This paper conceptualizes the knowledge transfer implications of social (lateral) integration mechanisms in the MNE. The generation and transfer of knowledge among geographically dispersed units is one of the primary concerns for the multinational enterprise (MNE) (Ghoshal & Bartlett, 1990; Nohria & Ghoshal, 1997). One of the most used tools for MNE headquarters to stimulate knowledge transfer between subsidiaries, is social or lateral integration mechanisms (for example, committees, meetings, liaisons, expats) (Baliga & Jaeger, 1984). Social mechanisms are perceived as costlier than alternative coordination mechanisms (i.e. formal or centralized coordination mechanisms), but a range of studies have found that these mechanisms open up for communication, dialogue and trust which in turn facilitate knowledge sharing and capability development (i.e. Gupta and Govindarajan, 1991). In a study of an MNE with activities in more than 24 countries, we have data from 115 foreign units that inform on the extent to which the unit is socially integrated with the rest of the MNE, the extent of knowledge transfer between units as well as costs of bargaining between the unit and headquarters. Our findings suggest that social integration on the level of the individual employee increases knowledge transfer between units, but social integration viewed from the management level in the units has the opposite effect. In addition, social integration increases bargaining costs. These findings suggest that there is a darker side of social integration in MNE’s that warrant scholarly attention.