Based on a sample of 169 subsidiaries of MNCs operating in USA, Russia, and China, this paper investigates the relationship between MNC subsidiary HRM practices, absorptive capacity and knowledge transfer. The paper makes two key contributions. First, the paper examines the relationship between the application of specific HRM practices and the level of the absorptive capacity. Second, the paper suggests that absorptive capacity should be conceptualized as being comprised of two dimensions-ability and motivation. Further, results indicate that the interaction of ability and motivation (absorptive capacity) significantly facilitate transfer of knowledge from other parts of the MNC.-2 -