Academic journal article Management International Review

Firm Characteristics and MNC's Intra-Network Knowledge Sharing

Academic journal article Management International Review

Firm Characteristics and MNC's Intra-Network Knowledge Sharing

Article excerpt

Abstract

* This study examines important firm characteristics that facilitate the scope and diversity of MNC's intra-network knowledge sharing.

* Drawing on the transaction cost concept, it identifies and evaluates major transaction cost affecting factors that determine MNC unit's differential involvements in intra-network knowledge sharing, using experiences of MNC subsidiaries in Korea.

Key Results

* In general, the cultural similarity, the degree of parent's ownership, the product and process similarity, and the MNC's overall competitive advantages (stock of valuable knowledge) contribute to the scope and diversity of MNC's intra-network knowledge sharing.

With increasing integration and interdependence of national markets, the importance of global learning has received considerable attention over the last decade. The value of global learning in the multinational corporation (MNC) can be particularly high since foreign markets often provide access to new ideas and stimuli that can be subsequently applied in other markets. By leveraging knowledge across different markets, MNC's can capitalize on market imperfections and differing market endowments, thus achieving higher returns on their investments. Numerous researchers have argued that higher levels of global learning lead to higher MNC performance (Ghoshal 1987, Grant 1996, Marquardt/Reynolds 1994, Nonaka/Takeuchi 1995, Vermeulen/Barkema 2001). Successful learning from outside the MNC network (extra-network learning) and timely and efficient diffusion of the learning among members of the network (intra-network knowledge sharing) will surely enhance the value of MNC's global learning.

Further, MNC's global learning has also attracted attentions of host governments. Traditionally, foreign direct investments (FDIs) have been a dominant channel of knowledge diffusion and an important conduit of knowledge spillovers to host countries (for example, Aitken/Harrison 1999, Blomstrom/Persson 1983, Chung 2001, Hejazi/Safarian 1999, Kokko 1994). The literature shows that the greater foreign presence in a host country is associated with the greater productivity of host country industry. Thus, many governments offer explicit and implicit incentives to MNC's to establish subsidiaries in their countries in order to benefit from their knowledge diffusion and spillover potential. The knowledge diffusion and spillovers to the host country via FDIs usually involves a two stage process, namely, the knowledge transfer from MNC headquarters and/or sister subsidiaries to the subsidiary in the host country (intra-network knowledge sharing), and the spillovers from the host subsidiary to the host industry.

Despite the clear importance of both stages, past research on international knowledge and technology transfer has traditionally focused on the latter stage (for example, Aitken/Harrison 1999, Blomstrom/Persson 1983, Chung 2001, Kokko 1994). Empirical research on the former stage, i.e., MNC's intra-network knowledge sharing, is rather thin. Further, most existing studies involving intra-firm knowledge transfer focus on the transfer of one value activity, mostly technology, and characteristics of knowledge transferred such as tacitness (Mansfield/Romeo 1980, Kogut/Zander 2003, Simonin 1999). Our focus here is on the intra-network knowledge sharing involving a whole set of value chain activities of the firm and salient subsidiary characteristics. Moreover, most existing studies deal with the parent-subsidiary links in high-income advanced economies. What remains unclear is the extent to which the parent-subsidiary links are important for MNC's operating in emerging markets (Luo 2003). Addressing such gaps, this study focuses on MNC subunit-level experience in relation to intra-network knowledge sharing of MNC subsidiaries in South Korea--a middle-income developing country. The use of a Korean sample extends the empirical scope of the knowledge sharing literatures. …

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