MNE subsidiaries face a trade-off between the ambition to source knowledge embedded in the host-location and the need to protect their corporation’s knowledge from appropriation by competitors. We explore how foreign subsidiaries operating in a highly competitive clusters orchestrate their local linkages with non-value chain partners to manage the knowledge imperatives they are exposed to.
Our results show that subsidiaries establish heterogeneous patterns of interaction with different local non-value chain agents. We reconcile the extant contradiction between the strategic deterrence and physical attraction theses in that spillover risks, by themselves, do not automatically drive the choice to avoid interaction.