Academic endeavours in International Business research have produced a number of convincing studies which argue for the importance of the Multinational Enterprise (MNE) in the world economy and acknowledge its positive impact on international investment activities, in particular through Foreign Direct Investment (FDI). One of the main ways in which the benefits ofFDI can be fully realised is through the MNE's interactions with host country firms. These linkages are considered pivotal in order to induce positive externalities to domestic firms through knowledge and technology transfer, essentially upgrading their capabilities. The overall desired impact of this, is that host country domestic industry becomes more productive, creating increased employment for local workers resulting in an improvement in the economic development of the host country as a whole. Previous studies have come to a number of important conclusions regarding these issues in manufacturing industries. However, fewer studies have focused on looking at services, nor have they explored emergent questions which arise when looking at this topic in greater depth. We argue that with increasing internationalisation and scope in the service sector it is now more important than ever to try to pinpoint how linkages can be utilized to positive effect in services. With this in mind, the main aims and objectives of this exploratory study are to a) develop a conceptual framework examining the factors involved in linkages in services which builds on existing theory by using internalisation theory, network theory and development theory b) to address existing research gaps to show how and what general patterns of linkages occur in services and the strength of their main determinants using a comparative approach in the previously unexplored countries of China and Korea c) to identify how linkages in services affect domestic host country suppliers with a focus on the benefits to the host country and finally, d) to make a contribution to knowledge in this area for academics, policymakers and managers to be able to draw on by discussing key policy & development issues. We address a methodological gap in this area by using qualitative cases studies and indepth interviews and examine the MNE HQ, subsidiary and linked host country enterprise which is particularly useful for an exploratory approach. A total of eight cases, four in each country are examined overall. Data collection is conducted through a series of indepth; semi structured personal interviews with relevant managers of these firms at the headquarters, subsidiary and with one or more suppliers of the MNE subsidiary in the host country (so called 'linked' firms). A total of 30 interviews are used and analysed separately for each case. This study concludes that the most important group of variables affecting the formation of linkages in services are subsidiary related, which suggests that policymakers should focus on helping subsidiaries to become well embedded in the local market through long term focused strategies. At a secondary level of analysis, the sourcing strategy of the MNE and government policy as well as the subsidiary mode of establishment have the most impact, showing that factors affecting linkage formation are multi layered. These factors have been shown to have a strong influence on whether linkages will be created, deepened and extended in a host economy and also on the level of upgrading and other positive effects that are transferred to host country firms. Theoretically, we build on internalisation, network and development theories, finding that certain factors involved in linkage formation are more strongly related to respective theories than others. This study argues that work on configurations of the linkages of service firms are of pivotal importance and these types of issues should be high up on emerging economies' policy agenda.