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When a multinational corporation (MNC) internationalizes by establishing a new subsidiary, the subsidiary's evolution depends upon its acceptance within its host country environment, by its home country headquarters, by other subsidiaries, and by all other stakeholders, including employees, suppliers, customers, complementary innovators, product market critics and analysts. To be accepted, the subsidiary organization has to have a legitimate form with some combination of properties- such as activities, features, and boundaries- that make it recognizable and understandable as a meaningful social unit. In short, as a social object, the subsidiary has to have an identity that conforms to a recognized and accepted type, so that it is evaluated positively as belonging to a legitimate category of organizations. Yet, if value creation simultaneously depends upon a subsidiary developing organizational capabilities, how does its identity shape the development of those capabilities? How do the capabilities in turn alter the subsidiary's identity? How does the identity-capability relationship influence the subsidiary's strategy, and how do th