Procedural justice, not absorptive capacity, matters in multinational enterprise ICT transfers.
| Verfasser | Verbeke, Alain |
| Posten | RESEARCH ARTICLE |
Abstract:
* This paper empirically tests the effectiveness of information and communications technology OCT) knowledge transfer and adoption in the multinational enterprise (MNE) as an issue of critical importance to contemporary MNE functioning. In contrast to mainstream thinking on absorptive capacity, but in line with prevailing international business theory, our research supports the proposition that perceptions of procedural justice, rather than absorptive capacity, determine effectiveness, especially in cases of high tacit knowledge transfers.
* Data was collected from senior ICT representatives in 86 Canadian subsidiaries of foreign owned MNEs. Each of these subsidiaries recently experienced a significant ICY transfer imposed by the parent organization.
* Support was found for the main propositions: Procedural justice significantly predicted successful ICT transfer and adoption, while absorptive capacity was not significant. These findings are consistent even when knowledge tacitness was high.
* The perceived success of the ICT transfer as well as its adoption varied widely across these firms. The potential reasons for this divergence in effectiveness are manifold, but our findings suggest that in situations of substantial knowledge tacitness, a higher level of procedural justice, rather than a higher level of absorptive capacity, is critical to effective transfer and adoption.
Keywords: Absorptive capacity * Information and communications technology * Knowledge management * Knowledge tacitness * Multinational enterprises * Procedural justice
Introduction
Multinational enterprises (MNEs) function as vehicles for the international transfer of proprietary knowledge, commonly referred to as non-location bound firm specific advantages (FSAs) (Rugman and Verbeke 2005). MNE knowledge diffusion processes include inter-organizational ones, as well as transfers within the internal network that are dispersed across geographic borders (Dunning 1958; Meyer et al. 2011; Rugman and Verbeke 2001; Vernon 1966).
The functioning of the contemporary MNE typically takes on features of "federative rather than unitary organizations" (Yamin and Sinkovics 2007, p. 322). Such configuration allows subsidiary management to enjoy a high degree of autonomy (Birkinshaw and Hood 1998), but has also led to a significant loss of information at the head office level potentially resulting in a knowledge deficit. In other words, subsidiary autonomy has allowed many local activities in the subsidiary network to remain invisible to the MNE head office. This knowledge deficit and the associated perceived lack of control is now facing increased intolerance from head offices (Yamin and Sinkovics 2007), and has at times triggered a power struggle between the head office and the subsidiaries. However, technological advances have provided MNE head offices with new tools to counter the knowledge deficit problem. More specifically, information and communications technology (ICT) is critical here: "ICT advancement facilitates significant structural changes in multinational enterprises, away from the traditional federative system towards more tightly integrated and controlled entities" (Yamin and Sinkovics 2007, p. 324).
ICT performs a dual role in these knowledge transfer processes. First, ICT can act as an FSA, in the form of a knowledge bundle, in its own right, allowing efficiencies in how information is managed in the MNE. Second, ICT can be a tool for diffusing other non-location bound FSAs throughout the enterprise's internal and external networks (Eccles and Nolan 1993; Pan and Leidner 2003). This article focuses primarily on ICT's first role. Much work to date on cross-border knowledge transfer has focused on the recipients of such transfers, more specifically on the recipients' absorptive capacity (Mahnke et al. 2005; Minbaeva et al. 2003).
In the context of inter-organizational transfers, one can safely assume that recipients want a successful transfer to occur, or else the recipient organization would not have agreed to the transfer process in the first place. However, this assumption is not necessarily valid with intra-organizational transfers, whereby the corporate head office can simply mandate a knowledge transfer that is undesired by subsidiary management. Importantly, because the transfer can be a strategy implementation that often involves a top-down decision by the head office, subsidiary managers may feel disinclined to commit fully to the decision and implementation. Subsidiary managers may feel that a mandated knowledge transfer is being imposed by a clueless overseer (Ciabuschi et al. 2011). The MNE head office is not only spatially removed from the subsidiaries, but subsidiaries enjoy some level of autonomy and, as a result, their managers may have substantive objections to the head office decision. Allowing subsidiary managers to voice their concerns and head office subsequently addressing these concerns may alleviate any reluctance on the part of the subsidiary. Szulanski (1996) emphasized the impact of recipient resistance in knowledge transfer should not be taken lightly. This is especially the case when the transfer of highly tacit knowledge is involved, whereby knowledge-related barriers were found to be of greater significance than motivation-related barriers. In such situations, not only issues of motivation, but also issues of knowledge needed to make the transfer successful, must be examined.
As noted above, ICT implementation can greatly benefit the MNE, but there is a paucity of research examining the 'affective' element on the recipients' side in ICT knowledge transfers. This affective element includes the enthusiastic embracing (or the lack thereof) by subsidiary personnel, of mandated ICT knowledge transfers. In other words, ICT implementation may result in much improved knowledge held by the head office about subsidiary activities, but such an improvement may also lead to a substantial reduction of voice by the subsidiaries in the corporate system, at least as perceived by the subsidiary managers themselves. Thus, subsidiary managers may feel that ICT implementation does not benefit them because of a perceived or real loss in autonomy. Here, it is critical for the MNE head office to involve subsidiary managers and to enlist their cooperation in terms of effective ICT knowledge transfer and subsequent usage.
A considerable body of evidence suggests that procedural justice is a key determinant of subsidiary managers' motivation to make head office directives work. Procedural justice reflects the perception by subsidiary management that a head office decision has been reached in a fair and transparent fashion (Hunton and Price 1997; Kim and Mauborgne 1993; Korsgaard et al. 2002; Sapienza and Korsgaard 1996). The present paper argues that procedural justice plays a key role in determining the success of mandated (i.e., compulsory) intra-organizational knowledge transfers, and is likely to be much more important than the recipient's absorptive capacity. In other words, when subsidiary managers believe that the MNE head office has made decisions regarding the transfer in a procedurally fair fashion, our main proposition is that they will be more likely to apply themselves fully to ensuring transfer and subsequent usage success. Prior research has concluded that procedural justice increases subordinates' commitment to strategic decisions made by the leader (Korsgaard et al. 1995). In addition, Yamin et al. (2011) reported that dyadic 'willingness' was considerably more important in lateral innovation transfers than even absorptive capacity. Hence, these studies suggest that the motivation of the recipient is critical for knowledge transfer with this motivation being influenced by procedural justice. Consequently, subsidiary managers will better understand and more readily accept the rationale behind the decisions and not view knowledge transfers as a threat to be resisted or as orders to be reluctantly obeyed. In contrast, it could be argued that cases of inadequate absorptive capacity at the subsidiary level largely represent a technical rather than a social challenge. Here, additional resources, whether from outside suppliers or from inside the network, are likely to be provided by the transfer promoters at the head office or inside the subsidiary to guarantee a successful process.
Interestingly, the reduced role of internal absorptive capacity proposed here, which would appear at odds with the mainstream literature on this concept, is actually consistent with prevailing international business theory, namely internalization theory. Internalization theory suggests, as far as classes of transactions with underlying competences are concerned, that MNEs will choose to conduct these classes of transactions inside the firm or to outsource these, as a function of comparative efficiency (Rugman and Verbeke 2003). This implies that when engaging in knowledge transfers inside the firm, an insufficient level of subsidiary absorptive capacity can be interpreted as the absence of requisite complementary knowledge on the recipient side. Such lack of complementary knowledge may then lead the MNE to purchase in the external market, e.g., from ICT consultants, both the needed skills to adopt the newknowledge, and more importantly for the long run, the skills to help subsidiary managers develop better internal knowledge absorption.
The present study analyzes the decision-making processes driving the transfer of ICT knowledge to the MNE subsidiary, as well as the acceptance thereof by subsidiary management. Our focus is on senior management's view of such acceptance and various performance outcomes at the subsidiary level, rather than on the views of individual employees. Here, knowledge transfer is investigated as an intended and planned activity from corporate head office to the subsidiary. We test a number of...
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