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Knowledge transfer mechanism

Knowledge transfer mechanism in the multinational enterprise network

Introduction 4
Conceptual Clarification 5
Significance of Knowledge Transfer 6
Knowledge Transfer Mechanism 9
Vital Players of Knowledge Transfer 11
Expatriate Management Policy 12
Communication Frequency 12
Systems of Classfying Knowledge 14
Internal vs External Mechanisms 14
Human vs Technology Mechanisms 15
Explicit vs. Tacit Mechanisms 15
Structural vs Non-Structural Mechanisms 17
The Knowledge Transfer Process 18
Sources of Knowledge for The Headquarters 19
Sources of Knowledge for the Subsidiary 20
Internal Sources of Subsidiary Knowledge 21
External Sources of Subsidiary Knowledge 22
Types of Knowledge Transfer Within MNCS 23
Conventional Knowledge Exchange 23
Reverse Knowledge Transfer 24
Knowledge Transfer Barriers within MNCs 24
Principal-Agent Problem: Information Asymmetry 26
References 30

Knowledge Transfer Mechanism in Multinational Enterprises


Knowledge Transfer Mechanism in Multinational Enterprises


As the absence of physical resources becomes increasingly apparent, new,
advanced resources are sought for to improve company capacity. The focus of this
literature review is on one of such resource, knowledge, as one of the most evolved
and complex company assets central to relatively recently developed resource-
based and knowledge-based ideas of the firm. Knowledge usually demands a
complex environment for its existence and advancement. Multinational companies
(MNCs) thus usually present the most appropriate environment for knowledge
creation. Due to its elusiveness and complexity, management of knowledge in MNCs
is a very demanding procedure, incorporating considerable resources and often
utilizing the mechanism of expatriate managers, which is the main mechanism
studied by this reviewed. The development of the network perspective research on
knowledge transfer has began to move in one particular direction, emphasizing
mechanisms of knowledge transfer which is the subject of this review. Reverse
knowledge transfer through expatriate managers is reviewed here on the basis of
global MNCs.
The goal of the review is to study the many reports of researchers, and observe
whether knowledge is managed throughout the globe in the same way, using the
global MNCs for this purpose. This review analyze the types and mechanisms of
knowledge, giving the biggest responsibility to expatriate managers and their
competences in the process.
A broad view of the global MNCS presents a perfect sample for empirical analysis.
This takes into consideration many developed as well as developing countries,
presenting a perfect pattern of elating companies in the past couple of years, thus
baking this review comparable and applicable to all companies.

Knowledge Transfer Mechanism in Multinational Enterprises


The results indicate that the process of knowledge transfer is a highly supported
process in MNCs. It is further enhanced by expatriate capacity, while their inspiration
and proactivity became insignificant in this process. Knowledge characteristics was
demonstrated to be a significant moderator of knowledge transfer process, while
they affected expatriate competences. Lastly, the size and type of industries did not
have an effect on expatriate competences while they hesitate knowledge transfer.
This literature review presents a comparative framework which illustrates the
mechanisms of knowledge transfer process and uses a mix of international business
and human resource management approaches to explains it.
KEYWORDS: Multinational company, subsidiary, knowledge transfer, expatriate
managers, knowledge

Knowledge Transfer Mechanism in Multinational Enterprises


The world is consistently united through the interconnection of individuals, time,
occasion and space, to frame a worldwide town where individuals, thoughts, data
and merchandise and ventures can uninhibitedly move from one area then onto the
next thereby shaping a global town. Globalization has brought about the cross
fertilization of individuals, the establishment of multinationals across continents over
continents and have shrieked time and space through late advancement in
Information Technology (ICT); individuals distance apart, could communicate seeing
each other and similarly go to be physically present in a specific location. The
globalizations of business sectors and manufacturing have achieved essential
change of corporate strategy in many organizations. The number of Multinational
Corporations (MNCs) and individuals utilized by them is on the increase around the
world. Alongside it, the size and pace of foreign direct investments to nations outside
the developed world are growing. In these MNCs, there is the forward and backward
data linkages which is indispensable for successful operation
The capacity to produce and transfer knowledge within is a key competitive
advantages of MNCs. There is a that standard belief that knowledge is a key
organizational resource for MNCs to reinforce and maintain competitive advantages.
Be that as it may, an issue is that nobody has adequate information to proficiently go
up against different rivals on global level. As a result, MNCs regularly endeavor to
create and enhance their authoritative competitiveness by coordinating and mixing
different sources of information generated within MNC networks (Lane et al., 2001).
MNC subsidiaries often play a pivotal role in this process, by absorbing locally

Knowledge Transfer Mechanism in Multinational Enterprises


resident information and transferring it reversely to their headquarters (Ambos et al.,
2006; Subramaniam and Venkatraman, 2001).
It might generally be acknowledged as basic wisdom that knowledge incorporation
mechanisms should precisely be practiced by MNCs with the end goal of suitably
sharing outer information inside MNC systems in mind. This is on account of the
utilization of information combination systems diminishes the instabilities on the
breadth and the dissemination of knowledge appropriation (Lane et al., 2001).
Comparative commentaries can easily be found from past reviews. For example, as
pointed out by Bresman et al. (1999), a precondition for utilization and
application of information to occur in the perspective of information acquirers
is wealthier knowledge incorporation system. However, Gupta and Govindarajan
(2000) separated knowledge integration mechanism between MNCs and
subsidiaries into formalization integration and socialization mechanisms, and
presented them as antecedent factors in knowledge flow relationship. This is majorly
because interactions of knowledge integration mechanisms inside an MNC network
improves ‘breadth’, ‘depth’, and adequacy of complementary knowledge use (Singh,
2005; Tsai, 2001), and builds knowledge accessibility and use of MNCs units
(Feinberg and Gupta, 2004). Thus, there is need to take a look at how knowledge is
actually exchanged within multinational corporations
Conceptual Clarification
There has generally been no accepted definition for Globalization, however, various
scholars have conceptualized it. It bothers on the interconnection of individuals,
goods and services, over time, and through the cross fertilization of concepts,
cultures, among others.

Knowledge Transfer Mechanism in Multinational Enterprises


MNC on the other hand is the combination of huge corporations with branches in
different continents and nations producing similar products or somewhat unique
goods depending on the uniqueness of the location, but responsible to other
branches. A decent case of an MNC includes Total, Cadbury, Coca-Cola, PZ, Julius
Berger, Chevron, Delta Airline, and so on. MNC is seen by Forsgren et al. (2005)
as a separated network of headquarter and subunits associated by
relationships. Subunits can build their own external networks of clients and suppliers.
MNCs are organizations working together abroad in the form of export and
import and developing a worldwide system which links supply, research,
production, development and sales units (Cullen and Parboteeah, 2005)

Significance of Knowledge Transfer
The procedure of knowledge transfer between business units is an essential
aspect of the knowledge management. The capacity to exchange knowledge
within is one of the principal competitive advantages of MNCs. The exchange of
knowledge between units in one country is not to be looked down upon. Given that
through knowledge exchange, within the same country with exceptional cultural
foundation, the result of is required to be firmly related if not the same when the
information given is well applied. Nonaka and von Krogh (2009) makes the case that
tacit knowledge is a valuable asset to any organization, and the “competitive
advantage of firms rests on the processes of coordinating and combining
[knowledge] assets”. Information makes a firm or individual ahead of contemporaries’
information help individuals and firms in reaching rational decisions. Between the
parent company and subsidiaries, knowledge transfer can be of various types;
product, process or management.

Knowledge Transfer Mechanism in Multinational Enterprises


If we need to do an analysis of the directions of knowledge transfer, we need to
consider the approaches of MNCs. Four kinds of strategic mentality were recognized
by Bartlett et al. (2004). The earliest phase of internationalization is International
strategic mentality, in which technological innovations and other sorts of knowledge,
are transferred, generally to the subsidiary from the parent organization.
Multinational strategic mentality demonstrates that technique is based “on the
establishment of numerous, nationally responsive procedures of the company’s
global subsidiaries”.
In organizations with global strategic mentality, research, production and
development are basically overseen from the headquarters; furthermore, most vital
decisions are taken at the centrally. Organizations with transnational strategic
mentality recognize the significance of adaptable and responsive country-level
operations. The techniques of knowledge transfer which are recognized by DeSouza
and Evaristo (2003) might be associated with the above-portrayed approach. As
indicated by them, there are three sorts of vertical knowledge transfer that typifies
three methodology of knowledge transfer in global enterprises: methodology
appointed in the headquarters of the organization carried out at the local
subsidiaries; methodology developed in the headquarters which is carried out
regionally; methodology developed regionally which is carried out locally. We can
infer that numerous researchers acknowledge the significance of the developing
complexity of knowledge motion among organization units.
Openness to learning as a knowledge characteristic alludes to the simplicity with
which knowledge can be taught to new individuals (Nieto and Pérez-Cano, 2004;
Zhang and Zhang, 2014), while codifiability is how much knowledge can be encoded
and divided into specific segments that are effectively comprehended (Zander and

Knowledge Transfer Mechanism in Multinational Enterprises


Kogut, 1995; Chou et al., 2007). Expanding on the work of Polanyi (1966), Foss
(1996) and Millar (2008) distinguished between explicit and tacit knowledge. Galang
(2014) offers three sorts of characteristics, separating them into knowledge
codifiability, complexity and systemicness. Complexity refers to whether the measure
of data needed to use the technological innovation is basic or generous, while
systemicness refers to whether the data needed to operate the technological
innovation is epitomized inside a single field, or many other related fields.
Knowledge can likewise be described as common sense knowledge vs. professional
knowledge, shallow vs. deep, procedural vs. declarative, static vs. dynamic, domain-
independent vs. domain specific, and proprietary vs. non-proprietary (Awad and
Ghaziri, 2004; Ulrich and Smallwood, 2004). Chang et al. (2009) identify four
knowledge characteristics as the most imperative: knowledge volatility (dynamic vs.
static), knowledge mode (explicit vs. implicit), strength of knowledge appropriability
(ease of replication and transfer), and knowledge complexity.

Knowledge Transfer Mechanism in Multinational Enterprises


Knowledge Transfer Mechanism
The idea of knowledge has been utilized in various ways. One noteworthy distinction
can be found in its use as connected to individuals, companies, and institutions.
Understanding knowledge transfer mechanism has been dependent on context and
multi-dimensional given that knowledge transfer has been referred to as institutional
policy, change, review, etc. Patriotta et al. (2013) define knowledge transfer as
“…the process by which knowledge is deliberately moved across
organizational boundaries to increase or leverage a firm’s knowledge base”, in
the same vein, Gupta and Govindarajan (2000) define it as “transfer of skills and
technology between organizational subunits”. As reported by Lee and Wu (2010),
knowledge transfer can either be in both or either of the following directions :
from subunit to headquarter, and from headquarter to subunit, and successful
knowledge transfer brings about the acquisition of new knowledge by receiving
unit. A lot of useful knowledge for headquarter and different subunits may
have been gathered by the subunits. There is subsequently no single channel for
knowledge transfer given that it can flow from bottom to top, or top to bottom,
depending on the knowledge base.
Successful knowledge transfer requires compatibility between communication
systems and information process, which strongly relies on knowledge vagueness
(Sheer and Chen, 2004). In the process of knowledge transfer, “richness” of
information plays an essential role (Gorovaia and Windsperger, 2013). Information
“richness” comprises of and increases with the following characteristics of the
knowledge transfer mechanism: feedback ability, the availability of signs such as
body language, voice gesturing, language variety, words; feelings of self-

Knowledge Transfer Mechanism in Multinational Enterprises


concentration and individual concentration (Gorovaia and Windsperger, 2013). The
more characteristics a mechanism has, the higher the level of information richness of
that mechanism, and greater the capability to handle vagueness, which leads to
more noteworthy knowledge transfer.
As indicated by Pesalj (2011), the network based mechanism of MNC’s members
could be contended, to be the primary sources of competitive advantages of MNC
due to the fact that deep and long-term relationships was built with local business
partners and other units of the MNC system. New knowledge could be created
because of these close relationships. The fact that it is implanted in a particular
setting is a fundamental characteristic of this knowledge. These companies are
seen by knowledge-based hypothesis of MNC as social groups that specialize
in the creation and transfer of knowledge internally.
This approach make an evolution of the hypothesis of MNC suggesting that MNCs
have superior proficiency in knowledge transfer across borders than through external
market system. As indicated by Meyer and Su (2014), little explicit exploitation of
worldwide integrating advantages is included in International strategies, as well as,
local adjustment advantages, and constrained continuous exchange of knowledge in
this manner. Strategic decisions and centralize core operations are included in
global strategies leading to flows of knowledge primarily from top to down, as
well as tight control.
With respect to local markets, multi-domestic techniques assign subsidiaries a
particular scope yet permit more local adjustment. The hallmark of knowledge
transfer is to guarantee minimal cost, local adaptation, and increased output and
profit. As contended by Gupta and Govindarajan (2000), to encourage flow of

Knowledge Transfer Mechanism in Multinational Enterprises


knowledge between headquarter and subunits, corporate socialization systems and
formal integrative systems are very vital. utilization of expatriate Subunit directors,
specification of performance assessment criterion, and subunit management
renumeration are three more systems are promoted by Björkman et al. (2004).
Vital Players of Knowledge Transfer
In the MNC setting, cultural and functional similarity or differences can have an
effective impact on knowledge processes and sharing, and since international
business life is associated with individuals’ mobility and interaction with crossing
national borders, variables for example, value system, tolerance, impacts of
multinational environment, accent, behavioral diversity, languages, understanding,
have become more vital than any other time in recent memory. Expatriates are
viewed as a critical means of distinguishing new knowledge and transferring tacit
knowledge in MNCs. Expatriates to foreign subsidiaries are regularly appointed by
MNCs with the goal of transferring knowledge. However, regarding their key role in
encouraging knowledge transfer, research is inadequate, as well as in upgrading
foreign direct investment performance.
Usually, we distinguish two sorts of assignments in MNCs: trustees sent from the
parent organization or from a third country to a subsidiary (expatriates) and the
trustees from a subsidiary delegated for a long-term stay outside at the parent
organization (inpatriates). In translating and disseminating the parent organization’s
knowledge at the subsidiaries, expatriates from the parent organization play a huge
role. Skills and knowledge which do not exist at the subsidiary are usually
transferred, including; financial knowledge, company culture, process knowledge,
technical knowledge, and market knowledge. Additionally, they take new knowledge
homme with them, because they manage a culturally diverse workforce, dealing with

Knowledge Transfer Mechanism in Multinational Enterprises


diverse individuals with diverse attitudes. The expatriates gain from the assignments,
since their reputation and global competence has been enhanced due to their work
abroad. Another outcome of their assignment abroad is that a two-way knowledge
transfer becomes reality. Companies are interested in utilizing the knowledge and
experiences of the expatriates in the most ideal way, for the sake of the organization
and the individual. Thus, through their tasks, expatriates add to the reverse
knowledge transfer of MNCs. However, in order to have an opportunity to do this,
companies have to develop knowledge-oriented perspectives, and develop and
sustain a strong collaborative company culture. The repatriation process influences
the retention of these individuals, how their global experience and skill is retained for
the company.
Expatriate Management Policy
The expatriate managers a very important factor that facilitates knowledge
transfer to the foreign subunits within MNC (Gupta and Govindarajan, 2000;
Björkman et al., 2004). Their work experience and culture can be imparted to
the headquarter managers and different workers from the home organization,
and within the MNC, this could help form casual communication networks
(Bartlett and Ghoshal, 1990; Scullion, 1994). Additionally in the MNCs, the
absorptive abilities of all parties during the process of sharing business culture and
experience, can be improved in terms of inter-unit knowledge exchange (Gupta and
Govindarajan, 2000).
Communication Frequency
As reported by Ghoshal and Bartlett (1988), a very vital factor for exchange of
innovations from headquarters to its abroad subunits is maintaining a frequent
correspondence between subunit directors and headquarter chiefs. Inside MNC
network, correspondence and inter-unit knowledge transfer can be facilitated by

Knowledge Transfer Mechanism in Multinational Enterprises


regular contacts between administrators from different subunits (Ghoshal et al.,
1994). Social interactions, as demonstrated by recent investigations serve as
knowledge channels which can promote knowledge flows fundamentally (Monteiro et
al., 2008; Noorderhaven and Harzing, 2009; Corredoira and Rosenkopf, 2010).
In grouping knowledge, there are numerous approaches, and the most popular
gouping is explicit and tacit knowledge (Nonaka and Takeuchi, 1995; Lam, 2010). As
defined by Nonaka et al. (2000), explicit knowledge is a knowledge that can be
shared in the form of data, manuals, specifications, scientific formulae etc, as well as
expressed in formal and precise language. Tacit knowledge in contrast, is rooted
profoundly, in action, routines, procedure, ideals, emotions, commitment and values.
Lam (2010), utilized tacit explicit and individual – collective dimensions to recognize
the following four types of knowledge: embodied (individual-tacit), embrained
(individual-explicit), embedded (collective-tacit) and encoded (collective-explicit).
Implanted knowledge is tacit and context-specific (collective) ingrained in inter-
dependent routines, procedures and technologies in addition to individuals who
share common experiences and values. There are different sources of knowledge as
earlier mentioned, however, this study will focus on explicit and tacit knowledge.

Knowledge Transfer Mechanism in Multinational Enterprises


Systems of Classfying Knowledge
Tacit knowledge, as reported by Michailova and Mustaffa (2012) signifies that it is
embedded in values, practices, actions and behaviors, and is not easily accessible,
available and transferable, and on the other end, explicit knowledge is treated as
codifiable in forms that are relatively easy to retrieve.
Having noted that explicit and tacit knowledge are the most utilized classifications, it
will be appropriate to highlight different systems. Leaning on the classification
embraced by (Forsten-Astikainen, 2010 p. 50) with the following classifications:
• internal versus external mechanisms,
• human versus technology mechanisms,
• explicit versus tacit mechanisms,
• structural versus un-structural mechanisms.
Internal vs External Mechanisms
A company can concentrate either on internal mechanisms – different
mechanisms utilized inside the company – or external mechanisms – those utilized
outside the company (Cuevas‐Rodríguez et al., 2014; Ding et al., 2013). The
situations and contexts determine the mechanisms (Easterby-Smith et al., 2008),
and a company can utilize nearly all of them. Internal mechanisms mostly involve
mentoring, benchmarking or joint problem solving. External mechanisms refer to
those not in a company, and the regularly cited instances of external mechanism are
symposia and conventions arranged outside the firm that representatives attend,
getting knowledge and bringing it back into the company. External knowledge

Knowledge Transfer Mechanism in Multinational Enterprises


transfer mechanisms regularly depends on the company’s stakeholders such as
customers, competitors and suppliers (Escribano et al., 2009).
Human vs Technology Mechanisms
As reported by Ambos and Ambos (2009), knowledge transfer mechanisms ought
to be seen as technology-based coordination mechanisms (TCM) and personal-
based coordination mechanisms (PCM). Technological revolution came about with
huge changes in the knowledge exchange procedure (Hamilton et al.,2014).
Recently created instruments that showed up in business practice appeared to be
faster, more effective and cost reducing. In traditional instruments for example,
printed version manuals and directions were supplanted by mechanically advanced
systems. The scientific literature, from the early 2000s gave a lot of space to new
components which showed up, for example, web, video conferences, intranet, cell
phones, social networks, instant messaging, and so forth. In any case, while
talking about knowledge transfer systems, there are constrained instances of
human-driven exercises which can’t be transfered through technological means.
Because of that people as instruments ought not be disregarded. Negotiations,
communication, meetings and different types of individual coordination systems
remain an extremely successful strategy for knowledge exchange, as affirmed by
various reviews (Ingram and Baum, 1997; Rabbiosi, 2011; Swart and Harcup,
2013; Walsh, 2014, etc)
Explicit vs. Tacit Mechanisms
One method for partitioning knowledge exchange systems is as indicated by the
tacit/explicit knowledge distinction. Knowledge exchange mechanisms which are
considered identified with clear and solid activities and instruments are viewed as
explicit, while systems identified with experiential information which is meant to
exchange at the individual level are characterized as tacit. There are additionally

Knowledge Transfer Mechanism in Multinational Enterprises


components to exchange tacit knowledge to an explicit form (Lubit, 2001). Such
instruments are additionally appropriate in circumstances when a mix of various
enterprises happens, and incorporate positive and negative narrating,
conceptualizing, collaboration or creating and testing standard strategies for
appropriateness in various events (Forsten-Astikainen, 2010, p. 52).
There are two approaches to advance unequivocal and unsaid knowledge: to
attempt to keep moving workers and assignments or to change the workers’
worldview. Innovation empowers proficient exchanges of knowledge between
associations(Lubit, 2001). The SECI-model (Nonaka and Takeuchi, 1995) is a
knowledge creation and exchange hypothesis. Implicit learning can be gathered
from inside and outside the community. The most imperative thing is to get the latest
implied knowledge by direct correspondence with people. Toward the starting
implied knowledge spreads and exchanges straightforwardly to associates through
thoughts, pictures, ideas and distinctive analogies. Externalization refers to
conveying inferred learning, thoughts and pictures into investigations, ventures,
ideas and analogies justifiable to everybody. Combination refers to bringing
together new knowledge into past knowledge, and also networking and pre-data
collection. The reason for combination is imparting and spreading open knowledge.
Hence organizations utilize archives like distributions, plans reports and so on.
Internalization of open information bit by bit occurs through activities, reproductions
and experimentation (Nonaka, 1994). Eventually, new practices and ideas are joined
into exercises and changed to implicit knowledge information. Fruitful transition
process needs appropriate improvement exertion, self-governance of members and
practical and authoritative variety (Nonaka, 1994). Hansen (1999) proposes that both
feeble and solid social bonds have association with inferred knowledge because

Knowledge Transfer Mechanism in Multinational Enterprises


even in frail social bonds there is express exchange of knowledge. Consequently,
solid social bonds prompt to more extensive course of knowledge (Hansen, 1999).
Structural vs Non-Structural Mechanisms
Another classification of knowledge exchange components tries to build up
whether the information exchange process is basic or non-auxiliary (Moreno‐Luzón
and Begoña Lloria, 2008, p. 259). Structural knowledge exchange instruments
require exact learning since they are organized, formal and purposeful, and can
comprise of, for instance, rules, examples of association weights, pieces, or entire
items taken as examples of the structure learned during training (Szulanski,
1996; Mealor and Dienes, 2013). Non-structural instruments are central for
fruitful results of an organization (Moreno‐Luzón and Begoña Lloria, 2008). They
are difficult to foresee and depend on unconstrained circumstances (Chen and
McQueen, 2008; Mealor and Dienes, 2013). A portion of the cases of non-basic
instruments are gatherings, tutoring, distinctive social exercises, coaching, mutual
problem solving and so forth.
In this study, components of all characterizations can be found. Both internal and
external exchange mechanisms are utilized, given that knowledge is being
exchanged inside associations additionally it being exchanged from outside
environment. The emphasis is basically on human exchange instruments since the
specimen examined are exile chief

Knowledge Transfer Mechanism in Multinational Enterprises


Knowledge Transfer Process
Through a variety of different modes, firms can transfer knowledge across
countries. Two basically different mechanisms of knowledge transfer are
identified by our conceptual model, for reasons of simplification: ‘Written media’
and ‘rich communication media’. These two transfer mechanisms, in practice,
constitute two extremes that presumably rarely occur in pure forms. In most
cases, it is more likely that the actual transfer of internationalization knowledge
include both face–to–face communication and written media (Håkanson 2000).
Individual or team level visits will be required, sharing of experience and face-to-
face interaction (Nonaka 1987).
The transfer of knowledge that is experienced-based is facilitated by face-to-
face interaction between individuals, and it permits interactive communication,
questioning, and flexibility (Bresman et al. 1999). It was noted by Almeida/Kogut
(1996), that exploitation of experiential and tacit knowledge in new locations is
allowed by transfer of individuals. Transfer of knowledge is also allowed by
Rich communication media, that the sender may be unable to express in, or
unaware of a written media. When partners see the need to adapt new and
joint business practices, Rich communications media are suitable. Differences
in culture, laws, and business practices globally may be concerned by these
adaptations. Rich communication media are also suitable in transferring
knowledge that requires expressions facially, as well as creation of trust
between those who those who receive knowledge, and those who transmit it
(Sharma, 1998). It is however costly to transfer knowledge through rich
communication media. It is also difficult to make face-to-face communication due to

Knowledge Transfer Mechanism in Multinational Enterprises


the travel costs involved, as well organizational cultures that are not similar, and
differences in language..
Sources of Knowledge for The Headquarters
Knowledge can turn into a part of the headquarters through internal and external
sources. Internal source of knowledge for the headquarters is through their
own workers or through knowledge that arrives from subsidiaries in a process
which is called reverse knowledge transfer (RKT) (Ambos et al., 2006; Yang et
al., 2008; Mudambi et al., 2014). Headquarters can likewise remove learning from
the outside environment, through participation with clients, suppliers, institutional
environment, contenders, and so on (Hoenen et al., 2014). For quite a while the
headquarters were recognized as the main source of competitive advantage for an
MNC. As of late foreign auxiliaries have begun to lose the part of knowledge
receivers and competence-exploiting units, and turned into a piece of system of
knowledge makers (Di Minin and Zhang, 2010), which suggests that auxiliary is
turning into a critical knowledge provider for the headquarters. Subsidiary
initiative-taking (Dorrenbacher and Gammelgaard, 2006), however considerably
more, headquarter determinism in the allocation of assignment (Taggart and Hood,
1999), to a great extent shape the auxiliary part.
Knowledge which will originate from the MNC internal network a great extent relies
on upon the relationship quality level among internal units (Michailova and
Minbaeva, 2012). It is not expected that every unit (auxiliary) will similarly contribute
in knowledge sharing, which is the reason the headquarters can reinforce its control
by making an organizational setting (i.e. reshaping the internal MNC network)
that is most fitting for knowledge sharing (Ciabuschi et al., 2010). So as to
improve knowledge advancement and sharing, the headquarters utilize a

Knowledge Transfer Mechanism in Multinational Enterprises


particular system, establishment of a focal point of excellence (Adenfelt and
Lagerstrom, 2006). Centers of excellence are generally self-governing auxiliaries
which create knowledge abroad and utilize internal network linkages for
directing such information to whatever remains of the MNC.
Sources of Knowledge for the Subsidiary
From an MNC subsidiary perspective, knowledge has two main sources. A
subsidiary’s access to knowledge is greatly influenced by its internal
relationships (within its MNC) and its external contacts (Almeida and Phene,
2004). Internal source of knowledge for subsidiaries represents the relationship
of auxiliaries with other MNC units, like other subsidiaries or the headquarters.
Internal source of knowledge for a subsidiary is also presented with its ability
to innovate. Alternatively, knowledge sources may come from external partners
(customers, suppliers, institutional environment, competitors, etc.). Subsidiary
embeddedness presents the development of lasting business relationship
between a focal subsidiary and a small number of counterparts in the process
of developing production processes and products (Andersson et al., 2007).
All through the development of this relationship with partners, auxiliaries’
innovative and authoritative skills emerge. In business and management literature
two sorts of subsidiary embeddedness are perceived: internal and external
(Yamin and Andersson, 2011). External embeddedness represents business
associations with external partners, while internal business connections inside
MNCs introduce a level of internal embeddedness. In business and administration
writing the idea of “embeddedness” serves to emphasize the significance of
associations with various business and institutional actors (Andersson et al., 2002;
Uzzi, 1997; Figueiredo, 2011; Ciabuschi et al., 2014; Andersson et al., 2014). The

Knowledge Transfer Mechanism in Multinational Enterprises


idea got significant importance while investigating the power premise of the
auxiliary for gaining significance in the MNC (Andersson et al., 2007; Garcia‐Pont
et al., 2009), since embeddedness is corresponding with the level of knowledge in
the watched unit (in this case a subsidiary).
Internal Sources of Subsidiary Knowledge
Internal source of strength or subsidiary’s abilities show an idea roused by two
noteworthy writing streams, asset -based view and absorptive capacity hypothesis
(Fang et al., 2013). The previous accentuates that predominant auxiliary
performance is after effect of the parent’s profitable, uncommon, and supreme
asset, while the latter emphasizes the subsidiaries’ capacity to successfully
oversee knowledge exchanged from their parent (Minbaeva et al., 2013). The
fundamental thought of inner capacities is that they are one of a kind for every firm,
and that is the reason proficiency among firms contrast (Foss and Pedersen, 2002).
Such capacities should be the premise of the organizations’ competitive
advantages, which, it is contended by Forsgren, Pedersen, and Foss (1999),
will be sustainable in as much as the firm keeps on learning and developing.
Internal assets can be coincidence with possession or firm-particular advantages
(Kirca et al., 2011; Bhaumik, Driffield, Zhou, 2015).
The internal source of subsidiary knowledge is depends on internal business
connections in view of the prior level of intra-corporate connections and common
trust between specific units (Yamin and Andersson, 2011). Intra-organizational
units are attached to each other by managerial nature and in addition by
information and knowledge flows. In this way the potential business accomplices
are to a degree known to each other and may effortlessly coordinate since they are
now to some degree compatible, with little requirement for adjustment. Knowledge

Knowledge Transfer Mechanism in Multinational Enterprises


received by auxiliary as the after effect of internal business connections will be all
the more firmly compelled by the enterprise’s “predominant logic` (Yamin and
Andersson, 2011): data will be separated and just information from corporate
setting will be gotten.
External Sources of Subsidiary Knowledge
External sources of auxiliary knowledge depend on outside embeddedness of the
subsidiary, i.e., accomplishment of outer relationships. Improvement of an outer
relationship begins with a basic market exchange phenomenon (a safe distance
exchanges), business exchange between a purchaser and a seller, and after that
develops into a business relationship. Associations with outside markets ought to be
seen as subsidiaries’ external networks (McLoughlin and Horan, 2002), where
embeddedness in those kind of networks results with chances to grow new
business activities (Yamin and Andersson, 2011). Discoveries of Andersson and
Forsgren (2000) and Medcof (2001) demonstrate a specific level of auxiliary
independence, showing that the headquarters are not generally acquainted with the
subsidiary’s external business connections. This can bring about debilitating the
control that the headquarter have over the central auxiliary.
Usually, External sources of knowledge are distinguished into two types,
network and cluster based knowledge sources (Foss and Pedersen, 2002). The
latter, “cluster-based knowledge” (Porter and Sölvell,1998) is based upon the
ability of a particular nation, industry and network components, well-educated
work force or local knowledge institutions like specialized colleges etc.
Forsgreen et al. (1999) list still helpful talks of pertinent components – Porter
(1990) on the level of a nation and Dunning (1992) on the area and Foss and
Eriksen (1995) on industry- particular elements, taking note that those regularly

Knowledge Transfer Mechanism in Multinational Enterprises


said are market size, association and production features, etc. Network-based
knowledge sources allude to business associations with particular partners. Here,
Forsgreen et al. (1999) experimentally bring up that these generally are
characterized as long-term relationships which as indicated by them everything
characterize the association’s capacities, for which the “collection of ties with
different firms” procedure is hence essential. Relationships with local actors,
distributor, supplier, customer and so on give the subsidiary new knowledge
created outside of the association which introduces an input for mproducing
company innovation (Achcaoucaou et al., 2013).
Types of Knowledge Transfer Within MNCS
The global business/administration literature accentuates cross-border knowledge
exchange as the MNCs’ primary source of competitive advantage (Bartlett and
Ghoshal, 1989; Kogut and Zander, 1993; Argoteand Ingram, 2000; Rugman and
Verbeke, 2001; Tallman and Phene, 2007; Mudambi et al., 2014). As indicated
by more recent literature (Liu et al., 2010, Gorovaia and Windsperger, 2010) the
capacity to exchange knowledge is a key source of competitive advantages for
firms even in the 21 st century. Grosse (1996) classified knowledge exchange as
horizontal and vertical. While horizontal knowledge exchange refers to exchange
of knowledge from a subsidiary to its peer subsidiaries, vertical knowledge
exchange presents exchange of knowledge from the parent firm to its auxiliary
and the other way around, (Tavani, 2010). The concentration of this postulation is
on the relationship among the headquarters and an auxiliary, so vertical streams will
be contemplated.
Conventional Knowledge Exchange
Knowledge exchange was defined by Yang et al. (2008) as the procedure of
re-making know-how, administrative methods, RandD abilities, and so on In

Knowledge Transfer Mechanism in Multinational Enterprises


new settings while keeping them functioning properly. The most widely
recognized type of knowledge exchange is a type of vertical knowledge exchange
known as conventional knowledge exchange (exchange from parent company to
its subsidiary). it was demonstrated In previous section that parent organizations
(the headquarters) are an essential source of new knowledge for auxiliaries,,
and most parent organizations have significant immaterial resources and abilities
(Piscitello, 2004) that subsidiaries can exploit to flourish in neighborhood markets
(Kuemmerle, 1999).
Reverse Knowledge Transfer
Despite the fact that they are reasonably comparative, reverse and conventional
knowledge transfer contrast in the rationale of exchange. Conventional transfer
presents a exchange exhibits a teaching procedure, where the subsidiary is
frequently under commitment to duplicate knowledge from the parent. Reverse
exchange is a convincing procedure and subsidiaries are persuaded to impart their
knowledge with parent organization in order to improve their key position.
Because of that, they need to induce the parent firm that their knowledge fits the
parent’s needs (Yang et al., 2008). This exposition makes the procedure of
reverse knowledge exchange a great deal more difficult than conventional transfer.
The significance of reverse knowledge exchange is affirmed by the developing
dispersion of knowledge creation observed by current reviews, which shows that
the supposition of headquarter knowledge matchless quality valid for less and less
organizations (Ambos et al., 2006), while reverse transfers will probably contribute
broadly to the formation of the MNC competitive advantage.
Knowledge Transfer Barriers within MNCs
For knowledge to be effectively utilized as a part of a MNC, a great
comprehension of facilitators and hindrances of intra–organizational knowledge

Knowledge Transfer Mechanism in Multinational Enterprises


exchange is required. The literature can frequently be equivocal when discussing
the impact that a specific component has on knowledge exchange, with no
reasonable agreement on its positive or negative impact (Caligiuri, 2014;
Albuquerque et al., 2013; Boh et al., 2013). Distinctive scientific classifications are
conceivable: those identifying just factors that positively impact knowledge exchange

  • regularly called enablers or facilitators (Foss and Pedersen, 2002; Albuquerque
    et al., 2013; Kumar, 2013; Mudambi et al., 2014), and also those portraying just
    negative impacts – constraints (Haas and Cummings, 2014; Tihanyi et al., 2012).
    Cummings and Teng (2003) divide the various variables into four noteworthy
    groups: recipient context, relational context, knowledge context and activity
    context. Before long, Søndergaard et al. (2007) utilized three classifications
    (organizational, leadership, and individual factors) with three sub-factors (individual
    motivation, trust and geographical location). Riege (2007) proposes a scientific
    categorization comprising of forty barriers: 20 individual, 14 organizational and 6
    technological. Duan, Nie, andCoakes’ (2010) scientific categorization
    incorporates four classifications of components: actor, context, content and media.
    Wang and Noe (2010) sort out the different subfactors into three main categories:
    environmental, motivational and individual factors.
    The global business and administration literature all the more regularly focuses on
    individual knowledge exchange facilitators and barriers, emphasizing various
    diverse variables, for example, leadership (Raab, 2014), embeddedness (Yamin
    and Andersson, 2011), absorptive capacity (Minbaeva et al., 2013; Song, 2014),
    inspiration (Caligiuri, 2014; Minbaeva et al., 2013), openness (Boh et al., 2013;
    Sabini, Valentino, and Sinha,, 2012), learning culture (Jimenéz-Jimenéz et al.,
    2014), protectionism / knowledge hoarding (Park, 2012; Paulin, 2013), age

Knowledge Transfer Mechanism in Multinational Enterprises


distance (Kim et al., 2012), knowledge distance (Song, 2014; Li, Chang, Lin,
and Ma, 2014), gender (Peltokorpi and Vaara, 2014), trust (Song, 2014),
autonomy (Rabbiosi, 2011), articulability (Li et al., 2014), information asymmetry
(Zhang et al., 2014b), integration and interunit tensions ( Oltra, Bonache, and
Brewster, 2013).
In any case, paying little mind to the quantity of components recorded in the
literature on determinants of knowledge exchange in MNCs, a cross-section of
scientific classifications is required.. This proposition goes in this course and
accentuates the four frequently tended to determinants of knowledge exchange in
MNCs: interdependence, information asymmetry, absorptive capacity and
Principal-Agent Problem: Information Asymmetry
A solid connection was appeared to exist organizational (subsidiary) autonomy and
information asymmetry. The significance of data asymmetry was initially highlighted
in the agency hypothesis created by Ross (1973). The agency theory
concentrates on effective information association between two groups in the
relationship, called the agent and the principal . The essential unit of analysis is
the agreement between them, with the suspicions of selfinterest, limited soundness,
and hazard avoidance as human qualities (Eisenthart, 1989) Because of
incompletely contrasting objectives and hazard inclinations among parties
contracting problems emerge, for example, moral peril and adverse choice. MNCs
can be seen from the agency theory perspective. The fundamental objective of
MNCs would then be productive administration of the intra-organizational knowledge
flow. Because of information asymmetry between the headquarters and the
subsidiary, it is normal that multinationals can’t completely control their subsidiaries.

Knowledge Transfer Mechanism in Multinational Enterprises


This gives the subsidiary with a chance to seek after its self-interest and not to
disperse knowledge to different parts of the MNC (Björkman et al., 2004).The
agency hypothesis was utilized widely in the writing on MNCs, with the principal-
agent relationship seen as the headquarters-auxiliary relationship (Björkman et
al., 2004; Mudambiand Navarra, 2004; Vahlne et al., 2012; Keupp et al., 2012).
The pressure in the relationship between the subsidiary and the headquarters more
often than not emerges because of a low level of information sharing. A subsidiary
can choose not to share the knowledge because of an absence of inspiration,
distinctive premiums essentially because of the fact that it works in a local
environment which is specific and different from any other (Forsgren et al.,
2000). The headquarters can permit denying data to auxiliary, since it is an essential
in this relationship. The auxiliary is an agent, and hence obliged to satisfy every
one of the necessities forced by the headquarters which include information and
knowledge sharing. So as to guarantee this the headquarters will attempt to control
this association with instruments as shields against opportunism with respect to the
auxiliary (Björkman et al., 2004). These instruments are mostly corporate
socialization mechanisms (Gupta and Govindarajan, 2000).

Knowledge Transfer Mechanism in Multinational Enterprises


Knowledge is acknowledged as an important company asset and a competitive
advantage by both classical and contemporary management and global business
literature. The mechanisms of management to improving companies’
performance and proficiency relies on restructuring and reconfiguring companies’
successful knowledge at a time when there are limited physical resources.
This is additionally driven by the advancement of global business activities.
Knowledge and innovation are not created over the entire economy indistinctively.
Its components are shared by players working inside a specific specialized or nearby
group. Effective knowledge management is thus currently of vital concern to
companies globally, particularly for multinational enterprises, and knowledge
transfer, as discussed in this review is one of its important elements. This review
combines two fields of research, including business and human resource
management, basically because the subject of knowledge is necessarily
interdisciplinary. It presents the findings from both fields. Academic literature
regularly presents them independently although these subjects are in real life,
are highly intertwined,.
The success stories of developing economies show that a s huge role in this process
is played by foreign owned organizations as providers of knowledge and experience
from advanced economies. In transition economies which lack own knowledge
resources, foreign investments are usually followed by knowledge transfers. The
review tried to specifically look at expat managers of multinational enterprises as
drivers of knowledge transfer.

Knowledge Transfer Mechanism in Multinational Enterprises


This review has consequently connected with the different degree of knowledge
exchange in MNCs’ channels and chain of command of information dispersal in
MNCs. It brings out two research streams. The first examines the degree of context
sharing, while the second takes a look at which environment is most appropriate to
make learning (out of firmly associated in shared space loosely connected in distant
place and other combinations).
This review opens up space for new research in the field of knowledge management
in MNCs in general. It raises two questions; “Is knowledge flow an observable
process in MNCs globally, especially in developing economies?” and “are the key
mechanisms for knowledge transfer in MNCs presented by expatriate managers?”
The study describes the relationship between expatriate managers competences,
knowledge transfer mechanisms and types. The nature of expatriates assigned to
the MNCs globally is provided in comprehensive overview, as well as their role in
knowledge flow in subsidiaries of MNCs.
This contribution of this review emphasizes the significance of globalization and
standardization of knowledge market beyond the development and empirical study of
a conceptual model of intra-organizational knowledge transfer. Additionally,
subsidiaries are offered insight into expatriate managers’ relevance, which provides
framework for an ideal mechanism of efficient knowledge management in MNCs.

Knowledge Transfer Mechanism in Multinational Enterprises


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