This paper discusses the current links between international business, economic geography and knowledge management. Despite the recent proliferation of papers dealing with knowledge transfer by multinational enterprises (MNEs) in China, there is limited work investigating the role of geographic space on knowledge transfer. Given the growing interest in knowledge transfer by MNEs, the lack of research on geographic space in the Chinese context is a significant gap in our knowledge. In response, we have conducted what we believe to be the first study on the relationship between geographic space and knowledge transfer by the Japanese MNEs to their subsidiaries in China. The paper reviews the relevant literature from which it develops a theoretical model which is then tested empirically. We then provide empirical results on the relationship between geographic space, perceived distance and knowledge transfer. A LISREL model is employed to study the impact of the latent variables associated with geographic space on knowledge transfer. Based on the results, this study provides useful insights for economic geographers who wish to study knowledge transfer between parent companies and their subsidiaries across geographic space.