Academic journal article Management International Review

Procedural Justice, Not Absorptive Capacity, Matters in Multinational Enterprise ICT Transfers

Academic journal article Management International Review

Procedural Justice, Not Absorptive Capacity, Matters in Multinational Enterprise ICT Transfers

Article excerpt

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. …

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