The Influence of Knowledge Heterogeneity on Subsidiary Innovation Performance: The Moderating Role of Knowledge Absorptive Capability and Knowledge Combination Capability

The innovation performance of subsidiaries of a multinational enterprise (MNE) is the key of the MNE's survival and development in the increasingly competitive international environment. The issue of how to promote subsidiary innovation performance from the perspective of knowledge management is becoming an important issue. However, studies do not systematically reveal the mechanisms of the effects of knowledge heterogeneity on subsidiary innovation performance. Thus, based on knowledge-based view, absorptive capability theory and dynamic capability theory, we investigated the impact of internal knowledge heterogeneity (IKH) and external knowledge heterogeneity (EKH) on subsidiary innovation performance by focusing on moderating roles of the knowledge absorptive capability and knowledge combination capability. The results of a field survey of 343 subsidiaries in China indicate that IKH is positively related to subsidiary innovation performance and EKH is positively related to subsidiary innovation performance. Besides, the findings provide that knowledge absorptive capability strengthens the effects of IKH and EKH on subsidiary innovation performance, such that the higher the knowledge absorptive capability, the stronger the relationships between IKH and EKH as well as subsidiary innovation performance. Knowledge combination capability also positively moderates the relationships between IKH and EKH and subsidiary innovation performance, such that the higher the knowledge combination capability, the stronger the relationships between IKH and EKH as well as subsidiary innovation performance. Theoretical and managerial implications of this study are discussed.