PurposeA major challenge faced by MNCs is how to manage knowledge transfer between headquarters and subsidiaries located in dissimilar cultural contexts. While the impact of culture on knowledge transfer has been widely acknowledged, an important gap in the literature is how cultural distance (external variable) and subsidiary roles (internal variable) interact in impacting on knowledge flows in MNCs. The purpose of this paper is to present an integrative model to advance understanding of the interaction between cultural distance and subsidiary roles in the knowledge transfer process within MNCs.Design/methodology/approachAn environment‐strategy‐performance framework is developed based on a review of extant literature. A case study is used to substantiate the framework. It was conducted in an MNC in China and involved in‐depth interviews with expatriate and local managers.FindingsKnowledge transfer in MNCs is influenced by external context (cultural distance) and internal mechanisms (subsidiary roles). The direction and magnitude of knowledge flows is related to the strategic roles of the subsidiary and is influenced by cultural distance. Negative impacts are evident where cultural distance is large, with positive impacts where cultural synergies occur. Changes in Chinese cultural values impacting on knowledge transfer are also evident.Originality/valueThe conceptual model combines internal resource and external environmental perspectives. It links literature on cross‐cultural management, subsidiary roles and MNC knowledge transfer. Furthermore, it explores linkages between culture and knowledge transfer, cultural distance and subsidiary roles, knowledge transfer and subsidiary roles. The model is operationalised in a China‐based case study.
