Compared to local and global Asian competitors, Western Multinational Companies struggle to offer successful innovations in emerging markets. This research aims to define, understand and explain the specific knowledge transfer mechanisms at the local level compared to Western Countries and how Western Companies integrate knowledge coming from a culturally different environment internally. The research focuses on four clusters in China and India with high relevance for their research and development activities: Bangalore, Beijing, Shanghai and Shenzhen. Especially interesting is the consideration of knowledge transfer mechanisms in Asian territories and for Western MNCs with respect to cross-cultural challenges. Basis for the research is a retrospective analysis of successful innovations and actors involved in the innovation process for each cluster. Results from the interviews with these key agents elucidate the most important knowledge transfer mechanisms for developing successful innovations in each of the economically, culturally and socially different clusters and draw a new typology of clusters in emerging and developed countries. Additionally and in comparison, formal and informal knowledge transfer mechanisms for communicating and integrating knowledge from the foreign subsidiary to headquarters are highlighted. This overall approach leads to new conclusions on the type of innovation strategies and organizations Western MNCs need to adopt to bring about successful innovation in Asia.