This study answers three questions, namely: How does the width of knowledge distance influence the effectiveness of knowledge transfer in MNCs? How does the depth of knowledge distance influence the effectiveness of knowledge transfer in MNCs? How do organizational trust and knowledge embededdness influence the relationship between knowledge distance and the effectiveness of knowledge transfer in MNCs? The researcher used a quantitative survey to answer the questions about the effectiveness of knowledge transfer, and to assess the relationships between the major variables of the study. From the findings, all the four variables are significant predictors of the effectiveness of knowledge transfer in MNCs, and organisational trust and knowledge embededdness are significant moderators of the relationship between knowledge distance and knowledge transfer effectiveness. Overall, in MNCs where the level of trust between the organisational members is low, knowledge distance is a significant impediment to effective knowledge transfer. MNCs can use trust-enhancing strategies to make the most of their knowledge management initiatives.
Theoretically, multinational corporations (MNCs) exist because, compared to markets, they are more efficient in the creation, acquisition, transfer, integration and application of the major forms of knowledge (Kogut and Zander, 1992). Therefore, some researchers have conceptualized MNCs as global networks for managing knowledge across countries (Gupta and Govindarajan, 2000). Numerous factors have created a challenge for operationalising the working process of the global, knowledge-transfer networks; knowledge distance and culture, among others, comprise these factors. Researchers have argued that transmitting knowledge across borders is easier when cultures are similar than when cultures are dissimilar. Consequently, the interest in documenting the role of various antecedents in the effectiveness of knowledge transfer within MNCs has increased.
Extant literature suggests that the strategic context of MNCs has a moderating impact on the relationship between environmental factors and the effectiveness of knowledge transfer in MNCs. Thus, one can expect that the cultural environment of a host nation and the nations cultural distance from the home nation affect the effectiveness of the MNC in transferring knowledge to and from its subsidiaries. Cultural distance relates to the extent of the differences in shared norms and values across two or more countries; it is the aggregation of the circumstances that necessitate knowledge, on one hand, and the impediments to knowledge flow, on the other hand (Drogendijk and Slangen, 2006). Li and Scullion (2006) contend that cultural distance has a negative impact on the effectiveness of knowledge transfer; not all researchers share this view, though Song and Grant (2002) argue that that cultural distance can incentivise MNCs to step up knowledge-transfer efforts. Firms with linkages to certain cultural contexts and countries may find it motivating to learn from their partners who have different cultural linkages.
Knowledge transfer within MNCs is not easy because as a resource, knowledge is socially complex. Knowledge entails a dynamic process through which human beings justify their personal beliefs as part of their aspiration for the truth (Vermeulen and Barkema, 2001). Therefore, social context factors have a significant influence on knowledge. Barney (1991) argues that, although all firms may have the same technology, not all of them posses the soft resources they need to leverage that technology in implementing their strategies; these soft resources include social relations, organisational routines and traditions. The embeddedness of knowledge has resulted in researchers according disproportionate attention to the context in which MNCs use and transfer organisational knowledge. Davis & Meyer (2004) consider culture as an important contextual variable that affects the effectiveness of knowledge transfer in MNCs. In fact, to some researchers, it seems that, in the global economy, knowledge management is nothing more than managing exchanges across cultures; such exchanges are meant to secure and sustain competitive advantage. This study uses MNCs operating in China as a context because China plays a strategic role in the global market and it has a distinctive cultural environment. As one of the worlds largest economies with a history spanning thousands of years, Chinas cultural environment is complicated and unique (Chen, 2014). The cultural distance between China and the home countries of the MNCs operating in China is a good context for exploring the effect of knowledge distance on the effectiveness of knowledge transfer. China also has about a quarter of the global population, meaning it is potentially the largest market for the worlds goods and services. For a long time, China remained a major area of growth for anyone who sought opportunities in the global market. As China opened tremendously, so did unprecedented opportunities for large global corporations to grow their businesses in Chinas huge market.
From a managerial perspective, the speed of innovation and increased competition have forced MNCs to find a continuous way of local generation of new knowledge and the global application of that knowledge within the firms boundaries. Thus, it is essential to facilitate the process of transferring knowledge, but facilitation could be a challenge considering some cultural differences between the home and host countries of MNCs. Particular values in a given culture should influence how employees perceive knowledge and their actions in knowledge transfer, and this, in turn, affects the effectiveness of knowledge transfer within MNCs. Therefore, it is important for the managers of the MNCs in China to enhance knowledge transfer, and, ultimately, improve the performance of subsidiaries through the acknowledging national culture distance as an integral moderating factor. Drawing on the cross-cultural management and knowledge management literature, this study proposes and tests a model that MNCs can use in transferring knowledge.
In the literature on cross cultural, and knowledge, management, there are two ways of examining how national culture affects MNC knowledge transfer. One approach focuses on the cultural distance separating home and host countries and it analyses the impact of distance on knowledge flows. The other approach focuses on cultural dimensions or particular values and it considers these dimensions or values affect knowledge transfer behaviour, and hence the outcome of knowledge transfer processes (Ford & Chan, 2003). Although each approach deals with an essential aspect of the impact of national culture, considering both approaches jointly yields greater insight. The conceptual model that this study proposes, therefore, combines the two approaches to assessing the effect of national culture on the effectiveness of knowledge transfer in MNCs. This study answers three questions, namely:
1. How does the width of knowledge distance influence the effectiveness of knowledge transfer in MNCs?
2. How does the depth of knowledge distance influence the effectiveness of knowledge transfer in MNCs?
3. How do organizational trust and knowledge embededness influence the relationship between knowledge distance and the effectiveness of knowledge transfer in MNCs?
2. Literature Review
2.1 Knowledge Management and Competitive Advantage: Theoretical Framework
The resource based view theory conceptualizes a firm as an institution that integrates knowledge (Grant, 1996). As an influential paradigm in strategic management research, the resource-based view (RBV) comprises a theoretical foundation for evaluating the importance of knowledge for MNCs. In the RBV framework, firms can be considered as bundles of tangible and intangible resources (Barney, 1991). Resources refer to the assets, capabilities, processes, organisational attributes, information and knowledge that a firm controls and that enable it to design and implement strategies for making it effective and efficient (Barney, 1991, p.101). A firm can earn maximum rents, outperform other firms and sustain a competitive advantage if it can combine its unique resources and its capabilities in exploring, gaining, developing, sharing and integrating resources.
The origins of the RBV can be traced to the school of thought that considered leadership skills and elite groups as distinctive competencies that firms need to attain good performance. Classical views assert that organisations are nothing more than bundles of productive resources that entrepreneurs organise in an administrative framework a framework that determines, in part, the amount and nature of services that productive resources can yield. Two contemporary paradigms - the knowledge based view (KBV) and the dynamic capabilities paradigm - have reformed the RBV into two major streams. In the KBV, the emphasis has shifted towards knowledge resources and capabilities because they hold the greatest potential to support competitive advantage at the level of the firm. Knowledge, particularly tacit knowledge, qualifies as a source of heterogeneity that can sustain competitive advantage because of several reasons. First, knowledge is valuable as it enables firms to implement strategies that make them more efficient and effective. Secondly, knowledge is rare because many firms cannot hold t...
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