A formal analysis of knowledge combination in multinational enterprises
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A formal analysis of knowledge combination in multinational enterprises Peter J Buckley1 and Martin J Carter2 1
Centre for International Business University of Leeds, Leeds University Business School, UK, 2 Leeds University Business School, UK Correspondence: PJ Buckley, Centre for International Business, University of Leeds (CIBUL), Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK. Tel: þ 44 113 343 4646; Fax: þ 44 113 343 4465; E-mail: [email protected]
Received: 4 February 2003 Revised: 19 November 2003 Accepted: 17 February 2004 Online publication date: 22 July 2004
Abstract This paper outlines a model of process organisation for the combination of different types of knowledge from spatially separated sources in the multinational enterprise. The model envisages an initiator-entrepreneur as the motor of the process, and identifies regularities in the types of knowledge combination within the firm that provide additional value. Knowledge losses, decision losses and coordination losses are imperfections in the process, and result in barriers to the effective combination of knowledge. Strategies of combination are of three types – additive, sequential and complex – implying different types of control outcomes. Journal of International Business Studies (2004) 35, 371–384. doi:10.1057/palgrave.jibs.8400095 Keywords: knowledge management; multinational enterprises; process model
Purpose of the paper This paper presents a formal analysis of knowledge combination within the multinational enterprise (MNE). We introduce a representation of knowledge about fluctuations and change using a simple model of activity choice. Our central concern is with the organisation of processes that the firm uses in bringing together complementary knowledge, by which we mean (spatially) dispersed knowledge whose value is enhanced by combination. Following a formal definition of knowledge, we develop a model of knowledge transfer and combination within the firm by a team of entrepreneurs under the direction of a strategic manager (an initiator-entrepreneur). This process is affected by the characteristics of the knowledge, and by the expectations of the active agents as to the value that will be achieved through knowledge combination. The impact on firm performance is mediated through losses arising from the costs of acquiring and transmitting information (knowledge costs), motivation costs including incentive measures taken by the firm, and the costs of coordinating actions. We identify three distinct knowledge combination scenarios that illustrate different situations facing the firm in knowledge creation or acquisition. These suggest outcomes in terms of performance of different knowledge transfer processes that have implications for the organisation design of spatially complex MNEs. Foss and Foss (2000) have pointed out that processes within firms have been relatively neglected both in the economics of organisation and in the an
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