanding the nature of and the mechanisms behind the different directions of flows and, consequently, how these flows can be managed. We advocate that this practice be discontinued and suggest that authors be specific and explicit in regard to

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whether they examine in- or outflows and vertical or horizontal flows. While these different directions may generate significant advantages for the focal subsidiary as well as for the MNC, they also differ significantly in their nature and purpose (Schulz, 2001). The examination of some categories in relation to studying subsidiary flows seems to have reached quite a mature stage of development. For instance, there is a limit to how much more insightful research on knowledge characteristics can be, no matter how ‘‘creative’’ scholars are in labeling and re-labeling the continua on which these characteristics are positioned. Instead, we suggest that more can be learned by addressing the issue of knowledge characteristics in conjunction with other categories (e.g., actors’ characteristics, characteristics of relationships between actors in the transfer process) and how such combinations influence knowledge flows. Treating knowledge characteristics as moderators of the relationships between some of the other three categories is a fruitful research possibility. From the review, we know that characteristics of actors have been examined extensively. We emphasized that such focus, while contributing to shedding light on subsidiary knowledge flows, has been at the cost of individual level and multi-level studies – a conclusion we drew also in relation to studying relationships between actors engaged in knowledge flows. In relation to examining outcomes of knowledge flows, we noted the overly positive tone of studies and a dominant focus on the advantages of these flows and the almost complete lack of a critical interrogation of possible drawbacks and disadvantages of the knowledge flows for some of the actors involved. On the basis of these observations, we advance the following: Guideline #1: Future studies should focus increasingly on subsidiary knowledge outflows, both horizontal and vertical as compared to inflows. Examinations, both theoretical and empirical, should distinguish between the directions of flows and should clearly specify the direction of the flows under investigation. We advocate against re-labeling well established concepts as a masked effort to advance research and suggest that knowledge characteristics should be studied in conjunction with some of the other clusters rather than being the sole focus of examination. In our sample of articles only 17 articles, (18%) are conceptual. Excluding an introduction to a special issue (Mudambi, 2002), a literature review paper (Werner, 2002) and a research agenda (Zander & Solvell, 2000) leaves us with 14 papers published in a period of 14 years – somewhat humble progress in terms of theory development. Developing theories and theoretical models with the subsidiary at the center of the attention is challenging because causality (or relationships), correlations and contingencies are far from clear-cut. Nevertheless, as observed by Sutton and Staw (1995, p. 380), without constant pressure for theory building, even fields that are by nature applied would surely slide to empiricism. We see potential in developing mid-range theories on subsidiary knowledge flows because these theories are moderately abstract, have limited scope and invite propositions/hypotheses. It is puzzling that only one of the 14 conceptual studies, Kostova (1999), has been (partially) tested empirically later on by Kostova and Roth (2002). Why is it that no more conceptual papers have stimulated empirical testing? We speculate that because some conceptual papers propose constructs and relationships at multiple levels of analysis (e.g., Bhagat et al., 2002; Lazarova & Tarique, 2005), testing them empirically is demanding and complex. There are inherent difficulties in measuring individual level constructs, such as cognitive style, attitudes, personal career considerations, etc. – a feature that explains the general lack of micro-level research in MNCs. An additional reason behind the lack of empirical papers that test proposed conceptual models could be

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the resistance of many journals to accept pure testing papers as valuable contributions. There is considerable variation in the theoretical foundations of the literature on subsidiary knowledge flows. Not surprisingly, the theory most commonly utilized so far has been knowledge-based theory. Organizational learning and (social) network theories also have a prominent position in the existing literature. Studies have looked at knowledge flows by viewing the MNC as a (differentiated) network, a concept first proposed by Nohria and Ghoshal (1997). It is however worth noticing that several studies have interpreted this term differently, from differentiated activities within the MNC network (the original idea behind the concept) to the very network itself being seen as differentiated. Relational dimensions of the social capital theory and social network concepts, first utilized by Tsai and Ghoshal (1998) to examine intra-MNC knowledge transfer, have only recently been actively integrated into the literature on subsidiary knowledge flows, and now seem to be rather dominant. The resource-based view, (co-) evolutionary theory of the MNC and institutional theory also constitute a solid theoretical foundation, though not a very extensively utilized one. Organizational behavior based concepts (e.g., intra-firm politics, organizational identification, organizational communication), HRM based concepts (e.g., human capital, top management teams, expatriation) and culture and language have also received recent attention. Borrowing theories from closely related as well as from more distant disciplines and bodies of knowledge can be fruitful in advancing the management and international business literature on subsidiary knowledge flows. The examination of the MNC has historically adopted insights from industrial organization theory, transaction cost theory, evolutionary theory of the firm, contingency theory, business network theory and institutional theory, to mention but a few. They, and several others, have provided powerful lenses to examine MNC related processes and phenomena. While some of these theories will most probably continue to provide useful theoretical platforms for analyzing subsidiary knowledge flows, theories from other distant disciplines (e.g., political science, psychology, (economic) geography) also have potential to enter the theoretical terrain in the coming years. For instance, political science can provide logic and vocabulary fertile in explaining power relationships, voice, attention seeking, rent seeking and coalitions in the MNC and their relationships with knowledge flows. If we are to take individuals in the MNC seriously, and to properly understand and examine individual motivations, intentions and actual behavior associated with knowledge flows, it is difficult not to utilize psychology theories. Bearing in mind the persistent and increasing interest in various distance constructs, integrating knowledge from (economic) geography is a sensible way forward. Carefully integrating insights from these disciplines can both extend and deepen what we already know about subsidiary knowledge flows. In sum, we propose the following: Guideline #2: In order not to slide into pure empiricism, research on subsidiary knowledge flows is in need of more theoretical (and particularly mid-range theoretical) examinations of the phenomenon. Research will benefit from utilizing theories that have so far not often been used to examine knowledge flows (e.g., the organizational behavior and HRM fields can be explored in more depth in relation to knowledge flows) as well as more distant bodies of knowledge, such as political science, psychology, and economic geography.

4.2. Methods, levels of analysis and geographical context By far the majority of the papers in our review are empirical. As with international business literature in general, the literature on

subsidiary knowledge flows has extensively applied quantitative research methods. More than 80% of the studies in our sample are quantitative, adopting various units of analysis: transfers or dyads (Ambos et al., 2006; Jensen & Szulanski, 2004; Szulanski, 1996; Szulanski et al., 2004), teams or project members within subsidiaries (e.g., Hansen et al., 2005; Zellmer-Bruhn & Gibson, 2006) or patent citations (Almeida & Phene, 2004; Frost & Zhou, 2005; Phene et al., 2005; Yamin & Otto, 2004). Of the other empirical papers in our review, one is based on mathematical modelling, one on mixed methods, and 15% utilize qualitative methods, opting primarily for case studies. The management journals are particularly focused on quantitative examinations of subsidiary knowledge flows, with only Journal of Management Studies having published qualitative papers. International business journals prove to be more receptive towards qualitative studies on the topic, with Journal of World Business taking the lead in this area. We argue that the literature is disadvantaged by not adopting more extensively qualitative methods to reach a deeper and more nuanced examination and understanding of subsidiary knowledge flows. If we engage with new, more process-oriented research questions, this is likely to naturally lead us to utilize the power of qualitative methods. For instance, studying the impact that these flows have on different variables at the level of subsidiary may best be studied using qualitative accounts. Qualitative studies can potentially produce richly and relevantly detailed descriptions and particularized interpretations and explanations of actors involved in the subsidiary knowledge flows by taking these actors’ (insiders’) viewpoints and understandings seriously rather than treating them as objects of our examinations. Employing qualitative methods can also generate ideographic, context-sensitive knowledge of particular practices, events and processes that are intertwined in subsidiary knowledge flows. On the other hand, if the practice of conducting primarily quantitative studies continues, it is questionable how much more in-depth knowledge we can generate about the phenomenon. As a growing stream of research adopts a more psychological perspective on the MNC, conceptualizing it and empirically examining it in a way that emphasizes the role of individuals, the field can only benefit from deeper and more contextualized qualitative accounts of subsidiary knowledge flows in the MNC. In sum, we advance the following: Guideline #3: The literature on subsidiary knowledge flows is imbalanced in the sense that there is an over-representation of quantitative studies and a clear under-representation of qualitative accounts. Such an imbalance impedes the continuous accumulation of knowledge about the phenomenon. Utilizing qualitative approaches and techniques can potentially produce much needed rich and detailed descriptions and particularized interpretations of subsidiary knowledge flows and generate ideographic, context-sensitive knowledge of particular practices, events and processes that are involved in these flows. Almost all the studies in our sample are conducted at a single level of analysis, either individual (Riusala & Smale, 2007), team (Zellmer-Bruhn & Gibson, 2006), or (mostly) subsidiary level. Notable exceptions are Mudambi and Navarra (2004) who utilize firm and industry level data, Hansen et al. (2005) who analyze within-team, inter-subsidiary and transfer networks data and Zhao and Anand (2009) who examine and distinguish between individual and collective absorptive capacity and teaching for the purpose of knowledge transfer. We recommend that more studies in the future are conducted at multiple levels of analysis. Here is why. The significance of the multi-level examination of concepts, processes and phenomena associated with subsidiary knowledge flows is theoretical, methodological and practical. The subsidiary is a salient entity that, on the one hand, is a group of

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individuals and on the other hand, is nested in the overall organizational structure of the MNC. While the boundaries of these levels might be fluid (e.g., an individual who is a member of the focal subsidiary is also a member of the respective MNE), the nesting assumption is theoretically and analytically valid, and this positions subsidiary-related phenomena as particularly fertile for multi-level examination. Investigating the relationship between constructs at different levels captures much of the nested complexity of knowledge flows, enriching existing theories and providing the opportunity for theory-building. The field is in need of more studies which investigate how knowledge flows among individuals can affect subsidiary-level and MNC-level knowledge flows. For instance, a fine-grained assessment of organizational members is likely to trigger new and more nuanced insights about knowledge flows in subsidiaries and in MNCs. Similarly, in order to better understand the nature, intensity and quality of subsidiary knowledge flows, we need to assess the surrounding contexts (industry, market, technology, culture, institutions) in which these flows are embedded. It is also worth considering using individual level data as moderators when examining relationships between variables at higher levels of analysis. Methodologically, multi-level research on knowledge flows provides the opportunity for crosslevel – i.e., bottom-up as well as top-down – examination of links and interactions, increasing internal validity and avoiding ecological or atomistic fallacy. Finally, managers are in need of guidelines and advice as to the mechanisms (and combinations thereof) with which they can work to steer the direction and intensity of knowledge flows depending on what they want to achieve. In sum, we suggest the following: Guideline #4: When appropriate, engaging in multi-level investigation of subsidiary knowledge flows has the potential to enrich and advance the knowledge in the area because it can capture much of the nested complexity of the phenomenon and reveal links and relationships that otherwise remain hidden and black-boxed. Bottom-up transitions (explanations of how individual level variables are linked to subsidiary knowledge flows) and top-down links (examination of how MNC or other higher-level variables influence subsidiary knowledge flows) can provide the much needed nuances, depth and process orientation in understanding subsidiary knowledge flows. More than a quarter of the empirical studies in our review (20 out of the 75) focus on a single country and more than half (60%) focus on China or the USA. Some, but not many, studies utilize a two-country context – Brazil and Mexico (Sparkes & Miyake, 2000), USA and Denmark (Schulz, 2001, 2003), and Finland and China (Bjo¨rkman et al., 2004; Fey & Furu, 2008). Only a few papers consider subsidiaries located in several countries within the same region. For instance, Grosse (1996) examines MNC subsidiaries in Latin America, Foss and Pedersen’s (2002) study is conducted on the basis of subsidiaries in seven West European countries and Kostova and Roth (2002) consider 10 countries in Europe, North America and Asia. In line with these latter studies, we recommend examining subsidiary knowledge flows in a diversified geographical context. While China has been a popular focus and context of research in both management and international business, expanding the geographical coverage of the subsidiary knowledge flows literature will provide further examinations of variables and relationships that have been subject to inconsistent findings and conclusions (for example absorptive capacity and institutional distance). Scholars typically examine subsidiaries in a single or very few MNCs (e.g., Hansen, 2002; Sunaoshi et al., 2005; Tsai, 2001, 2002; Tsai & Ghoshal, 1998). We recommend that future studies shift away from such an approach and instead focus on subsidiaries of several MNCs. It is also worth studying subsidiaries located in one

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or a few contextually similar host countries. Additionally, we suggest a move away from examining subsidiaries located in the country of origin of the MNC (usually a Western developed country). While the latter may lead to greater response rates because of typically relatively easier negotiations and access, we call for research on subsidiaries located in one or a few contextually similar host countries in order to more accurately explicate the role of factors in relation to subsidiary knowledge flows. Studying subsidiaries of a single MNC or subsidiaries of MNCs located in a chosen home country provides limited insights. Careful consideration needs to be given to the settings in which knowledge flows take place. This requires investing efforts in understanding and explicating contextual conditions, both theoretically and empirically. Some factors may prove much more important in one context than others (Michailova, 2011). For instance, the fact that studies on trust and knowledge flows have documented inconclusive findings may be due to the lack of careful contextualization. Networks and trust-based relationships are deeply embedded and not easy to transfer across different contexts. We believe that taking context seriously and integrating it into studying subsidiary knowledge flows explicitly can help in explaining (or even reconciling) mixed findings from previous research. Hence, we suggest the following: Guideline #5: Situational settings in which knowledge flows take place need to be considered carefully. This requires investing efforts in understanding and explicating contextual conditions, theoretically as well as empirically. Research should move away from examining knowledge flows in subsidiaries of single MNCs. Instead, the focus should be on subsidiaries of several MNCs, or on several subsidiaries located in one or a few contextually similar host countries. 5. Concluding remarks and managerial relevance The objective of the present paper was to review and bring some much-needed clarity to the literature on subsidiary knowledge flows, a literature which has been growing steadily over the last decade and a half. We have organized the studies published in the fields of management and international business in the period 1996–2009 along a few important dimensions. We classified the literature into four clusters: studies which examine outcomes of knowledge flows, studies with a focus on knowledge characteristics, those with an emphasis on the actors involved in knowledge flows, and finally, papers which concentrate on relationships between these actors. In parallel to this, we differentiated between knowledge inflows and outflows and between vertical and horizontal flows. Such an analysis allowed us to identify and discuss current accomplishments, existing gaps, discrepancies and outline future research directions. We consider this to be a relevant and timely contribution to the intra-MNC knowledge flows literature. Our study is not exempt from limitations. These relate to the criteria we used to discipline and limit the scope of our review. We only reviewed literature published in top management journals and in international business journals. While these are appropriate choices for reasons explained earlier, we did not cover studies published in other journals which have engaged seriously with knowledge flows in MNCs. For instance, HRM journals and information systems journals have published on knowledge flows and some papers there have used the MNC as a research context. Another important limitation is the fact that we restricted ourselves to analyzing only the literature on knowledge flows within MNCs. We realize that studies on subsidiary knowledge flows to and from external actors (e.g., firms, customers, suppliers, governmental agencies, and research institutions in the host and

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home countries) can be a valuable addition to our work. Finally, while we argue that covering a period of 14 years is a substantial basis on which we draw our conclusions, we do acknowledge the fact that studies have been published prior to 1996, the starting year of our review. Notwithstanding these limitations we believe that our work provides a much needed classification of a well established, rich and rapidly growing literature that will facilitate the accumulation of further knowledge on subsidiary knowledge flows. The guidelines we have developed clearly outline possible fruitful directions for future research. 5.1. Managerial relevance Our analysis and findings have several important managerial implications. Compared to domestic companies, MNCs possess unique advantages in the way they source, generate, transfer and utilize knowledge. Subsidiaries are distinctively positioned in that respect as they are dually embedded – on the one hand they are part of the intra-MNC network and on the other hand they are embedded in the MNC host environments. Understanding in detail how the knowledge possessed by subsidiaries flows within the MNC is of the utmost practical importance. If managers at the HQ and at the subsidiary level are well informed about the processes of knowledge transfer, they will be able to design and implement mechanisms that can assist them in managing these processes, depending on whether they want a focal subsidiary’s knowledge to be transferred in a vertical or horizontal direction – or both – and whether the transfer should be an in- or outflow. As we have analyzed, while these four processes (horizontal in- and outflows and vertical in- and outflows) may appear to be the same or similar at first glance, they are actually quite distinct in nature and therefore require different sets of governance mechanisms. Knowledge flows are highly complex and our review provides a path of deconstructing this complexity into practically manageable components. Managers at HQ and subsidiaries may want to focus their attention on some of the four clusters we have identified and give some others less priority. For instance, if familiar with the ways in which characteristics of knowledge are likely to influence the flows of knowledge, managers may make better informed decisions about which stocks of knowledge to transfer, in which direction and how. Being knowledgeable about the specific

characteristics of actors involved in a particular knowledge transfer and about the relationships between the sender and the recipient, too, is of the utmost importance if valid knowledge is to be transferred between these actors. Finally, the outcomes of knowledge flows are in practice not always as intended by management and being well aware of the multiple possible outcomes and also of what makes certain outcomes more likely has clear managerial relevance and tangible practical consequences. Many of the studies we have reviewed have investigated possible barriers to intra-MNC knowledge flows as well as factors that are likely to facilitate such flows. Managers have an array of mechanisms, harder (e.g., structural, coordination, infrastructure, etc.) as well as softer (trust, socialization, motivation, etc.) and numerous combinations between them which they can employ to influence the knowledge flows in order to achieve the results they desire. The categorization we have developed provides managers with systematized information on what influences intra-MNC knowledge flows and how this can occur. The way we have reviewed and clustered our chosen array of studies offers HQ and subsidiary managers structured knowledge in terms of the types and dimensions of knowledge they may (or may not) want to transfer to their colleagues in peer subsidiaries and/or HQ. Such knowledge includes who is involved in the flows and how they relate to other actors in the MNC, as well as leading to a more in-depth understanding of the impact and effect knowledge flows can have on the teams they belong to, their subsidiaries or the entire MNC.

Acknowledgements We appreciate comments provided on earlier versions of the paper at research seminars at the University of Auckland, New Zealand, the University of Sydney, the University of New South Wales, Australia and the Aalto University School of Economics, Finland. We also thank colleagues from the Vienna University of Economics and Business Administration, Austria and the University of Pennsylvania, USA. We particularly acknowledge the extensive feedback provided by Prof. Peter Liesch, University of Queensland, Australia on an early version and by Prof. Wilhelm Barner-Rasmussen, Hanken School of Economics, Finland and Prof. Larissa Rabbiosi, Copenhagen Business School, Denmark.

Appendix A. Subsidiary knowledge inflows and outflows Conceptual papers are marked with C. Studies in which the respective category is used as a mediator or moderator are italicized. Characteristics of knowledge Tacit/explicit continuum Gnyawali et al. (2009) C, Haka˚nson and Nobel (2000), Hansen (1999), Hansen (2002), Hansen et al. (2005), Levin and Cross (2004), Minbaeva (2007), Riusala and Smale (2007), Schulz (2003), Sunaoshi et al. (2005) Types of knowledge Almeida et al. (2002), Bhagat et al. (2002) C, Buckley and Carter (2002), Gnyawali et al. (2009), Hong and Nguyen (2009), Lazarova and Tarique (2005), Lee and MacMillan (2008), Yamin and Otto (2004) Complexity and causal ambiguity Jensen and Szulanski (2004), Madhok and Liu (2006) C, Minbaeva (2007), Riusala and Smale (2007), Szulanski (1996), Szulanski et al. (2004) Specialized knowledge Minbaeva (2007), Phene et al. (2005), Schulz (2001, 2003) Knowledge distance/linkage/relevance Buckley, Carter, Clegg, and Tan (2005), Grosse (1996), Phene et al. (2005), Yang et al. (2008), Zhao and Luo (2005) Knowledge stock/base Adenfelt and Lagerstro¨m (2008), Fang et al. (2007), Gupta and Govindarajan (2000), Hong et al. (2006), Johnston and Paladino (2007), Pe´rez-Nordtvedt et al. (2008), Schulz (2003) Source(s) of knowledge

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Appendix A (Continued ) Characteristics of knowledge Foss and Pedersen (2002), Phene and Almeida (2008) Changes to knowledge/knowledge activity Gnyawali et al. (2009), Hong and Nguyen (2009), Hong, Snell, and Easterby-Smith (2009), Jensen and Szulanski (2004), Schulz (2001) Characteristics of actors Subsidiary Ability/capacity/capability Absorptive capacity Gupta and Govindarajan (2000), Madhok and Liu (2006) C, Mahnke et al. (2005), Minbaeva (2007), Minbaeva et al. (2003), Riusala and Smale (2007), Szulanski (1996), Tsai (2001), Zhao and Anand (2009) Learning capacity/routines Hong et al. (2006), Pe´rez-Nordtvedt et al. (2008), Wang et al. (2004), Williams (2009) Retentive/receptive/disseminative capacity Lazarova and Tarique (2005), Minbaeva (2007), Szulanski (1996) Transfer/subsidiary capabilities Holtbru¨gge and Berg (2004), Monteiro et al. (2008), Noorderhaven and Harzing (2009), Schlegelmilch and Chini (2003) C Motivation and willingness to transfer/learn Gupta and Govindarajan (2000), Jensen and Szulanski (2004), Lazarova and Tarique (2005) C, Minbaeva (2008), Pe´rez-Nordtvedt et al. (2008), Szulanski (1996), Wang et al. (2004), Williams (2009) Attractiveness Almeida and Phene (2004), Grosse (1996), Haka˚nson and Nobel (2001), Mu et al. (2007), Tsai and Ghoshal (1998), Szulanski (1996), Szulanski et al. (2004), Levin and Cross (2004), Pe´rez-Nordtvedt et al. (2008) Use of mechanisms/infrastructure Reward/incentive/compensation system Bjo¨rkman et al. (2004, 2007), Fey and Furu (2008), Persson (2006), Zhao and Luo (2005) Use/involvement/development/richness of knowledge management/communication infrastructure/mechanisms Almeida et al. (2002), Ambos and Ambos (2009), Bjo¨rkman et al. (2007), Gupta and Govindarajan (2000), Holm and Sharma (2006), Johnston and Paladino (2007), Kiessling et al. (2009), Lazarova and Tarique (2005) C, Schlegelmilch and Chini (2003) C, Zellmer-Bruhn and Gibson (2006), Zhao and Anand (2009), Zhao and Luo (2005) Subsidiary role/mandate Ambos et al. (2006), Holtbru¨gge and Berg (2004), Manolopoulos et al. (2007), Noorderhaven and Harzing (2009), Schlegelmilch and Chini (2003) C, Wang and Suh (2009) C, Yang et al. (2008) Subsidiary autonomy Foss and Pedersen (2002), Noorderhaven and Harzing (2009), Schulz (2001) Subsidiary’s location Fey and Furu (2008), Yang et al. (2008) Subsidiary’s international orientation Zellmer-Bruhn and Gibson (2006) Subsidiary’s social capital Reiche, Harzing, and Kraimer (2009) Number of expatriates in subsidiary Bjo¨rkman et al. (2004) Ownership structure Buckley et al. (2005), Cho and Lee (2004), Grosse (1996), Noorderhaven and Harzing (2009), Zhao and Luo (2005) Size and/or age Cho and Lee (2004), Noorderhaven and Harzing (2009), Schulz (2001) MNC Intention/willingness/readiness/capacity to learn/transfer Pe´rez-Nordtvedt et al. (2008), Wang et al. (2004) Absorptive capacity Ambos et al. (2006) International experience/internationalization strategies Fang et al. (2007), Grosse (1996), Wang and Suh (2009) C Organizational culture/context Hong et al. (2006), Kostova (1999) C, Riusala and Smale (2007), Szulanski (1996) Size Noorderhaven and Harzing (2009), Schulz (2001) Individual level Absorptive capacity/behaviors and attitudes, linguistic competence, cognitive styles, career considerations Bhagat et al. (2002) C, Engelhard and Na¨gele (2003), Lazarova and Tarique (2005) C, Sunaoshi et al. (2005), Welch and Welch (2008) C, Zhao and Anand (2009) Characteristics of relationships between actors Integration/embeddedness Haka˚nson and Nobel (2001), Lehrer and Asakawa (2002), Noorderhaven and Harzing (2009) Dependence/interdependence Almeida and Phene (2004), Foss and Pedersen (2002), Holtbru¨gge and Berg (2004), Kostova (1999) C, Kostova and Roth (2002), Lee and MacMillan (2008), Luo (2003), Persson (2006), Riusala and Smale (2007), Schulz (2001, 2003), Zhao and Luo (2005) Control/coordination/socialization mechanisms Bjo¨rkman et al. (2004), Persson (2006), Tsai (2002) Teaching/training programs Bjo¨rkman et al. (2007), Sparkes and Miyake (2000), Zhao and Anand (2009) Relational Trust (in HQ/other units and external actors) Buckley et al. (2006), Engelhard and Na¨gele (2003), Inkpen and Tsang (2005), Kostova (1999) C, Kostova and Roth (2002), Levin and Cross (2004), Li (2005), Riusala and Smale (2007) Commitment/identification with parent

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Appendix A (Continued ) Characteristics of relationships between actors Kostova (1999) C, Kostova and Roth (2002), Riusala and Smale (2007), Vora and Kostova (2006) C Shared vision/mindset/practices/culture Buckley et al. (2006), Fey and Furu (2008), Inkpen and Tsang (2005), Li (2005), Tsai and Ghoshal (1998), Williams (2009) Communications intensity/frequency Adenfelt and Lagerstro¨m (2008), Monteiro et al. (2008) Inter-unit competition Hansen et al. (2005), Luo (2005) C, Tsai (2002) Network Existence of tie/relationship/network/social capital Frost and Zhou (2005), Phene et al. (2005), Reiche et al. (2009), Schmid and Schurig (2003), Tsai (2002), Tsai and Ghoshal (1998), Williams (2009) Qualities of network/relationships/interaction – tie strength/quantity/intensity/length/size Adenfelt and Lagerstro¨m (2008) C, Gnyawali et al. (2009) C, Hansen (1998), Hansen (2002), Hansen et al. (2005), Inkpen and Tsang (2005) C, Johnston and Paladino (2007), Levin and Cross (2004), Minbaeva (2007), Noorderhaven and Harzing (2009), Pe´rez-Nordtvedt et al. (2008), Schulz (2003), Szulanski (1996), Tsai (2001), Tsai and Ghoshal (1998), Williams (2009) Distance/similarity Institutional distance Jensen and Szulanski (2004), Kostova (1999) C, Kostova and Roth (2002), Riusala and Smale (2007) Organizational distance Ambos et al. (2006), Schlegelmilch and Chini (2003) C Product and process similarity Cho and Lee (2004) Cultural distance/similarity Ambos and Ambos (2009), Ambos et al. (2006), Bhagat et al. (2002) C, Cho and Lee (2004), Engelhard and Na¨gele (2003), Schlegelmilch and Chini (2003) C Geographical and linguistic distances Ambos and Ambos (2009) Outcomes of knowledge flows Occurrence/existence of flows/transfer Vertical inflows Buckley et al. (2005), Buckley et al. (2006), Frost and Zhou (2005), Grosse (1996), Hong et al. (2009), Li (2005), Minbaeva (2007) Vertical outflows Haka˚nson and Nobel (2000, 2001) Vertical in- and outflows Lee and MacMillan (2008), Sparkes and Miyake (2000), Vora and Kostova (2006) C, Wang et al. (2004), Yang et al. (2008) Horizontal inflows Levin and Cross (2004) Horizontal outflows Foss and Pedersen (2002) Horizontal in- and outflows Cho and Lee (2004), Hansen (2002), Johnston and Paladino (2007), Luo (2005) C, Schulz (2003), Tsai (2002), Zhao and Luo (2005) Vertical and horizontal inflows Minbaeva (2008), Minbaeva et al. (2003), Schulz (2003) Vertical and horizontal outflows Bjo¨rkman et al. (2004), Fey and Furu (2008), Mu et al. (2007), Persson (2006), Schulz (2001) Vertical and horizontal in- and outflows Gupta and Govindarajan (2000), Holtbru¨gge and Berg (2004), Hong and Nguyen (2009), Inkpen and Tsang (2005) C, Madhok and Liu (2006) C, Noorderhaven and Harzing (2009), Phene and Almeida (2003), Wang and Suh (2009) C, Welch and Welch (2008) C Success/effectiveness of knowledge flows Adenfelt and Lagerstro¨m (2008), Almeida et al. (2002), Ambos and Ambos (2009), Ambos et al. (2006), Bhagat et al. (2002) C, Buckley and Carter (2002), Frenkel (2008) C, Hansen (1999), Hansen (2002), Hansen et al. (2005), Jensen and Szulanski (2004), Kostova (1999) C, Kostova and Roth (2002), Lazarova and Tariq ue (2005) C, Pe´rez-Nordtvedt et al. (2008), Phene et al. (2005), Reiche et al. (2009), Schlegelmilch and Chini (2003) C, Szulanski (1996), Szulanski et al. (2004), Tsai (2001), Zhao and Anand (2009) Impact of knowledge flows Subsidiary learning/innovation/value creation Almeida and Phene (2004), Engelhard and Na¨gele (2003), Johnston and Paladino (2007), Phene and Almeida (2003, 2008), Tsai (2001, 2002), Tsai and Ghoshal (1998), Zellmer-Bruhn and Gibson (2006) Subsidiary isolation Monteiro et al. (2008) Subsidiary performance Fang et al. (2007), Kiessling et al. (2009), Lee and MacMillan (2008), Luo (2003), Mahnke et al. (2005), Monteiro et al. (2008), Tsai (2002) Subsidiary role Harzing and Noorderhaven (2006a) Subsidiary tie effectiveness Gnyawali et al. (2009) Subsidiary’s bargaining power Mudambi and Navarra (2004) Subsidiary’s HRM practices Bjo¨rkman et al. (2007) Subsidiary’s evolutionary path/centralization Lehrer and Asakawa (2002), Sanna-Randaccio and Veugelers (2007) Subsidiary’s development of critical capabilities Schmid and Schurig (2003) MNC (organizational structure, innovations, development) Buckley and Carter (2002), Holm and Sharma (2006), Williams (2009), Yamin and Otto (2004)

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