RELATIONAL MECHANISMS, FORMAL CONTRACTS, AND LOCAL KNOWLEDGE ACQUISITION BY INTERNATIONAL SUBSIDIARIES

This research focuses oil relational and contractual mechanisms and examines their impact oil foreign subsidiaries' acquisition of tacit and explicit knowledge from local suppliers. Using survey data from 168 foreign subsidiaries operating ill China, this study finds broad support for the proposed analytical framework. When the foreign subsidiary and supplier share common goals, the foreign subsidiary acquires greater levels of both explicit and tacit knowledge: trust between the two parties promotes the acquisition of greater levels of tacit than e explicit knowledge. However, access to the local supplier network through the focal supplier enables the foreign subsidiary to acquire greater levels of explicit bill not tacit knowledge. Formal contracts play a complementary, role in knowledge acquisition contracts enhance the acquisition of explicit knowledge an further strengthen the affects of relational mechanisms oil tacit and explicit knowledge acquisition. Overall, these findings provide important implications for foreign subsidiaries regarding how to acquire local knowledge in host countries through both formal and informal mechanisms. Copyright (C) 2009 John Wiley & Sons, Ltd.