International Joint Ventures as Boundary Spanners: Technological Knowledge Transfer in an Emerging Economy

• Author: Yong Kyu Lew,Rudolf R. Sinkovics,Zaheer Khan
• Published date: 01 February 2015
• DOI: http://doi.org/10.1002/gsj.1089
• Date: 01 February 2015

INTERNATIONAL JOINT VENTURES AS

BOUNDARY SPANNERS: TECHNOLOGICAL

KNOWLEDGE TRANSFER IN AN

EMERGING ECONOMY

ZAHEER KHAN,1YONG KYU LEW,2and RUDOLF R. SINKOVICS34*

1Hull University Business School, University of Hull, Hull, U.K.

2School of Business, Sejong University, Seoul, Republic of Korea

3Centre for Comparative and International Business Research (CIBER) at

Manchester Business School, The University of Manchester, Manchester,

U.K.

4Lappeenranta University of Technology, Lappeenranta, Finland

We investigate how international joint ventures(IJVs) established in emerging economies help

their local suppliers with technological knowledge transfer. Data from 50 Pakistani-owned

Tier 1 suppliers, three of the major assemblers, and policy makers in the Ministry of Industries

and Production in Pakistan is collected. Findings suggest that, in the context of the Pakistani

emerging economy, IJVs can also play a critical role as the boundary spanners of knowledge

transfer.Local suppliers are linked with their global suppliers’ networks through associational

learning. Social capital between the IJVs and the local component suppliers and the IJVs’

willingness to initiate a knowledge transfer dialogue among local and global Tier 1 suppliers

are critically important factors that enable this transfer. Copyright © 2015 Strategic Manage-

ment Society.

INTRODUCTION

The impacts of multinational enterprises (MNEs) on

host countries have been studied since the 1960s

(Hymer, 1960). Policy makers in developing econo-

mies have put attracting foreign direct investment

(FDI) at the top of their policy menus, in the hope

that investment by MNEs will bring much-needed

capital, sophisticated and updated technological

knowledge, production methods, marketing tech-

niques, and tacit and codified managerial know-how

to local firms (World Bank, 1993).

According to Meyer and Sinani (2009), local firms

view FDI as both competition and a source of

advanced technologies and managerial knowledge.

Keeping in mind these benefits, the Government of

Pakistan has embarked upon liberalization, deregu-

lation, and privatization programs and developed

sector-specific policies for FDI (e.g., Pakistan Board

of Investment, various publications). The World

Bank (2010) has recently recognized Pakistan as the

83rd most business-friendly country in the world in

its annual ‘ease of doing business’ index.

The transfer and receipt of technological knowl-

edge is of fundamental concern to scholars investi-

gating how firms and local (and national) economies

grow in terms of technological knowledge, which

functions as a base for developing sustainable com-

petitive advantage (Lylesand Salk, 1996; Tsai, 2001;

Zahra, Ireland, and Hitt, 2000). Several scholars

have suggested that recipient firms can gain long-

term benefits from technology transfer (Dyer and

Keywords: international joint ventures; technological knowl-

edge transfer; boundary spanners; social capital; automotive

industry; emerging economy

*Correspondence to: Rudolf R. Sinkovics, Centre for Compara-

tive and International Business Research (CIBER), Manchester

Business School, The University of Manchester, Booth Street

West, Manchester M15 6PB, U.K. E-mail: Rudolf.Sinkovics@

manchester.ac.uk

Global Strategy Journal

Global Strat. J., 5: 48–68 (2015)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/gsj.1089

Copyright © 2015 Strategic Management Society

Nobeoka, 2000; Dyer and Singh, 1998; Gupta and

Govindarajan, 2000; Simonin, 1999; Szulanski,

1996; Zander and Kogut, 1995). But, scholars have

acknowledged that it is critical that the technology

transfer be effective in this highly competitive and

uncertain environment (Bhagat, Harveston, and

Triandis, 2002; Hansen, 2002; Pérez-Nordtvedt

et al., 2008).

The entry of MNEs also contributes to the devel-

opment of underdeveloped supply chains in the host

countries through their sourcing behaviors. Recently,

researchers have documented that the entry of MNEs

can be beneficial for local suppliers because they

transfer technology to them, which is in the interests

of MNEs as it creates vertical linkages (Blalock,

2001). However, one aspect that still requires better

understanding is how MNEs influence the develop-

ment of local firms, again mainly through their local

sourcing behaviors (see e.g., Javorcik, 2004; Moran,

2005).

MNEs often prefer the establishment of interna-

tional joint ventures (IJVs) as a governance vehicle

when they decide to set up operations in emerging

and developing economies, in the hope that equity

partnerships will help with the transfer of techno-

logical knowledge. For example, China, India, and

Pakistan have all, from time to time, seen IJVs used

as the preferred mode of entry. In this respect, extant

international business (IB) research has focused on

knowledge transfer between the joint ventures’ part-

ners, reverse knowledge transfer from subsidiaries/

IJVs to headquarters, or knowledge transfer from

parents to IJVs in emerging and developing markets.

Furthermore, previous research has focused on

MNEs, and especially IJVs, established in emerging

and developing countries as a source of knowledge

transfer and as the holders of valuable knowledge

stock (Beamish, 1993; Child and Yan, 2001; Lyles

and Salk, 1996). However, in the context of emerg-

ing countries, these IJVs can also play a critical role

in facilitating knowledge transfer beyond their own

boundaries to their local network suppliers when

those suppliers lack absorptive capacity and have

limited connectivity within the MNE’s global pro-

duction network. This is one of the crucial roles

of IJVs that, so far, the extant literature has

downplayed.

Little research has focused its attention beyond

the IJVs’ boundaries to their local suppliers in the

developing and emerging economies (Zhao, Anand,

and Mitchell, 2005). As Easterby-Smith, Lyles, and

Tsang (2008: 677) suggest, ‘transferring knowledge

between organizations brings more complexity

because of the multifaceted nature of the boundaries,

cultures, and processes involved. It is therefore an

interesting domain for further theoretical investiga-

tion.’ In addition, research has demonstrated that

accessing knowledge from across boundaries is an

important contributor to innovation and organiza-

tional performance (Cohen and Levinthal, 1990;

Hansen, 1999; Tsai, 2001). Indeed, since heteroge-

neous knowledge resides across firm, national, and

international boundaries, individuals involved in

moving knowledge across these boundaries might

struggle to find a common ground to facilitate the

transfer and integration of knowledge, due to social

and cultural differences, a lack of common under-

standing, and coordination issues (Bechky, 2003;

Mors, 2010).

Research in the field of innovation has acknowl-

edged the key role of boundary spanners within and

across organizations in the process of innovation

(Allen, 1977; Henderson and Clark, 1990;

Tushman, 1977). Similarly, research in the area of

cross-unit knowledge transfer has noted the impor-

tant role played by individuals who maintain close

connections with their colleagues in different orga-

nizational units in facilitating such transfer (Allen

and Cohen, 1969). Despite these contributions,

empirical support is scarce and often mixed about

the success of boundary spanners. One line of

research has suggested they play a positive role,

pointing out that organizational units with bound-

ary spanners are more productive (Ancona and

Caldwell, 1992; Hansen, 1999; Tushman and Katz,

1980). Other researchers note a negative role in the

transfer of knowledge within organizations (Cross,

Nohria, and Parker, 2002; Gould and Fernandez,

1989), either because of the boundary spanners’

desire to keep their power and influence or because

they do not want to invest the time and effort

needed to transfer knowledge efficiently. So far,

research has mainly looked at the role of boundary

spanners within organizations (e.g., Fleming and

Waguespack, 2007; Leifer and Delbecq, 1978;

Marrone, Tesluk, and Carson, 2007; Tushman and

Katz, 1980; Zhao and Anand, 2013). In this article,

we extend this line of reasoning to the context of

IJVs. We consider that IJVs established in emerg-

ing economies may overcome barriers to knowl-

edge transfer due to their position in their parents’

networks. They can play vital roles as boundary

spanners by linking local suppliers with these net-

works. This argument is also in line with the recent

Boundary Spanners 49

Copyright © 2015 Strategic Management Society Global Strat. J., 5: 48–68 (2015)

DOI: 10.1002/gsj.1089