Subsidiaries' dual network embeddedness : explaining vertical and horizontal knowledge outflows of MNC subsidiaries

Abstract

As an inter-organisational network organisation, MNC subsidiaries possess the advantage of having relations with their headquarters (HQ) and peer subsidiaries, as well as with external firms such as suppliers, customers and local agencies in the host country. Realising this, my study examines subsidiaries’ internal network embeddedness and local network embeddedness on vertical and horizontal knowledge outflows. My conceptual framework is developed from the social capital and social network literature. Internal embeddedness and local embeddedness are hypothesised to positively influence vertical and horizontal knowledge outflows. Local network embeddedness, however, is conceptualised to have an indirect association with vertical and horizontal knowledge outflows through localised subsidiary innovation. Mixed methods of inquiry are adopted to test the hypotheses and explain subsidiaries’ inherent tensions in managing dual network embeddedness. My study is contextualised within MNC subsidiaries located in Malaysia. Findings of my study demonstrate that vertical and horizontal knowledge outflows are influenced differently by subsidiaries’ network embeddedness. Vertical knowledge outflows are driven by subsidiaries’ internal embeddedness, while horizontal knowledge outflows are influenced by local network embeddedness. The study also explains how subsidiaries manage dual network embeddedness and its impact on vertical and horizontal knowledge outflows. My study provides theoretical contributions to subsidiary embeddedness and subsidiary-focused knowledge management literature and practical implications in managing subsidiaries, HQ-subsidiary relations and firms located in the host country.