Academic journal article Multinational Business Review

Multilateral Knowledge Transfer and Multiple Embeddedness

Academic journal article Multinational Business Review

Multilateral Knowledge Transfer and Multiple Embeddedness

Article excerpt

Introduction

That firms are superior to markets in moving knowledge across national borders has been established as a key foundation for the theory of multinational enterprises (MNEs) (Almeida et al. , 2002). This important pillar is rooted in the fundamental theory of MNE - internalization theory, which has assumed the presence of a firm-specific, ownership advantage and theorized the exploitation of this advantage in foreign locations via internalization (Buckley and Casson, 1976; Dunning, 1980; Hennart, 1982; Rugman, 1981). As a tradition, most existing studies have applied this theorization in a unidirectional headquarters-to-subsidiary fashion instead of the reverse vertical (subsidiary-to-headquarters) and horizontal (subsidiary-to-subsidiary). Even studies adopting the knowledge-based view, in which MNEs are knowledge communities characterized by international knowledge sharing, have focused on the headquarters-to-subsidiary knowledge transfer (Fransson et al. , 2011; Kogut and Zander, 1992, 1993).

Since the early 1990s, researchers started to study and theorize how MNE competitive advantage may emerge from locations outside of the corporate home base and be exploited internationally (Dunning and Narula, 1995; Frost, 2001; Rugman and Verbeke, 1992; 2001). The context of this research is the observation that foreign technological activities of MNEs have been increasingly aimed at tapping into foreign local fields of expertise as a new source of technology (Cantwell, 1995; Cantwell and Janne, 1999). One particular phenomenon is found closely associated with these foreign technological activities - the transfer and integration of subsidiary-created, knowledge-based assets into the MNE group (Frost and Zhou, 2005; Håkanson and Nobel, 2001; Rugman and Verbeke, 2001; Yamin, 1999). This paper studies subsidiary-initiated multilateral knowledge transfer , which is a more generalized concept covering both subsidiary-to-headquarters and subsidiary-to-subsidiary knowledge transfer, extending from the conventional top-down model.

What are the rationales behind multilateral knowledge transfer? What determines its success? As this paper explains, two lines of thinking have heralded the concept of multilateral knowledge transfer - the first is the exploitation of multinationality (Hedlund, 1986; Papanastassiou and Pearce, 2009) and the second is the contributory role of subsidiaries (Birkinshaw et al. , 1998; Rugman and Verbeke, 2001). While the exploitation of multinationality concerns how MNE headquarters may benefit from their extensive geographical reach, the contributory role of subsidiaries presents how advantages developed in MNE subsidiaries may contribute to the business performance of the entire MNE. These two lines of thinking originate in international R&D literature and subsidiary evolution literature, respectively, and appear to pave the way for multilateral knowledge transfer as an MNE strategy to systematically transform and integrate knowledge created in subsidiaries for MNE global competitive advantage.

While the majority of existing studies in multilateral knowledge transfer emphasize either MNEs exploiting multinationality or subsidiaries developing knowledge-creating competence in advantageous host-country environments, the phenomenon of multilateral knowledge transfer actually involves all three levels of analysis - MNE headquarters, knowledge-creating subsidiaries as well as advantageous host-country environments - and the success of multilateral knowledge transfer really hinges on the interdependencies between these three. This paper puts forward a cross-level interdependency model by synthesizing the R&D internationalization literature and the subsidiary evolution literature and re-evaluates the notion of subsidiary embeddedness, which only vaguely addresses subsidiaries' internal and external interactions. The investigation into the multilateral knowledge transfer and resultant performance implications will reiterate the multi-level and multidisciplinary nature of the IB field and indicates new directions for theoretical and empirical development. …

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