Multinationals and Cross-Cultural Management

The Transfer of Knowledge within Multinational Corporations

Parissa Haghirian

• Publisher: Routledge
• Year: 2010
• Print ISBN: 9780415449311
• eBook ISBN: 9781136936494
• Topic: Business
• Subtopic: Business General
• Index: Business

Globalisation makes our world appear smaller: it is easier to connect, communicate and do business with people all over the world. But cultural differences remain and challenge globalized knowledge communication and transfer. This book examines cross-cultural management within multinational enterprises (MNEs), focusing in particular on how cultural differences influence the transfer of knowledge between different units within individual corporations.

Based on detailed empirical analysis of 267 companies in Germany and Japan, it considers the relative effectiveness of inter-cultural and intra-cultural knowledge transfer; identifies the factors that inhibit or facilitate successful knowledge transfer; and suggests how management processes of MNEs can be improved. It demonstrates that although cultural differences do not necessarily influence the selection and transmission of knowledge overseas, they do have a strong impact on how that knowledge is received, integrated and put into practice locally.

The book shows how knowledge is accepted differently in Europe and Asia and which factors have the strongest impact on efficient knowledge transfer. It suggests that to improve cross-cultural management MNEs should focus less on upgrading the technology that allows knowledge transfer, and more on the capabilities and beliefs of individual employees.

Part I
Theoretical foundations of knowledge management and transfer in multinational corporations

1 The nature of knowledge

The research of knowledge is not a new science. It derives from a long philosophical tradition that started millenniums ago. Since then philosophers have tried to find out what knowledge really is and what meaning it has for humankind. In traditionalWestern philosophy, the quest for the understanding of the nature of knowledge began with Plato and his student Aristotle and suggests that Western thinking is based on the fundamental split between mind and body (Nonaka and Takeuchi 1995). Over the centuries two main Western traditions developed, discussing knowledge from a philosophical perspective. The first of these traditions is rationalism, which supports the belief that reason alone, without any reliance on experience, can reveal the nature of reality. The second tradition is empiricism, which refers to the idea that all knowledge is based on experience and that the human mind is not equipped with a set of concepts in advance of experience. In the nineteenth century attempts were made to reconcile these two philosophical streams, the leading protagonists being Immanuel Kant, Georg Hegel and Karl Marx. Their beliefs laid the foundations for philosophical discussion about the relationship between the self and the outside world, which is manifested by society (Holden 2002). These streams form the background of the knowledge management discussion of today.

From the notion of knowledge as truth or meaning a change towards notions of knowledge as practice or action took place. Knowledge became technology, which strongly influenced the process of industrialization. Accordingly, the concept of knowledge and its role in production changed dramatically and traditional knowledge institutions like the church or universities were sidelined by profit-oriented organizations (Maasdorp 2001). Knowledge suddenly was not some exclusive good anymore that entertained and challenged only the intellects of a certain class; knowledge suddenly became societal, a social good and a common good. By becoming available to many more members of society, the nature of knowledge itself therefore changed. It developed because it was being used and applied by different people, not only by the clergy and philosophers, which led to numerous new and alternative ideas and thus to changes in politics and society.

As knowledge developed into a public good, it became an object of interest for organizations too. Corporations started to recognize the value of knowledge. Knowledge helps organizations develop faster than their rivals and create or sustain corporate advantages. In organizations knowledge becomes more valuable when it is shared. Knowledge is a very complex and subjective concept and the management of knowledge proves to be more difficult than the management of traditional organizational assets such as money, people, land and other assets.

Researching knowledge

Knowledge is the main material of our work as researchers. Our work therefore includes all aspects of knowledge management. It consists of identifying interesting questions in life or to picture a reality (knowledge creation or knowledge discovery); to teach our findings to students or to communicate them to the interested public (knowledge sharing); or to be taught, informed or lectured about the newest research results by experts, colleagues, mentors or practitioners (knowledge reception).

On top of this, knowledge does not only form the bases of our work, we also want to find out how to use knowledge more efficiently. Today knowledge is a ‘fashionable’ research topic and is being discussed in a number of disciplines. Traditionally, knowledge and its meaning have been investigated by philosophers over the centuries. Nowadays social sciences have also discovered knowledge as a point of interest. Knowledge is a major topic in information systems research, where the focus lies on data and its storage and analysis and transmission.

Quite recently knowledge has also become a topic of interest for management researchers. Here, the premise is that knowledge is a means of increasing organizational profit. It is an equivalent to tangible assets, such as people, money and land or buildings, which need to be managed in an efficient way to increase the company’s profits. Knowledge management researchers therefore investigate knowledge manageability and its role within organizations.

It is obvious that dealing with organizational information, knowledge and other intellectual assets are of major importance for the success of today’s enterprises. Businesses have internationalized and can only deal with increasing competitive pressure by managing their intellectual assets as efficiently as possible. Management researchers are required to support these processes by developing solutions on how to handle the complex issue of knowledge efficiently.

Defining knowledge

But what makes knowledge management, its theory and its practice, so very challenging? The answer can be found in knowledge itself. Most management publications are focusing on the idea that knowledge can be managed like an object. Knowledge is considered an asset, an item which can be bought, sold, transferred, stored and basically used just like a product. Accordingly, the discussion focuses on the consistency of knowledge, factors increasing or inhibiting knowledge sharing, and how to use knowledge in the most effective way. But in reality the management of knowledge is a lot more complex, because knowledge is a very subjective concept. Knowledge is often intangible and can therefore not easily be bought and sold or moved around like other organizational assets or products. It is strongly connected to its holder and his or her intellectual skills. Defining it is already a challenging task. Using it is even more difficult. Sometimes knowledge is difficult to find, as it often resides in objects and in some cases it does not even exist yet. Finally, knowledge is often personal or tacit knowledge stored inside people and therefore not visible.

In any event knowledge, its definition, its creation and its management and usage are strongly connected to the individuals performing these processes. But knowledge is not only personal because it is owned, created and used by individuals, it is also interpreted and communicated by them. Knowledge is therefore a difficult concept to understand, to research and to investigate. It can neither be clearly defined nor strictly considered an object. All these aspects make the management of knowledge a very challenging task.

Data

The knowledge hierarchy starts with the smallest item: data. Data represent raw numbers or signs. In their raw form they may be devoid of context, meaning or intent (Becerra-Fernandez et al. 2004). They are the raw material to be further processed (Rehäuser andKrcmar 1996).A sign, for example a single Chinese character, is considered data. The number of how many items of a product sold every day is an example for sales data. Data are treated isolated from a context and need further interpretation by an individual to become useful or to be further processed. Accordingly, data are considered carriers of knowledge and information (Kock et al. 1997) and represent observations or facts, which are not directly meaningful without context (Zack 1999). To make use of data, it needs to be converted into information. This can happen with the help of a computer system, which allows data input to be changed into information output (Becerra-Fernandez et al. 2004).

Information

The term information refers to details about an event or situation in the past or simply to a scientific fact (Wikström and Normann 1994). It results from placing data within some meaningful context, often in the form of a message (Zack 1999). Pure data cannot be used by itself; it needs to be transformed into information. When converting data into information you need to set it against a background, making comparisons and adding other supplementary items (Bennett and Gabriel 1999). In contrast to data, information can describe a current situation, it allows reality or a certain situation to be pictured. It does not yet include an interpretation. Information is therefore objective and purely descriptive and explicit and does not enable one to decide or act, nor does it trigger new questions (Kriwet 1997). Sales data for example tell us how many products or items were sold during a certain period of time. They only become useful if compared with sales data of another period or if we compare with sales data of another corporation. To produce information you need to compare or connect data such as entering different sales figures into a computer program and finally calculating an increase or a decrease in corporate sales. Information itself does not yet contain any interpretation yet. Placing data into a certain context allows conclusions or further interpretations about why sales are moving up or down or which products are successful and which are not. It presents a theoretical base on which managers make decisions and develop company processes. Information is therefore simply considered a flow of messages, whereas knowledge provides links between different information plus an interpretation and a sense-making process (Kriwet 1997). Since information is different data connected with each other, it can be transferred rather easily.

Knowledge

In most cases, information is the base of knowledge, because it is mostly the foundation of decision-making and further actions. This asks for an interpretation, which leads to knowledge. Although the terms ‘information’ and ‘knowledge’ are often used interchangeably, there is a clear distinction between information and knowledge (Nonaka and Takeuchi 1995). As shown above, information basically just consists of raw material in the form of data which is put together in a way which makes sense for the organization. Knowledge is created by interpretation of information. Zack (1999) refers to is as ‘what we come to believe and value on the basis of the meaningfully organized accumulation of information (messages) through experience, communication, or interference’. Interpretation is an individual action. This is the reason why it enables the individual to decide, act and trigger new questions (Kriwet 1997).

Machlup (1983) distinguishes knowledge from information very clearly. Information is piecemeal and fragmented, whereas knowledge is structured and coherent. Information is timely and transitory, whereas knowledge is long-lasting and of enduring significance; information a flow of messages, whereas knowledge can be restructured and changed easily (Machlup 1983). Knowledge can be viewed as a thing to be stored and manipulated and as a process of simultaneously knowing and acting (Zack 1999). However, in an organizational context knowledge cannot be compared to other physical assets, such as people, facilities or financial assets. Physical and knowledge assets show differences. Whereas physical assets have a real value because they are scarce and have limited utility, knowledge assets have a higher potential value because they are unlimited and their utility is extensive.

Know-how

Knowledge can change its form and become know-how, which is knowledge that is internalized and defines the ability to perform a task. Know-how refers to knowledge which is embedded in the individual and so becomes the base of the capacity to act (Wikström and Normann 1994). It requires to be accumulated over time. Know-how is based on repeatedly performing a certain activity or business process. Know-how can be divided into explicit and tacit know-how. Explicit know-how refers to procedures, product specifications, codified systems, manuals, software or scientific formula. Tacit know-how refers to embedded individual or organizational know-how, which cannot be easily documented and codified. Examples of tacit know-how are skills, capabilities and expertise (Soo et al. 2000). In an organizational context, know-how refers to operational knowledge, which is knowledge on how to perform a certain operation in a very efficient way. Know-how also refers to the surroundings of the operations, such as industry experience or expertise in a certain field. For organizations their members’ know-how plays a significant role. Such know-how often decides on what level operations and processes are performed and whether they are successful or not. Know-how is also difficult to share, because it is highly tacit and only builds up after a long time of trial and error when performing a certain task.

Wisdom

Knowledge is perishable, but, properly harnessed, can result in wisdom that may be directed to support operational tasks (Bennett and Gabriel 1999). Whereas know-how defines knowledge which is internalized and explains how processes are performed well, wisdom refers to tacit knowledge which accumulates over a long period of time and is influenced by the knowledge owner’s personality. Wisdom is therefore implicit knowledge which not only deals with performance and operations, but all aspects of life. Unlike know-how it is strongly related to its owner’s life experience and therefore wisdom cannot be acquired easily and is not accumulated quickly. The more experience the owner of wisdom gains in a certain field, the stronger wisdom becomes. Wisdom is therefore very strongly connected to its holder and his or her personality and attitudes. It cannot be made explicit very easily.

Table 1.1 provides and overview on the definitions of knowledge. All concepts are strongly related to each other. Some authors even assume that there is a hierarchy between these three concepts, starting from data through information and knowledge to wisdom. This development is accompanied by some dimensions such as content, structure or accuracy (Alavi and Leidner 2002).

Knowledge categories

Reviewing knowledge management literature one may get the impression that there are as many classifications of knowledge as there are publications about it. As explained above the concept of knowledge is difficult to capture, since knowledge is not only tangible but also a very subjective organizational asset. In the following section I will try to summarize the most relevant types of knowledge for the field.

Table 1.1 Data, information, knowledge, know-how and wisdom

Explicit and tacit knowledge

The most relevant distinction of knowledge is its division into tacit and explicit knowledge. Maasdorp (2001) considers this a distinction between focal (explicit) and background (tacit) knowledge. Explicit knowledge is the most articulable and most context-free type of knowledge. It exhibits the highest degree of fit between the knowledge and its representation to others (Doz and Santos 1997) and is knowledge that can be separated from its owner and is expressed in a formal and systematic language (Nonaka et al. 2000), learned by observation and study (Doz and Santos 1997) and is shared in the form of data, scientific formulas, specifications, manuals (Nonaka et al. 2001), patents, technical blueprints, computer software, etc. (Doz and Santos 1997). Because of its explicit form it can easily be processed, transmitted and stored (Nonaka et al. 2001, Nonaka 1994). Explicit knowledge plays an increasingly larger role in organizations and is considered the most important factor of production in the knowledge economy (Zack 1999). Explicit knowledge is mainly based on the separation of the individual that holds knowledge and the known. This, however, does not mean that explicit knowledge is simple to handle. Articulation and codification of explicit knowledge may require rather specific languages and codes.

Tacit knowledge in contrast is based on the unity of the person who knows and the object of knowledge (Scharmer 2000). It is deeply rooted in action, commitment and involvement in a specific context (Nonaka 1994). Polanyi (1985) puts it like this: ‘We know more than we can say’. He observed the fact that although people may be able to perform certain tasks, they may not be able to articulate the way they managed to perform these. Being able to perform an activity does not imply that it is also possible to explain the very same action (Polanyi 1985). Tacit knowledge is therefore not only strongly connected to its knowledge owner, but also located within an individual. It refers to knowledge that is not easily articulated and is defined as ‘non-codified, disembodied, know-how that is acquired via the informal take-up of learned behaviour and procedures’ (Howells 1996). In fact, knowledge can never be fully explicit and always shows a certain degree of tacitness. Even if knowledge can be separated from its owner and put down in words or other explicit ways, there is still a part of it which stays tacit and cannot be extracted and therefore cannot be easily shared.

Its intangible form makes tacit knowledge very personal and hard to formalize. Subjective insights, intuitions and hunches fall into this category of knowledge (Snowden 1999). For example, salespeople’s knowledge about customers is often very personal, anecdotal and depends on the situation prescribed (Bennett and Gabriel 1999). It is tacit in the form of skills possessed by individuals, their experiences and intuition, their relationships and their understanding (Snowden 1999). Tacit dimensions of knowledge build up over time in people’s heads, hands and relationships. Knowledge management is challenged by tacit knowledge. As with explicit knowledge corporations try to access and manage tacit knowledge. The overall aim is to gain access to tacit knowledge and make it useful in differing organizational contexts. However, tacit knowledge is created within organizations through dynamic, unstructured and often subtle processes. These processes cannot be codified into explicit entities such as formal training programmes or captured in information systems (Swap et al. 2001).

Individual and organizational knowledge

Knowledge can be further categorized into individual and organizational knowledge. As the term already suggests, individual knowledge is owned by an individual. In a corporate environment it refers to knowledge owned employees. Individual knowledge can be a source of varied interpretations of shared experience with others (Nonaka 1994) and is manifested in skills and expertise. Usually it combines both explicit and tacit knowledge. Individual knowledge is expanded through its interaction with experience and rationality, which are perspectives that are based on individual belief and value systems. Since individual knowledge is located in an individual, it can also be personal (De Long and Fahey 2000). These individual abilities of corporate employees are the basis for successful corporate action (Probst et al. 1998). Organizations consequently often support their members in developing individual skills and abilities.

Individual knowledge has to become organizational knowledge to improve the overall goals of the co...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Preface
• Acknowledgements
• Part I Theoretical foundations of knowledge management and transfer in multinational corporations
• Part II Research questions and results
• Part III Effectiveness of cross-cultural knowledge transfer in multinational corporations
• Appendix
• Bibliography