Why Do Mnc Subsidiaries Engage in Knowledge Sharing with Other Subsidiaries and What Are the Implications for Performance?

This paper suggests how a MNC subsidiary’s knowledge outflow can influence its performance. We distinguish between direct costs and opportunity costs. Direct costs are contingent on knowledge types and the lack of appropriate communication channels. Opportunity costs are due to resource-use for knowledge outflows that could have been utilized for the subsidiary’s own business and development activities. Despite costs, increased knowledge inflow and reputation gains induce knowledge outflows. A simultaneous equation model applied to unique data, from a German MNC, HeidelbergCement, shows that costs and benefits incurred have a significant effect on knowledge outflows, which in turn have a significant curvilinear effect on subsidiary performance. Why do MNC subsidiaries engage in knowledge sharing with other subsidiaries and what are the implications for performance?