We study the international innovation strategies of Australian and New Zealand (ANZ) firms in the European context, to explain their investment motives, knowledge flows and innovation performance. Our thematic analysis of seven case studies suggests that ANZ investors' motives for innovation in Europe are often both market- and knowledge-seeking and that some are also motivated by diversification and cooperation. While the strategic intent is often for the knowledge to flow in multiple directions among subsidiaries and headquarters (HQ), distance poses challenges to the efficiency of the process. European subsidiaries are often seen as potentially playing a key role in firms' global innovation systems, particularly with regards to radical innovation. However, because of distance and communication bottlenecks (e.g., time zone differences), HQ does not always recognise this potential. We develop a model proposing that HQ–subsidiary trust and strategic motives are moderators in the process of international knowledge connectivity and knowledge creation.

The knowledge-based view of the firm portrays knowledge assets as the basis of sustainable competitive advantage. However, leveraging the knowledge available to the firm is not straightforward. The transfer of best practices within the firm or the replication of a certain routine poses challenges for managers. Causal ambiguity of knowledge makes it difficult to transfer practices into other contexts within the firm. In this paper, a new framework is proposed that identifies four antecedents to causal ambiguity: complexity, tacitness, relevance to the existing knowledge base, and the locality of knowledge. The paper concludes with the implications of the framework.