Are social ties always valuable to knowledge search? Contextualizing knowledge search by foreign subsidiary executives in an emerging economy.
| Verfasser | Zhao, Hongxin |
| Posten | RESEARCH ARTICLE - Report |
Abstract The extant research of cross-border knowledge acquisition by multinational enterprises often assumes away the role of local contexts within which knowledge acquisition occurs. To extend this line of research, this study contextualizes the knowledge search by foreign subsidiary executives to examine the contingency value of social ties. The results based on the multilevel analyses of both micro (433 dyad ties) and macro effects of the regional knowledge environment (26 provinces) provide support for the hypotheses that, though close social ties facilitated knowledge search as predicted by social capital theory, the utility value of social ties for knowledge search tends to be attenuated in the regions with high level of social capital and FDI density.
Keywords Social ties * Knowledge acquisition * Regional knowledge environment
1 Introduction
Conceiving of multinational enterprises (MNE) as a learning network (Bartlett and Ghoshal 1987; Ghohsal and Barlett 1991) and as superior arrangements of knowledge creation and transfer (Kogut and Zander 1992), international business scholars have paid increasing attention to the examination of the determinants of NINES' knowledge transfer and acquisition (e.g., Gupta and Govindarajan 1991; Zander and Kogut 1995; Makino and Delios 1996; Inkpen and Dinur 1998; Shenkar and Li 1999; Gupta and Govindarajan 2000; Schulz 2001, 2003; Koka and Prescott 2002; Dhanaraj et al. 2004; Bjorkman et al. 2004; Mudambi and Navarra 2004; Cummings 2004; Lyles and Salk 2006). While these studies have examined various inter- and intra-firm, as well as team- level determinants, one area in this line of research remains underexplored enough to warrant further investigation. The prevalent studies of the determinants of knowledge acquisition typically assumed away the influences of the subnational context in the host markets. So far, little research attention has been paid to whether within-country regional variations (i.e., the subnational contexts) affect knowledge acquisition by MNEs in a host country.
Moreover, research of social ties on knowledge transfer has divergent views about the relative value of weak and strong ties, and the empirical findings are mixed. Some take the "bonding view", arguing that strong-ties, in the form of frequent and close interactions among individuals, lower information asymmetry and facilitate resource exchanges and the transfer of tacit knowledge (Uzzi 1997). Coleman (1988, 1990) argues that close and cohesive social ties yield higher levels of information sharing and the exchange of tacit knowledge. Supporting this reasoning, empirical studies show that strong and close relationships positively influence the information and knowledge exchange (Weiss 1998) because the frequent and close interactions help to lower information asymmetries through fine-grained knowledge transfer (Uzzi 1997). By contrast, other research from the structural hole perspective offers a "bridging view," arguing weak ties create brokerage opportunities (Burt 1992, 1997; Granovetter 1973) that facilitate knowledge flow, while strong ties create redundancy in information. Some empirical findings also lend support for this theory, for example, a study by Hansen (1999) shows that weak ties are effective in knowledge transfer. In the context of MNEs, a recent study of knowledge search reports that brokered access to local business networks positively impacted the acquisition of both explicit and tacit knowledge (Li et al. 2010). Moreover, research also shows that there exists an inverted U-shaped relationship between tie strength and knowledge sharing (McFadyen and Cannella 2004).
These deficiencies and the mixed findings in the literature are significant for two reasons. First, knowledge acquisition either by individuals or organizations is nested within specific local contexts that can affect the occurrence and the meaning of behaviors and information (Johns 2006). While cross-country comparisons provide the basis for developing country-level knowledge that can aid market selection and entry decisions, treating a country as a single homogeneous environment masks the regional heterogeneity that can affect the management and operations of MNE subsidiaries. Even recent cross-country comparison research suggests that subnational institutions are the most relevant institutional settings when studying foreign subsidiaries (Chan et al. 2010). In the same vein, many scholars argue that research involving geographically large countries, like China, India, and Russia, requires a subnational perspective (Wright et al. 2005). The emergent empirical literature on subnational institutions shows that the different institutional environments give rise to distinct relationship between social capital in the form of trust and governance formalization (Rus and Iglic 2005) and influence the nature and pace of entrepreneurial development (Welter and Smallbone 2011). Recent research found that the sub-national institutional environment not only affects the performance outcome of foreign subsidiaries (Chan et al. 2010; Ma et al. 2013), but also exerts a contingency effect on the attractiveness of different network attributes (Shi et al. 2012). Nonetheless, as a recent review of network research in the area of IB critiques (Chabowski et al. 2010), the role of subnational institutional differences has been largely ignored. Second, the social capital literature has long been questioned. Nahapiet and Ghoshal (1998) claimed that the benefit of social capital is not universal (p. 245). Maurer and Ebers (2006) called for further research that "explores the contingencies under which social capital becomes an asset or a liability" (p. 290).
Our study fills this gap by empirically addressing the following question: does the value of external ties in the knowledge search still hold in different subnational environments? The external social ties in this study refer to the nonwork related relationship between an executive with an individual outside the executive's organization. We characterize subnational environment using two dimensions: institutions (formal, intermediate institutions and informal, regional social capital) and agglomeration (density of foreign direct investment). Specifically, extending from the perspectives of economic geography, we conceive these two subnational dimensions as constituting the key components of a "learning region" that provides the knowledge environment and infrastructure that facilitates the knowledge flow (Florida 1995; Capellow and Faggian 2005; Hauser et al. 2007). (1) We focus on the search for institutional knowledge that encompasses a wide range of knowledge areas such as managerial expertise, host market knowledge and practices, and the host country macro-environment (Luo 1999). Specifically, following this notion, institutional knowledge in this study is defined as the "experiential knowledge of government, institutional framework, rules, norms and values" in this study (Eriksson et al. 1997, p. 343). In a broad sense, it not only refers to explicit rules and laws, but also to more complex cultural and business practices (North 1990) and social institutions (Fligstein 1996). We focus on institutional knowledge because lacking institutional knowledge is costly for MNEs (Eriksson et al. 1997). Particularly in emerging economies, this lack of understanding how formal and informal institutions function can create problems for foreign subsidiaries to formulate and implement appropriate strategic responses (Wright et al. 2005).
We posit that the local context within a large emerging economy can vary significantly across subnational regions along these two dimensions. We argue that, although the external ties (defined as the non-work related social relations an executive has developed outside of his/her organization and outside of the geographic region where the executive lives in the host country) represent useful conduits for acquiring knowledge, the value of the social ties may vary due to the heterogeneous regional knowledge environment. We conceptualize and empirically validate how the munificent regional environment, characterized by the regional-level of social capital embedded in the collective value of trusting relationships (Coleman 1988; Porter 1998; Lin 2001), develops intermediate institutions and how a high density of foreign direct investment (FDI) dampens the utility value of social ties in the knowledge search by subsidiary executives. (2) To statistically examine the propositions, we draw on the concept of the "learning region" from the perspectives of economic geographic literature to develop hypotheses on the influences of the regional knowledge environment on the tie-search relationship and test it in a multilevel model (Fig. 1), controlling for subsidiary-specific characteristics.
Contextualization--identifying how context enhances or modifies the understanding of a common phenomenon across contexts--is at the core of detecting novel questions and developing interesting theories (Tsui 2007). The primary contribution of this study is that we conceptualize the subnational environment as a munificent knowledge context and theoretically delineate how it influences the relationship between foreign executives' ties and their search for knowledge in a host market. Given that the substantiation of theoretical discourse on regional context continues to be largely unexplored, our study advances the existing knowledge acquisition research by incorporating the moderating role of the regional knowledge environment. By defining clear boundary conditions within a host market, our study echoes the recent call that "international business scholars analyzing organizational learning should incorporate contextual variations in future research designs" (Meyer 2007, p. 28). Specifically, uncovering the precise nature of knowledge search variations across the...
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