Multinational Corporations, Foreign Direct Investment and Knowledge Issues: Literature Review

Multinational corporations (MNCs) often attempt to enrich their knowledge reservoir through various means such as setting up subsidiaries in foreign markets to access other firms’ knowledge. Even though knowledge acquisition is not the only motivation for setting up a subsidiary, knowledge acquired through such subsidiaries may range from explicit skills embodied in certain products and processes to tacit know-how. Knowledge management within MNC networks is commonly considered to be a central prerequisite to not only guarantee the successful operations of subsidiaries but to also boost the MNCs’ competitive advantage, thus strengthening their market position in the global arena. From the perspective of the MNC, both conventional knowledge flow (i.e., knowledge transfer from headquarters to subsidiaries) and the acquisition of local market information (LMI) from subsidiaries (i.e., reverse knowledge transfer) is a difficult and frustrated process, but one that must be addressed given that the development of organisational competitiveness mainly depends on this issue. Due to the importance of this topic, this paper attempts to outline the characteristics of each market entry strategy, provide relevant theoretical discussions, give a chronological overview of previous studies on 1) knowledge transfer/acquisition and 2) reverse knowledge transfer, and explore recent publication trends of those topics in highly positioned academic journals.