Subsidiary strategic types and functional activities: the importance of knowledge in the multinational’s differentiated network

This paper explores the increasing significance of knowledge creation and exploitation in the differentiation of strategic roles of foreign subsidiaries and functional units within the differentiated network of the multinational corporation (MNC). Developing a knowledge-augmented integration-responsiveness (IR) framework the paper argues for a more explicit recognition of organisational learning and innovation processes within the MNC as core to the analysis of differentiation, interdependencies and evolution of subsidiary types and functional units. Empirical results, in the context of foreign subsidiaries and functional units of leading American MNCs in Taiwan's IT industry, shows the increasing relevance and differentiation of knowledge transfers across foreign subsidiaries and different kinds of functional activities. However, the composition and knowledge characteristics of different functional activities in each subsidiary strategy type require a more specific and detailed analysis that may reflect the particular features of this empirical study. This then points to directions of research fruitful for reconciling organisational issues discussed in the international business literature with the resource-based literature on the creation and transfer of knowledge within the MNC.