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This paper investigates how subsidiary companies are able to contribute to the firm‐specific advantages of the multinational corporation (MNC). Specifically we examine the determinants of the contributory role of the subsidiary and subsidiary initiative. The study reveals the following significant relationships: (a) internal subsidiary resources in combination with initiative have a strong positive impact on the subsidiary's contributory role; (b) subsidiary initiative is strongly associated with the leadership and entrepreneurial culture in the subsidiary; and (c) contributory role is strongly associated with subsidiary autonomy and a low level of local competition. We discuss the implications of these findings and some of the theoretical issues associated with subsidiary initiative. Our provisional conclusion is that MNC subsidiaries can not only contribute to firm‐specific advantage creation, they can also drive the process. © 1998 John Wiley & Sons, Ltd.

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This paper examines the characteristics of foreign-owned subsidiaries in export-intensive "leading-edge industry clusters" as defined by Porter [1990]. Using a sample of 229 subsidiaries from three countries, we show that subsidiaries in such clusters are more embedded, more autonomous, and more internationally-oriented than subsidiaries in other industry sectors. We also show that there are significant differences in the roles of J t is well established that the roles of foreign-owned subsidiary companies (i.e. the activities that they have responsibility for in the multinational corporation) vary according to such contingencies as the local environment [Ghoshal and Nohria, 1989], the structural context imposed by the parent [Gupta and Govforeign-owned subsidiaries from one leading-edge cluster to the next, that are associated with the dynamism of the cluster and the overall level of foreign ownership. The results indicate (1) that typologies of subsidiary roles should give increased consideration to environmental factors, and (2) that thinking on industry clusters, instead of treating them identically, should recognize that they have heterogeneous characteristics. indarajan, 1991], and the entrepreneurial capacity of subsidiary management [Birkinshaw, 1997], to name some of the most well-known factors. In this paper we examine another potentially important predictor of varying subsidiary roles -the membership (or not) of a leadingedge industry cluster. An industry clus-*Julian Birkinshaw is an Assistant Professor of Strategy and International Management at the London Business School. His research is concerned with the strategy and organization of large multinational corporations.