How existing organizational practices affect the transfer of practices to international joint ventures.

VerfasserTsang, Eric W.K.
PostenRESEARCH PAPER

Abstract This study examines whether and how far the existence of prior organizational practices affects the transfer of new practices in the context of international joint ventures. Based on 324 pairs of survey responses collected from joint ventures set up by either Hong Kong or Singapore companies in mainland China, the results indicate that similarity between new and existing practices decreases while entrenchment of existing practices increases the difficulty of transfer. These two effects are moderated by the ownership--Chinese versus foreign--of existing practices. Transferring new practices that substitute for Chinese practices is more difficult than transferring practices that substitute for foreign practices or than transferring brand new practices.

Keywords Organizational practice * Knowledge transfer * International joint venture * Organizational learning * Organizational unlearning * China

1 Introduction

Inter-organizational knowledge transfer is a complex phenomenon (Inkpen 2002). Easterby-Smith et al.'s (2008) literature review classifies factors affecting the transfer process into four groups--characteristics of the donor firm, characteristics of the recipient firm, inter-organizational dynamics, and nature of knowledge. This study focuses on the last group of factors, which includes tacitness, ambiguity, and complexity (Easterby-Smith et al. 2008). Argote et al. (2003) argue that the properties of the knowledge affect the donor firm's ability to transfer that knowledge, the rate at which it will be assimilated by the recipient firm, and how much of it will be retained. Yet previous studies have not investigated the properties of the knowledge replaced during the transfer process. Nor have they examined a more fundamental issue--whether or not the transfer involves replacing existing knowledge and how that may affect the transfer. The present study addresses this crucial gap in the context of international joint ventures.

Knowledge transfer usually takes the form of transferring practices from one organization to another. Similar to the definition used by Jensen and Szulanski (2004), an organizational practice or routine refers to a repetitive and recognizable pattern of interdependent actions carried out by multiple organizational members for achieving a certain objective (Feldman and Pentland 2003). This broad definition includes such things as hiring practices, production lines, purchasing procedures, and logistic systems. A key characteristic of these practices is that they are repetitive and have a recognizable pattern. Certain organizational activities, such as holding a farewell party for the founder of the organization, are therefore not organizational practices. Moreover, organizational practices are only one form of knowledge (Jensen and Szulanski 2004). For example, patents are another form of knowledge but they are not organizational practices.

There are two general scenarios in the transfer process. First, the practice is new to the organization in the sense that no practice serving the same function exists in the organization. Second, the practice replaces an existing one within the organization where both practices serve the same function. A key difference between these two scenarios is reflected in the transfer process. In the latter scenario organizational members learn to use the new practice and at the same time discard the old one, which may have been deeply entrenched in the organization. Research on the transfer of organizational practices rarely makes a distinction between these two scenarios and accordingly neglects an important question: how does the presence of an existing practice affect the adoption of a new practice?

There are two views in the literature--facilitation and hindrance--that shed some light on the above question. As Cohen and Levinthal (1990, p. 129) argue, "[t]he premise of the notion of absorptive capacity is that the organization needs prior related knowledge to assimilate and use new knowledge". The presence of an existing practice should ease the transfer of a new practice since it is likely that both the new practice and the existing practice it replaces are related. While this facilitation view may sound commonsensical, there is a contrasting argument, which I call the hindrance view, that an old practice may become a barrier to learning a new practice: "the tension between assimilating new learning (feed forward) and using what has already been learned (feedback) arises because the institutionalized learning (what has already been learned) impedes the assimilation of new learning" (Crossan et al. 1999, p. 533). Edmondson et al.'s (2001) study on implementing innovative technology (namely minimally invasive cardiac surgery) in 16 US hospitals finds that "[e]xisting routines and status relationships in the context of cardiac surgery presented powerful barriers to implementing (minimally invasive cardiac surgery)" (p. 707). Tsang and Zahra (2008, p. 1437) define organizational unlearning as "the discarding of old routines to make way for new ones, if any". (1)

From this perspective, the unlearning process can be problematic when an organization must discard the old practice while learning the new one. Both the facilitation and hindrance views suggest that an existing practice will affect the adoption of a new practice. The present study attempts to investigate this important yet under-researched issue by drawing on theories of organizational learning and unlearning.

I employed a questionnaire survey as the second stage of a large research project investigating the international transfer of organizational practices to mainland China. The first stage was an intensive case study of 20 foreign-invested enterprises in China (referred to as the fieldwork hereafter). The objective was to investigate how practices were transferred to these enterprises and what the foreign companies learned from their transfer experiences. This fieldwork provided valuable information for constructing the questionnaires. In this article I examine two key factors that may affect the difficulty of transfer: similarity between new and existing practices as well as the entrenchment of existing practices. I probe deeper into this phenomenon by investigating how the ownership of existing practices--Chinese versus foreign--moderates the effects of these two factors. In order to provide a clear focus I only study practices that have been successfully transferred regardless of the difficulty encountered during the process, and exclude transfers that fail to take hold. By successful transfer I mean that the practice in question has been properly implemented in the joint venture as originally envisaged by the foreign partner.

2 Hypothesis Development

2.1 Prior Studies of Cross-Border Knowledge Transfer

A growing number of empirical studies have examined cross-border knowledge transfer during the past two decades. Studies of human resource management (HRM) practice transfer are particularly prominent (e.g., Edwards and Tempel 2010; Ferner et al. 2012). The social complexity as well as institutional and cultural sensitivities of HRM practices render these studies both theoretically interesting and practically enlightening. Since the beginning of economic reforms in China in 1978, thousands of multinational corporations (MNCs) have established operations in this fast-growing economy. At the same time there have been studies of knowledge transfer from MNCs to their subsidiaries in China. Researchers accordingly identify a number of factors affecting these transfers. For instance, based on an investigation of 18 cases in China, Tsang (2001) identifies factors associated with the MNC and the Chinese partner of a joint venture. While the former factors include the MNC's commitment of human resources to the venture, its experience in the industry to which the venture belongs, and overseas training provided to local employees, the latter are mainly concerned with the Chinese partner's intent to learn from the MNC along with the amount of effort spent on learning. Tsang's (2001) study also indicates that it would be easier to transfer physical versus organizational technologies. Wang et al.'s (2004) study involves interviewing 62 MNC subsidiaries operating in China. They arrange the factors in an integrated model consisting of four categories: the MNC's capacity to transfer, its willingness to transfer, the Chinese partner's capacity to learn, and its intent to learn. Each category in turn consists of a couple of variables. For instance, the Chinese partner's capacity to learn depends on the qualifications of its employees as well as its emphasis on training. Finally, Wang and Nicholas's (2005) survey 65 contractual joint ventures established by Hong Kong companies operating in China. Their results indicate that the learning intent and learning ability of Chinese managers are two key factors affecting knowledge transfer from the Hong Kong firms to their ventures.

The above brief survey of past studies suggests that how the presence of prior knowledge impacts the difficulty of transfer has been neglected. I address this gap in the literature by developing hypotheses regarding the difficulty of transferring organizational practices from foreign partners to Sino-foreign joint ventures. I specifically examine how the existence of a prior practice affects this transfer and test the facilitation view by drawing on the core idea of absorptive capacity that prior related knowledge would ease the absorption of new knowledge. Similarity between new and existing practices would therefore alleviate the difficulty of transfer. The hindrance view notably concerns the problem of organizational unlearning. For instance, Zhao et al.'s (2005) case study of R&D capability transfer to four international joint ventures in the Chinese automotive industry suggests that "the preexisting knowledge stock...

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