In the Right Place at the Right Time!: The Influence of Knowledge Governance Tools on Knowledge Transfer and Utilization in MNEs

• Author: Ulf Andersson,Peter J. Buckley,Henrik Dellestrand
• DOI: http://doi.org/10.1002/gsj.1088
• Published date: 01 February 2015
• Date: 01 February 2015

IN THE RIGHT PLACE AT THE RIGHT TIME!:

THE INFLUENCE OF KNOWLEDGE GOVERNANCE

TOOLS ON KNOWLEDGE TRANSFER AND

UTILIZATION IN MNEs

ULF ANDERSSON12, PETER J. BUCKLEY34, and

HENRIK DELLESTRAND5*

1School of Business, Society and Engineering, Mälardalen University,

Västerås, Sweden

2Department of Strategy and Logistics, BI Norwegian Business School, Oslo,

Norway

3Centre for International Business, Leeds University Business School,

University of Leeds, Leeds, U.K.

4University of International Business and Economics, Beijing, China

5Department of Business Studies, Uppsala University, Uppsala, Sweden

This article examines the utilization of knowledge transferred between sending and receiving

subsidiaries within multinational enterprises. A model was developed and tested on 169

specific knowledge transfer projects. The model explains the utilization of knowledge subject to

transfer in terms of hierarchical governance tool efficacy and lateral relationships within the

multinational enterprise. The results show that headquarters’ involvement during knowledge

development does not have any significant impact on subsequent knowledge utilization in the

receiving units and, in fact, hierarchical governance forms have a negative impact on knowl-

edge utilization. However, lateral relationships are positive stimuli to building subsidiary

capabilities in the knowledge transfer process that enhance receiving unit knowledge

utilization. Copyright © 2015 Strategic Management Society.

INTRODUCTION

In this article, we analyze knowledge transfer effec-

tiveness between sending and receiving subsidiaries

within multinational enterprises (MNEs) in terms of

utilization of transferred knowledge at the receiving

unit. Viewingand measuring knowledge transfer as a

discrete event, rather than an aggregate of knowl-

edge in- and outflows enables teasing out the knowl-

edge transfer effectiveness in terms of use and

adoption at the receiver.1This is an important con-

tribution of our study, as only knowledge that has

been adopted and is used can have a genuine impact

on capability development. The conceptual frame-

work of this article builds on the knowledge-based

view and integrates both hierarchical governance

tools and lateral relationships for understanding

Keywords: headquarter-subsidiary roles and relations; knowl-

edge governance; knowledge management; multinational enter-

prise; relationships

*Correspondence to: Henrik Dellestrand, Department of Busi-

ness Studies, Uppsala University, Box 513, SE-751 20,

Uppsala, Sweden. E-mail: henrik.dellestrand@fek.uu.se

1Effectiveness reflects the utilization of knowledge that has

been transferred to a receiving unit. As the adoption and use of

transferred knowledge is what influences organizational learn-

ing, this is the goal when transferring knowledge between units

in an MNE. The ’cost efficiency,’that is, the number of people,

hours, and amount of financial resources employed in the trans-

fer process, can, of course, compromise the benefits of adopting

and using the transferred knowledge, but it does not in itself

influence organizational capabilities. Previous research has

found that knowledge transfer drives performance, butthe issue

of use and adoption has been left relatively unexplored.

Global Strategy Journal

Global Strat. J., 5: 27–47 (2015)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/gsj.1088

Copyright © 2015 Strategic Management Society

knowledge transfer effectiveness. The knowledge-

based view highlights integrating isolated knowl-

edge (Almeida, Song, and Grant, 2002; Foss and

Pedersen, 2004; Song, Almeida, and Wu, 2003). We

contribute to the knowledge-based view by making

manifest hierarchical and lateral factors facilitating,

or impeding, firms’ de facto knowledge integration.

Put differently, the knowledge-based view is

extended by explaining antecedents to the use and

adoption of geographically dispersed knowledge by

focusing on effective knowledge transfer.

Given knowledge’s prominence as a fundamental

competitive resource, a key firm activity is knowl-

edge governance, that is, the development and lever-

age of knowledge throughout the firm (Argote and

Ingram, 2000; Foss, 2007). Managers at different

firm levels orchestrate knowledge processes with

varying degrees of difficulty: for example, the more

geographically dispersed the firm is, and the more

dissimilar the activities of its subsidiaries are, the

greater the obstacle to knowledge transfer (Agrawal,

Kapur, and McHale, 2008; Tallman and Phene,

2007). The MNE, which can be viewed as a bundle

of resources that are geographically dispersed

(Bartlett and Ghoshal, 1989; Penrose 1959), there-

fore constitutes a particularly important laboratory in

which to study knowledge governance (Foss, 2006).

Geographically dispersed knowledge and associated

sources may benefit the MNE due to location hetero-

geneity, but, at the same time, it may be difficult to

integrate (Foss and Pedersen, 2004). However,a core

idea of the knowledge-based view is that MNEs can

transfer this knowledge efficiently (Kogut and

Zander, 1993), but at the same time it may be diffi-

cult for the recipient to utilize the transferred knowl-

edge effectively (Barney, 1991). This conundrum is

rarely discussed within the knowledge-based view;

by focusing on the use and adoption of transferred

knowledge, we address this gap in the literature.

The struggle between internal consistency and

local adaptation is apt to be more pronounced in

MNEs as compared to domestic firms, thus compli-

cating the knowledge transfer process. MNE manag-

ers at both the subsidiary and the headquarters level

can employ different governance mechanisms to

influence knowledge transfer processes (Foss,

Husted, and Michailova, 2010)—hence, the need to

understand the various tools at the managers’ dis-

posal. We focus on specific knowledge transfer proj-

ects with particular reference to the role of

headquarters in the process—the relationship

between subsidiaries and specific managerial actions

taken to ensure effective knowledge transfer (Foss

and Pedersen, 2004; Grant, 1996; Kogut and Zander,

1992, 1993; Martin and Salomon, 2003; Szulanski

and Jensen, 2006).

Firms are not only important and efficient gover-

nance structures, but are also a locus for learning

(Ghoshal and Moran, 1996; Madhok 1996, 1997;

Tallman and Chacar, 2011; Teece, 1990) and culti-

vate routines as coordinative devices (Nelson and

Winter, 1982; Williamson, 1999). Previous research

has primarily focused on characteristics of the

knowledge transferred or subsidiaries’ absorptive

capacity , that is, cognitive aspects (Mahnke and

Pedersen, 2004), whereas hierarchical intervention

has attracted less attention, especially at the subsid-

iary level. Relational governance, defined as, ‘a

social institution that governs and guides exchange

partners on the basis of cooperative norms and col-

laborative activities’ (Poppo, Zhou, and Zenger,

2008: 1197) seems to be a promising perspective in

analyzing the utilization of transferred knowledge,

i.e., transfer effectiveness, as it encompasses hierar-

chical governance tools and lateral relationships.

This article also addresses the important question,

discussed by Foss and Pedersen (2004), of how

MNE managers at both the subsidiary and headquar-

ters level can orchestrate knowledge transfer activi-

ties in the MNE network and how this affects

knowledge transfer effectiveness. The link between

organizational processes and knowledge transfer is

still under-researched (Foss, 2006). This article con-

nects actions taken by headquarters with more

micro-features associated with subsidiaries engaged

in knowledge transfer, that is, the social structures of

inter-subsidiary relationships (Szulanski, Cappetta,

and Jensen, 2004) that can help explain knowledge

transfer effectiveness. While extant research has

looked at knowledge transfer in MNEs from differ-

ent viewpoints, most has looked at ‘flows of knowl-

edge’ as an aggregated quota that is transferred,

which makes it inherently difficult to tease out the

actual effect of the knowledge transfer effort at the

recipient unit. The focus on flows of knowledge

obscures the success of individual transfer projects

in terms of adoption and use in the receiving units. It

also makes the influence of different knowledge gov-

ernance tools on knowledge transfer effectiveness

ambiguous. In the present study, we address this

important gap in the existing knowledge transfer

literature.

The findings are based on a questionnaire admin-

istered through structured face-to-face interviews

28 U. Andersson, P. J. Buckley, and H. Dellestrand

Copyright © 2015 Strategic Management Society Global Strat. J., 5: 27–47 (2015)

DOI: 10.1002/gsj.1088