Abstract
This study investigates the development of subsidiary capability within a multinational corporation. Conceptually, it distinguishes the capabilities of the overseas subsidiary into exploitative and explorative capability and illuminates the factors that influence these two forms of capabilities, taking an organizational learning theory. Using data from 398 overseas subsidiaries belonging to 205 listed Korean multinational corporations (MNCs) operating in 49 countries, it analyzes the determinants for explorative capability and exploitative capability among these Korean subsidiaries. The findings show that the use of output and social controls and double-loop learning facilitates explorative capability of the subsidiaries of Korean MNCs. This study provides insights into subsidiary federalism network and subsidiary mandate within an MNC, and organizational learning literature.
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