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The international marketing literature has suggested that the characteristics of the subsidiary-headquarters relationship play an important role insubsidiary knowledge development within the field of multinational corporations. However, few studies have examined the association between thesubsidiary-headquarters relationship and the subsidiary strategic role and its effects on subsidiary knowledge development. In this article, the authors first examine the effect of four subsidiary-headquarters relational characteristics (socialization mechanisms, autonomy, shared values, and internal embeddedness) on subsidiary knowledge development. Then, building on configuration theory, the authors employ two perspectives of fit (moderation and profile deviation) to investigate the impact of fit between strategy and relational characteristics and examine their effects on subsidiary knowledgedevelopment. Using data from 184 U.K. foreign-owned subsidiaries operating in the knowledge-intensive business services sector, the authors confirm that internal embeddedness, socialization mechanisms, and autonomy are positively related to subsidiary knowledge development. Furthermore, the findings support the moderation and profile deviation perspectives and indicate that aligning the subsidiary's strategic role with relational characteristics can lead to superior knowledge development.