Subsidiary’s External Networkability as a Source of Competitive Advantage

This article focuses on the influence of a subsidiary’s capability to create and cultivate social capital in a host country or the external networkability of MNC’s subsidiary. We first identify the external networkability which is critical to build up social capital with other parties in the relational network, shifting the point of view about social capital from network level to firm level. Then, based on the identification, we examine why and how an MNC’s local subsidiary can successfully play their strategic roles by taking advantage of its external networkability. It is proposed that the differences between subsidiaries in the degree of gaining host country experience and technological learning can be explained by their different ability to create and manage the relationships with their external networks in that host country. This paper also explores how the types of MNCs moderate the relationships between the external networkability of its subsidiaries and organizational performances.