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This study examines the impact of human resource management (HRM) system on subsidiary performance in multinational corporations (MNCs). We examine the relationship at various levels of HRM investment. Hypotheses were tested using longitudinal, multi-informant and objective performance data from a large European MNC operating in 27 countries with 92 subsidiaries. The results showed an S-shaped relationship between the extent to which HRM system is implemented and subsidiary financial performance. The results of this study provide complex insights into the degree to which HRM system contributes as a sustainable competitive advantage for MNC subsidiaries.