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Despite extensive research on subsidiary roles and mandates, the mechanisms through which subsidiary managers translate structural changes, such as gaining R&D mandates, into performance outcomes remain unclear. This dissertation addresses this shortcoming by developing a modular microfoundations framework that conceptually integrates the MNE-, subsidiary-, and subsidiary manager levels to explain how antecedents, mechanisms, and outcomes unfold across levels. Empirically, the dissertation comprises four papers focused on the subsidiary and subsidiary manager levels, examining 98 global subsidiaries of eight Swedish engineering multinational enterprises (MNEs). It analyses how managers’ activities, managerial aptness, and subsidiaries’ relational embeddedness shape subsidiary performance across three dimensions: strategic, innovation, and financial, following the gaining of an R&D mandate.

The findings reveal that subsidiaries are not passive recipients of R&D mandates. When headquarters grants such mandates, it simultaneously transfers control over the use and development of knowledge resources to the subsidiary. This shift positions subsidiary managers as central actors whose activities embed resources within internal and external networks. Through these behavioural mechanisms, subsidiaries enhance their capacity to innovate, strengthen their strategic influence vis-à-vis headquarters, and improve their positioning within the MNE’s global value chain.

The results further show that innovation performance does not automatically improve after an R&D mandate gain. The value of new resources and responsibilities attached to the R&D mandate depends on how subsidiary managers direct their activities and manage relational embeddedness. Internal activities towards headquarters and sister units may constrain innovation, whereas external activities encourage exploration but may not yield immediate gains. Moreover, the internal relational embeddedness serves as an anchor, enabling subsidiaries to convert innovation outcomes into financial returns by aligning experimentation with effective appropriation.

Finally, the dissertation identifies managerial aptness as a key condition shaping managers’ activities. Two distinct forms of aptness are defined: local aptness, which enhances external engagement and contextual responsiveness, and global aptness, which fosters alignment with global direction and corporate strategy. Local and global aptness guide how managers direct their influential activities across internal and external networks, ultimately shaping the subsidiary’s strategic positioning and performance within the MNE network.

Overall, this dissertation demonstrates that subsidiary performance after structural change stems not from resource assignment alone but from the interplay among managerial aptness, behavioural mechanisms, and relational orchestration. The findings contribute to international business research by demonstrating how subsidiary managers transform structural change into multidimensional performance outcomes, providing a human-centred explanation of adaptation, resilience, and sustained effectiveness in the evolving MNE system.