Based on embeddedness theory and transaction cost theory, this study explores the influences of innovation and adaptation, which benefit from relationship quality between the subsidiaries of foreign MNC and their local suppliers, on the corporate performance of foreign subsidiaries. I order to examine the hypothetic relationships, subsidiaries of foreign MNCs operating in Taiwan were surveyed. The results indicate that the relationship quality, including social capital, information exchange, and frequency of contact, have positive impacts on innovation an adaptation. Additionally, innovation and adaptation function as the mediating mechanism delivering the beneficial influences of relationship quality to the foreign subsidiary's performance. These results imply that the foreign subsidiaries not only devote their resources to innovation for their own interest, but also adjust themselves and invest in the relationships with local suppliers