Recent contributions highlight the importance of international knowledge transferas a fundamental source of competitive advantage of MNCs. Due to the traditionalassumption that parent firms are the prime source of knowledge, majority ofstudies have focused on knowledge transfer from headquarters to subsidiaries.However, the role of subsidiaries within MNCs has changed dramatically; manysubsidiaries have gained a creative role by generating new resources depending onthe comparative advantage of the location in which they operate, and through theprocess of reverse knowledge transfer, they subsequently contribute to thecompetence upgrading of the MNC. In reviewing the extant literature on MNCknowledge transfer and in particular reverse knowledge transfer, this researchunleashes several gaps, notably in the understanding of factor affecting subsidiaryknowledge development and reverse knowledge transfer within the service sector.Borrowing concepts from the knowledge-based and network views, a series ofhypotheses were tested using the result of a web-based survey of the subsidiariesthat were located in the UK, had a non-UK parent firm, and were active in theKIBS sector. Responses from 187 general managers, managing directors, or chiefexecutives of subsidiaries confirm that those subsidiaries that develop andmaintain business relationships with their internal (sister subsidiaries andheadquarters) and external actors (customers, universities, suppliers, competitors)and have high level of autonomy are more capable of developing knowledge.With regards to determinants of reverse knowledge transfer, while subsidiarycharacteristics (knowledge development and willingness) and relationshipcharacteristics (socialization mechanisms) are emerged as the main facilitators ofreverse knowledge transfer, knowledge characteristics (tacitness and complexity)appeared as the main hindrances of this phenomenon. Moreover, the resultsindicate that, (a) socialisation mechanisms augment the extent of shared valuesand subsidiary-parent firm embeddedness and (b) willingness mediates theimpacts of shared values and subsidiary-parent firm embeddedness on reverseknowledge transfer.The key contributions of this research are two-fold: firstly, it examines the processof reverse knowledge transfer and knowledge development exclusively within theKIBS sector. Secondly, it investigates the joint impacts of relationshipcharacteristics, knowledge characteristics, and subsidiary (sender) characteristicson reverse knowledge transfer.