Competence Development through Business Relationships or Competitive Environment? — Subsidiary Impact on MNC Competitive Advantage

The need for studies of how MNCs make extensive use of the knowledge of subsidiaries is stressed in the literature. The relevance of such studies has its origins in the belief that an MNC is a knowledge-seeking organisation and that knowledge transfer between its separate units leads to competitive advantage (Cantwell 1990, Kogut/Chang 1991, Madhok 1997, Teece/Pisno/Shuen 1997, Frost 2001). An important condition, though, is that subsidiaries actually do develop unique knowledge, a “fact” confirmed in several studies which partly has been explained by the characteristics of subsidiary environments (Bartlett/Ghoshal 1986, Andersson, Forsgren, and Holm 2002, Foss/Pedersen 2002). For instance, besides other explanations, such as the internal co-ordination of resources and the entrepreneurship of individual managers, the environment is assumed to contribute to the development of corporate “strategic leaders” (Bartlett/Ghoshal 1989), “centers of competences” (Sölvell/Zander/Porer 1991), and “centers of excellence” (Forsgren/Johanson/Sharma 2000, Holm/Pedersen 2000) and, thus, competitive advantages for the MNC (Cohen/Levinthal 1990, Dunning 1998, Nobel/Birkinshaw 1998).