Impact of policy uncertainty on subsidiary reverse knowledge transfer

Abstract

Despite the recognized importance of subsidiary reverse knowledge transfer (RKT) for multinational enterprises' (MNEs') competitive advantages, little is understood about how host country policy uncertainty may affect it. This study, based on absorptive capacity and resource dependence theories and utilizing the global economic policy uncertainty (GEPU) index, examines 1565 firm‐year observations of Taiwanese MNE parent–subsidiary activities. Findings suggest that GEPU indirectly undermines subsidiary RKT benefit by reducing MNEs' global R&D intensity and geographical R&D diversity. Notably, this effect is mitigated when MNEs choose joint venture entry modes. This study enriches international business literature by elucidating the intricate relationships between the host country policy uncertainty, MNE strategies, and subsidiary RKT outcomes, thus contributing to a deeper scholarly understanding in the RKT domain.