Subsidiary Knowledge Development in Knowledge-Intensive Business Services: A Configuration Approach

The international marketing literature suggests that the characteristics of the subsidiary-headquarters relationship play an important role in subsidiary knowledge development within the field of multinational corporations (MNCs). However, few studies examine the association between the subsidiary-headquarters relationship and subsidiary strategic role, and its effects on subsidiary knowledge development. In this paper, the authors first examine the effect of four subsidiary-headquarters relational characteristics (socialization mechanisms, autonomy, shared values, and internal embeddedness) on subsidiary knowledge development. Then, building on configuration theory, the authors employ two perspectives of fit (moderation and profile deviation) to investigate the impact of fit between strategy and relational characteristics, and examine their effects on subsidiary knowledge development. Using data from 184 UK foreign-owned subsidiaries operating in the Knowledge Intensive Business Services (KIBS) sector, the authors confirm that internal embeddedness, socialization mechanisms, and autonomy are positively related to subsidiary knowledge development. Furthermore, the findings support the moderation and profile deviation perspectives, and they indicate that aligning the subsidiary’s strategic role with relational characteristics can lead to superior knowledge development.