MNE subsidiariesface a trade-off between the ambition to source knowledge that is embedded in the host-location and the need to protect their corporation’s knowledge-based assets from external appropriationby close competitors. In this paper, we explore how foreign subsidiaries operating in a highly competitive knowledge-based cluster or chestrate their local linkages with non-value chain partners to strategically manage the knowledge imperatives to which they are exposed.
Our results show that subsidiaries establish heterogeneous patterns of interaction with different non-value chain agents in the host location, as their perception regarding the role these agents may play varies. More specifically, in the presence of fierce competition, when higher spillover risks should compel them to refrain from local interaction, subsidiaries do shy away from competitors. However, some simultaneously pursue their knowledge creation objectives by linking to agents that minimize spillover risks while still offering learning opportunities, such as the local university. This leads us to conclude that spillover risks, by themselves, do not automatically drive the choice to avoid interaction, as subsidiaries are able to strategically differentiate between various types of partners. In so doing we reconcile the extant contradiction between the strategic deterrence and physical attraction theses