Antecedents of stickiness in intrafirm knowledge transfer

Research on the intrafirm transfer of best practices indicates that such transfers are often very difficult or sticky (Szulanski, 1996; Teece, 1997; von Hippel, 1994) with frequent incidents of transfer failure (Galbraith, 1990; Gupta &

Govindarajan, 2000; Jensen & Szulanski, 2004). For instance, Galbraith (1990) reports that many firms find intra-firm knowledge transfer much more difficult than expected. Gupta & Govindarajan (2000) describe that the expectations of intra-firm knowledge transfer are often not met. Stickiness is defined as the degree of perceived difficulty in transferring knowledge in organizations (Jensen

& Szulanski, 2004).

Stickiness or accelerators for knowledge transfer can have many origins.

Knowledge transfer between MNC subsidiaries can be regarded as a communication process that involves the source, the recipient, a channel, and a message (Gupta & Govindarajan, 2000). Stickiness can take place related to any of these elements.

Stickiness during the implementation phase and ramp-up phase is common.

Empirically, stickiness during these phases is measured by monitoring difficulties in communication and relationship between source and recipient, difficulties in assessing the requirements of the knowledge to be transferred and in assessing the expertise of the source, difficulties in implementing the template, the need to develop solutions to implementation problems, and the inability to meet project deadlines and budgets (Szulanski, 1996).

Table 1 provides a short literature review of the main findings on intra-firm knowledge transfer from empirical studies. Synthesizing the findings from these studies provides an overview of the factors which have been found empirically to increase or reduce the stickiness of knowledge transfer. These constructs are summarized in Figure 2.

Table 1: Empirical research on intrafirm knowledge transfer

 Time to imitation depends on the degree to which the innovations may be codified and taught, and also on the threat of market preemption

 Major barriers to internal knowledge barrier include

 Social interaction and trust were significantly related to

each

 Weak inter-unit ties speed up projects when the knowledge is not complex

 Weak inter-unit ties impede the transfer of complex knowledge

 Weak inter-unit ties slows down the transfer of complex knowledge

 Strong ties accelerate the transfer of complex

 Knowledge flows from

 Illustration of high level of ROA using replication

knowledge in

Tsai (2001) Impact of network position and

 Unit’s innovative capability is significantly increased by its centrality in the intra-organizational network

 Units with high absorptive capacity are more innovative

 High absorptive capacity increases the impact of centrality on innovation

 Units with higher absorptive capacity have higher

 Project teams obtained more existing knowledge from other units and completed their projects faster to the extent that they had short

able to benefit

acquired inter unit network paths to units that possessed related

 Use of templates enhances the effectiveness of knowledge transfer.

European

 Strong ties between change implementation networks and change recipient networks increases change use and successful change implementation

 Unit leader density of strong ties were significant

 Recipient motivation has a negative effect on stickiness

 The above relationship is moderated by the degree of

franchising

 Use of templates enhances the effectiveness of

 Innovative performance is a curvilinear function of the

innovative performance.

 Strategy of copying more exactly enhances network

market place

 Recipient learning intent and source attractiveness

 Knowledge value, rarity and non-substitutability influence source attractiveness

 Recipient learning intent and source attractiveness

new

manufacturing site through infra-firm knowledge transfer

foreign countries

Wong, Ho &

Lee (2008)

Whether unit power affects inter-unit knowledge transfer

Interview and questionnaires followed by quantitative analysis

Insurance company and Marketing and Sales company in Singapore with

departmental units

Unit Dyadic

Extent of knowledge transfer measured as each way transfer

 Knowledge criticality and non-substitutability impact the extent of knowledge transfer i.e. units with greater power receive more knowledge

 Units which are less central in the workflow have greater unit power on units that are more central

Figure 2: Sources of stickiness during knowledge transfer (compiled from Lippman and Rumelt (1982) to describe the phenomena surrounding business actions and outcomes that make it difficult for competitors to copy strategies. It has been shown empirically to be significant during all phases of transfer, especially implementation phase (Galbraith, 1990; Hansen, 1999; 2002;

Szulanski, 1996; 2000). Meta-analysis has shown it to be less detriment to transfer within organizations than between organizations (Van Wijk et al., 2008).

It has been suggested but not shown empirically that causal ambiguity depends on the attributes of the template and that it increase with template size, knowledge complexity or difference from the recipient’s existing routines (Jensen et al., 2003). organization to formulate strategies that enable effective and efficient outcomes and rare if it is possessed by a limited number of players (Barney, 1991).

Valuable and rare knowledge is expected to increase the attractiveness of the source. Empirical evidence shows that the value of a subsidiary’s knowledge is

Source

positively associated with outflows of knowledge from that subsidiary (Gupta &

Govindarajan, 2000).

Changes made during template transfer

If the template is modified during transfer then this can increase the stickiness of transfer.

Presumptive adaptation - Empirical research has shown that transfer stickiness is increased by adapting the template to the needs of the subsidiary before the transfer takes place (known as “presumptive adaptation” ⁶) (Jensen &

Szulanski, 2004; 513). An explanation given for negative impact of presumptive adaptation is that transferring a template to new environment is sticky because of the ambiguity of fit to the new environment. Even local, experienced managers are likely to incorrectly understand the relevant characteristics of the local environment and hence adaptation efforts will be misdirected, thereby increasing the stickiness rather than decreasing it (Jensen & Szulanski, 2004).

This is of course, does not to preclude that local adaptation can safely take place once the template has been copied across (Jensen & Szulanski, 2004). It has also been shown empirically that firms can look for replication and adaptation at the same time, replicating the more discrete pieces of knowledge and adapting when the units possess a greater understanding of their knowledge. Both were found to lead to higher performance.

Completeness of the template (rather than a collection of disparate sub-routines) - Empirical studies have found that transferring a single observable template increases the effectiveness of knowledge transfer, in comparison to implementing a collection of sub-routines taken from several different places (Jensen & Szulanski, 2007).

Source characteristics

A number of characteristics of the source have been identified a causing stickiness.

Source reliability - When the source is not perceived to be reliable, trustworthy or knowledgeable then initiating a transfer from that source will be more difficult and its advice is likely to be challenged or rejected (Szulanski, 1996; 2000;

Zander & Kogut, 1995). But if the recipient is trusting of the source then it is more likely to accept the advice of the source and change its behaviour (Andrews & Delahaye, 2000; Szulanski et al., 2004). Trust operates by increasing the amount of information exchanged (Tsai & Ghosal, 1998), decreasing the cost of exchange (Curall & Judge, 1995), and increasing cooperation (Dirks & Ferrin, 2001). However, empirical studies have shown that the relationship between trustworthiness and the degree of knowledge transfer is moderated by the casual ambiguity of the knowledge being transferred (Szulanski, et al., 2004). This finding suggests that trustworthiness increases the

6Presumptive adaptation is defined as any adaptations involving two or more simultaneous changes that are sufficient magnitude to render the template site, or previously working version of the practice of little diagnostic value (Jensen & Szulanksi, 2004).

receptivity of the recipient but also lessens or inhibits the efforts of the recipient to validate the source’s advice in a timely manner.

Source motivation - Source motivation studies have covered a wide variety of potential ways in which sources may be encouraged to share knowledge e.g.

intrinsic motivation, social ties (e.g. Hansen, 1999; Levin & Cross, 2004), incentive systems (e.g. Bock, Zmud, Kim & Lee, 2005) such as economic rewards (Gupta & Govindarajan, 2000) or career enhancement or enhanced reputation (Hall, 2002), knowledge sharing culture (e.g. Jarvenpaa & Staples, 2000). Sources must weigh the potential power or relative expertise loss or other costs such as the effort required to support the transfer against the potential benefits in status or possible reciprocation that they gain by sharing (McNamee

& Levin, 2009). Interunit competition for resources has been shown to contribute to a reduction in knowledge sharing (Tsai, 2002). Not all studies have found that source motivation impacts knowledge transfer (Gupta & Govindarajan, 2000).

Source size and age - Studies assessing the effect of size on knowledge transfer find positive effects (Gupta & Govindarajan, 2000). Larger units may have more resources to devote to knowledge transfer (Gupta & Govindarajan, 2000) and may also have more diverse knowledge resources that enable absorption of new knowledge (Cohen & Levinthal, 1990). Older units appear to experience difficulties transferring knowledge within organizations (van Wijk et al., 2008).

Recipient characteristics

Recipient characteristics are also important.

Recipient motivation - One of the main sources of stickiness in MNC knowledge transfer is the recipient motivation, defined as the recipient subsidiary’s desire to implement the practice being transferred (Jensen &

Szulanski, 2004; 513). Subsidiaries acquiring knowledge from other MNC subsidiaries may suffer from what is typically referred to as Not-invented-here syndrome (NIH) (Katz & Allen, 1982). Empirical studies show that recipient learning intent impacts both the efficiency and the effectiveness of knowledge transfer and that knowledge value is positively associated with recipient learning intent (Pérez et al., 2008). Empirical studies also show that institutional distance has a negative effect on recipient motivation making it more difficult to understand and correctly implement the intent of the practice (Jensen &

Szulanski, 2004).

Absorptive capacity - Absorptive capacity refers to the ability to recognize, assimilate and apply new external knowledge (Cohen & Levinthal, 1990; Lane, Koka & Pathak, 2006; Zahra & George, 2002). Various empirical studies have found that absorptive capacity contributes to the amount of knowledge learned across units within firms (Gupta & Govindarajan, 2000; Szulanski, 1996; Van Wijk et al., 2008).

Ability to unlearn former routines - The recipient has to be able to abandon old practices in favor of new practices (Szulanski, 2000). Evidence from studies of innovation (Rogers, 2003), planned organizational change, and organizational learning (Argote, 1999) suggest that this can be challenging.

Communication channel characteristics

Many researchers have looked at the influence of network relationships on intraorganizational knowledge transfer.

Number of network ties - In a MNC a unit can access new knowledge through a network of interunit links (Hansen, 1999). Various studies have shown that a large number of relations to other units increase the likelihood that relevant knowledge can be accessed. Relations enhance information processing capacity which enables knowledge flows through these relationships (Gupta &

Govindarajan, 2000; Hansen, 1999).

Network centrality - The degree to which a unit occupies central network positions has been shown to be related to the ability of that unit to produce more innovations (Tsai, 2001). Centrally located units are believed to be more able to access external information and knowledge.

Network tie strength - Tie strength which reflects the closeness of a relationship and increases with frequency of interaction and communication, leads to greater knowledge transfer (Hansen, 1999; Tsai, 2002). Strength of the tie between source and recipient is reflected in the ease of communication and in the “intimacy” of the overall relationship between the source and the recipient (Szulanski, 2000). Strong ties facilitate the flow of richer, detailed and redundant information and knowledge resources between individuals and groups (Granovetter, 1985; Hansen, 1999).The frequency of informal social relationships has a significant positive relationship on knowledge sharing among units that compete with each other for market share but not among units that compete with each other for internal resources (Tsai, 2002).Complex knowledge transfer requires a strong tie between two partners but building and maintaining these ties may only be justified if the knowledge being transferred is complex and not easily codified (Hansen, 2002). Strong ties between the change implementers and the change recipient network are significant predictors of change use as well as strong ties within the change recipient network (Tenkasi &

Chesmore, 2003). Weak ties may be useful for searching and identifying new knowledge or best practices but these ties have been found empirically to not be robust enough for copying templates from source units, particularly when the knowledge being transferred is complex (Hansen, 1999). An arduous relationship between the source and the recipient may create additional hardship in transfer (Szulanksi, 1996; 2000).

Richness of network ties - Richer transmission channels improve communication between transfer partners, resulting in great success in knowledge transfer, especially during knowledge implementation (Kwan &

Cheung, 2006).

Physical distance - Physical distance between the parties may impact the effectiveness of their communication and also has been shown to be a determinant of successful transfer (Galbraith, 1990).

Cultural distance or institutional distance - Cultural distance may increase operational difficulties that emerge from a lack of understanding of the norms, values, and institutions and hinder knowledge exchange (Mowery, Oxley &

Silverman, 1996). Meta-analysis of previous empirical work shows that cultural distance particularly hampers knowledge transfer across different units within

firms (Van Wijk et al., 2008).There is empirical evidence to suggest that stickiness increases with institutional distance (Jensen & Szulanski, 2004).

Similarity between source and recipient - Knowledge seekers tend to seek out partners with similar characteristics to transfer knowledge. For organizations one choice cited is similarity in business strategy (Darr & Kurtzberg, 2000).

Shared vision, systems and values are important cognitive elements that promote a crucial bonding mechanism that helps different actors to integrate knowledge (Tsai & Ghosal, 1998).

Timing during the transfer process

Certain causes of stickiness have been shown empirically to be more important during different stages of the transfer process (Szulanski, 1996, 2000).

Stage of transfer process - Factors affecting the opportunity to transfer are more likely to predict difficulty during the initiation phase i.e. traits of the source unit such as motivation. Factors affecting the execution of the transfer are more likely to predict difficulty during the implementation phase i.e. traits of recipient unit such as absorptive capacity.

Organizational characteristics

A number of organizational characteristics have been found to impact intraorganizational knowledge transfer.

Degree of centralization - Formal hierarchical structure in the form of centralization has a significantly negative impact on knowledge sharing (Tsai, 2002). Units in a highly centralized organization are thought to be reluctant to share knowledge unless mandated by headquarters.

Degree of formalization of integrative mechanisms - Intra-MNC normative integration may facilitate knowledge transfer (Ghosal & Bartlett, 1988). When subsidiaries are more tightly integrated with the rest of the corporation through formal mechanisms then there are greater knowledge flows to peer subsidiaries (Gupta & Govindarajan, 2000)

Organizational context - Organizational context may affect the willingness and ability of organizational sub-units to complete transfer related tasks (Szulanski, 2000).

From this exhaustive review of antecedents of stickiness during knowledge transfer, it can be seen that plenty is known about antecedents that are important when a best practice which is already established is being replicated.

But much less is known about attributes of the template that are important when the template is being formed and which are critical during the early stages of copying. To date the main attributes of the template itself that have been identified as important for stickiness include the nature of the knowledge included in the template in terms of casual ambiguity, provenness, and value.

2.1.4 Summary of literature gap in knowledge transfer theory

In summary, despite the acknowledged importance of templates for best practice transfer of organizational routines and the replication of business models, remarkably little is known about how templates are initially produced. Best practice research has focused purely on how existing templates are

encapsulated and then replicated in the recipient organization with the help of the source (Jensen et al., 2003; Jensen & Szulanski, 2004) but has not touched upon how these practices were initially created. Business model replication has gone further by showing how replication evolves through two stages; an exploration phase followed by an exploitation phase (Winter & Szulanski, 2001).

Exploration takes place as the business model is initially created and refined.

Exploitation takes over as the business model is stabilized and leveraged through large-scale replication. However, little focus has been placed to date on the exploration phase when the first template(s) is created and refined to provide guiding examples for subsequent replication. In neither best practice transfer nor business model replication have researchers delved into the way in which the initial template was created or, importantly, identified the key attributes of templates that lead to the initial adoption of a new organizational practice. And to date researchers have not investigated how actions taken during the creation of a template increase or decrease the likelihood of early strategic initiative adoption.

2.3 Institutional theory and global new practice adoption in MNCs

A major theme that emerged from the context selected for this exploratory research was that the adoption of a strategic initiative within an MNC following piloting involves a degree of imitation of the pilot location by other subsidiaries.

Institutional theory and neo-institutional theory is a body of literature that attempts to explain the conditions under which organizations imitate each other.

As the findings of the research became clearer, the relevance of concepts from institutional theory and institutional change theory as a way of interpreting some of the observed phenomena was strengthened to the point that I decided that institutional theory should be included as the central literature stream.

Neoinstitutional theory has been widely applied to many aspects of international business. Applications have focused on i) characteristics of national environments and the impact of these environments on the firm (e.g. Wright, Filatochev, Hoskisson & Peng, 2005), ii) intercompany transfer of practices and cross-border transfer of practices to explain cross-country differences and to examine conditions under which practices either diffuse or spread or converge (e.g. Duysters & Hagedoorn, 2001; Eden, Dacin & Wan, 2001; Gooderham, Nordhaug & Ringal, 1999; Guller, Guillen & Macpherson, 2002), iii) strategic behavior of firms in response to host country environments and local institutional environments for activities such as partner selection in international alliances, foreign expansion, strategic choices, environmental strategy, plant locations decisions (e.g. Child & Tsai, 2005; Guillen, 2002; Henisz & Delios, 2001; Hitt al., 2004; Peng, 2003; Yiu & Makino, 2002). From an intra-firm viewpoint, neo-institutional theory has been applied to the diffusion, adoption and institutionalization of practices within MNCs including across national and business unit borders (e.g. Kostova & Roth, 2002; Szulanski & Jensen, 2006) and has become a dominant framework in this stream of research (Kostova, Roth & Dacin, 2008).

In this section I start by introducing the major tenets of the neo-institutional perspective. Then I explain the complex institutional pressures experienced by MNC subsidiaries. Finally I describe institutional change models and explain three of the major themes or dilemmas that any institutional change model needs to elucidate when describing the institutionalization of a new practice.

2.3.1 Neo-institutional perspective

Current institutional work has largely employed the neo-institutional perspective (e.g. DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Powell & DiMaggio, 1991). Neoinstitutionalism aims at explaining stability and similarity among organizations. Fundamental to neo-institutionalism is the assumption of social determinism, particularly in granting organizations legitimacy. Legitimacy is the acceptance and approval of organization’s actions by important constituents in order to have access to valuable resources and thereby ensure survival and success (DiMaggio & Powell, 1983). Organizations gain legitimacy by adopting practices, procedures and templates for organizing that are institutionalized in a given society (Meyer & Rowan, 1977) and, as a result, become more similar, or

“isomorphic” to one another. Isomorphism is “a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions” (DiMaggio & Powell, 1983: 149). Organizations that share the same environment or organizational field become more isomorphic over time because they are exposed to the same structural forces. Empirical

“isomorphic” to one another. Isomorphism is “a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions” (DiMaggio & Powell, 1983: 149). Organizations that share the same environment or organizational field become more isomorphic over time because they are exposed to the same structural forces. Empirical

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