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The Impact of Subsidiary Autonomy on MNE Knowledge Transfer: Resolving the Debate
Abstract
This paper explores theoretical and empirical ambiguities in the literature concerning the impact of foreign subsidiary autonomy on intra-MNE knowledge transfer. We argue that understanding the interdependences between subsidiary autonomy and the use of different communication systems - e.g. person-based and electronic-based communication systems - is crucial to putting forward new insights in the debate. Based on the recent literature on strategic management, we hypothesize that the two communication systems call for different degrees of subsidiary autonomy and vice versa. Using a data set consisting of 307 dyads between foreign subsidiaries and their parent companies, we find that two distinctive configurations positively affect the extent of knowledge transfer from foreign subsidiaries to their parent companies. The first is the combination of a high degree of subsidiary autonomy and the use of person-based mechanisms, and the second is the combination of low subsidiary autonomy and the use of electronic-based mechanisms.
... Previous international studies about multinational organizations describe that there is a strong asymmetry between the headquarters (HQ) and its global subsidiaries (Björkman et al., 2007). More recent studies indicate that the disparity comes from a cultural gap between HQ and the hosting country; a choice of parent company strategy or policy (Gammelgaard et al., 2012); and the subsidiary's proactive actions (Dörrenbächer and Geppert, 2009, Rabbiosi, 2008, Mudambi et al., 2007. ...
The habituation of legal software use for students on college campuses is important because it helps future professionals exercise the rules of ethical compliance. In this action research study, over a two-year period, we investigated the effects of planned change interventions (a.k.a. organizational development efforts) on legal software use at an American business school in China. We examined correlations among the unified theory of acceptance and use of technology constructs by using the partial least square structural equation modeling technique. After obtaining the evaluative surveys from undergraduate business students (n = 215), the results indicated that the adoption rate of legal software increased from 40% to 71%, and change interventions accelerated the speed of legal software use. While performance expectancy, effort expectancy, and social influence had significant influences on behavioral intention, we found a substantial gender difference in the effect of facilitating condition on the legal software use behavior. Females are less likely to accept legal software that is mandated by the organizational policy, but they are highly influenced by the social influence. We also found out that participants accept legal software differently according to their respective year in the organization. Relatively new students are sensitive to the organizational policy whereas experienced students give more attention to the benefits of using legal software. Based on these findings, we suggest gender sensitive organizational policy and structured institutional efforts to build a software piracy free organization.
... However, the obstacles to reverse knowledge transfer by the 'knowledgesuperior' subsidiary are manifold. First, parent companies cannot easily apply the subsidiary's knowledge if it is highly embedded in local contexts (Rabbiosi, 2008). Second, when a foreign subsidiary possesses valuable knowledge, it may be anxious about the loss of its bargaining power if it transfers this commodity to the parent company. ...
This article analyses the parent–subsidiary relationship of Chinese subsidiaries, taking those located in Germany as an example. Our research focuses on two major questions: (i) What degree of decision-making autonomy do Chinese subsidiaries in Germany hold? (ii) What are the factors that determine the degree of their decision-making autonomy? On the basis of institutional theory and resource-dependence theory, we hypothesize that the autonomy of Chinese subsidiaries is: (i) influenced by state ownership of their parent companies and (ii) related to the extent of their reliance on knowledge transfer from subsidiaries to headquarters. In order to test these hypotheses, a multiple regression analysis was conducted. We found that Chinese companies apply no rigid rules regarding authority over decision making in their subsidiaries. Although the reliance on reverse knowledge transfer exerts a strong and positive influence on the subsidiary’s decision-making autonomy, state ownership of Chinese parent companies is not an important determinant of subsidiary autonomy.
... That is, conventional knowledge transfer has tended to be from the home country to subsidiaries, with the subsidiaries acting as net exploiters of assets originally developed in the home base. However, a number of studies have highlighted the growing phenomenon of reverse knowledge transfer, with certain subsidiaries transferring knowledge in the reverse direction (Frost, 1998;Håkanson and Nobel, 2001;Criscuolo et al, 2005;Frost and Zhou, 2005;Ambos et al. 2006;Rabbiosi, 2008). There are three possible steps in the reverse transfer of knowledge: from the local environment of the host country to the MNE's subsidiary, from the MNE subsidiary to the parent company, and from the parent company to the local environment of the country of origin 1 (see figure 1). ...
There is a growing international dispersion of R&D activities by MNEs for the purposes of maintaining and augmenting their knowledge assets. Firms need to tap into alternative knowledge sources , as home countries are rarely able to meet all their technological needs. However, accessing to foreign knowledge implies integration with the host country innovation system that requires considerable time and resources. Although asset-augmenting activities are seen as primarily benefitting the MNE, we argue that home country innovation systems can also benefit from reverse knowledge transfer. Policy makers need to promote these linkages and flows, rather than seeing R&D internationalisation as a threat to the home economy. New knowledge developed abroad by firms can and should be encouraged to be transferred to the rest of the firm and to the local environment of the home country.
Purpose
Nested within institutional theory and the political economy perspective, this study aims to examine Chinese outward foreign direct investments (OFDI)-supporting organizations and fostering mechanisms for its SMEs in Europe’s largest economy, Germany.
Design/methodology/approach
The authors conduct a multiple-case study to present rich insights from elite interviews with representatives of Chinese and German governmental organizations, intermediary parties and specialized OFDI consultants. In addition, the authors analyze secondary data such as presentations, websites, brochures, social media and recent Chinese OFDI policies for SMEs. The findings are triangulated by interviewing business owners and senior executives of seven Chinese SMEs that have invested in Germany.
Findings
Cooperating with Germany’s federal government, China’s ministries implemented an effective OFDI support network in Germany, which connects and benefits both economies. This includes Chinese governmental organizations, privately-held national champions, German–Chinese business associations and linked intermediary parties. These organizations support SMEs through four main mechanisms: networking and information, mutually beneficial knowledge transfer between innovation partners, lobbying for potential cooperation and an objective picture of Chinese OFDI and facilitating investment services.
Originality/value
This study advances OFDI theory and contributes to the growing discussion on the internationalization of Chinese SMEs by shedding light on China’s OFDI support organizations and mechanisms in the German market. The study also offers practical contributions. Understanding better how governments can spur internationalization is vital, as it determines the effectiveness of policymaking and fosters international mutual understanding, cultural exchange and firm growth and innovation (Ahlstrom, 2010), and hence ultimately contributes positively to society. Moreover, knowing the specific OFDI support organizations and measures China is currently adopting can serve as a helpful orientation for Chinese entrepreneurs who plan to invest in Germany.
Knowledge governance is characterised as a distinctive research subject, the understanding of which cuts across diverse fields in management. In particular, it represents an intersection of knowledge management, strategic management, and theories of the firm. Knowledge governance considers how deployment of governance mechanisms influences knowledge processes: sharing, retaining and creating knowledge. We survey the papers in this volume of the special issue, and discuss the remaining research challenges.
Question/Issue: Institutional and transaction costs theories highlight the idea that group affiliated firms outperform unaffiliated firms in emerging economies. The persistence of superior performance for group affiliated firms is, however, questioned by the fast and recent development of markets and institutions in these countries. In this article, we explore this link between firm performance and the evolution of institutional environment. Research Findings/Insights: The setting of the empirical investigation is India in the post-reform era (post 1990). We test for effects of business group affiliation on firm performance over a 17 year time period from 1990 to 2006. Our findings show that (i) the performance benefits of group affiliation erode with the evolution of the institutional environment; (ii) older affiliated firms are better able to cope with institutional transition than younger affiliated firms; (iii) service-sector affiliated firms are better able to cope with institutional transition than manufacturing-sector affiliated firms. Theoretical/Academic Implications: Our findings both support the institution - and transaction costs-based theory of business groups, and extends it by incorporating a dynamic and longitudinal component. They also demonstrate - in line with recent works - that the benefits of group membership differ for different types of member firms. Practitioner/Policy Implications: The article has implications for both managers and policy makers. Managers of business groups should timely adapt their strategy to the evolution of the institutional environment. Policy makers should, instead, devote attention to the consequences of their policies because they may undermine the efficiency of large national companies.
An enduring characteristic of extant literature on foreign operation modes is its discrete choice approach, where companies are assumed to choose one among a small number of distinctive alternatives.
In this paper, detailed information about the operations of six Norwegian companies in three key markets (China, UK and USA) is used as the basis for an exploration of the extent to which, and how and why, companies combine clearly different foreign operation modes. We examine their use of foreign operation mode combinations within given value activities as well as within given countries.
The study reveals that companies tend to combine modes of operation; thereby producing unique foreign operation mode “packages” for given activities and/or countries, and that the packages are liable to be modified over time—providing a potentially important optional path for international expansion.
The data show considerable variation across cases; ranging from extensive use of mode combinations to a singular focus on a specific mode of operation. The study contributes to a refinement of our understanding of the path of internationalisation, and throws up a number of awkward theoretical questions about the process.
Austrian economics focuses on markets, but has much to say about organizations. In particular, Austrian insights on the structure of production, the heterogeneity and subjectivity of resources, the nature of uncertainty, the role of monetary calculation, and the function of the entrepreneur provide solid foundations for a distinctly Austrian theory of organizations. We review these insights, discuss recent literature on Austrian economics and the theory of the firm, and suggest new directions for developing and extending an Austrian approach to organizations.
Agency theory studies the problems and solutions linked to delegation of tasks from principals to agents in the context of conflicting interests between the parties. Beginning from clear assumptions about rationality, contracting and informational conditions, the theory addresses problems of ex ante (“hidden characteristics”) as well as ex post information asymmetry (“hidden action”), and examines conditions under which various kinds of incentive instruments and monitoring arrangements can be deployed to minimize the welfare loss. Its clear predictions and broad applicability have allowed agency theory to enjoy considerable scientific impact on social science; however, it has also attracted considerable criticism.
I present an analysis of a survey in which the effect of entrepreneurship education and project-based education on students at lower secondary level is investigated. The results are based on a random sample of 2000 Danish students. The analysis indicates that entrepreneurship education has a positive effect on students’ personal development, and that its effect on entrepreneurial intentions is fully mediated by its effect on students’ self-conception. A finding with important policy implications is that there is a negative interaction effect between entrepreneurship education and project-based education regarding impact on students’ self-conception. The implication of the results is that we should replace project-based education with entrepreneurship education rather than having them run in parallel.
Three varieties of institutionalism currently dominate international business studies: new institutional economics, new organizational institutionalism, and comparative historical institutionalism. Yet corresponding measures of institutional country distance are only available for the first two strands of institutionalism. This paper addresses the under-representation of comparative historical institutional thought in currently available measures of institutional distance. Building on Whitley's business systems framework, a measure of institutional distance is developed and validated which captures intrinsic, substantive institutional differences in economic organization, rather than differences in institutional effectiveness. The results of the two-stage cluster analysis used to validate the selected indicators closely approximate the business systems typology, which is both indicative of the validity of this measure and of the distinctiveness of the business system types that make up the business system framework.
The emerging knowledge governance approach asserts the need to build micro-foundations grounded in individual action. Towards this goal, using the theory of planned behaviour, we aim to explain individual knowledge-sharing behaviour as being determined by the intention to share knowledge and its antecedents: attitude towards knowledge sharing, subjective norms and perceived behavioural control. In addition, we consider managerial interventions (governance mechanisms) that managers can employ to influence the identified antecedents and thereby govern individual knowledge-sharing behaviour. We test the model arrived at on a dataset collected among individuals engaged in knowledge sharing in two competing firms. Results of the LISREL analysis show that the use of rewards affects attitudes towards knowledge sharing negatively, while the use of reciprocal schemes and communication mechanisms have a positive effect on subjective norms and perceived behavioural control, respectively.
The role of knowledge, organizational learning and innovation as levers of competitive advantage is now a commonly acknowledged insight in research in international management, specifically in the emerging ‘knowledge-based view’. However, this view has not yet developed into a unifying framework and there are significant holes in the understanding of how knowledge may be turned into a source of competitive advantage for MNCs. In order to advance the knowledge-based view of the MNC – and particularly of the metanational company – we develop the notion of the MNC as a global knowledge system that links local knowledge structures and combines local knowledge elements that are complementary in order to achieve strategic advantage. These ideas are used to frame the changing environments, strategic intents and learning stances that characterize MNCs, and to derive a set of research challenges for MNC research.
Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within multinational enterprises. But how individual behaviour translates into absorptive capacity at the subsidiary level, and how this is contingent on subsidiaries' social context, remains under‐addressed. This not only limits our understanding of the relationship between individual‐ and organizational‐level absorptive capacity, but also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners who seek to increase their organization's capacity to put new knowledge to use. To address this shortcoming we conduct an in‐depth comparative case study of a headquarters‐initiated knowledge transfer at two subsidiaries of the same multinational enterprise. The findings demonstrate that social interaction is a prerequisite for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context and the development of local applications. The findings also illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as a key link between individual‐ and organizational‐level absorptive capacity.
We discuss the behaviorist and empiricist foundations of the organizational routines and capabilities literature, specifically the extant emphasis placed on experience, repetition and observation as the key inputs and mechanisms of behavior, learning and change in organizations. Based on this discussion we highlight several concerns associated with specifying experience and repetition as antecedents of routines and capabilities, namely, (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We highlight the “poverty of stimulus” argument and more generally discuss how internalist or rationalist, choice-based approach might provide a more fruitful (though preliminary) foundation for extant research on organizational routines and capabilities.
The knowledge-based view has recently been criticized for overlooking individual-level action and interaction in favor of an over-emphasis on the firm-level capabilities. This paper seeks to respond to that criticism by providing some individual-level explanations for a collective-level phenomenon – intraorganizational knowledge transfer. We suggest that variations in individual ability, motivation and the use of interaction opportunities provided by the organization explain part of the variation found in individuallevel knowledge acquisition and use, and that this has an influence on organizational level knowledge transfer within a firm. More specifically, we find that ability and intrinsic motivation are important drivers of individual level knowledge acquisition and use, while extrinsic motivation has no impact. Furthermore, the extent to which an individual uses interaction opportunities provided by the organization influences knowledge transfer both directly and through a moderator effect with ability and person-to-person interaction.
Entrepreneurs in a competitive economy face three fundamental problems. They need to search for and discover a business opportunity (Kirzner, 1973), evaluate it (Knight, 1921), and then seize the opportunity to reap entrepreneurial profits (Schumpeter, 1911) (Langlois, 2007). The problem that we address is how the ability to exploit business opportunities is influenced by entrepreneurial search and the economic organization of entrepreneurship (Arrow, 1962; Lippman & Rumelt, 2003; Aghion et al., 2005; Foss et al., 2007). In many cases, the discovery for a new business opportunity needs to be motivated by expected gains, since the search and evaluation of business opportunities is a costly, resource-consuming process (Denrell, Fang & Winter, 2003; Nickerson & Zenger, 2004; Foss & Klein, 2005; Teece, 2007; Foss & Foss, 2008). We show the critical role of expectations for understanding of the economic organization of entrepreneurship, and argue that transaction cost economics, with its insistence on bounded rationality, but far-sighted contracting offers useful insights and presents rich opportunities for further theoretical and empirical research (cf. also Furubotn, 2002).
Interest in entrepreneurship education is growing over the world, especially in innovation based economies, such as Denmark (GEM, 2010). However, we know rather little about the outcomes of entrepreneurship education, in particular with respect to which type of course content produces the best results (i.e. most high performing entrepreneurs) and how this affects different types of students. There is a great variety of different views in the field of research concerning the content and structure of entrepreneurship courses, but no comprehensive study has yet been done in which these competing views are clearly articulated as rivals and tested against each other. There is also a lack of programme evaluations that use control groups and have a longitudinal design (Gorman, Hanlon & King, 1997; Karlsson & Moberg, 2011; Matlay, 2008). Those that have this setup often experience methodological problems due to their conceptual framework (Krueger, 2009), or they have a view of entrepreneurship that does not take into account the advancements within research that have been made during the last decade (Sarasvathy, 2008). Thus, we clearly need to dig deeper into this field in order to create methods and models that allow us to evaluate the outcomes of different types of entrepreneurship courses.In the beginning of 2011, the Danish Foundation for Entrepreneurship – Young Enterprise initiated a research project with the aim to further our understanding of the type of impact entrepreneurship education and different educational designs have on different types of students. Two longitudinal surveys, one with a focus on elementary- and secondary-level education and one with focus on tertiary-level education, will be performed and databases with students from all levels of the Danish educational system will be created. The surveys will use entrepreneurial self-efficacy (Mauer, Neergaard & Kirketerp, 2009) as a performance indicator, but in order to generate robust results the development of new measurement tools is needed. In this paper the initial phases of this project and the research design of these two surveys will be presented. The development of a new ESE scale and the results from the pilot surveys will also be presented.
Israel Kirzner's concept of entrepreneurship as alertness to profit opportunities is one of the most influential modern interpretations of the entrepreneurial function. Shane and Venkataraman's (2000: 218) influential assessment defines entrepreneurship research as "the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited." As such, "the field involves the study of sources of opportunities; the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them." Shane's General Theory of Entrepreneurship (2003) cites Kirzner and "Kirznerian opportunities" more than any writer other than Joseph Schumpeter. More generally, the entrepreneurial opportunity, rather than the individual entrepreneur, the startup company, or the new product, has become the centerpiece of the academic study of entrepreneurship. In Kirzner's framework, profit opportunities result from prices, quantities, and qualities that diverge from their equilibrium values. Some individuals tend to notice, or be alert to, these opportunities, and their actions bring about changes in prices, quantities, and qualities. The simplest case of alertness is that of the arbitrageur, who discovers a discrepancy in present prices that can be exploited for financial gain. In a more typical case, the entrepreneur is alert to a new product or a superior production process and steps in to fill this market gap before others. Success, in this view, comes not from following a well-specified maximization problem, such as a search algorithm (High, 1980), but from having some insight that no one else has, a process that cannot be modeled as an optimization problem. Entrepreneurship, in other words, is the act of grasping and responding to profit opportunities that exist in an imperfect world. Unlike other approaches in modern economics, the imperfections in question are not seen as temporary "frictions" resulting from ill-defined property rights, transaction costs, or asymmetric information. While those imperfections can be cast in an equilibrium mold - as in the modern economics of information-Kirzner has in mind a market in permanent and ineradicable disequilibrium. Kirzner's approach, like that of Knight, Schumpeter, and other key contributors to the economic theory of entrepreneurship, sees entrepreneurship as an economic function, not an employment category (i.e., self-employment) or type of firm (i.e., a startup company). The main effect of the entrepreneurial function is market equilibration: by closing pockets of ignorance in the market, entrepreneurship always stimulates a tendency towards equilibrium (Selgin, 1987). While Kirzner's "pure entrepreneur," an ideal type, performs only this function, and does not supply labor or own capital, real-world business people may be partly entrepreneurs in this sense, partly laborers, partly capitalists, and so on. The relationship between entrepreneurial discovery and capital investment distinguishes Kirzner's approach sharply from Knight's (and, arguably, from Kirzner's mentor Ludwig von Mises's). Because Kirzner's (pure) entrepreneurs perform only a discovery function, rather than an investment function, they do not own capital; they need only be alert to profit opportunities. Kirznerian entrepreneurs need not be charismatic leaders, do not innovate, and are not necessarily creative or in possession of sound business judgment. They do not necessarily start firms, raise capital, or manage an enterprise. They perform the discovery function, and nothing else. Kirzner's work is routinely invoked in references to the classics of the economics of entrepreneurship, alongside Knight's (1921) and Schumpeter's (1911) contributions. Kirzner's framework builds on the market-process approach associated with the Austrian school of economics and can trace its roots further back to Richard Cantillon, J. B. Clark, Frank A. Fetter, and other writers. Kirzner himself sees his contribution as primarily an extension of the work of Mises and F. A. Hayek, in effect bridging Mises's (1949) emphasis on the entrepreneur with Hayek's (1946, 1968) conceptualization of market competition as an unfolding process of discovery and learning. Among mainstream economists, Kirzner has been cited in the literature on occupational choice, and there have been a few attempts to formalize his model of the market process (Littlechild, 1979; Yates, 2000) and a few experimental investigations (Demmert and Klein, 2003; Kitzmann and Schiereck, 2005). Kirzner has explained the Austrian model of the entrepreneurial market process to readers of the prestigious Journal of Economic Literature (Kirzner, 1997). Still, his work has been more influential among management scholars than among economists. Thus, his approach underlies much of the opportunity-discovery or opportunity-recognition branch of the modern entrepreneurship literature (Shane and Venkataraman, 2000; Gaglio and Katz, 2001; Shane, 2003) which makes opportunities, and their discovery and (potential) exploitation, the unit of analysis for entrepreneurship research. This has given rise to a large theoretical, empirical, and experimental literature looking into the various antecedents of such opportunity discovery. As we shall argue, this literature goes much beyond Kirzner's work, making opportunity discovery and its determinants the key feature of the theory, whereas Kirzner's real interest lies in explaining market equilibration, a higher-level phenomenon. This chapter traces the origin and development of the concept of entrepreneurial alertness. In particular, we place Kirzner's contribution within the broader context of the Austrian school of economics, comparing and contrasting it with other Austrian conceptions of entrepreneurship. We argue that while Kirzner's contribution is often thought of as the Austrian conception of the entrepreneur, there is in fact an alternative Austrian tradition that emphasizes the entrepreneur as an uncertainty-bearing, asset-owning individual and that this tradition offers some advantages over the discovery approach (whether in the Kirznerian or modern-management incarnations). We also critically discuss the way Kirzner's work has been interpreted and used in the opportunity discovery approach in recent management research on entrepreneurship.
This paper offers a critical perspective on Israel Kirzner’s basic analytical framework. Specifically, we characterize Kirzner’s emphasis on processes of equilibration as a departure from the causal-realist price theory developed by Menger and his nineteenth- and twentieth-century followers. In this context, we contrast Kirzner’s interpretation of entrepreneurship as discovery with a more realistic, and operationally meaningful, idea of entrepreneurship as action. Finally, we discuss an inconsistency in Kirzner’s treatment of the antecedents of entrepreneurial behavior.
This chapter discusses entrepreneurship in the context of the RBV. What does the RBV have to say that the study of entrepreneurship may usefully draw on? And, conversely, how can entrepreneurship research further the RBV? I begin by sketching the RBV. I then discuss the relation between the RBV and entrepreneurship research, before I characterize a new research stream that has emerged over the last decade or so in the intersection of the RBV and entrepreneurship research, namely “strategic entrepreneurship.”
The field of strategic entrepreneurship is a fairly recent one. Its central idea is that opportunity-seeking and advantage-seeking — the former the central subject of the entrepreneurship field, the latter the central subject of the strategic management field — are processes that need to be considered jointly. The purpose of this brief chapter is to explain the emergence of SE theory field in terms of a response to research gaps in the neighboring fields of entrepreneurship and strategic management; describe the main tenets of SE theory; discuss its relations to neighboring fields; and finally describe some research gaps in extant theory, mainly focusing on the need to provide clear microfoundations for SE theory and link it to organizational design theory.
The study of entrepreneurship and the study of economic organizing lack contact. In fact, the modern theory of the firm virtually ignores entrepreneurship, while the literature on entrepreneurship often sees little value in the economic theory of the firm. In contrast, we argue in this chapter that entrepreneurship theory and the theory of the firm can be usefully integrated, and that doing so would improve both bodies of theory. Adding the entrepreneur to the theory of the firm provides a dynamic view that the overly static analysis of firm organizing cannot support. Moreover, adding the firm to the study of the entrepreneur provides important clues to how we can understand entrepreneurship.
As the editors of this volume note in their introductory chapter, collaboration is inherent in any operating market economy, and collaboration is, of course, sought because of the advantages it yields relative to non-collaboration. At the most abstract level, “collaboration” simply means “non-autarcic”; thus, Austrian economist Ludwig von Mises (1936) saw the division of labor as organized under capitalist institutions as a primary example of peaceful collaboration. Less abstractly, collaborative advantage may be related to notions of social capital and generalized trust. Still, such understandings capture a very large part of extant social science research. A more narrow understanding of collaborative advantage is required, lest we merely engage in an unproductive relabeling game. In fact, starting with important contributions by, for example, Hirschman (1970) and Richardson (1972), modern writers associate collaborative advantage with (typically) long-lasting and stable relations between actors, supported by informal trust relations, relations based on formal contracts or property rights, or some combination thereof (Lazzarini, Miller & Zenger, 2004). The relevant actors may exist at different analytical levels (e.g., individuals, firms, dyads, industries, clusters, regions, nations) and may in turn be embedded in various formal and informal institutions (North, 1990), as well as in certain geographical contexts. However, even this conceptual narrowing of the notion of collaborative advantage still implies that we are making reference to very large and still expanding literatures in (fields in) economics (e.g., economic geography, urban economics, trade theory) and sociology, as well as management fields, such as strategic management, international business, and innovation studies. In various field and discipline-specific ways, these examine the morphology of collaboration and collaborative advantage, and seek to identify their antecedents and consequences. Methods differ, ranging from longitudinal single case studies to multi-level panel data studies using state of the art econometrics. Not surprisingly, it is far from clear that what is effectively a jumble of contributions actually adds up to robust generalizations and insights. Parts of extant work on collaboration and collaborative advantage is nicely summarized in the editors’ introductory chapter. In this chapter we argue that because there are so few obvious constraints on the meaning of collaboration on the social domain, and because it is mixed up with fundamental multi-level issues, both with respect to conceptualization, antecedents and consequences, clarity and rigor with respect to construct definition, location of constructs at various analytical levels, and methods is absolutely essential. For example, while collaborative advantage may be well-defined at the level of firm dyads (Richardson, 1972; Williamson, 1985; Dyer & Wilkins, 1993), it may be (in fact, is) less well defined at higher levels of analysis, such as industries or industrial districts. Or, collaborative advantage at these latter levels may actually mean something different from collaborative advantage at the dyadic level, and have different antecedents and consequences. For example, as the notion of collaborative advantage traverses levels of analysis, antecedents likely differ (Nielsen, 2010). As these examples suggest, many of the difficulties of researching collaboration and collaborative advantage stem from the multi-level nature of these constructs themselves, as well as from the fact that their antecedents and consequences may be located at multiple different levels. For instance, with respect to antecedents, dyad-level collaborative advantage (e.g., superior innovation resulting from pooling innovation capabilities in specific projects) may arise from particularly skilled R&D personnel or alliance managers; the firms’ endowments of innovation capabilities or their experiences from previous R&D collaboration; advantages accruing to the specific region they are located in; governmental support programs; broad societal institutions; etc. Thus, collaborative advantage may have antecedents on lower (”micro”) as well as higher (”macro”) analytical levels (Knudsen & Nielsen, 2010). In fact, one of our key points in the following is that researching collaborative advantage inherently requires a multi-level approach. Theoretically, account must be made of antecedents and consequences at different levels, as well as potential cross-level effects. In extant research, this is often not done; for example, research on national systems of innovation (e.g., Lundvall, 1992) often makes no reference to firms whatsoever (which logically must be part of the micro-foundations of such systems). By the same token, little effort has been devoted to defining the level at which constructs operate and little theory development within the strategic alliance field explicitly addresses the role played by variables at different levels (Nielsen, 2010). Proper — multilevel — empirical research methods must be adopted; otherwise, relevant causes are not identified and/or estimated parameters become biased. Accordingly, this chapter offers a condensed primer on multi-level conceptual and methodological issues pertaining to collaborative advantage in order to guide future research. Rather than striving to be all-encompassing, we focus our discussion on a particular type of collaboration—strategic alliances among independent business firms—as this area of research continues to play a central role in strategic management, international business and organizational science. Despite this focus, most of the ensuing discussion applies equally well to other kinds of collaborations and we draw parallels to these where relevant. A further limitation is that we restrict our inquiry to variable-centered theoretical and empirical inquiry, and as such do not touch upon collaborative advantage in the context of small-N research, such as narrative approaches or approaches relying on comparative case method.
We survey the resource-based view in strategic management, focusing on its roots in economics. We organize our discussion in terms of the Gavetti and Levinthal distinction between a “high church” and a “low church” resource-based view, and argue that these hitherto rather separate streams are increasingly overlapping.
Nationality diversity and international experience constitute two related yet distinct sources of competence among upper echelons. While both TMT international experience and nationality diversity increases the likelihood of firms expanding outside their home region, our results show that TMTs with international experience are more likely to expand abroad via greenfield investments, whereas nationally diverse TMTs are more likely to engage in international acquisitions and joint ventures. This highlights the need to treat TMT nationality diversity and international experience as two different characteristics influencing foreign entry mode decision.
SHRM increasingly emphasizes HRM practices as means to build strategic knowledge resources such as superior capabilities. While the knowledge-based view increasingly pays attention to micro-foundations, the SHRM field neglects these and emphasizes collective constructs such as "human capital pools," "HRM architectures", etc. As a result, causal links between HRM practices, knowledge and organizational performance are black-boxed. We propose a program for research and identify some of the key issues that future research must deal with.
In Europe, in particular, the number of foreigners appointed to top management teams has increased significantly over the past decade. However, the question of why some firms elect to employ foreign nationals on their top management teams remains unclear. This study utilizes a multi-level methodology to test the degree to which employment of a foreigner on the top management team is driven by individual level human capital characteristics versus firm level strategic considerations. Results from empirical tests on a sample of Swiss publicly listed companies suggest that degree of international diversification is positively associated with the likelihood of having a foreign executive, whereas human capital characteristics do not explain the propensity to employ a foreigner on the top management team. Further analyses indicate that nationality diversity at the board level, as well as the international experience of the top management team, are possible predictors of the probability of having a foreigner on the top management team.
This paper is the Introductory chapter to my forthcoming book, Knowledge, Organization, and Property Rights: Selected Essays of Nicolai J Foss, to be published by Edward Elgar in 2008. It provides a brief bio-statement and then discusses and places in context the various papers in the collection. The papers in the book are listed in the Appendix.
Manuscript Type: Empirical
Research Question/Issue: Institutional and transaction cost theories highlight the idea that group‐affiliated firms outperform unaffiliated firms in emerging economies. However, the persistence of superior performance among group‐affiliated firms could be challenged by the recent, quick development of markets and institutions in these countries. This article explores the link between firm performance and the evolution of the institutional environment.
Research Findings/Insights: We analyze how business group affiliation affected firm performance in India in the post‐reform era, i.e., from 1990 to 2006. Our findings show that: (1) the performance benefits of group affiliation are evident in the early phase of institutional transition, but level out in the late phase; (2) older group‐affiliated firms are better able to cope with institutional transition than younger group‐affiliated firms; and (3) group‐affiliated service firms are better able to cope with institutional transition than group‐affiliated manufacturing firms.
Theoretical/Academic Implications: Our findings support institutional and transaction cost theories, as they show that: (1) when labor, capital, and products markets are characterized by large imperfections and weak supporting institutions business groups outperform independent companies; (2) when markets become more efficient and institutions grow stronger group‐affiliated firms fail to show continued superior performance; and (3) heterogeneity among member firms may influence the appropriation of the benefits arising from group affiliation. These findings expand the traditional understanding of the relationship between firm performance and the institutional context in emerging economies, and provide further support for the idea that the relative performance of group‐affiliated firms is contingent upon the characteristics of the institutional context and their particular features.
Practitioner/Policy Implications: The article has implications for managers and policy makers. Managers of business groups should adapt the timing of strategies to the evolution of the institutional environment. Policy makers should focus on the consequences of their policies, as they may undermine the efficiency of large national companies.
To add insight in new value creation, opportunity discovery should be integrated with strategic management theory. Based on the resource-based view and the economics of property rights, we build a framework that accomplishes this. Our key argument is that property rights and transaction costs are important antecedents of opportunity discovery. We identify two mechanisms that establish this influence and examine alternative ways in which knowledge, transaction costs, and property rights influence opportunity discovery and sustainable advantage. Copyright © 2008 Strategic Management Society.
In this study we discuss and empirically test the assertion that over the last two decades multinational enterprises' (MNEs') configuration of value-adding activities has shifted from a sparse and simple (host–home) international division of labor among the foreign affiliates to a more specialized and ‘advanced’ global value chain configuration in which MNEs locate fine-sliced parts of the value chain at the most efficient locations. Using data on trade flows of U.S. affiliates in 56 host countries between 1983 and 2003 we find some indications of a trend in the direction of global value chain specialization. In particular among US affiliates in developing countries the proportion of host–host, intra-firm trade has increased significantly during the observed period of time. Conversely, the proportion of host–home and inter-firm trade has diminished. We interpret this as indicating both value chain disaggregation (vertical specialization) and MNEs' systematic exploitation of factor cost differentials across countries. We also find that the absolute levels of all types of trade flows have increased. Hence, it is the relative, and not the absolute, changes in the trade flow patterns of US affiliates that gives credibility to the global value chain assertion.
Organizational scholars have recently argued that economic theories and assumptions have adversely shaped management practice and human behavior, leading not only to the incorporation of trust-eroding market-mechanisms into organizations but also unnecessarily creating self-interested behavior. A number of highly influential papers have argued that the self-fulfilling nature of (even false) theories provides the underlying mechanism through which economics has adversely shaped not just social science but also management practice and individual behavior. We question these arguments, and argue that there are important boundary conditions to theories falsely fulfilling themselves, boundary conditions that have hitherto been unexplored in organizational research, and boundary conditions which question the underlying premises used by organizational scholars and social scientists to attack economics. We specifically build on highly relevant findings from social psychology, philosophy and organizational economics to show how (1) objective reality and (2) human nature provide two important boundary conditions for theories (falsely or otherwise) fulfilling themselves. We also defend organizational economics, specifically the use of high-powered incentives in organizations, and argue that self-interest (rightly understood) facilitates in creating beneficial individual and collective and societal outcomes.
The purpose of this Perspective Paper is to advance understanding of absorptive capacity, its underlying dimensions, its multi-level antecedents, its impact on firm performance and the contextual factors that affect absorptive capacity. Nineteen years after the Cohen and Levinthal 1990 paper, the field is characterized by a wide array of theoretical perspectives and a wealth of empirical evidence. In this paper, we first review these underlying theories and empirical studies of absorptive capacity. Given the size and diversity of the absorptive capacity literature, we subsequently map the existing terrain of research through a bibliometric analysis. The resulting bibliometric cartography shows the major discrepancies in the organization field, namely that (1) most attention so far has been focused on the tangible outcomes of absorptive capacity; (2) organizational design and individual level antecedents have been relatively neglected in the absorptive capacity literature; and (3) the emergence of absorptive ccapacity from the actions and interactions of individual, organizational and inter-organizational antecedents remains unclear. Building on the bibliometric analysis, we develop an integrative model that identifies the multi-level antecedents, process dimensions, and outcomes of absorptive capacity as well as the contextual factors that affect absorptive capacity. We argue that realizing the potential of the absorptive capacity concept requires more research that shows how “micro antecedents” and “macroantecedents” influence future outcomes such as competitive advantage, innovation, and firm performance. In particular, we identify conceptual gaps that may guide future research to fully exploit the absorptive capacity concept in the organization field and to explore future fruitful extensions of the concept.
The economics of growth has shown that countries not only grow by deploying higher levels of inputs to production, but also by better allocating whatever resources are at their disposal and by introducing productivity-enhancing innovations. We proffer arguments as to why and how entrepreneurship as well institutions of liberty (i.e., economic freedom, including the rule of law, easy regulations, low taxes and limited government interference in the economy) positively impact total factor productivity (TFP): These institutions allow entrepreneurial experimentation with the combination of factors to take place at low transaction costs. We test these ideas on a unique panel data set derived from Compendia, World Bank data and the Fraser Institute’s economic freedom data. We find that while entrepreneurship positively impacts TFP, the marginal contribution of entrepreneurship to TFP is strongest in economies with substantial government activity.
The emergence over the last two decades or so of knowledge as an important part of the explanatory structure of management research is an intellectual breakthrough that is comparable in terms of its transforming impact to the behavioral revolution of the 1960s. A veritable knowledge movement has emerged that spans several fields in management. I take stock on alternative research strategies with that movement, distinguishing between capabilities first, networks first and individuals first strategies. Reasons are given why more research attention need to be allocated to the latter strategy if the knowledge movement is to continue making progress, but that the aim should ultimately be to reach towards multi-level research that combines aggregate constructs with top-down processes and bottom-up processes.
The effective dissemination throughout the MNC organization of valuable knowledge acquired by its local affiliates is seen as an important source of competitive advantage.
Knowledge differs in characteristics and so do the available transfer mechanism. As such, it is essential that the MNC employ the mechanism of transfer that suits the specific knowledge characteristics. The use of unsuitable transfer mechanisms may cause loss of knowledge in the process of transmission or may involve unnecessarily high communication costs — both with potentially negative effects on the performance of the MNC.
Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm's sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.
Knowledge management systems try to elicit and support the flow of ideas and experiences among groups of employees (sometimes referred to as knowledge communities). Whereas numerous information and communication systems have been developed to support such knowledge exchanges, practical applications have found that technology alone cannot ensure that knowledge will indeed be volunteered and exchanged, and whereas researchers and consultants alike have argued that culture and other human variables constitute key success factors, it is not clear what specific variables are at play, nor what management practices can affect those variables. This exploratory research investigates some of the psychological, organizational and system-related variables that may determine individual engagement in intra-organizational knowledge sharing. Results from a survey of 372 employees from a large multinational show that self-efficacy, openness to experience, perceived support from colleagues and supervisors and, to a lesser extent, organizational commitment, job autonomy, perceptions about the availability and quality of knowledge management systems, and perceptions of rewards associated with sharing knowledge, significantly predicted self-reports of participation in knowledge exchange.
Self-reports figure prominently in organizational and management research, but there are several problems associated with their use. This article identifies six categories of self-reports and discusses such problems as common method variance, the consistency motif, and social desirability. Statistical and post hoc remedies and some procedural methods for dealing with artifactual bias are presented and evaluated. Recommendations for future research are also offered.
Fifty-one division managers of a United States conglomerate were studied to examine the conceptual and methodological adequacy of Duncan's and Lawrence and Lorsch's uncertainty scales. Additionally, Duncan's complexity-dynamism hypothesis was replicated. The internal reliability of both scales and their respective subscales was supported given alternative scoring methods for both scales. Overlap between the two scales was small. Comparisons of the scales with criterion measures produced disappointing results. The replication of Duncan's complexity-dynamism experiment produced contradictory results.
This paper uses an analysis of developments in aircraft engine control
systems to explore the implications of specialization in knowledge
production for the organization and the boundaries of the firm. We
argue that the definition of boundaries of the firm in terms of the
activities performed in house does not take into account that decisions
to outsource production and other functions are different from decisions
to outsource technological knowledge. We show that multitechnology
firms need to have knowledge in excess of what they need for what
they make, to cope with imbalances caused by uneven rates of development
in the technologies on which they rely and with unpredictable product-level
interdependencies. By knowing more, multitechnology firms can coordinate
loosely coupled networks of suppliers of equipment, components, and
specialized knowledge and maintain a capability for systems integration.
Networks enable them to benefit from the advantages of both integration
and specialization. Examples from other industries extend to other
contexts the model we develop.
Purpose
The purpose of the paper is to determine and empirically examine the effect of human resource management (HRM) practices on knowledge transfer within multinational corporations.
Design/methodology/approach
It is suggested that the employment of human resource practices, which affect absorptive capacity of knowledge receivers and support organizational learning environment, is positively related to the degree of knowledge transfer to the subsidiary. Moreover, the higher degree of knowledge transfer is expected when HRM practices are applied as an integrated system of interdependent practices. Hypotheses derived from these arguments are tested on the data from 92 subsidiaries of Danish multinational corporations (MNCs) located in 11 countries.
Findings
Results of the analysis indicated the existence of two groups of HRM practices conducive to knowledge transfer. The simultaneous effect of the first group of HRM practices consisting of “staffing”, “training”, “promotion”, “compensation” and “appraisal” on the degree of knowledge transfer was found to be positive and substantial. The hypothesis regarding the effect of corporate socialization mechanisms and flexible working practices (the second group of HRM practices) was not supported by the data. The analysis also indicated that some HRM practices have a complementary effect on the degree of knowledge transfer when they are applied as a system.
Research limitations/implications
While this study makes a contribution to our understanding of the relationship between HRM practices and knowledge transfer in the MNC, clearly, additional research is needed to develop this link further, which until now has been largely black‐boxed.
Originality/value
Makes a contribution to our understanding of the relationship of HRM practices and knowledge transfer in MNCs.
Research on multinational corporation (MNC) knowledge transfer has argued continuously for the behavior of knowledge senders to be a determinant of knowledge transfer. Although the importance of disseminative capacity regarding knowledge transfer has been illustrated in numerous conceptual studies, substantial empirical support is largely absent. Based on previous studies, re-operationalizes disseminative capacity as being dependent upon the ability and the willingness of organizational actors to transfer knowledge where and when it is needed in the organization. Using the context of expatriation, suggests that MNCs may apply different mechanisms depending on whether they want to develop expatriates' ability or willingness to transfer knowledge. Suggests that MNCs may enhance expatriates' willingness to transfer knowledge through the employment of long-term expatriate assignments, whereas expatriates' ability to transfer knowledge may be increased through their involvement in temporary assignments such as short-term assignments, frequent flyer arrangements, and international commuting. Tests the hypotheses empirically based on data from 92 subsidiaries of Danish MNCs located in 11 countries.
Empirical studies on the impact of knowledge management on the performance of MNC subsidiaries remain elusive to date. This study examines the effect of knowledge management tools such as corporate university, communities of practice, group benchmarking, learning systems and rewards upon absorptive capacity and performance with unique data from subsidiary units in a large German MNC – Heidelberger Cement. The findings suggest that knowledge management tools unfold their performance impact through their significant influence on absorptive capacity and knowledge inflows. The key contributions to the current literature on knowledge flows in the MNC include an empirically corroborated link between deployments of knowledge management tools and their impact on the subsidiary employee's ability and motivation to learn from internal knowledge flows in the MNC as well as their impact on subsidiary business performance.
Virtually all research on strategic control within multinational corpo- rations (MINCs) has focused on macro differences in control systems and processes across entire MNCs. Taking a less macro (i.e., subsid- iary-specific contingency perspective), this article examines how, within the same corporation, the nature of corporate control might also vary systematically across subsidiaries. Differences in subsidi- ary contexts are analyzed along two dimensions: (a) the extent to which the subsidiary is a user of knowledge from the rest of the cor- poration and (b) the extent to which the subsidiary is a provider of such knowledge to the rest of the corporation.
Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.
This research focuses on creating a theory of the "organizational advantage," a new concept identified within business and management. Using social capital research as a foundation for this theory, three of the study's objectives are identified: 1) incorporate different aspects of social capital to identify three common dimensions; 2) explain the role of each dimension in the process of creating and exchanging knowledge; and 3) maintain the belief that organizations are capable of creating extraordinary amounts of social capital on all three dimensions. Additionally, the relationship between social capital and intellectual capital is explored, as is the impact of this relationship upon a firm's perceived organizational advantage. In order for exchange and combination of resources to occur as a means of creating value, the research identifies three necessary conditions, including the opportunity for exchange and combination to occur, the expectation that exchange and combination generates value, and the motivation that exchange and combination in some way will be productive. This research further identifies a fourth condition, combination capability, as a significant factor in value creation. Due to social capital's influence upon the conditions needed for exchange and combination, social capital aids in the creation of intellectual capital. The research further hypothesizes that a firm's ability to create and utilize social capital contributes to performance differences among firms. Several limitations are identified, including omission of the negative impact of social capital upon a firm and the costs associated with creating and preserving a firm's social capital. The findings of the study are generalized to other institutional situations, and areas for future research are identified. (AKP)
As multinational corporations operate in multiple countries, headquarters must take into account differences in local settings when seeking the means to coordinate and control subsidiaries. The local system of industrial relations sets the framework for what kind of human resource management a multinational corporation can implement. Yet another question is whether the still stronger multinationals can change the existing systems of industrial relations, directly or indirectly. The paper analyzes four Danish enterprises over a ten-year period. This longitudinal study shows that none of the multinationals directly try to interfere in local industrial relations. However, by exercising their management prerogative in a way that differs from the Northern European tradition of industrial relations, they do influence the cooperation between employers and employees. In particular, the results show that a shift from a stakeholder to a shareholder management style and the increased degree of HQ control have an effect on the whole cooperative atmosphere in each of the companies. In the long run, they may affect the collective bargaining system as such.
This chapter introduces HRM practices that help MNCs to overcome knowledge transfer barriers (knowledge-driven HRM practices). It argues that MNCs can institute various HRM practices that impact knowledge transfer barriers associated with behavior of knowledge senders and receivers. HRM practices relevant for absorptive capacity of subsidiary employees form two groups - cognitive (job analysis, recruitment, selection, international rotation, career management, training and performance appraisal) and stimulative (promotion, performance-based compensation, internal transfer, orientation programs, job design and flexible working practices). The application of cognitive HRM practices enhances the ability of knowledge receivers to absorb transferred knowledge, while the use of stimulative HRM practices increases their motivation. Temporary and permanent types of international assignments respectively influence the ability and motivation of expatriate managers to share their knowledge.
This book shifts the debate on knowledge transfers within multinational corporations (MNCs) back to its core: How can we increase the effectiveness of cross-boarder transfers of knowledge? Several perspectives on international knowledge flows, from control issues to cultural barriers, are integrated into a comprehensive framework. Based on a sample of leading MNCs, empirical results show which managerial mechanisms have to be implemented to increase the benefit from knowledge transfers in headquarters and subsidiaries.
To an increasing extent, the success of multinational companies (MNCs) is considered to be contingent upon the ease and speed by which valuable knowledge is disseminated throughout the organization (Hedlund, 1986; Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 1991). Thus, creation of knowledge in a spatially dispersed multinational organization and tapping into advanced local knowledge wherever it can be found are necessary conditions for success in the global marketplace. The implication is that some subsidiaries are supposed to act as bridgeheads (Forsgren et al., 1999) that tap into knowledge created in a local context and subsequently transfer the knowledge to other MNC units where it is of better use. Therefore, some subsidiaries will or ought to have a strategic role in the global organization that reaches beyond their local undertakings (e.g. Gupta and Govindarajan, 1994; Holm and Pedersen, 2000). However, there are obstacles to the internal transfer of knowledge in the MNC, and a number of dilemmas unfold within those subsidiaries that are supposed to ensure internal knowledge transfer.
Getting more value from knowledge - especially from a firm's own hard-won knowledge - is one of the central challenges facing companies today. Many organizations have approached this problem in recent years by making big investments in IT systems, but the payoff has often been disappointing. Companies would do better to emulate the innovative giants of the Internet Google, eBay and Amazon - whose success has in part derived from their ability to make it easy for customers to find what they are looking for, to browse for products and services, and to evaluate potential purchases. These are exactly the things that are hard to do in most companies. That is, employees find that it is not intuitive to search for information in company repositories; they cannot easily browse within categories of knowledge; and they are not given the context they need in order to evaluate the quality of the knowledge they do find. The authors assert that if organizations apply the basic, proven approaches of the Internet success stories to capture the attention of their employees, they should be able to improve their ROI on sunk IT costs, while increasing knowledge-worker productivity.
In this study, two different theoretical perspectives are used to develop sets of hypotheses regarding the mechanisms used to manage foreign subsidiaries of multinational corporations. First, agency theory serves as the basis for a model that predicts the use of monitoring mechanisms and incentive compensation. Then, it is argued that these mechanisms are insufficient for managing subsidiaries characterized by high levels of intra-firm international interdependence, the management of which is critical to many of today's complex global firms. A second set of hypotheses is argued, linking international interdependence to several social control mechanisms. Primary and secondary data from U.S. based multinational corporations were used to test both sets of hypotheses. The results indicate that agency theory, although a useful foundation for studies of control within MNCs, is limited in its ability to explain fully the phenomenon of foreign subsidiary control, however, the model based on intra-firm interdependence had much greater predictive ability.
Creativity in all fields, including business, flourishes under intrinsic motivation—the drive to do something because it is interesting, involving, exciting, satisfying, or personally challenging. This article presents the Componential Theory of Organizational Creativity and Innovation, which defines the factors—including intrinsic motivation—that determine a person's creativity. This article also shows how the work environment can influence individual creativity.
Are multinational corporations (MNCs) superior to strategic alliances and markets in facilitating the flow of knowledge across borders? If so, what are the sources of this superiority? Despite their central importance to the theory and practice of international management, these questions have not been directly tested. Our paper seeks to address this gap in empirical research.
Drawing upon recent research on multinational corporations and the knowledge-based view of the firm, we develop hypotheses regarding the relative superiority of alternative institutional arrangements as regards cross-border knowledge building. Analysis of patent citations by semiconductor companies points to the superiority of multinational firms over both alliances and markets in cross-border knowledge building. Interviews with engineers and managers in MNCs point to the intertwining of codified and tacit knowledge and; therefore, the need for both formal and informal mechanisms for successful knowledge building. Our findings suggest that the superiority of MNCs stems from the firms' ability to use multiple mechanisms of knowledge transfer flexibly and simultaneously to move, integrate, and develop technical knowledge. Our research, therefore, suggests that the challenge of knowledge management for MNCs extends beyond the creation of international information systems, to the design of organizational structures, systems, and culture capable of supporting the flow of knowledge.
The global dispersion of knowledge and technological capabilities has moved MNCs to assign lead responsibilities to offshore units in order to take advantage of this phenomenon.
Moving core competencies to the periphery enables the firm to take advantage of resources not present in its home country, posing at the same time issues of integration and control.
This paper challenges common suggestions of the superiority of social control to best utilize Centers of Excellence (CoEs) established abroad. Utilizing a sample of German national origin, we test propositions grounded in social network theory.
This paper argues that knowledge mapping may provide a fruitful avenue for intellectual capital management in academic environments such as university departments. However, while some research has been conducted on knowledge mapping and intellectual capital management in the public sector, the university has so far not been directly considered for this type of management. The paper initially reviews the functions and techniques of knowledge mapping and assesses these in the light of academic demands. Second, the result of a focus group study is presented, where academic leaders were asked to reflect of the uses of knowledge mapping at their departments and institutes. Finally a number of suggestions are made as to the rationale and conduct of knowledge mapping in academe.
This paper addresses issues of global innovation in multinational corporations by examining the patterns of communication and control in international R&D operations. Using a sample of 110 international R&D units from 15 multinational corporations, we identify three types of R&D unit role (local adaptor, international adaptor, international creator). We show that: (1) each type of R&D unit is managed primarily through a different mode of control; (2) local and international adaptors both focus their communication on their internal corporate network; and (3) international creators have strong internally and externally oriented networks of relationships. The implications for the management of global innovation are discussed. © 1998 John Wiley & Sons, Ltd.
Using data collected from multiple respondents in all the business units of a large multinational electronics company, we examined the relationships both among the structural, relational, and cognitive dimensions of social capital and between those dimensions and the patterns of resource exchange and product innovation within the company. Social interaction, a manifestation of the structural dimension of social capital, and trust, a manifestation of its relational dimension, were significantly related to the extent of interunit resource exchange, which in turn had a significant effect on product innovation.
The ability to transfer best practices intemally is critical to a firm's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies might be difficult for other firms to imitate, its best practices could be difficult to imitate internally. Yet, little systematic attention has been paid to such intemal stickiness. The author analyzes intemal stickiness of knowledge transfer and tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to conventional wisdom that blames primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack of absorptive capacity, causal ambiguity, and an arduous relationship between the source and the recipient. The identification and transfer of best practices is emerging as one of the most important and widespread practical management issues of the latter half of the 1990s. Armed with meaningful, detailed performance data, firms that use fact- based management methods such as TQM, bench- marking, and process reengineering can regularly compare the perfonnance of their units along operational dimensions. Sparse but unequivocal evidence suggests that such comparisons often reveal surprising perfonnance differences between units, indicating a need to improve knowledge utilization within the firm (e.g., Chew, Bresnahan, and Clark, 1990).' Because intemal transfers typi-
This study explores how organizational learning in subunits affects outflows of knowledge to other subunits. Three learning processes are explored: Collecting new knowledge, codifying knowledge, and combining old knowledge. The results suggest that collecting new knowledge intensifies vertical flows, of knowledge, that codifying knowledge facilitates horizontal and vertical flows, and that combining old knowledge mainly affects horizontal flows. More generally, the study suggests that uncertainties about the relevance of new knowledge are resolved via vertical flows, which (compared to horizontal flows) expose new knowledge faster to a wider range of remote and different knowledge and thereby facilitate faster, more comprehensive discovery of its relevance.
This empirical paper explores knowledge outflow from MNC subsidiaries and its impact on the MNC performance. We develop and test hypotheses derived from literature on MNC knowledge flows integrated with the perspective of knowledge-creating, self-interested MNC subsidiaries. The hypotheses are developed using a simultaneous equation model applied to a unique dataset encompassing a German MNC, HeidelbergCement. Enablers and impediments of knowledge outflows are assessed in order to explain why subsidiaries share their knowledge with other MNC units. Implications are examined by studying the link between knowledge outflows and subsidiary performance. Our findings suggest that knowledge outflows increase a subsidiary's performance only up to a certain point and that too much knowledge sharing may be detrimental to the contributing subsidiary's performance.
This paper investigates how subsidiary companies are able to contribute to the firm-specific advantages of the multinational corporation (MNC). Specifically we examine the determinants of the contributory role of the subsidiary and subsidiary initiative. The study reveals the following significant relationships: (a) internal subsidiary resources in combination with initiative have a strong positive impact on the subsidiary's contributory role; (b) subsidiary initiative is strongly associated with the leadership and entrepreneurial culture in the subsidiary; and (c) contributory role is strongly associated with subsidiary autonomy and a low level of local competition. We discuss the implications of these findings and some of the theoretical issues associated with subsidiary initiative. Our provisional conclusion is that MNC subsidiaries can not only contribute to firm-specific advantage creation, they can also drive the process. © 1998 John Wiley & Sons, Ltd.
In this study, two different theoretical perspectives are used to develop sets of hypotheses regarding the mechanisms used to manage foreign subsidiaries of multinational corporations. First, agency theory serves as the basis for a model that predicts the use of monitoring mechanisms and incentive compensation. Then, it is argued that these mechanisms are insufficient for managing subsidiaries characterized by high levels of intra-firm international inter-dependence, the management of which is critical to many of today's complex global firms. A second set of hypotheses is argued, linking international interdependence to several social control mechanisms. Primary and secondary data from U.S. based multinational corporations were used to test both sets of hypotheses. The results indicate that agency theory, although a useful foundation for studies of control within MNCs, is limited in its ability to explain fully the phenomenon of foreign subsidiary control, however, the model based on intra-firm interdependence had much greater predictive ability. Copyright ? 2000 John Wiley & Sons, Ltd.
The determinants of R&D intensity differ between subsidiaries in a multinational enterprise (MNE). Previous literature suggests that whether a subsidiary achieves a competence-creating output mandate depends on the qualities of its location. R&D strategies in competence-creating subsidiaries are supply-driven while those in purely competence-exploiting subsidiaries are demand-driven. Using data on U.K. subsidiaries of non-U.K. MNEs, we find that the level of subsidiary R&D depends on MNE group-level and subsidiary-level characteristics as well as locational factors. The R&D of mandated subsidiaries rises with acquisition, but for non-mandated subsidiaries R&D falls upon acquisition. MNEs that grow through acquisition have more inter-subsidiary R&D diversity. Copyright © 2005 John Wiley & Sons, Ltd.
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The logit and probit models have become critical parts of the management researcher's analytical arsenal, growing rapidly from almost no use in the 1980s to appearing in 15% of all articles published in Strategic Management Journal in 2005. However, a review of three top strategy journals revealed numerous areas in their use and interpretation where current practice fell short of ideal. Failure to understand how these models differ from ordinary least squares can lead researchers to misunderstand their statistical results and draw incorrect conclusions regarding the theory they are testing. Based on a review of the methodological literature and recent empirical papers in three leading strategy journals, this paper identifies four critical issues in their use: interpreting coefficients, modeling interactions between variables, comparing coefficients between groups (e.g., foreign and domestic firms), and measures of model fit. For each issue, the paper provides a background, a review of current practice, and recommendations for best practice. A concluding section presents overall implications for the conduct of research with logit and probit models, which should assist both authors and readers of strategic management research.
This paper develops four categories of knowledge management strategies used by multinational corporations (MNCs). Codification strategies involve the transformation of tacit knowledge into explicit knowledge in order to facilitate flows of organizational knowledge. Tacitness strategies keep organizational knowledge tacit in order to prevent flows of knowledge to competitors. Focused knowledge management strategies regulate knowledge flows by controlling the degree to which knowledge is encoded in forms that match the information intensity and ambiguity of their knowledge. Unfocused knowledge management strategies attempt to regulate knowledge flows by controlling the overall level of codification of knowledge without special consideration of the capabilities of specific forms of codification. Empirical analyses of the effects of these strategies on subunit performance in a sample of US and Danish subsidiaries suggest that the focused strategies are superior to the other strategies. Our results also indicate that different kinds of organizational knowledge require matching forms of codification in order to increase performance. The results give rise to a nested contingency model of knowledge management.
The organizational science literature on motivation has for long been polarized into two main positions; the organizational economic position focusing on extrinsic motivation and the organizational behavior position emphasizing intrinsic motivation. With the rise of the knowledge economy and the increasing levels of complexities it entails, such polarization is not fruitful in the attempt to explain motivation of organizational members. This paper claims that a more nuanced perspective on motivation, acknowledging the co-existence of intrinsic and extrinsic motivation, the possible interaction between the two as well as different types of motivations filling in the gap between the two polar types, is urgently needed in the organizational science literature. By drawing on the research on intrinsic and extrinsic motivation conducted in social psychology and combining this with contributions from organizational science, economics, and sociology, this paper attempts to develop an emergent understanding of motivation, which is more facetted than the one dominating organizational science currently. Based on these discussions, eleven implications for future research on motivation in organizations are proposed.
This paper argues that knowledge sharing can be conceptualized as different situations of exchange in which individuals relate to each other in different ways, involving different rules, norms and traditions of reciprocity regulating the exchange. The main challenge for facilitating knowledge sharing is to ensure that the exchange is seen as equitable for the parties involved, and by viewing the problems of knowledge sharing as motivational problems situated in different organizational settings, the paper explores how knowledge exchange can be conceptualized as going on in four distinct situations of exchange denominated organizational exchange yielding extrinsic rewards, organizational exchange yielding intrinsic rewards, financial exchange, and social exchange. The paper argues that each situation of exchange has distinct assumptions about individual behaviour and the intermediaries regulating the exchange, and facilitating knowledge sharing should therefore be viewed as a continuum of practices under the influence of opportunistic behaviour, obedience or organizational citizenship behaviour.
Human capital (HC) may be defined as the stock of valued skills, knowledge, insights, and so on, controlled by an individual: the attributes of the relevant individual that are valuable in an economic context. It yields services such as labour services, management services, or entrepreneurship. While this overall perspective cuts across organizational economics perspectives-such as transaction-cost economics (TCE), property rights/incomplete contracts theory, and agency theory-the specific terminology applied here is particular to TCE. This article surveys TCE as it pertains to HC, concentrating on: the work of TCE's most prominent flag-bearer, Oliver Williamson; the precursors of his work; and the various operationalizations and extensions of his approach. Also briefly discussed is the property-rights approach, which, like TCE, rests on the notion of incomplete contracting and the need to safeguard transactions under such conditions.
The study explores how firms close their knowledge gaps in relation to business environments of foreign markets. Potential determinants are derived from traditional internationalization process theory as well as more recent literature on organizational learning processes, including the concept of absorptive capacity. Building on these two literature streams a conceptual model is developed and tested on a set of primary data of Danish firms and their foreign market operations. The empirical study suggests that factors considered essential in traditional internationalization process theory, such as experiential learning, explains only a very limited part of perceived knowledge gaps. When factors pertaining to the concepts of absorptive capacity and superstitious learning are added, the explanatory power improves significantly. Apparently, our understanding of firms' internationalization processes can be enriched by insights from organizational learning literature.
Arguments derived from the theory of science have been present in strategic management discourse since at least the beginning of the 1970s. The field's top-journal, the Strategic Management Journal, has printed several theory of science-based papers. Most positions in the theory of science (falsificationism, instrumentalism, realism, constructivism, etc.) have been present in the methodological discourse in the field. This chapter briefly reviews theory science applications to strategic management, before a distinctive perspective on the evolution of the strategic management field is developed. According to this perspective, science progresses when deeper level mechanisms are identified and theorized. Theoretical reduction may therefore be an independent criterion of scientific progress. Application to the strategic management field of this perspective, which in the social sciences is closely connected to the notion of methodological individualism, reveals that the field has evolved in a manner akin to a swinging pendulum, oscillating between micro and macro perspectives.