Knowledge Complementarity and Coordination in the Local Supply Chain: Some Empirical Evidence

DOIhttp://doi.org/10.1111/j.1467-8551.2003.00383.x
Date01 December 2003
Published date01 December 2003
AuthorStephen Roper,Mike Crone
Knowledge Complementarity and
Coordination in the Local Supply Chain:
Some Empirical Evidence
*
Stephen Roper and Mike Cronew
Aston Business School, Aston University, Birmingham, B4 7ET and wNorthern Ireland
Economic Research Centre, 22-24 Mount Charles, Belfast, BT7 1NZ, UK
email (corresponding author): s.roper@aston.ac.uk
Knowledge, managed or coordinated as a strategic resource, can help to internalize
uncertainty or volatility and play an important role in generating and sustaining
competitive advantage. One potentially important determinant of knowledge coordina-
tion between firms is the relative strength of the knowledge bases of the two partner
companies. In the context of the local supply chain, this paper examines the extent of
knowledge coordination between a group of 18 Northern Ireland-based MNE plants
and their local suppliers. A typology of knowledge complementarity is developed and
related to the extent of firms’ knowledge coordination activities. The analysis suggests
three main empirical results. First, and somewhat unexpectedly, the relationship
between MNE plants and their suppliers is characterized by a wide range of
configurations of knowledge complementarity. Second, clear differentials exist between
the occurrence of knowledge coordination activities incidental to normal trading
relations and more intentional knowledge coordination activities. Third, no direct link
was evident between knowledge complementarity and the level of knowledge co-
ordination. The implication is that firms’
willingness
to coordinate knowledge,
something that may be strategically determined, is more important than capability in
determining the extent of knowledge coordination.
‘Contemporary capitalism has arrived at a point
where knowledge is the most strategic resource and
learning the most important process.’ (Kevin
Morgan, 1997, p. 493)
Introduction
Knowledge, managed or coordinated as a strate-
gic resource, can help to internalize potential
sources of uncertainty or volatility and play an
important part in firms’ ability to generate and
sustain competitive advantage (Stewart, 1997;
Teece, 1998). Indeed, firms’ ability to internalize
uncertainty, and develop routines to efficiently
allocate resources in response, has been used to
justify the organizational form of the firm itself
(e.g. Casson, 1997). Essentially similar arguments
can be used to rationalize the existence of strategic
alliances, supplier partnerships, joint ventures and
other forms of inter-firm coordination (Mowery,
Oxley and Silverman, 1996). Here, the develop-
ment of boundary-spanning or inter-firm knowl-
edge transfers and coordination routines allow
those within the alliance to internalize sources of
internally generated uncertainty and to respond
more effectively to externally generated uncer-
tainty. Boundary-spanning knowledge transfers
may, for example, be important in reducing
*
This study was undertaken as part of the Northern
Ireland Economic Research Centre research programme
on Innovation and Industrial Change funded by the
Department of Enterprise, Trade and Investment,
Northern Ireland. We are grateful to two anonymous
referees for useful comments. The views in the paper are
those of the authors alone.
British Journal of Management, Vol. 14, 339–355 (2003)
r2003 British Academy of Management
primary uncertainty (i.e. volatility due to exo-
genous shocks), particularly where the behaviour
of one partner was previously a major source of
uncertainty for the other partner. Other advan-
tages may arise from the development by partner
organizations of routines designed to reduce
secondary uncertainty, i.e. the risk that managers
within the partner organizations will not coordi-
nate knowledge in the optimum fashion (Buckley
and Carter, 1999; Koopmans, 1957).
One area where boundary-spanning knowledge
transfers have achieved increasing prominence in
recent yearshas been in the supply chain.
1
Notions
of dynamic clusters (e.g. Turok, 1993), leader firms
(e.g. Albio, Garavelli and Schiuma, 1999), supplier
partnering (Beecham and Cordey-Hayes, 1998)
and Japanese and Korean industrial conglomer-
ates (e.g. Best, 1991; Linco ln, Ahmadjian, 1998)
have emphasized the contribution of various
organizational forms in increasing boundary-
spanning knowledge coordination and so sustain-
ing competitive advantage. Underlying each
organizational form is a recognition of firms’
mutual interdependence and the value of more
effective knowledge coordination than that asso-
ciated with more adversarial supply-chain rela-
tionships. Particular issues arise where the supply
links being considered are those between an
MNE plant and its local supply base. As Dicken
notes, for example, in relation to trans-national
corporations (TNCs):
‘Possession and exploitation of technology are a
diagnostic feature of the TNC. Such technology –
the essential life-blood of the TNC – is not lightly
handed over to other firms. Control over its use
is jealously guarded: the terms under which the
technology is transferred are dictated primarily by
the TNC itself in the light of its own overall
interests.’ (Dicken, 1992, p. 392)
Thus, while multinational (MNE) plants can be
a potentially important conduit by which new
technologies reach supplier companies (Dunning,
1993; Morgan, 1995; Young, Hood and Hamill,
1988) these effects are far from certain. Dicken
again comments:
‘beneficial spin-off effects will occur only if the
foreign affiliates of TNCs do become linked to local
firms. Where TNCs do not create such linkages they
remain essentially as foreign enclaves within a host
economy contributing little other than some direct
employment.’ (Dicken, 1992, p. 395–396)
Young and Lan (1997, p. 671) argue, however,
that the extent of knowledge coordination in any
MNE plant-supplier relationship will depend not
only on the capability and willingness of the
MNE plant to participate in such activities but
also on the capability and willingness of the sup-
plier company. In particular, they suggest that
the extent of any knowledge co-ordination activity
will depend on the relative level of technological
advance of the trading partners or on the extent
of any knowledge ‘gaps’ (Young and Lan, 1997)
or ‘lags’ (Mansfield and Romeo, 1980). Where
knowledge gaps are small, for example, there may
be little incentive for an MNE plant to invest in
supplier development activity; where knowledge
gaps are large, potential recipient companies may
not have the internal capability to assimilate new
technologies.
2
Other recent research on boundary-spanning
knowledge transfers has also emphasized the
complementarity of partners’ knowledge portfo-
lios in shaping the type of knowledge co-
ordination activity that takes place (e.g. Buckley
and Carter, 1999). For example, firms may pos-
sess complementary knowledge about different
areas, e.g. hardware and software developers in
mobile telephony; or, as in the majority of cases
considered by Young and Lan (1997), one firm
or group of firms may have a superior level of
technical knowledge in all areas.
In this paper, we investigate empirically the
links between knowledge complementarity and
knowledge coordination in the context of the
local supply chain. Specifically, following Young
and Lan (1997) and others, we make use of the
idea of knowledge gaps to provide an indication
1
For example, on stability and change in supplier
relations see Steed (1970, 1971), Phelps (1996) and
Crone and Watts (2002). Similarly, on the impact of
globalization on supplier relations see Hudson (1997),
while Morris (1992) outlines issues related to localiza-
tion. Regional dimensions of supplier relationships are
discussed in McDermott (1979), Phelps (1996) and
Barkley and McNamara (1994).
2
In their empirical examination of technology transfer
from FDI in China, for example, Young and Lan (1997)
argued that technology transfer from some Western
joint ventures was restricted because ‘assimilation
capabilities are poor at the local Chinese partner side
because all the projects are in high technology sectors’,
p. 676).
340 S. Roper and M. Crone

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