The aim of the research was to investigate the synergistic mechanism managers and employees deploy in leader-follower relationships and to facilitate innovative knowledge transfer and acquisition in a foreign subsidiary in New Zealand. Using a service industry subsidiary as a case study, 15 participants, including senior managers, supervisors, and non-managerial employees, were interviewed. The research identified the organizational cultural dynamics, people behaviors, and technological factors that can facilitate or impede innovative knowledge transfer in the service industry.

The extant literature on knowledge transfer and acquisition was reviewed to establish what is already known and what requires further study in relation to knowledge transfer and acquisition using the context of a foreign subsidiary as the setting for this examination.

Using the leader-member exchange (LMX), and transformational and transactional leadership theories, the study considered the management and leadership styles that subsidiary managers employ to respond to and assist employees in facilitating the adaptation of innovative knowledge from the parent firm, as well as locally generated knowledge to a local context.

The key findings are consistent with the current literature on innovative knowledge transfer and acquisition. The study reveals that knowledge transfer is best facilitated in a decentralized organizational culture that fosters open, vertical, and horizontal communication, along with active learning, collaboration, and supportive and motivating leadership. Moreover, training, employees? willingness to learn, and participative leadership grounded in trust and high-exchange qualities in the leader-follower relationships play a central role in knowledge transfer and acquisition. Furthermore, the study found that information technology (IT) greatly facilitates the learning process in the storage, retrieval, dissemination, and communication of the knowledge being transmitted but does not obviate the need for complementary face-to-face personal communication.

The most significant finding of this study is the role of multi-directional trust between leaders and followers and among employees in innovative knowledge transfer and acquisition. Trust based on integrity, honesty, transparency, and consistency enables leaders and followers to be open and receptive to each other in the learning process and sustains the confidence for sharing even sensitive information among organizational members. However, leaders and followers should guard against high trust leading to an ossified organizational mindset that reduces vigilance and critical analysis of information when everyone is highly trusted.

The findings of this research further the understanding of innovative knowledge transfer and acquisition challenges in the context of a subsidiary organization, and extends the body of knowledge about managers? and employees? behaviors and practices that facilitate knowledge transfer. Subsidiary managers could apply the researched findings on behaviors and practices to train and lead employees to enhance the overall performance of their subsidiaries.