Knowledge and Strategy Creation in Multinational Companies: Social-Identity Frames and Temporary Tension in Knowledge Combination

Article excerpt

Abstract:

* While a great deal of research on international business and management has fruitfully focused on knowledge transfer, this paper investigates knowledge creation; the process by which multinational companies (MNCs) continuously combine and recombine knowledge in order to generate a competitive advantage.

* By integrating contemporary strategic management research into the field of international business, we have developed a new perspective on strategy and knowledge creation in MNCs, by elaborating on and extending the knowledge-based view and other views of MNC strategy making. We suggest that the agglomeration of a multitude of diverse social-identity frames, nested inside a corporate centripetal frame, creates an arena in which exploitable new knowledge can be created.

* We propose that while a common corporate social-identity frame promotes knowledge transfer, the diversity of various subgroups" social-identity frames, in combination with interaction and temporary tension between them, advances knowledge creation. Although this partly involves a serendipitous process, it promotes a systemic advantage for MNCs compared to local firms, as regards knowledge exploration, (re-)combination, and integration. This competitive advantage is firmly rooted in hard-to-imitate complex social processes and may therefore be sustainable.

Keywords: Multinational companies * Strategy * Knowledge creation * Social identity frames

Introduction

For more than three decades, international business and management research has emphasized knowledge transfer and its associated characteristics and challenges as a primary undertaking of multinational companies (MNCs). (1) Most comonly, the rationale for undertaking this research is that the global economy is becoming increasingly knowledge-based (Dunning 2000) and/or that the MNC is an extraordinary vehicle for knowledge transfer across national borders (Kogut and Zander 1993/2003). Significant progress has been made in this analysis, but the international literature on knowledge transfer lacks a thorough examination and micro-level analysis of the way in which potentially valuable MNC knowledge is created in the first place. Knowledge transfer in itself may not necessarily provide a competitive advantage; what matters is also how transferred knowledge is combined and formed into novel knowledge throughout the MNC in order to generate competitive advantage.

Despite the fact that the existing literature includes a debate over the significance of centrally versus locally situated knowledge, extant studies say relatively little about what drives the processes that combine and recombine knowledge in (and between) MNC subunits and subgroups and the external environment which they are embedded in. Thus far, the emphasis has largely been on the MNC as a common 'umbrella body' defining shared identity and understandings through which knowledge transfer across national borders runs smoothly. Our mission is to analyze the extent to which the MNC is also an extraordinary vehicle for combining and recombining knowledge in ways that will facilitate knowledge creation and potentially generate competitive advantage. Specifically, we will examine how diversity and temporary tension, under a common corporate MNC umbrella (Regner 2003), can facilitate the exploration and multiplicity that is required for the discovery and creation of strategic opportunities and sustainable competitive advantage (Denrell et al. 2003).

It is our view that the widespread, interesting and important scholarly discussion of knowledge creation in MNCs over time has moved from an excessive focus on the activities and capabilities of units in the parent country to a possibly equally excessive focus on initiatives, entrepreneurship and the environmental embeddedness of foreign subsidiaries. Since the pendulum has swung, less focus has been given to developing a synthesis, that is, a more balanced, integrated theory that explores the details of why and how MNCs are regularly able to combine parent and subsidiary competencies with external knowledge and to create knowledge of the type that underlies a sustainable competitive advantage. …