The performance implications of knowledge management and strategic alignment of MNC subsidiaries

Purpose: The purpose of this paper was to investigate antecedents and results of strategic choices of multinational corporation (MNC) subsidiaries in Croatia economy. Hence, the authors examined knowledge management and its association with performance. Additionally, they explored which of the strategies will be most likely chosen by subsidiaries in transitional economies that are characterized by market volatility and uncertainty. Design/methodology/approach: Data were collected from a survey of 131 MNC subsidiaries operating in Croatia. To test the theoretical correlation between knowledge management capabilities and strategic orientation, the authors used the ANCOVA method and controlled for industry, years in international business and firm size. Findings: The results pointed out the recognized necessities for a specific alignment between environment, strategy and knowledge management capabilities. The findings also suggest that there is a positive relationship between knowledge management and performance. Research limitations/implications: As with most of the research, this paper has limitations. First, all data were collected using self-report surveys raising the possibility of response set biases. Additionally, all data were collected at one point in one country specifically in Croatia. Practical implications: Clearly, there is substantial interaction between the MNC subsidiary’s environment and the MNC subsidiary’s strategic orientation. Most notably, the environment studied here was at the competitive and consumer market level. Firms need to develop a strategic plan for knowledge management based upon the local environmental influences. Social implications: Other firms from Central and Eastern European and developed countries may compare their own environment, strategy and knowledge management practices in MNCs with findings from Croatia to be aware of similarities and market differences. Originality/value: The strategic employment of knowledge acquisition, conversion and application are examined across firms using the Prospector, Analyzer, Defender and Reactor strategic orientations.