The Strategic Impact of External Networks: Subsidiary Performance and Competence Development in the Multinational Corporation

A special feature of multinational firms (MNCs) is the notion that their sub-units (subsidiaries) are embedded in different local networks (Ghoshal and Bartlett, 1990; Ghoshal and Nohria, 1997; Fors-gren, Johanson, and Sharma, 2000). Each subsidiary maintains unique and idiosyncratic patterns of network linkages and consequently is differentially exposed to new knowledge, ideas and opportunities (McEvily and Zaheer, 1999). In fact, this differential exposure has been put forward as one of the basic competitive advantages of the multinational firm, because it increases the breadth and variety of its network resources (Malnight, 1996). It is also in line with recent trends in foreign direct investment theory, in which foreign investments are viewed as series of attempts to selectively tap knowledge linked to specific local business contexts (Cantwell, 1990; Almeida, 1996; Dunning, 1996).