Intra‐organizational knowledge exchange. An examination of reverse capability transfer in multinational corporations
| Published date | 16 January 2009 |
| Pages | 149-164 |
| Date | 16 January 2009 |
| DOI | https://doi.org/10.1108/14691930910922969 |
| Author | Andreas Schotter,Nick Bontis |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intra-organizational knowledge
exchange
An examination of reverse capability transfer
in multinational corporations
Andreas Schotter
Richard Ivey School of Business, The University of Western Ontario, London,
Canada, and
Nick Bontis
DeGroote School of Business, McMaster University, Hamilton, Canada
Abstract
Purpose – Recent research on intra-organizational knowledge-transfer showed that new capability
development within multinational corporations shifts from parent companies to foreign subsidiaries.
This paper seeks to identify antecedents and barriers for reverse capability-transfer in multinational
corporations.
Design/methodology/approach – The paper adopts a multiple case study approach based on
active interviews at six subsidiaries of a multinational manufacturing company.
Findings – The results suggest that subsidiary autonomy, environmental heterogeneity, and
managerial initiatives are all necessary antecedents of unique capability development at the
subsidiary level, but that companies do not utilize foreign subsidiary-originated capabilities in their
home-country operations. The results also show that person-to-person communication is required for
intra-MNC capability-transfer in any direction, and that other forms of communication seem to be
inefficient.
Research limitations/implications – A logical next step is the investigation of the phenomenon at
the headquarters level with the goal to identify specific barriers for reverse capability-transfer.
Practical implications – The findings support the idea that managers of multinational
corporations should recognize that new unique capabilities originate not only at the parent
company level but also at the foreign subsidiary level, and that it could be beneficial for the company
as a whole to transfer these new capabilities back to the home country operation.
Originality/value – The study shows that in-depth interviews provide the richest form of data for
this type of research. Moreover, it provides a counter-intuitive perspective on intra-organizational
knowledge and capability-transfer in multinational corporations.
Keywords Multinationalcompanies, Knowledge management,Knowledge transfer
Paper type Research paper
Introduction
The development and operationalization of competitive advantages and superior
capabilities across different countries are central to the strategies of multinational
corporations (MNCs) (Dunning, 1980, 1988, 2000). The domain of this research project
lies within the MNC strategy-structure-paradigm (Harzing, 2000), at the interse ction of
subsidiary role, corporate structure, and corporate-level strategy (Bartlett and G hoshal,
1998). Corporate structure not only pre-empts the level of autonomy, but it also
The current issue and full text archive of this journal is available at
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Intra-
organizational
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Journal of Intellectual Capital
Vol. 10 No. 1, 2009
pp. 149-164
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930910922969
pre-empts subsidiary initiative, intra-organizational communication, and ultimately
knowledge and capability transfer within MNCs.
This research aims to empirically identify reverse capability transfer (RCT) and its
antecedents as a source of competitive advantages in the MNC context. RCT is defined
as the transfer of foreign-subsidiary-originated capabilities to the home country
operations of MNCs. For example, when a subsidiary develops a value-added product
for its local market, which goes beyond the product proposition provided by the parent
company, new capabilities have been developed at the subsidiary level, which could
then be transferred to the parent company for utilization in the home country.
While intra-subsidiary transfer has been investigated (Frost et al., 2002), previous
research has mostly overlooked the RCT phenomenon. It appears to be an
unchallenged assumption that capability and knowledge transfer within MNCs flow in
one direction, along the hierarchical structures, from the parent company down to the
subsidiaries, and not the other way around, from the foreign subsidiaries to the home
country operation. More recently, researchers have combined network theory and the
knowledge-based view of the firm to uncover other intra-MNC knowledge transfer
mechanisms including subsidiary-to-subsidiary transfers (Frost et al., 2002), but only a
few studies have addressed knowledge transfer from the foreign subsidiary to the
parent company (Frost, 2001; Hakanson and Nobel, 2000; Piscitello and Rabbiosi, 2004).
It is suggested that the reason for the limited number of publications on RCT lies in the
inherent assumption that knowledge and capability transfer is path-dependent (Arau jo
and Rezende, 2003) and in the belief of researchers and practitioners that knowledge
and capabilities indeed only flow top-down from the parent company to the subsidiary
or from subsidiary to subsidiary at best. In this context, one could also think of
similarities to parent-child relationships, or the question of how perceptive parents can
learn from their children. It is a prevailing assumption that parents learn about
children, but not from children. Bartlett and Ghoshal (1998) call this phenomenon
“administrative heritage”, which describes companies as “captives of their past”. It is
suggested that it is this assumption that prevents parent companies from learning
from their foreign subsidiaries.
Another explanation for the limited number of investigations into this phenomenon
might be that it is difficult to detect, since it requires multipoint access to different
foreign subsidiaries as well as access to the home-country operation of the MNC. It also
requires expert understanding of the particular capabilities of the individual
subsidiaries and the parent company. RCT goes beyond the notion of knowledge
transfer and falls into the category of dynamic capabilities (Teece et al., 1997). Once
RCT and its potentials have been identified, it will gain significant relevance for
researchers and practitioners alike.
For this preliminary study, an active interview approach is used at the foreign
subsidiary level of an international manufacturing company to identify evidence of
RCT and to analyze its antecedents (and barriers). In the following sections, a
preliminary review of previous research that bears on the problem is provided. Then, a
conceptual framework that leads to a series of working hypotheses is developed. Then,
a hermeneutical research design is described before a detailed analysis of the empirical
data.
The purpose of this study is to develop a clear understanding of the phenomenon
and to develop reference points for future more wide-ranging empirical analyses that
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