Too Much of Two Good Things: Explicating the Limited Complementarity Between Drivers of MNC Headquarters' Absorptive Capacity.

VerfasserBarakat, Livia Lopes

1 Introduction

The ability to recognize, assimilate, and apply new external knowledge--defined as absorptive capacity (AC) (Cohen & Levinthal, 1990)--is critical for multinational corporations (MNCs) as it reduces knowledge gaps (Petersen et al., 2008), and fosters learning, innovation and cross-border knowledge transfers (Lane et al., 2001). In their seminal paper, Cohen and Levinthal (1990) introduce a helpful distinction between "inward-looking" and "outward-looking" AC. The former relates to the efficiency of the firm's internal communication and the commonality of knowledge, whereas the latter refers to its points of contact with external sources of knowledge and diversity of knowledge (Cohen & Levinthal, 1990, p. 133). This distinction provides a starting point for identifying organizational determinants of AC, where some determinants aifect the inward-looking AC while others are oriented towards the outward-looking AC.

Cohen and Levinthal (1990) further proposed a trade-off between the two dimensions of AC. While both types of AC are needed, the authors suggest that too much of one or the other may be detrimental to learning. The problem is that firms cannot at the same time maximize commonality and diversity of knowledge, as they will crowd out each other, so the creation of AC will suffer. However, Cohen and Levinthal (1990) do not specify the proposed trade-off between inward-looking AC and outward-looking AC. Consequently, scholars have recently called for more studies focused on this particular aspect of AC (Pedersen et al., 2020; Volberda et al., 2010).

We respond to this call by carefully examining the interplay between the inward-looking and outward-looking determinants of AC. More specifically, we elaborate and test the direct and interaction effects of determinants of AC of the MNC headquarters. A unique feature of MNCs is that they have geographically scattered activities and are thus exposed to multiple external sources of dispersed knowledge. The more internationally exposed the MNC, the greater is its exposure and contact with diverse knowledge (Barkema & Vermeulen, 1998; Hitt et al., 1997; Jimenez-Jimenez et al., 2014) that promotes outward-looking AC. The subsidiaries are the operational units exposed to external sources of knowledge. In this sense, the subsidiaries are the outpost sensing the diverse external knowledge that needs to be shared through internal communication channels in the MNC. The inward-looking determinants of AC that promote internal communication efficiency are MNC knowledge management mechanisms of systems, coordination, and socialization (Jansen et al., 2005; Van den Bosch et al., 1999).

Our main contribution lies in our exploration of the expected trade-off, which revolves around analyzing the interaction between the internal knowledge management mechanisms and the level of international exposure. Our research question is the following: To what extent do MNC knowledge management mechanisms (the inward-looking determinant of AC) and international exposure (the outward-looking determinant of AC) affect headquarters' absorptive capacity?

The idea of looking at headquarters lies in its central role in allocating resources and tools to foster the knowledge transfer process (Ciabuschi et al., 2010; Schleimer & Pedersen, 2014), especially considering that foreign subsidiaries have become a significant source of knowledge capture (Blomkvist et al., 2017; Forsgren, 2002). In fact, the literature has called for more studies on the contextual conditions that make reverse knowledge transfers effective in MNCs (Gaur et al., 2019).

To shed light on this question, we conducted a quantitative study with survey data from a sample of 106 Brazilian and Portuguese MNC headquarters. We found support for our four hypotheses that predicted a positive direct effect of knowledge management mechanisms (systems, coordination and socialization) and international exposure on the AC of MNC headquarters. We also found support for one of our three hypotheses predicting a trade-off between inward and outward determinants of AC. Our findings suggested that when both coordination mechanisms and international exposure are high, the AC of MNC headquarters is reduced.

2 Theoretical Background and Hypotheses

2.1 MNC Headquarters' Absorptive Capacity

The knowledge-based view suggests that knowledge is vital to differentiate one firm from another and lead to competitive advantages (Conner & Prahalad, 1996). Grant (1996) argues that the firm's primary role is to integrate diverse specialist knowledge into goods and services. MNCs are regarded as networks of firms with a superior ability to effectively transfer and manage dispersed knowledge across borders (Kogut & Zander, 1993). This ability makes them exploit knowledge more effectively and efficiently in the intra-corporate context than through external market mechanisms (Gupta & Govindarajan, 2000).

In line with this view, MNCs use their subsidiaries as instruments for sensing environmental change and accessing external knowledge (e.g., from clients, suppliers, research institutes) (Mudambi, 2002) that is instrumental in triggering product innovation, operating model adjustments and supply chain reconfigurations. Foreign subsidiaries have thus become a significant source of knowledge (Blomkvist et al., 2017; Forsgren, 2002), and in some circumstances, they may become centers of excellence in the MNC's network (Frost et al., 2002; Holm & Pedersen, 2000).

MNC headquarters need to absorb foreign subsidiaries' knowledge from their external network to conduct seizing and reconfiguring activities in response to environmental change. This view does not suggest that subsidiaries are reactive in the reverse knowledge transfer process. Instead, it indicates that MNC headquarters reverse transfer subsidiary knowledge by stimulating its flow (Ciabuschi et al., 2011; Schleimer & Pedersen, 2014) and introducing proper knowledge management mechanisms (Gupta & Govindarajan, 1991; Rabbiosi, 2011), thus increasing their AC (Ambos et al., 2006).

Absorptive capacity has been widely studied as one of the most critical aspects of organizational knowledge transfer and firm innovativeness (Lane et al., 2006; Van Wijk et al., 2008; Volberda et al., 2010). The concept first appeared in a study on international technology transfers by Kedia and Bhagat (1988) (according to the bibliometric analysis of Volberda et al., 2010). It was then scrutinized by Cohen and Levinthal (1989, 1990, 1994), who conceptualized it as the ability of firms to recognize, assimilate, and apply new external knowledge. In this study, we draw on theoretical perspectives of AC from the organizational learning literature, as several early studies link a firm's ability to absorb knowledge to its learning and performance outcomes (Cohen & Levinthal, 1990; Fiol & Lyles, 1985; Kedia & Bhagat, 1988; Levitt & March, 1988). Later studies proposed recon-ceptualizations of AC, thereby adding to the richness of the construct (Lane & Lubatkin, 1998; Lane et al., 2006; Zahra & George, 2002).

From an organizational learning perspective, Cohen and Levinthal (1990, p. 129) posit that AC is primarily a function of a firm's prior related knowledge, which "enhances learning because memory--or the storage of knowledge--is developed by associative learning in which events are recorded into memory by establishing linkages with pre-existing concepts." This notion implies that shared knowledge and expertise permit effective internal communication at the organizational level, which the authors term "inward-looking AC."

However, while prior related knowledge is the primary element in the learning process, it is insufficient to develop effective AC. According to Cohen and Levinthal (1990, p. 131), the diversity of knowledge plays an important role, as diversity "provides a more robust basis for learning because it (...) facilitates the innovative process by enabling the individual to make novel associations and linkages". This diversity mainly emerges through interactions with external sources of knowledge by the operation unit (i.e., the subsidiaries) who act as gatekeepers or boundary-spanners and, as such, translate the obtained knowledge into the MNC-context. Cohen and Levinthal (1990) refer to the firm's ability to absorb knowledge from external sources as "outward-looking AC."

Cohen and Levinthal (1990) highlight that while both inward and outward-looking components are essential, excessive dominance of either one may be detrimental to organizational learning: "If all actors in the organization share the same specialized language, they will be effective in communicating with one another, but they may not be able to tap into diverse external knowledge sources" (Cohen & Levinthal, 1990, p. 133). This observation raises issues like how inward- and outward-looking ACs interact. Are they complementary or crowding each other out, as indicated by Cohen and Levinthal? Given these gaps in the extant research, scholars have called for more investigations of these aspects of AC (Pedersen et al., 2020; Volberda et al., 2010).

Bibliometric studies show that the majority of the literature focuses on the outcomes of AC as opposed to its antecedents (Lane et al., 2006; Van Wijk et al., 2008; Volberda et al., 2010). For instance, Volberda et al. (2010) identify three types of antecedents of AC: (i) interorganizational, (ii) managerial, and (iii) intraorganizational. They also note that the latter receives less attention in the literature. These authors argue that internal mechanisms that can influence AC at the firm level, such as the structure of communication, organizational structure, and human resource management (HRM) practices, should be further explored in subsequent studies. In their meta-analytic study on knowledge transfer, Van Wijk et al. (2008, p. 844) claim that "given its importance to organizational knowledge...

Um weiterzulesen


VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT