An important aspect in this relationship is the transfer and the communication of corporate knowledge between company units located in differing cultural and geographical settings. Knowledge has been recognized as a primary resource of organizations. Some authors even propose that knowledge is a company’s only enduring source of advantage in an increasingly competitive world. Dealing with knowledge creation, transfer, and exploitation will be increasingly critical to the survival and success of corporations, and of societies. 

The problems and the challenges companies encounter are to manage knowledge in an effective way in order to increase their competitive advantages. The capability of MNCs to efficiently combine knowledge from different locations around the world is therefore becoming increasingly important as a determinant of competitive success. Thus, MNCs may derive competitive advantages by managing knowledge flows efficiently. The management of knowledge in the MNC involves transferring knowledge between different units of the corporation, e.g. from the centre (Headquarters) to the periphery (subsidiaries) or vice versa. While the transfer of knowledge from the Headquarters to subsidiaries has created a strong interest among international management researchers, our knowledge on reverse knowledge transfer (subsidiary to Headquarter) is still rudimentary.

Today, managers in Headquarters of multinational companies (MNCs) clearly recognize the need to access internationally dispersed knowledge. Most scholars share the belief that subsidiaries of MNCs are crucial to tap into local ´pockets of knowledge`. Doz et al. (1997, p. 5) state: “as leading edge of knowledge creation gets more dispersed, the opportunity cost of relying exclusively on the home base as the source of knowledge and innovation increases.” Thus subsidiaries tap domestic sources of knowledge, which should subsequently be diffused and exploited within the MNC. Only a few studies explicitly investigate the incidence of this type of knowledge transfer. While this literature mainly shows that subsidiaries can provide valuable information for Headquarters, it reveals few insights into what drives Headquarters` ability to benefit from knowledge received from subsidiaries. In a series of research studies on knowledge transfer the department of International Marketing and Management (IMM) at Vienna University of Economics, focuses on the drivers that determine the headquarters` benefits of appropriating local knowledge. Among the issues researched are the type of knowledge most valuable for Headquarters, and the relative importance of factors that influence Headquarters` ability to access and leverage knowledge from its offshore affiliates.
 

Reference: 

Doz, Y., Asakawa, K., Santos J. and Williamson P. (1997a): The Metanational Corporation. INSEAD Working Paper Series, Fontainebleau, France.