Knowledge, Market Failure and the Multinational Enterprise: A Theoretical Note
- PDF / 3,468,846 Bytes
- 9 Pages / 450 x 771 pts Page_size
- 77 Downloads / 211 Views
Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve, and extend access to Journal of International Business Studies ® www.jstor.org
400
JOURNALOF INTERNATIONALBUSINESS STUDIES,SECONDQUARTER1995
KOGUT AND ZANDER'S THESIS One of the key aims of K&Z's article is to question the perspectivethat firms exist to internalize markets. They argue that some firm-specific (ownership) advantageis a necessary condition for foreign direct investment(FDI) to occur, but thatinternalizationto avoid the hazardsof the marketis not. The ownership advantage with which they are concerned derives from certain "attributesof knowledge,"such as its tacitness, and the choice of FDI versus licensing will be influencedby the characteristicsof this advantage. Firms are viewed as "social communitiesthat serve as efficient mechanismsfor the creationandtransformationof knowledge"(p. 627). Crucially,the determining factor for whether a firm will transfer such knowledge internally is not the efficiency of such a course of action relativeto a markettransaction,but the efficiency of internaltransferby the firmin questionrelativeto otherfirms.Market failurethereforehas no necessaryrole. Knowledge is frequentlytacit and uncodifiable.There may thereforebe important differences in firms' abilities to understandand apply knowledge which is the subjectof transfer.Thus the cost of transfervariesbetween firms, and some firms are better than others at transferringspecific kinds of technology. Such costs, andthe superiorcapabilitiesof some firmsrelativeto others,do not ariseas a resultof the hazardsof the market. The problem with the argumentthat firms exist due to marketfailureis that it is overdetermined;the assumptionof opportunismis not needed, only the differentialin costs in the transmissionof knowledge withinthe firmas opposedto between firms.(p. 629) Therefore,the boundariesof the firmaredeterminednot by marketfailure,butby differential"embeddedcapabilities"thatexist between the creatorsof knowledge and its users. This hypothesisis testedusingdetaileddataon eighty-twoexamplesof knowledge transfer,half of which were effected internallyand half by contractualmethods (licensing,joint ventures,etc.). Eachtransferwas coded on indexescoveringthree attributes of knowledge: codifiability, teachability and complexity, and logit analysis carriedout to test the null hypothesis that the three attributesmade no difference to the choice of knowledge transfermechanism.The null hypothesis was consistentlyrejected:the more complex is a technology,the more likely was transferto be internal,while the more codifiableand teachableis knowledge,the morelikely it was to be transferredby marketmeans. K&Z conclude that their results indicate that firms specialize in the transferof tacit, difflcult-to-understandknowledge: "the advantageof a firm is its relative efficiency in transferringidiosyncratictechnologies"(p. 636). This, they argue,is consistentwith a broad,evolutionaryperspectiveof the firm. TRANSACTION COSTS, MARKET FAILUREAND OPPORTUNISM K&Z
Data Loading...
