Exploring the effects of vertical and lateral mechanisms in international knowledge transfer projects.

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RESEARCH ARTICLE - Report

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Exploring the effects of vertical and lateral mechanisms in international knowledge transfer projects.

Abstract:

* Knowledge is critical for creating and sustaining competitive advantage and in today's fast-moving international market firms need to leverage knowledge globally. Therefore, one important question becomes what effect different transfer mechanisms have on transfer success.

* This study investigates 169 international knowledge transfer projects in multinational corporations focusing on the role of hierarchy, heterarchy and IT in terms of effects on knowledge transfer success, that is, efficiency and effectiveness of the transfer project.

* We find that the effects of the different integrative and coordinative structures on knowledge transfer success are contradictory. Centralization through headquarters involvement is negatively related to knowledge transfer success in both its dimensions, while previous cooperation between subsidiaries has positive effects on transfer effectiveness, but not on efficiency. The use of IT nurtures knowledge transfer success in both dimensions.

* This study adds to the knowledge about the effects of vertical and lateral mechanisms on the success of knowledge transfer projects.

Keywords: Hierarchy and heterarchy * IT * Knowledge transfer * Multinationals * Vertical and lateral mechanisms

Introduction

Knowledge is one of the most important factors in differentiating firms from their competitors and in creating competitive advantage. The creation and sustenance of capabilities in order to continuously generate knowledge is a primary objective of strategy (Teece et al. 1997). However, advantage positions eventually erode through competition and imitation (Schumpeter 1942; Nelson and Winter 1982). According to the resource-based view (Barney 1991), resources and capabilities generate competitive advantage only as far as there are barriers to imitation. One important barrier to imitation lies in the causal ambiguity of knowledge concerning the resource inputs and the productive output it renders (Lippman and Rumelt 1982; Reed and DeFillippi 1990). This implies somewhat of a paradox for globally dispersed firms that need to transfer and replicate knowledge, practices and capabilities in multiple locations. In fact, barriers to imitation are also barriers to internal transfer (Szulanski 1996; King and Zeithaml 2001). For multinational corporations (MNCs)--which are geographically dispersed and can be conceptualized as inter-organizational networks (Ghoshal and Bartlett 1990; Andersson et al. 2007)--dealing with this issue is paramount. The development and international transfer of knowledge have been identified as primary strategic issues for MNCs (Bartlett and Ghoshal 1989) and the ability to facilitate such processes within an organizational context has been advanced as a main explanation for the existence of MNCs (Kogut and Zander 1993). Thus, a key management concern in MNCs is to understand what mechanisms and structures are available for transferring ambiguous knowledge, and what trade-offs these mechanisms might entail. For instance, are activities organized laterally between subsidiaries and vertically through centralization always favorable for international knowledge transfer projects? These mechanisms may both hinder and facilitate global integration and coordination of knowledge. In this study we are particularly interested in what results different types of mechanisms generate in terms of knowledge transfer success.

According to Foss (2006), there is still little understanding of the effects of different organizational mechanisms and structures that can be used in knowledge transfer processes. The most common findings indicate that knowledge transfer is, while worthwhile, problematic and costly (Teece 1977; Szulanski 1996; Simonin 1999; Gupta and Govindarajan 2000). A number of studies from the 1990s have come to define the field--among them, Szulanski's study (1996) of best practice transfers in firms, Nonaka and Takeuchi's (1995) work on knowledge creation, and the formulation of a knowledge-based view of the firm (Grant 1996; Spender and Grant 1996). Since then, knowledge transfer has predominantly been seen as dependent on the properties and attributes of that which is transferre...

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