Adaptations to Knowledge Templates in Base‐of‐the‐Pyramid Markets: The Role of Social Interaction

• Date: 01 December 2014
• DOI: http://doi.org/10.1002/sej.1186
• Author: Christopher J. Sutter,Geoffrey M. Kistruck,Shad Morris
• Published date: 01 December 2014

ADAPTATIONS TO KNOWLEDGE TEMPLATES

IN BASE-OF-THE-PYRAMID MARKETS:

THE ROLE OF SOCIAL INTERACTION

CHRISTOPHER J. SUTTER1*, GEOFFREY M. KISTRUCK2, and

SHAD MORRIS3

1Farmer School of Business, Miami University, Oxford, Ohio, U.S.A.

2Schulich School of Business, York University, Toronto, Canada

3Marriott School of Business, Brigham Young University, Provo, Utah, U.S.A.

While templates may facilitate knowledge sharing within the base-of-the-pyramid, it is often

necessary for entrepreneurs to adapt the template for reasons of resource scarcity. We explore

the role of social interaction in determining whether these adaptations are beneficial or

detrimental. Our results suggest that interactions between the entrepreneur and technical

experts who understand the ‘why’ behind each practice can result in improved performance

while interactions with entrepreneurial peers can produce more varied results. Thus, the type

of knowledge generated through social interaction plays a significant role in the degree to

which adaptations to templates are principled versus presumptive in nature.Copyright © 2014

Strategic Management Society.

INTRODUCTION

Recent work regarding the base of the pyramid

(BOP) has emphasized the importance of knowledge

transfer to microenterprises (e.g., small-scale agri-

culture, small-scale manufacturing, etc.) as a means

of increasing productivity and improving welfare

(Pietrobelli and Rabellotti, 2006; Perez-Aleman,

2011). However, the BOP has several characteristics

that make knowledge transfer difficult, including a

lack of human, social, and financial capital (Alvarez

and Barney, 2014; Armendariz and Morduch, 2007;

Becker, 2009; Woolcock, 1998). In the face of these

challenges, templates present a particularly promis-

ing mechanism for knowledge transfer in the BOP,

as they capture complex tacit knowledge in an acces-

sible format, even when recipients lack a deep under-

standing of the knowledge itself (Winter and

Szulanski, 2001; Szulanski and Jensen, 2006). Tem-

plates are, however, potentially problematic when

knowledge cannot be replicated perfectly (Jensen

and Szulanski, 2004, 2007), as may be the case when

resource constraints force adaptations to practices.

In such cases, recipients may choose to look beyond

the template for knowledge by turning to their social

networks.

Prior work has shown that, independently, both

the use of templates and social interaction can facili-

tate knowledge transfer (Adler and Kwon, 2002;

Szulanski and Jensen, 2006). However, relatively

less work has focused on how the use of templates

and social interaction, together, might affect knowl-

edge transfer (Haas and Hansen, 2007; Morris et al.,

2009). This is especially likely to be important in the

BOP context where, due to resource and other con-

straints, knowledge recipients may seek out addi-

tional information from peers or other individuals in

order to decide how to adapt one or more of the

practices prescribed within the template (Jensen and

Keywords: base-of-the-pyramid; knowledge transfer; tem-

plates; adaptation; social interaction

*Correspondence to: Christopher J. Sutter, Farmer School of

Business, Miami University, 800 E. High Street, FSB 2067,

Oxford, OH 45056, U.S.A. E-mail: sutterc@miamioh.edu

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Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 8: 303–320 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1186

Copyright © 2014 Strategic Management Society

Szulanski, 2007; Lin, 2011). Thus, the BOP is an

ideal context to explore the role of social interaction

when resource constraints force adaptation to estab-

lished templates.

The purpose of this article is to examine how

social interaction can either enhance or impair the

performance of microentrepreneurs in the BOP

when adaptations to templates are necessitated by

resource constraints. The particular context exam-

ined in this article is the sharing of knowledge

regarding best practices between a development

organization (which possessed expert knowledge

regarding dairy practices) and 1,812 dairy farmers

in rural Nicaragua in an attempt to improve their

milk production. Our results suggest that templates

can serve as an important knowledge transfer

mechanism for improving performance within

BOP settings. However, when templates require

modification, the information garnered through

the entrepreneur’s social interactions can have a

significant impact on their subsequent perfor-

mance. More specifically, frequent interactions with

technical experts that understand the ‘why’ behind

each practice, and combination of practices, can

result in ‘principled adaptations,’ or practices that

adhere to the underlying causal principles and,

thus, improve performance. Comparatively, interac-

tions with entrepreneurial peers can have a much

more varied effect on performance, as such adap-

tations can be either ‘principled’ or ‘presumptive’

in nature.

THE TRANSFER OF KNOWLEDGE IN

THE BOP

Base-of-the-pyramid markets are defined as the

impoverished regions of the world, particularly

within Africa, Latin America, and Southeast Asia,

where the average individual surviveson less than $2

per day (Prahalad and Hart, 2002; London, 2009). In

addition to economic poverty, such individuals often

suffer from illiteracy and a general lack of human

capital due to poor educational systems (Becker,

2009; Webb et al., 2010).As a result, the vast major-

ity of individuals residing within BOP markets are

microentrepreneurs who operate within the informal

economy at subsistence levels (Renko, 2013).

Knowledge transfer has been viewed as a critical

tool for integrating such microentrepreneurs into

larger, more formal markets and for helping reduce

poverty (Pietrobelli and Rabellotti, 2006).

Knowledge consists of both factual statements

and know-how regarding the means by which spe-

cific activities are carried out (Kogut and Zander,

1992). Thus, while knowledge regarding routines or

practices usually contains simple information, it is

also often comprised of multiple components which

are, at least in part, tacitly linked to one another

(Orlikowski, 2002). Indeed, scholars have argued

that building and maintaining such complex knowl-

edge within the bounds of an organization can

serve as a source of competitive advantage (Barney,

Wright, and Ketchen, 2001; Grant, 1996; Peteraf,

2006). The capability to transfer complex knowl-

edge across individual and firm boundaries is

often desirable for many reasons (Markman et al.,

2005).

At a macro level, the transfer of best practices

across and within least developed countries is seen

as a critical factor in attempts at alleviating poverty

(Bruhn and Zia, 2011; Pietrobelli and Rabellotti,

2006). At a more micro level, such efforts are typi-

cally undertaken by development-oriented nongov-

ernmental organizations that seek to redress the

underlying causes of poverty through capacity build-

ing, reducing transaction costs, and generating

additional business opportunities for entrepreneurs

(Kistruck et al., 2013). For microentrepreneurs,

knowledge transfer is especially valuable, as it can

help improve productivity (McKenzie and Woodruff,

2012), meet the standards required by more formal

markets (Perez-Aleman, 2011), and ultimately

improve social well-being (Becker, 2009).

While knowledge transfer from one actor to

another is often desirable, it has also been charac-

terized as ‘sticky,’ given the difficulties inherent in

the transfer process (Szulanski, 1996; Von Hippel,

1994). The primary difficulty rests in the social

complexity and causal ambiguity associated with

what are often multiple interrelated routines and

practices. For example, knowledge of a particular

business model may be composed of a large number

of parts that, for reasons of interdependence, are

each an important component to generating the

desired outcome (Adler and Kwon, 2002; Kogut

and Zander, 1992). These interdependencies can

lead to uncertainty with regard to linking appropri-

ate resources to performance (Rivkin, 2000). As a

result, exploring potential mechanisms for over-

coming knowledge stickiness in the transfer process

has been a primary source of discussion for man-

agement scholars (e.g., Cohen and Levinthal, 1990;

Dyer and Singh, 1998; Gupta and Govindarajan,

304 C. J. Sutter, G. M. Kistruck, and S. Morris

Copyright © 2014 Strategic Management Society Strat. Entrepreneurship J.,8: 303–320 (2014)

DOI: 10.1002/sej