MNEs and FSAs: Network knowledge, strategic orientation and performance Joanna Scott-Kennel a, *, Axele Giroud b a Department of Strategy & HRM, Waikato Management School, University of Waikato, Private Bag 3105, Waikato Mail Centre, Hamilton 3240, New Zealand b Manchester Business School, University of Manchester, F17, Booth Street East, M15 6PB, United Kingdom 1. Introduction Knowledge is a fundamental driver of value creation in the firm (Barney, 1991; McEvily & Chakravarthy, 2002; Porter, 1986, 1990). The literature suggests knowledge from various sources and locations leads to strong competitive advantages (Almeida, Song, & Grant, 2002; Gupta & Govindarajan, 2000; Mudambi, 2002; Regner & Zander, 2011; Zaheer & Nachum, 2011), and knowledge flows from both internal and external sources enhance firm performance (Fang, Wade, Delios, & Beamish, 2013; Holm & Sharma, 2006; Nguyen, 2011; Tsai, 2002). Thus, multinational enterprises (MNEs), by virtue of their global scope and strategy, can derive further advantage from their ability to tap into global and local networks of knowledge (Gupta & Govindarajan, 1991, 2000). Indeed, MNEs are recognized as one of the most efficient and effective mechanisms for transferring knowledge, through their ability to span both internal (corporate) and external business (industry) networks across national boundaries (Feinberg & Gupta, 2004; Hansen & Løva ˚ s, 2004; Kogut & Zander, 1993/2003). Despite its importance to MNEs, there are research gaps in our understanding of how network knowledge influences firm-specific advantages (FSAs) of various units across borders. The extent to which different sources of knowledge underpin FSA remains a central question about the nature and evolution of the firm, and the question deserves attention. On the one hand, subsidiary-centered work has demonstrated that both internal and external network knowledge enhance subsidiaries’ ability to recombine and gener- ate new advantages (see for instance Andersson, Forsgren, & Holm, 2002; Birkinshaw, Hood, & Jonsson, 1998; Birkinshaw, 2000; Cantwell & Mudambi, 2005; Frost, Birkinshaw, & Ensign, 2002; Rugman, Verbeke, & Yuan, 2011). Such advantages, in turn, can also contribute to headquarters through reverse transfers from foreign subsidiaries for internal knowledge (Ambos, Ambos, & Schlegel- milch, 2006; Najafi-Tavani, Giroud, & Sinkovics, 2012) or inter-firm interactions for external knowledge (Andersson et al., 2002; Andersson, Bjorkman, & Forsgren, 2005; Giroud & Scott-Kennel, 2009). Studies of FSAs focus either on headquarters or, more recently, subsidiaries, in limited contextual settings (Rugman, Verbeke, & Nguyen, 2011) – typically a single country or MNE (Michailova & Mustaffa, 2012, p. 9). This does not allow the comparison of the role of network knowledge in explaining FSAs for both headquarters and subsidiaries across countries. In this paper, we address this gap by analyzing FSAs in both headquarters and subsidiary units, doing so in a number of country contexts, thereby addressing calls for analysis of firms’ advantages within a cross-comparative research methodology (Grant, 1996; Khalid & Larimo, 2012). Within the MNE network context, we further suggest that distinguishing sources of knowledge and strategic orientation is Journal of World Business xxx (2014) xxx–xxx A R T I C L E I N F O Article history: Available online xxx Keywords: Multinational enterprise Firm-specific advantage Knowledge source Networks Strategic orientation Performance A B S T R A C T The objective of this research is to empirically investigate the contribution of network knowledge and strategic orientation to firm-specific advantages (FSAs). Using a unique firm-level dataset of the largest multinational enterprise (MNE) units across six small advanced economies, we find significant and positive relationships between different types of FSAs and (1) knowledge of the focal unit, and from internal corporate and external business networks; (2) unit role (headquarters and subsidiaries); (3) strategic orientation (local and global) and; (4) firm performance. ß 2014 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +64 7 858 5022. E-mail addresses: scottkjo@waikato.ac.nz (J. Scott-Kennel), Axele.Giroud@manchester.ac.uk (A. Giroud). G Model WORBUS-675; No. of Pages 14 Please cite this article in press as: Scott-Kennel, J., & Giroud, A. MNEs and FSAs: Network knowledge, strategic orientation and performance. Journal of World Business (2014), http://dx.doi.org/10.1016/j.jwb.2014.02.004 Contents lists available at ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb http://dx.doi.org/10.1016/j.jwb.2014.02.004 1090-9516/ß 2014 Elsevier Inc. All rights reserved.