Knowledge of the firm and the evolutionary theory of the multinational corporation

Abstract

Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporationJournal of International Business Studies (2003), 34, 516–529. doi:10.1057/palgrave.jibs.8400058

The theoretical rationale for a multinationality-performance relationship

“…This argument is inspired by the work of a number of authors who see today's MNEs as "heterarchies" or "transnationals" which use matrix organizational structures to allow all members of the network to generate and share knowledge with one another (Hedlund 1986, Bartlett/Ghoshal 1989. Indeed, the very competitive advantage of MNEs would be their capacity to pool this geographically dispersed knowledge (Kogut/Zander 1993). If this is true, then the larger and more diverse the portfolio of countries in which MNEs have subsidiaries, the greater their ability to learn, and the greater their profitability (Hitt/Hoskisson/Kim 1997, Ruigrok/Wagner 2003.…”

Corporate decision-making in R&D outsourcing and the impact on internal R&D employment intensity

“…Davidson and McFetridge (1984) find that the probability of outsourcing is lower the more radical the technology and the larger the R&D department of a firm. Other studies indicate that, in general, outsourcing is more frequent the more codifiable and less complex the technology is -with complexity being measured through the amount of R&D necessary to produce a good (Wilson, 1977;Kogut and Zander, 1993). Similarly, Trefler (2005) argues that outsourcing is the appropriate way for a sufficiently routine project that can be fully scoped or described, while projects difficult to describe from the outset should be conducted in-house.…”

Subsidiary managers’ knowledge mobilizations: Unpacking emergent knowledge flows

“…Knowledge flows are an important source of advantage for multinational corporations (MNCs) (Gupta & Govindarajan, 2000;Kogut & Zander, 1993;Mudambi, 2002), and there are two main ways that make knowledge flows in the MNC strategically important. First, knowledge might be shared for reuse and leverage, i.e.…”