Determinants of MNC’s Knowledge Inflows to Subsidiaries: A Perspective on Internalization Advantages

Abstract

Previous studies have contributed to understand the determinants of MNC's internal knowledge flows. However, the critical role played by internalization-specific factors in determining the knowledge flows has attracted relatively little attention. The present study aims to fill this gap by investigating the relationship between an MNC's motivation to acquire internalization advantages (MIA) and the level of knowledge inflows to its foreign subsidiaries; including both the vertical knowledge inflows (VKF) from the headquarters and the horizontal knowledge inflows (HKF) from other subsidiaries. Furthermore, it is asserted that the relationship between the MIA of the MNC and the knowledge inflows is contingent on two specific subsidiary characteristics, namely the subsidiary importance and the subsidiary local experience. An analysis of 100 Taiwanese MNCs' foreign subsidiaries demonstrates that the MIA is indeed an important determinant of knowledge inflows to subsidiaries. Moreover, the effects of MIA on the VKF and HKF vary with the subsidiary-specific characteristics. This study supports the validity of internalization factors on explaining the internal knowledge flows of the MNC and the necessity of incorporating the subsidiary-specific characteristics to comprehend the complex phenomenon of knowledge flows.

Reverse Knowledge Transfer in Multinational Companies: A Systematic Literature Review

“…As already mentioned, with very few exceptions (Nair, Demirbag, & Mellahi, 2015;Pérez-Nordtvedt et al, 2008;Tseng, 2015), most studies tend not to analyze the RKT as a process, but to focus on a specific aspect of the process at a time, such as how or why the transfer occurs. However, the RKT phenomenon is a full process, and thus should be analyzed with all of its parts and contexts.…”

“…However, the RKT phenomenon is a full process, and thus should be analyzed with all of its parts and contexts. Gupta and Govindarajan (2000), Pérez-Nordtvedt, Kedia, Datta and Rashee (2008) and Tseng (2015), to cite a few, consider as factors influencing the degree of knowledge (a) flows from the sender (source unit), (b) to the receiver (target unit), (c) the transmission per se (formal and informal mechanisms) and (d) the knowledge characteristics (mainly complexity and tacitness). Figure 2 below summarizes a typical knowledge flow process.…”

“…Li et al, 2016), for it enables knowledge to flow from the subsidiary to the headquarters and to the rest of the corporation. This, in turn, enables the MNCs to obtain competitive advantages by combining local knowledge with their own technological and management capabilities (Chung, 2014;Tseng, 2015) and accrue the consequent benefits of it. Indeed, Sofka (2008, p. 786) claims the globalization of knowledge in the MNCs "is in fact a combination of investments into absorptive capacities, international experience and domestic scarcities".…”

“…Michailova and Mustaffa (2012) and Tseng (2015) noted though that when it comes to analyzing the benefits gained by the knowledge flows, studies don't usually analyze it from the MNE level, of how much did the knowledge flow help the MNE to reach its objectives and goals on a global level.…”

“…Li, Strange, Ning, & Sutherland, 2016;Tseng, 2015), in spite of its growing importance to the knowledge generation (Frost & Zhou, 2005;Gupta & Govindarajan, 2000;J. Li et al, 2016;Tseng, 2015) of multinational enterprises (MNE) and its contribution to global competitive advantage (Chung, 2014;Eden, 2009;Frost & Zhou, 2005;Makela, Bjorkman, & Ehrnrooth, 2009;Tseng, 2015).…”