KNOWLEDGE FLOWS WITHIN MULTINATIONAL CORPORATIONS: WHY ARE SOME SUBSIDIARIES ISOLATED?

This paper seeks to explain why some subsidiaries are isolated from the knowledge transfer activities within multinational corporations. Applying a new theoretical and empirical approach to intra-firm knowledge transfers, we argue that differences in learning capabilities and in-group-out-group dynamics result in some subsidiaries never or very rarely exchanging any knowledge with other units within the firm. We also propose that sending and receiving knowledge become self-reinforcing cycles, positive for those units that engage but downward spirals for those that are isolated from the knowledge transfers. The roles of both learning capabilities and in-group-out-group categorization were examined with data from 171 subsidiaries around the world belonging to six large Swedish multinationals. Results highlight that subsidiaries with strong learning capabilities are more likely to send knowledge to the rest of the organization. We also found empirical support that units more likely to receive knowledge are those similar, in terms of certain characteristics, to the unit sending the knowledge. Performance implications are discussed and results indicate the existence of a