Abstract
The authors use the environment–strategy–performance theoretical framework to examine the direct influence of the environmental market conditions of competitive intensity and market dynamism on knowledge management capabilities of multinational corporation (MNC) subsidiaries and resultant subsidiary performance. The results of a survey of the managers of Croatian subsidiaries of foreign MNCs indicate that though both competitive intensity and market dynamism individually influence knowledge management capabilities, when examined jointly, market dynamism is a more influential environmental market condition than competitive intensity. The authors also find a significant, positive relationship between a subsidiary's knowledge management capabilities and its performance. The findings indicate the importance of understanding local market conditions and developing proper strategic configurations for MNC subsidiaries.
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