Tapping a Foreign Subsidiary’s Competence: An Empirical Test of Subsidiaries of Multinational Corporations in South Korea

Abstract

This study examined the conditions under which a foreign subsidiary

becomes the competence center within the multinational corporation

(MNC)’s network. We developed an integrated framework by investigating

effects of both subsidiary-level factors and headquarter (HQ)-level

factors on subsidiary’s competence development. Survey data from 76

foreign subsidiaries of MNCs in South Korea largely supported our

hypotheses. We found that subsidiaries with high management

autonomy and high network embeddedness in the local market (South

Korea) tend to build superior capabilities that would be useful

throughout the entire MNC network. Concerning an MNC’s management system, our results suggested that technological and managerial

knowledge transfer from HQ to subsidiaries plays important roles in

helping a subsidiary evolve into a competence center in the MNC’s global

network.