Marketing management fundamentals and practices

Ram Mudambi, Pietro Navarra; Is Knowledge Power? Knowledge Flows, Subsidiary Power and Rent-Seeking within MNCs. Journal of International Business Studies. Volume: 35. Issue: 5. 2004. p. 385+.

This journal article deals with the subject of knowledge and its role in subsidiary's bargaining power. With Multinational corporations (MNCs) enjoying powerful existence in many parts of the world, the parent firm has traditional been the provider of knowledge which allows it greater power over its subsidiaries. But researchers in this article maintain that knowledge can be successfully used by the subsidiaries to gain leverage. MNC headquarters enjoy greater influence over subsidiaries because of control of knowledge assets that is carefully mentioned in the charters. If subsidiaries start controlling MNC's research and development intangibles, power base can shift from parent to subsidiary. The authors also posit that subsidiary's location also plays an important role in knowledge creation. They present four directions in which knowledge can flow within the large network. It can either from the subsidiary to parent (Flow 1), or flow from location to subsidiary, subsidiary to location or from parent to subsidiary (Flow 4). If Flow 1 dominates, then subsidiaries can enjoy immense bargaining power. They hypothesize that a) higher level of research intensity means greater knowledge output, and b) higher inflows of knowledge into the subsidiary also lead to greater knowledge creation. In connection with bargaining power, the researchers posit that higher levels of knowledge production from the subsidiary equip the subsidiary with greater bargaining power. They also test the assumption that greater inflows of knowledge from other units into the subsidiary lower its bargaining power. It is also asserted that the duration of operations of a subsidiary is directly connected with level of bargaining power. The older the subsidiaries, the more power they enjoy. They authors conclude that subsidiaries may enjoy bargaining power if they have greater control over R&D but in reality, this is easier said than done. Headquarters usually retain the right to veto to curtail subsidiary's autonomy thus considerably limiting its leverage.

Barner-Rasmussen, Ingmar Bjorkman; Managing Knowledge Transfer in MNCs: The Impact of Headquarters Control Mechanisms. Journal of International Business Studies. Volume: 35. Issue: 5. 2004. 443+.

Transfer of knowledge from subsidiaries to other units and the headquarters is a relatively new but extremely important concern which is highlighted in this article as well. The authors conclude that flow of information from the subsidiaries to the headquarters can be controlled by the MNCs by making effective use of "corporate socialization mechanisms." The most important question in these circumstances with all the given challenges is how to select the most effective organizational mechanism that would facilitate flow of knowledge and would subtly force subsidiaries to share information. The major barrier to information-sharing includes motivational factors. Even when a subsidiary realizes that sharing knowledge with other units would positively impact MNC's performance; it may withhold information due to its own vested interests. There are thus many reasons why a subsidiary might not want to share knowledge with other units. And conflict of interests is almost always the motivational factor seriously affecting flow of information. But the authors find out that MNCs can successfully control flow of information or force a subsidiary to share knowledge by ensuring that performance assessment is based on amount, frequency and extent of knowledge shared by a subsidiary with other units. Agency theory is used to test the hypothesis that higher the importance attached to knowledge-sharing, the more the outflow of information from subsidiary to other MNC units. The study finds that use of expatriate managers may over time negatively affect flow of information because it was seen that subsidiaries that were more deeply rooted in their environment exhibited greater interest in sharing knowledge with other units. The performance of MNC is not a strong motivational force and thus there is no positive link between sharing of knowledge and the idea that it can lead to better performance. In other words, subsidiaries are less concerned about the overall performance of MNCs that could be attributed to greater outflow of information. MNCs can however effectively facilitate flow of information by making it an important part of the criterion used to assess performance of subsidiaries.

Robert Jensen, Gabriel Szulanski. Stickiness and the Adaptation of Organizational Practices in Cross-Border Knowledge Transfers. Journal of International Business Studies. Volume: 35. Issue: 6. 2004.

This article talks about adaptation of knowledge assets such as organizational practices that are transferred from one location to another. When knowledge assets are transferred from MNC's headquarters to subsidiaries or among subsidiaries, it is not only the knowledge itself that counts but more importantly, the way it has adapted to the local environment which is a vital key to success. The researchers find that it is important for firms to have consistent organizational practices and strategies across its many subsidiaries. But since units are located in a different environment, it may actually become a problem to implement the practices as they originated in the host country. For this reason, firms need to obtain legitimacy for these practices in the local environment and by the local people. Legitimacy refers to acceptance of practices when they are successfully molded to meet the local cultural and customer preferences. We must understand that practices bear a distant mark of the place where they originated. They are embedded in the culture of that area. And therefore when the same knowledge is transferred to a unit located in a different region, it may be rejected for its foreignness. That is when firms have to come up with ways to shape the organizational practices according to local culture without losing the original intent and objectives. It must also be borne in mind that the greater the distance between the area where a practice originated and the recipient firm's area, the greater are the adaptation challenges that exist. One note-worthy finding presented in this article is that when firms transfer knowledge assets, there is a stickiness issue which means transferring knowledge is not always easy. Adaptation also has influence on stickiness factor. But researchers find that as important as it may be to adapt the practice to local culture; this adaptation should be delayed till the practice has once been implemented in its original form completely. The researchers also find that motivation of subsidiaries is a secondary factor and doesn't have as much bearing on transfer of knowledge as was previously assumed.

Peter J. Buckley, Martin J. Carter. A Formal Analysis of Knowledge Combination in Multinational Enterprises; Journal of International Business Studies; Volume: 35. Issue: 5. 2004. Page Number: 371+.

This article handles the subject of knowledge transfer between firm and its subsidiaries and discusses the three process types that the authors have identified as additive, sequential and "complementarity." The authors focus on knowledge losses that can occur during transfer of information and thus suggest that a firm should adopt the process that minimizes knowledge losses. They explain additive process as the type of knowledge transfer process where two different types of information are combined and implemented in one location. For instance if knowledge of local customs and preferences originate in location A and a new practice or technique originates in Location B, they should be combined to work effectively at Location C. In this process, knowledge losses can be serious because both locations possess incomplete information about the knowledge that the other has created. Sequential process refers to creation of knowledge when teams are working on some other task. This is closely connected to research and development activities but here motivation issues are involved. A team or person may come up with certain knowledge but may not feel like sharing it with others without realizing some gains from it. Complementarity process refers to coordination of knowledge when firm is operating at different location or when a product is being worked on by various departments. Knowledge has to be shared and for this reason coordination is important. In this case, each person and unit needs to recognize their interdependence. Coordination can most effectively be achieved with the help of centralization of decision-making.

Bernard L. Simonin. An Empirical Investigation of the Process of Knowledge Transfer in International Strategic Alliances. Journal of International Business Studies. Volume: 35. Issue: 5. 2004. Page Number: 407+.

In this study by Bernard Simonin, the model developed by the researcher for knowledge transfer, the context is process by means of which international strategic alliance partners share knowledge. This integrated model explains effects of learning objectives, the learning capacity of alliances, and vagueness of knowledge and protectiveness factor that affects knowledge transfer. The structure on which the model is developed and applied on organizational level can be described as learning-intent-learning capacity-knowledge transfer that closely resembles the model of motivation or individual learning intent.

The study deals with learning capacity construct which includes all organizational resources that lean towards learning of different kinds. Learning capacity of an organization and its people is manifold. There is resource-based learning that is connected with human resources, and then there is incentive-based learning which is related to organizational rules and practices, and last but not the least, there is cognitive-based learning which is closely associated with personal attitude and beliefs towards learning. The author has connected learning capacity with another major concept known as absorptive capacity, which is described in the words of another researcher as the "ability to recognize the value of new external knowledge, assimilate it, and apply it to commercial ends." But the author doesn't focus much on this aspect of learning and instead discusses the traditional variables such as ambiguity of knowledge, protectiveness factor and motivation level to explain what is it that hinders effective transfer of knowledge.