Academic journal article Management International Review

Sharing International Joint Venturing Experience: A Study of Some Key Determinants (1)

Academic journal article Management International Review

Sharing International Joint Venturing Experience: A Study of Some Key Determinants (1)

Article excerpt

Abstract

* This paper develops and tests a model of the key factors affecting the sharing of international joint venturing experience in parent firms. Experience sharing here refers to the extent that joint venturing experience is shared among managers at different levels of the parent. Joint venture-specific factors include overseeing effort and management involvement; parent-specific factors consist of firm size, foreign direct investment experience, and institutionalization of experience.

* The discussion is based on survey responses from 73 Singapore and 89 Hong Kong companies with respect to their joint ventures set up in China. The statistical technique of partial least squares was used to test the model.

Key Results

* The results indicate that overseeing effort, management involvement, and institutionalization of experience are important factors affecting experience sharing, while foreign direct investment experience is a main determinant of institutionalization.

Conceptualizing the firm as a bundle of knowledge, Gupta and Govindarajan (2000) argued that the primary reason why multinational corporations (MNCs) exist is because of their superior ability (vis-a-vis markets) to engage in internal knowledge transfer. During the past decade or so, thousands of MNCs have flocked to set up operations in transitional economies such as Russia, Central and Eastern Europe, and China. Through these foreign direct investments (FDIs), active transfer of management knowledge from MNCs to local business communities has taken place. A growing number of empirical studies have been conducted on this transfer process (e.g., Child/Markoczy 1993, Cyr/Schneider 1996). However, it should be noted that in addition to the knowledge outflows from MNCs mentioned above, there are knowledge inflows into these companies at the same time. During the process of transferring its knowledge from headquarters to a foreign operation, an MNC learns from the process. This is a kind of experiential learning, which refers to the case where organizations acquire knowledge through direct experience.

This paper examines the sharing of international joint venturing experience in parent firms. This is an important issue, considering the fact that organizations often do not know what they know. How effective a parent firm can make use of its past joint venturing experience depends partly on how far the experience is shared among its members. As argued by Huber (1991), when information is widely distributed in an organization, individual members and units are more likely to be able to retrieve the information and learn. Thus, experience sharing leads to more broadly based organizational learning.

Generally speaking, the experience gained from running overseas operations by an MNC forms part of its organizational memory, which refers to the information stored in an organization for future use (Walsh/Ungson 1991). Since the knowledge associated with internationalization has a substantial tacit element and part of the knowledge cannot be codified, individuals are important repositories of such knowledge. Individuals are capable of capturing subtle nuances that other components of organizational memory are not able to store as readily (Argote 1999). In order to withstand personnel turnover, the knowledge has to be shared among the managers of an MNC. The organization can suffer a tremendous loss in its learning capacity should key managers leave (Kim 1993).

Experience sharing is therefore essential for raising the lessons learned from overseas ventures from an individual to an organizational level. Mechanisms should be in place for individuals to share their observations and experiences (Inkpen/Beamish 1997). As argued by Westney (1988, p. 343) in the case of cooperative venture management:

   to the extent that such people (i.e., managers involved in managing
   cooperative ventures) disseminate their individual learning by training
   others and by producing formal analyses that are disseminated within the
   firm, and to the extent that their learning becomes institutionalized in
   the organization's rules and routines, we can speak of organizational
   learning in managing the processes of cooperation. … 
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