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Asia Pacific Journal of Management

, Volume 35, Issue 2, pp 373–397 | Cite as

The role of dual embeddedness and organizational learning in subsidiary development

  • Ming PuEmail author
  • Pek-Hooi Soh
Article

Abstract

We investigate how subsidiaries exploit the knowledge flows embedded in internal and external networks and support their development in terms of scope (breadth of functional operations) and competence (ability to perform specific activities). We argue that individual subsidiaries have different organizational learning processes, which would influence the way subsidiaries evolve and manage multiple sources of knowledge and adapt their knowledge structure and routines systematically for subsidiary-wide development. Our analysis of 81 foreign-owned subsidiaries in China shows that subsidiary competence is enhanced by the knowledge arising from MNC networks whereas subsidiary scope depends on the knowledge embedded in the host environments. Moreover, organizational learning affects the way knowledge adapted from internal embeddedness but not external embeddedness. These findings imply that foreign subsidiaries must effectively cope with increased flows of distant knowledge within MNC networks while maintaining their location-specific advantage. The different outcomes of subsidiary development add a nuanced understanding of the relationship between dual embeddedness and subsidiary development.

Keywords

MNC network Internal embeddedness External embeddedness Organizational learning Subsidiary development 

Notes

Acknowledgements

The authors wish to acknowledge the generous financial support from the China Scholarship Council (Grant no. 201408230026), the National Natural Science Foundation of China (Grant no. 71472057; 71372179) and the Humanity and Social Science Youth foundation of Ministry of Education of China (Project no. 14YJC630025).

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© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Management SchoolHarbin University of Science and TechnologyHarbinChina
  2. 2.Beedie School of BusinessSimon Fraser UniversityVancouverCanada

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