A Resource-Based Model of Market Learning in the Subsidiary: The Capabilities of Exploration and Exploitation

Abstract

The literature reflects remarkably little effort to develop a framework for understanding market learning at subsidiaries of multinational corporations. This article develops a model that incorporates exploratory and exploitative learning as two capabilities that need to be effectively nurtured and managed in subsidiaries. The authors integrate the organizational-learning and resource-based view of the firm; present field interviews with managers; and propose that resources derived from the parent, the subsidiary, and the parent–subsidiary relationships are related to the creation of new knowledge and the use of existing knowledge in subsidiaries. The authors develop research propositions that capture the differential impacts of each learning capability on subsidiary performance. It is suggested that the turbulence of subsidiary markets moderates the strength of the relationships between market-learning capabilities and performance.