The current issue and full text archive of this journal is available at www.emeraldinsight.com/0969-6474.

htm

The role of culture on knowledge transfer: the case of the multinational corporation
Leyland M. Lucas
Department of Management and Business Administration, Morgan State University, Baltimore, Maryland, USA
Abstract
Purpose This paper aims to look at the issue of cultures role in knowledge transfer within multinational corporations (MNCs). Studies of MNCs have hinted at the importance of culture to the performance of subsidiaries. Using Hofstedes cultural dimensions of power distance, individualism/collectivism, uncertainty avoidance, and masculinity/femininity, it is argued that the location of subsidiaries along each of these cultural dimensions will signicantly impact the possibility of knowledge transfer occurring between subsidiaries. Design/methodology/approach The objectives were achieved by providing additional insights into the complex nature of knowledge transfer efforts in MNCs. To do so, a discussion of the challenges associated with the dimensions of culture is presented. These challenges are further complicated by the degree to which the home ofce is involved in the strategic decision-making process surrounding inter-subsidiary knowledge transfers. Findings The paper suggests that managers should pursue knowledge transfer activities cautiously. Although these efforts may be supported by the home ofce, resistance to change and sharing must be carefully managed. Furthermore, knowledge transfer efforts are most likely to be successful if the parties are culturally aligned. And, when this is missing, success is highly dependent upon home ofce directives and support. Research limitations/implications This paper forces us to address a critical question: how do subsidiaries deal with the challenges to knowledge transfer efforts posed by cultural differences? While research has looked at various aspects of culture and its impact on MNC activities, more research is needed on these issues. As knowledge continues to be emphasized as the basis for performance differences, more thorough examination of the issues affecting it is necessary. In addition, variables such as spatial distance, native origin, and language differences, all of which make translation difcult, are not considered. Practical implications The ideas presented here reinforce the notion that national context and its impact on culture has major consequences for inter-subsidiary knowledge transfer efforts. This is particularly the case when these transfers involve subsidiaries with different cultural dynamics. Since, knowledge is contextual, this helps subsidiaries identify their partners in this process, what are there benets to be gained from engagement, and how involved the home ofce needs to be in these transfer efforts. Therefore, managers need to pay careful attention to contextual issues that affect knowledge transfer efforts. Originality/value It reinforces the notion that subsidiaries have access to condential information regarding developments in other subsidiaries. This access to inside information allows for the speedy pursuit of knowledge transfer opportunities. However, such pursuits must be tempered by understanding that cultural differences may inhibit success. Keywords Knowledge transfer, Uncertainty management, National cultures, Management power, Multinational companies Paper type Research paper

The role of culture on knowledge transfer 257

The Learning Organization Vol. 13 No. 3, 2006 pp. 257-275 q Emerald Group Publishing Limited 0969-6474 DOI 10.1108/09696470610661117

TLO 13,3

258

Introduction As trade barriers are eliminated and national boundaries become more permeable, the transfer of knowledge between subsidiaries of multinational corporations (MNCs) has become increasingly important. Through the free movement of personnel across national boundaries opportunities for knowledge transfer have increased, even when it is not the specic intention of the parties (Pablos, 2004). These and other events have generated interest into the ways that subsidiaries can engage in knowledge transfer and create a knowledge network within the MNCs. The strategic management literature has yielded several bodies of research to better explain inter-subsidiary knowledge transfer (Hansen and Lovas, 2004). One body of research has emphasized the importance of control and is built on the notion that most knowledge transfer is both a linear sequence and uni-dimensional. Specic subsidiaries are generators of knowledge and transfers are mandated by head ofce (Almeida and Phene, 2004; Gupta and Govindarajan, 2000). Subsidiaries, therefore, are seen as appropriators rather than creators of knowledge. A second body of research acknowledges that subsidiaries are networks of relationships that facilitate the transfer of knowledge (Gupta and Govindarajan, 2000; Hedlund, 1994; Nohria and Ghoshal, 1994). As a consequence, any subsidiary can be either an appropriator or a generator of knowledge. This allows for transfers to occur independent of head ofce mandates. A third body of knowledge suggests that these transfers are neither fully dependent nor independent of home ofce inuence. Some knowledge transfer will be mandated by the home ofce either because subsidiaries are unwilling to do so voluntarily or because such transfers are essential to achieving long-term strategic objectives. Other knowledge transfer will occur independent of head ofce input. Despite the advances that these streams of research have made to the study of MNCs, there still appears to be a disconnect. For instance, there is some discussion of subsidiaries operating in technologically specialized clusters. However, the body of research has not fully examined how patterns of inter-subsidiary knowledge transfer emerge. For instance, what mitigating role will cultural constraints affect such activities? In particular, does cultural distance between subsidiaries play a major role in limiting inter-subsidiary knowledge transfer? This paper examines how culture affects knowledge transfer within MNCs whose subsidiaries often operate in heterogeneous national cultures. Numerous frameworks to assess the consequences of culture exist. Schein (1985) presents a framework which emphasizes understanding the compatibility of different cultures as important to inter-organizational cooperation. Similarly, other researchers use social comparison theory to reinforce the idea of cultural compatibility. These cultural gaps play in performance (Cullen, 2002). More recent work has sought to develop a perceived cultural compatibility index, acknowledges that differences in beliefs exist between perception and reality (Veiga et al., 2000). Based on the existence of these differences, one can determine to what extent culture can have major consequences for inter-organizational relationships. Perceived cultural compatibility is based on the assumption that normative beliefs about culture cannot be divorced from the national context (Hofstede, 2001; Veiga et al., 2000). This national context is the hallmark of Hofstedes work on the importance of culture to organizations. Based on social comparison theory, he argued that the value systems within our societies shape our behaviors and cannot be divorced from our views of the world (Hofstede, 1997).

Seeing MNCs as networks of relationships, the argument is made that culture can help to explain why knowledge transfer occurs between some subsidiaries and not between others. Using Hofstedes framework, we develop a conceptual model of knowledge transfer and the associated propositions. It is also important to note that, while knowledge transfer activities may involve entities outside of the MNC, the arguments presented here relate only to knowledge transfer activities between subsidiaries that are part of the same MNC. To some degree, these arguments take a closed system approach to knowledge transfer activities by ignoring those that involve external entities. Given that national context cannot be ignored and this paper looks at MNCs, Hofstedes approach appears to be most relevant here. This paper is organized as follows. In the next section, several issues critical to inter-subsidiary knowledge transfer are addressed. Out of this discussion comes a framework for assessing the ow of knowledge from conceptualization to integration. The following section presents a detailed discussion of the dimensions of Hofstedes cultural index. This section shows how each one affects inter-subsidiary knowledge transfer. The paper concludes with a discussion of the implications and limitations of this framework, and provides some ideas on issues that should be considered in future research on knowledge transfer within MNCs. Critical issues of knowledge transfer There are numerous denitions of knowledge transfer within the literature. Knowledge transfer has been dened as an attempt by an entity to copy a specic type of knowledge from another entity (Rogers, 1983). Others have dened knowledge transfer by focusing on such elements as speed, extent, effectiveness, and institutionalization. However, we do not consider speed and extent to be important. It is neither about how quickly knowledge is transferred (speed) nor how much of the knowledge is transferred (extent). Instead, knowledge transfer is about ensuring that efforts provide the desired results (effectiveness) and ensuring that the new knowledge becomes embedded within the organizations fabric (institutionalization). Therefore, for purposes of this paper, we take the view and dene knowledge transfer as either the identical or partial replication of knowledge from one place to another and involving both a provider and a receiver (Kostova, 1996; Szulanski, 1996). Any discussion of knowledge to be transferred must focus on three dimensions: type, embodiment, and transformation. Here, the knowledge being transferred is embedded in the practices, routines, technologies, and individuals that permit the implementation of new techniques designed to improve performance. It involves the movement of knowledge regarding how to do things, what to be done, and when these activities should occur, such that new techniques can be successfully employed. The movement of personnel is particularly important to the knowledge transfer process because there is some amount of stickiness in these practices to be implemented (Song et al., 2003; Szulanski, 1996). Knowledge can either be tacit or explicit. Tacit knowledge exists either in the heads of individuals or a collective body and has been acquired through experience and repetitive actions (Kostova, 1996). Explicit knowledge, which can exist either individually or collectively, is documented and can be transferred in a formal and systematic way through rules, policies, and procedures (Pablos, 2004; Polanyi, 1962).

The role of culture on knowledge transfer 259

TLO 13,3

260

One challenge to successful knowledge transfer directly related to tacitness is dealing with ambiguity. Ambiguity is present when those involved in the transfer cannot reduce what is being acquired into a precise list of items that contribute to a particular outcome. This is a manifestation of the way that knowledge may be embedded within its original context (Song et al., 2003; Szulanski, 1996; Zollo and Winter, 2002). Embeddedness highlights the fact that replication of the original contextual is not possible and this impedes knowledge transfer efforts. Once knowledge is found, the issue becomes what are its elements. Typically, knowledge is embodied in individuals and processes (DeLong and Fahey, 2000; Hall and Johnson, 1970). Individual-embodied knowledge is that which either has been acquired through experience and can be documented (explicit) or can only be shared through personal interaction (tacit). It has a social dimension to it. Such knowledge may be the result of people working together and developing either routines or subtle linkages between processes in which they are involved. Process-embodied knowledge is either embodied in routines and subroutines or facilitating the integration of several routines. It exists in the processes that facilitate the integration of sub-processes. These processes allow for the effective and efcient utilization of knowledge, and subroutines that are essential parts of a larger whole (DeLong and Fahey, 2000). Process-embodied knowledge may be either tacit or explicit. Such knowledge is tacit when it requires the involvement of individuals familiar with these components. For example, the transfer of personnel between subsidiaries prior to or as part of the transfer of processes reects the tacit component of process-embodied knowledge (Almeida and Phene, 2004). Process-embodied knowledge that is explicit merely involves the transfer of manuals and standard operating procedures associated with the adoption of a new process. Once knowledge is acquired, one must make adjustments such that it can t into the new context. That is, it needs to be transformed into be applicable in the new environment where it will be employed. This transformation is the third dimension of the knowledge transfer process. It is the ability to recognize and exploit technological opportunities within the organization (Garud and Nayyar, 1994). There are certain things specic to knowledge and transfers require that it be adapted for the new conditions in which it will be applied. In order for this transformation to occur, organizations must rst determine how best to acquire and keep knowledge within the organization. This process involves nding ways to determine the appropriateness of knowledge, how it can be incorporated into existing techniques with as little disruption as possible, and how best to ensure that what has been acquired is used and not mothballed. This transformation is the complement to absorptive and retentive capacities because successful knowledge transfer cannot occur, unless we have the abilities to recognize these opportunities and to adapt what is being transferred to the new environmental conditions while ensuring that they are institutionalized. Absorptive capacity is which they dene as the ability to acquire, absorb, and assimilate new knowledge (Cohen and Levinthal, 1990), while retentive capacity is the institutionalization of what has been transferred (Szulanski, 1996). The framework shown in Figure 1 suggests that knowledge is embedded in technologies, routines, practices, and people. Successful knowledge transfer is predicated on an understanding of its origins, people, and processes. Knowing this helps us to ascertain what challenges exist, where they exist, and how the social

The role of culture on knowledge transfer 261

Figure 1. Generalized model of knowledge

context may inuence transfer efforts. One aspect of the social context is culture and the similarities/differences between the cultures in which the providing and acquiring subsidiaries exist (Figure 2). Knowledge transfer among subsidiaries: a conceptual model In line with current thinking, MNCs are seen as networks of resources that operate in culturally and geographically diverse regions. This dispersion comes with varying resource endowments for these subsidiaries that, when combined, lead to some degree of heterogeneity in their competencies (Hansen and Lovas, 2004; Phene et al., 2005). As a consequence, this heterogeneity in competencies among subsidiaries does provide the potential for each one to engage in knowledge transfer either under the direction of or independent of the home ofce. A common theme underlying research on MNCs is that subsidiaries can be no longer viewed as appropriators of knowledge based on the home ofce mandates. Instead, subsidiaries are appropriators and generators of knowledge (Gupta and Govindarajan, 2000; Pablos, 2004). These activities are inuenced by their geographic location and the resource endowments within these regions. These resource endowments are inuenced by economic, educational, political, and social factors, among which is culture. Culture is dened as a system of beliefs that are deeply embedded within the society and is reected in the behaviors of its organizations and

TLO 13,3

262

Figure 2. Conceptual model of cross-border knowledge transfer within multinational corporations

people (McDermott and ODell, 2001). It represents a core set of values governing the attitudes employees adopt towards change and their approaches to the introduction of something new (Schein, 1985). Using Hofstedes cultural index, we now explore how differences in this index can inuence inter-subsidiary knowledge transfer efforts. Individualism/collectivism Individualism/collectivism (IC) is the degree to which self-interest. It reects the concerns of individuals with their own well-being versus the well-being of others. In examining the issue of inter-subsidiary knowledge transfer based on the IC dimension of the cultural index, one wants to determine the importance of individual and group interests (Hofstede, 2001; Triandis, 1995). The extent to which individual self-interest supersedes group interest is an important determinant of where knowledge is transferred from and who acquires it. When obtaining knowledge from another subsidiary, the acquiring subsidiary wants to know that the skills and capabilities needed are not only compatible but also easily accessible (Hansen and Lovas, 2004). Subsidiaries may either be similarly or differently positioned along the IC dimension, and their relative position will have consequences for knowledge transfer efforts. Therefore, we must consider knowledge transfer activities between subsidiaries in individualistic cultures, collectivist cultures, and different cultures. In individualistic cultures, ties among individuals are very loose. Such cultures are generally driven by self-interest rather than by group interest. Subsidiaries in individualistic societies are likely to ask the question To what extent does this benet me? rather than focus on the overall benets of knowledge transfer to the organization (Gargiulo and Benassi, 2000; Kedia and Bhagat, 1988). When benets are perceived as absent, subsidiaries are likely to create signicant roadblocks to impede knowledge transfer efforts (Sherif and Cantrill, 1947). This individual focus also exists within the subsidiary providing the knowledge. Subsidiaries acting as knowledge providers are also focused on assessing the benets that might accrue from participating in the

knowledge transfer process. Unless these subsidiaries determine that there is some benet to be gained, then they are unlikely to engage in the process. Thus, for knowledge transfer to occur between subsidiaries in individualistic cultures, there must be an alignment in expectations of knowledge providers and acquirers. In effect, self-interest will motivate subsidiaries that operate in individualistic cultures to engage in knowledge transfer activities. Any deviation from this norm will be based on signicant pressure from the home ofce to promote these knowledge transfer efforts. The home ofce intervenes because it sees bottlenecks in the knowledge transfer process that, in its estimation, cannot be navigated independently by the subsidiaries. For example, research has shown that home ofce intervention often occurs when knowledge transfer is linked to the strategic importance of the subsidiaries (Holtbrugge and Berg, 2004). Because they are strategically important, they are given wide latitude in carrying out the mandate of engaging in knowledge transfer as stipulated by the home ofce. Latitude is granted because the home ofce is condent that the end result will be achieved, since success at knowledge transfer is linked to stature in the overall MNC. Collectivist societies reinforce the notion of group and inclusion rather than exclusion. They operate on the notion that self-interest is subservient to the societys interest (Chen et al., 1998; Triandis, 1995; Trice and Beyer, 1993). The interests of the collective are reinforced in every aspect of society. As a result, the collectivist attitudes dominant within the society are also reected in the attitudes and behaviors within the subsidiary. The subsidiary views its knowledge as the property of the MNC and to be used for the benet of any subsidiary that so desire (Kedia and Bhagat, 1988). This is in contrast to the attitudes within subsidiaries operating in individualistic cultures where the emphasis will likely be on knowledge transfer efforts that promote the self-interest of the providing subsidiary. Thus, we expect that knowledge transfer efforts will be more successful when they involve subsidiaries in societies with similar collectivist cultures. Several studies of knowledge transfer activities between Korean and Japanese subsidiaries have shown that knowledge transfer goals are easily achieved because of their cultural alignment (Inkpen, 1996; Pak and Park, 2004). The similarities in these national contexts help to facilitate inter-subsidiary knowledge transfer. This has been found to be the case in studies of German MNCs. Holtbrugge and Berg (2004) found that the transfer of knowledge is positively related to the cultural proximity between the parties involved. The general argument here is that similarities in national contexts of the parties create some cluster of subsidiaries. Because knowledge is highly localized and embedded within a specic cultural context, this contextual similarity eases the transfer process. In instances where these subsidiaries do not exist in the same IC dimension, competing perspectives affect the possibility of knowledge transfer. Subsidiaries from collectivist cultures view knowledge is the property of the MNC, while those from individualistic cultures see knowledge as individual property (Kedia and Bhagat, 1988). Therefore, we need to resolve these diametrically opposed views of the same phenomenon. Such resolution will require increased input from the head ofce. As an entity concerned with the overall strategic direction of the MNC, the head ofce takes a more strategic view of knowledge transfer efforts. Through directives, dictates, and persuasion, the head ofce can manage these disparate views of knowledge transfer. By so doing, the head ofce seeks to manage resistance to sharing while promoting

The role of culture on knowledge transfer 263

TLO 13,3

264

knowledge transfer efforts. Thus, knowledge transfer efforts that match individualist and collectivist cultures will encounter signicant resistance barriers and increase the prospects of failure. Successful knowledge transfer efforts will only be possible with the direct involvement of the home ofce. Studies of alliances geared towards learning between Japanese and US organizations provide several examples of the challenges when there is cultural misalignment (Inkpen, 1996; Osland and Cavusgil, 1996). In these instances, there is need for repeated intervention by the respective parent companies to resolve issues that complicate learning and knowledge transfer objectives. Instead, there is continuous exchange of personnel, technologies, and ideas, but very little learning occurs because of these cultural differences (Inkpen, 1996). This discussion of ICs impact on knowledge transfer bears direct relationship to issues of search. A subsidiary may be less reluctant to search for knowledge and acquire it from another subsidiary that is not similarly positioned along this IC dimension (Hansen, 1999; Hansen, 2002). A subsidiary might conclude that the difference on this dimension is so large that it further complicates efforts at a relatively smooth transfer. This tendency to avoid interactions when there are signicant differences between acquirers and providers is well documented in previous research (Allen, 1977; Almeida and Phene, 2004; Song et al., 2003; Sorensen and Stuart, 2001). These differences may act as a deterrent to efforts at knowledge transfer and increase the tendency to interact with others that are similar along this dimension of the cultural index (Kedia and Bhagat, 1988) (Figure 3). Therefore, we propose that: P1. The location of subsidiaries along the IC dimension of the cultural index will inuence the likelihood of successful inter-subsidiary knowledge transfer.

Power distance Power distance (PD) is based on peoples perception of inequality. It fosters a notion of dependence and may be small or large. It reects the non-symmetrical nature of relationships that may exist between subsidiaries (Hofstede, 2001). In much of MNC research, discussions of PD have focused on relationships between the home ofce and subsidiaries, and not enough to the relationships that exist between subsidiaries. These relationships are important because the successful transfer of knowledge cannot be

Figure 3. Impact of individualism/collectivism on knowledge transfer effort

divorced from the power-based interactions that occur between subsidiaries that may or may not be similarly positioned along this dimension of the index. Small PD supports a participative approach to decision making. In cases of small PD, there is a willingness to consult rather than impose ones will allowing for the free exchange of ideas. Large PD situations support an autocratic approach to decision making. In large PD cultures, those with power adopt a paternalistic approach to those without power, seeing the latter as their subordinates rather than as their equal. Large PD further perpetuates the traditional model of knowledge transfer in MNCs where most subsidiaries are seen as acquirers and not generators of knowledge (Almeida and Phene, 2004; Phene et al., 2005). Large PD situations lead to either total acceptance or total resistance. To understand knowledge transfer from the PD perspective, one must determine where the transfer partners exist on the PD grid. One possible scenario is for both subsidiaries to exist in small PD environments. In this instance, both parties are willing to consult (Almeida and Kogut, 1999; Hansen and Lovas, 2004). Knowledge transfer involves changing the way things are done and adopting new approaches that may be radically different from those currently in use. Thus, efforts at knowledge transfer are dominated by attempts at compromise. Both subsidiaries will focus on reducing the resistance to change and nding ways to smooth the transition from what it currently used to the new techniques. As part of this process, signicant effort is devoted to the transfer of personnel from the knowledge provider to facilitate a smooth transition and to the acquirer in anticipation of the transfer occurring (Allen, 1977; Almeida and Kogut, 1999; Pablos, 2004; Sorensen and Stuart, 2001). The willingness of these subsidiaries to compromise may be based on their presence in technological and cultural clusters (Enright, 2000; Almeida and Phene, 2004; Song et al., 2003). These technological clusters may exist because subsidiaries in the same region may have similar resource endowments. Cultural clustering results from the similarity in background, language, and native origin help to shape their belief systems. This contributes to the ease of knowledge transfer between Canadian and US subsidiaries. An alternative scenario is for both subsidiaries involved in the knowledge transfer effort to be located in large PD societies. The nature of these societies is to create an autocratic relationship where things are accepted as presented. In this instance, the effort at knowledge transfer is tantamount to a battle between two heavyweights in which neither one has the ability to destroy the other. The issue in large PD situations becomes nding ways to resolve this battle of heavyweights. The resolution lies within the framework of game theory where parties involved in a process make moves, old and new, until recognizing that compromise is essential to success (Almeida and Kogut, 1999; Martin and Salomon, 2003). Efforts at knowledge transfer are likely to succeed because both subsidiaries are forced to compromise. If the transfer is successful, then both subsidiaries gain stature and their respective proles are raised in the MNC. Similarly, successful knowledge transfer allows the acquirer to improve the way things are done and achieve increased returns on their investment. Recognizing that both subsidiaries stand to gain, they are likely to look for ways to make their efforts successful. The willingness of heavyweights to compromise is based on strategic interdependence. This reects the extent to which the strategic implications of the

The role of culture on knowledge transfer 265

TLO 13,3

266

actions of these subsidiaries are interrelated (Zhao and Luo, 2005). Because these subsidiaries are likely to be playing a major role in the overall objectives of the MNC ad their actions are linked, they represent mirror images of each other and of their home ofce. Their level of technological competence is highly developed. And, much of what they seek to transfer builds on what they already know and better exploits existing competencies. A third scenario involves knowledge transfer between subsidiaries at different ends of the PD index. On the one hand, if the knowledge provider enjoys large PD and the acquirer enjoys small PD, then one can encounter a situation in which actions by the former are designed to exercise control and exercise inuence over the latter. The knowledge provider views the acquirer as a dependent entity whose success is highly dependent upon the providers willingness to transfer knowledge (Kedia and Bhagat, 1988; Martin, 1992). Since, the knowledge to be transferred is seen as fostering a notion of dependency, the interests of the acquirer subsidiary are seldom given serious consideration. Instead, these technologically superior tools are imposed on the recipient subsidiary. To further this dependence relationship, knowledge providers attempt to impose their terms, irrespective of the values and context in which this knowledge will be used. In these instances, knowledge acquirers will create barriers, thereby decreasing the likelihood of successful transfer (Gargiulo and Benassi, 2000). Acquirers nd ways to not perpetuate this dependent relationship, thereby forcing the abandonment of these efforts (Sherif and Cantrill, 1947). To some extent, acquirers are attempting to convey to the providers the need for compromise and negotiation. On the other hand, if the knowledge provider enjoys small PD and the acquirer enjoys large PD, one is confronted with a different problem. While the acquirer recognizes that there is the potential for gain from acquiring this new knowledge there is some caution over being seen as vulnerable. The perception here is that successful transfer can lead to performance improvements and raise the institutional prole of both subsidiaries (Almeida and Kogut, 1999; Holtbrugge and Berg, 2004; Phene et al., 2005). However, the acquirer wants to feel as though they have some control over the transfer process. The acquirer sees knowledge as being transferred on their terms, while the provider is constantly looking for ways to better facilitate the process. Both scenarios in which there is misalignment between the parties on the PD index demand an increased role from the home ofce. Because one subsidiary favours compromise and the other is authoritative, signicant resistance can develop. It becomes the responsibility of the head ofce to manage this resistance, such that the overall goals associated with knowledge transfer can be achieved. For instance, the home ofce may not only have to carefully monitor these efforts but may also be required to mandate when transfers should occur and under what conditions. The home ofce may instruct knowledge providers when to and what personnel should be transferred as part of the process in order to ensure that barriers to change can be surmounted. Studies of US-Japanese cooperative ventures show that those focused on knowledge transfer and learning objectives often fail. This occurs because US managers try to impose their standards on their Japanese counterparts, rather than respect their differences (Inkpen, 1996). US personnel often take the position that there is nothing that their Japanese counterparts can teach them because of their perceived superior

intellect. However, exposure to Japanese managers suggests otherwise. And, with signicant involvement from senior management in both organizations, they slowly begin to achieve knowledge transfer and learning objectives. The notion of subsidiaries at the same level in the PD index taking advantage of opportunities to engage in knowledge transfer is similar to subunit learning. Such learning occurs when subunits retrieve and combine knowledge from peer units that share similar environmental conditions (Schulz, 2001). Viewing subsidiaries as peers, we can expect them to have a better understanding of the needs, constraints, and capabilities of their peer subsidiaries participating in the knowledge transfer process. With increased distance between subsidiaries along this dimension of the cultural index comes increased resistance that must be managed by the home ofce (Gargiulo and Benassi, 2000; Hansen and Lovas, 2004). Transfer efforts are likely to be extremely difcult because of differences in perspectives and these must be reconciled by head ofce. Knowledge transfer efforts when subsidiaries are not similarly located on the PD dimension involve nding ways to balance autocracy with compromise. Often when failure occurs, it is because these unevenly matched subsidiaries have become trapped in their own nets as they try to impose their views of the world on others (Figure 4). Thus, we propose that: P2. The location of subsidiaries along the PD dimension of the cultural index will inuence the likelihood of successful inter-subsidiary knowledge transfer.

The role of culture on knowledge transfer 267

Uncertainty avoidance Uncertainty avoidance (UA) is the reluctance to deal with ambiguity and is directly related to the willingness to embrace change. Change involves taking a leap of faith knowing that the future is unpredictable. Those who embrace change do so with varying degrees of caution while those that do not must be forced and coerced into doing so. Though synonymous with risk reduction, UA is a distinct concept. Risk reduction has connotations of probability while UA does not. UA acknowledges that several outcomes are possible and risky behavior is possible. In some instances, UA can be strong reecting a reluctance to embrace change and take risk. In other instances, uncertainty is cherished and change is anxiously pursued.

Figure 4. Impact of PD position on knowledge transfer efforts

TLO 13,3

268

To understand how UA affects knowledge transfer, one must determine where subsidiaries exist on this dimension. In cases of strong UA, change is seen as dangerous (Doz et al., 1981; Hofstede, 1997). People in these environments prefer formalized structures, strict and detailed directions, and pre-programmed rules. Adopting something new is seen as risky and having the potential to create signicant problems. Instead of accepting change, there is a strong preference for dealing with what we are already good at, and avoiding new techniques even if these offer the potential for increased efciency. This suggests that subsidiaries in strong UA cultures will attempt to avoid making changes and will be less than aggressive in their search for new ways of doing things. In order for knowledge transfer to occur within these subsidiaries, there must be signicant input from the home ofce. Because of the risks involved in making changes, the home ofce must manage the resistance to change. Actions by the home ofce should include making tangible incentives to enact change and preventing the imposition of penalties for failures associated with change. In cases of weak UA, change is appreciated. People in this environment are exible, have an open mind, and rely on social control instead of formal rules. Subsidiaries in weak UA cultures continually look for new ways of doing things because they are governed by a philosophy that there must be a better way (Doz et al., 1981; Kostova, 1996). Adopting new ways of doing things is seen as risky but rewarding because of the potential gains to efciency. Therefore, in subsidiaries in weak UA societies, there is a continuous desire to experiment with things that are new and continue to learn. The subsidiaries seeking to engage in knowledge transfer may not be so aligned. The challenge becomes getting those who avoid change to embrace what is being provided. In the instance where the provider operates in a strong UA environment and the acquirer operates in a weak UA, there will be signicant resistance to the knowledge-transfer process. This is likely to be the case even when there are clear benets accruing from changing the way things are done. Because it is in the nature of these individuals to avoid change, then they develop resistance and nd ways to justify the status quo. In this situation, the home ofce needs to play a major role in facilitating the knowledge transfer effort. The home ofce must not only overtly and covertly convince the subsidiary to engage in knowledge transfer, but may also need to establish incentives and methods of persuasion (Sherif and Cantrill, 1947). However, in instances where the knowledge provider operates in a weak UA environment and the acquirer in a strong UA environment, involvement by the home ofce is unnecessary. Because the acquirer embraces change and is constantly looking for new and better ways to do things, they actively pursue knowledge transfer opportunities. It is likely that, in this case, these knowledge acquirers will actively search for knowledge transfer opportunities. Their search patterns will be very aggressive in an effort to explore all options. Here, it is argued that except in instances where both subsidiaries are weak on this index, UA will likely hamper knowledge transfer. Subsidiaries operating in weak UA cultures embrace change by developing exible capabilities. They operate on the principle that there are always newer and better ways of doing things and these should be explored. Subsidiaries are being asked to change the way they do things and these changes have uncertain consequences (Almeida and Kogut, 1999; DeLong and Fahey, 2000). This is tantamount to the establishment of knowledge clusters based on resource

endowments that support specic patterns of knowledge transfer (Almeida and Phene, 2004). These clusters may also develop similar resource endowments because they spatial distance, national origin, and language differences are minimal. Prior research has found that clusters allow for the ow of knowledge between these subsidiaries because that knowledge is highly localized. Subsidiaries also have their own resource endowments and what is being transferred may not be commensurate with their existing resource endowments. Given the uncertainty surrounding the potential results of knowledge transfer efforts, subsidiaries will nd reasons to resort to the way things were done previously rather than embrace new techniques (Figure 5). Thus, we propose that: P3. The location of subsidiaries along the UA dimension will have a signicant effect on the likelihood of successful inter-subsidiary knowledge transfer.

The role of culture on knowledge transfer 269

Masculinity/femininity Masculinity/femininity (MF)is the willingness to promote societal values. In masculine cultures, there is a preference for assertiveness. Priority is given to results and rewards are based on ambition and competitiveness (Hofstede, 2001). The dominant theme in masculine cultures is may the best person win. In feminine cultures, assertiveness is downplayed and differences are resolved through compromise and negotiation. Rather than adopting a winner takes all approach, feminine cultures believe that both parties can win and promote cooperation. How MF affects knowledge transfer will differ depending upon the combination of subsidiaries involved in knowledge transfer. If both subsidiaries operate in masculine societies, then their approach to knowledge transfer is geared around answering the question whats in it for us? (Kedia and Bhagat, 1988; Kostova, 1996; Zander and Solvell, 2000). Subsidiaries in masculine societies will only engage in knowledge transfer if they determine that there is some net gain accruing to them. Although masculine cultures emphasize self-interest, the focus on winning results in knowledge transfer gains to both the provider and the receiver. Mutual gains occur because both subsidiaries determine that it is their self-interest to engage in knowledge transfer. These subsidiaries are likely to engage in knowledge transfer because of their strategic and technological interdependence (Phene et al., 2005; Zhao and Luo, 2005).

Figure 5. Impact of UA on knowledge transfer efforts

TLO 13,3

270

They are strategically linked because they both play signicant roles in the overall performance of the MNC. They may both historical generators and providers of knowledge to other subsidiaries. With a history of generating and providing knowledge to other subsidiaries, these may be similarly endowed with resources. Their technologies allow them to build on what they already know and exchange knowledge that is compatible. Moreover, personnel may be less reluctant to share their expertise because they see their actions as engaging with peers rather than with subordinates. All of this helps to reduce the learning curve and accelerate the acquisition process. When both subsidiaries engaged in the knowledge transfer effort operate in feminist cultures a win-win situation again arises. Knowledge transfer between subsidiaries in feminist cultures is achieved through a process of negotiation (Kedia and Bhagat, 1988; Zander and Solvell, 2000). This negotiation focuses on nding ways, whereby knowledge can be successfully transferred. Because both parties are interested in achieving a successful outcome, they nd ways to accommodate differences. As in the cases of knowledge transfer involving subsidiaries in masculine societies, both subsidiaries achieve some measure of success from participating in knowledge transfer. Thus, we nd that knowledge transfer efforts between Asian subsidiaries are often successful. A third scenario involves subsidiaries operating in masculine and those in feminine cultures and how their conicting interests affect knowledge transfer. The self-interest focus of masculine societies is in direct contrast with the cooperative focus of feminist societies (Gargiulo and Benassi, 2000). Since, these subsidiaries have opposing views, there is unlikely to be knowledge transfer between subsidiaries from these differing societies without the inuence of the home ofce. This is particularly likely to be the case when the knowledge provider either seeks to impose its will or cannot determine the gains from engaging in knowledge transfer. At the same time, knowledge acquirers in feminist societies have concerns regarding the knowledge transfer process and what is being transferred because of the providers superior attitude. This approach creates conict causing the acquirer to resist and signicantly reduces the potential for success. Nonetheless, one instance in which knowledge transfer is likely to occur between subsidiaries at different ends of the MF index is where the knowledge provider is in a feminine culture and the acquirer is in a masculine culture. In this case, the knowledge transfer occurs because self-interest motivates the subsidiary in the masculine culture to participate. The recipient subsidiary knows that self-interested behavior is uncharacteristic of the providing subsidiary and is, therefore, willing to be vulnerable to its actions. In fact, the subsidiary in the feminist society that is providing the knowledge will likely devote signicant resources to better facilitating the knowledge transfer process. For instance, the recognition by a US subsidiary that its Japanese counterpart has knowledge that may be critical to efforts aimed at improving its performance, it may actively pursue these opportunities. This suggests that MF presents subsidiaries with a new set of challenges in pursuing knowledge transfer goals. Masculine cultures focus on competition and self-interest, but feminist societies focus on compromise and negotiation. These represent two opposite views at dealing with change and accepting new ways of doing things. Given that knowledge transfer involves changing the way things are done, subsidiaries in masculine societies will only adopt new practices if it is determined that

there is some new gain accruing from doing so. Similarly, knowledge will only be provided by subsidiaries if they determine that there is some new gain accruing from doing so. Hence, knowledge transfer between subsidiaries in masculine societies occurs when both determine that there is a win-win situation (Kostova, 1996; Trott, 1993; Zander and Solvell, 2000). In instances where knowledge transfer involves subsidiaries in feminist societies, such transfers are unlikely to be complete. Instead, subsidiaries nd ways of working around problems associated with the transfer. Partial transfer occurs because both parties recognize that, given the acquiring subsidiarys resource endowment, the non-transferrable embedded qualities of knowledge, and idiosyncratic conditions in the acquiring subsidiarys environment, complete knowledge transfer is not possible (Almeida and Phene, 2004; Phene et al., 2005; Trott, 1993). As in the case of knowledge transfer between subsidiaries in masculine societies, such activities in feminist societies also result in a win-win situation (Figure 6). Thus, we propose that: P4. The location of subsidiaries along the uncertainty-avoidance dimension of the cultural index will inuence the likelihood of successful inter-subsidiary knowledge transfer.

The role of culture on knowledge transfer 271

Conclusions In this paper, it is argued knowledge transfer between subsidiaries is critical to the success of MNCs, and can be speedy and efcient. However, cultural differences may create bottlenecks that either impede or eliminate the potential for successful knowledge transfer. Thus, the quality of relationships between subsidiaries and with the home ofce has major implications for knowledge transfer. This is the case irrespective of which dimension of the cultural index is under consideration. Engaging in knowledge transfer is a risky venture and some degree of condence must exist between the parties to do the right thing, even if doing so is at the behest of the home ofce. If relationships are perceived to be poor, then signicant resistance to change will occur even if subsidiaries realize that they can benet from knowledge transfer. Hence, the home ofce may be forced to devote signicant scarce resources to actively managing the process.

Figure 6. Impact of MF on knowledge transfer effort

TLO 13,3

272

It is important to note that although the constructs have been treated independently, this is not to suggest that there cannot be interaction effects. Since, all of these factors are operating simultaneously within societies, it is likely that these factors will be interacting and will have an impact on knowledge transfer. For instance, the combination of high individualism and large PD can require a greater role for the home ofce in knowledge transfer decisions than in other instances. While such interactions are possible, they are not addressed here. This paper is signicant because it addresses an issue of practical importance to MNCs. That is, how to better manage the challenges posed by cultural distance to knowledge transfer, particularly without directives from the home ofce. Such transfers are very complex because they involve movement of human capital and technologies, which must be adapted and institutionalized in their new environment. MNCs that know how to do this well are likely to achieve signicant synergies and improved performance. Ascertaining how culture affects these knowledge transfer efforts will result in specic recommendations that can improve the process. It is important to note that inter-subsidiary knowledge transfers are likely to be most effective when they involve subsidiaries that are located in similar cultural contexts. Otherwise, issues of strategic importance and strategic direction force the home ofce to become actively involved in the process. Although it has been argued that cultural distance does affect inter-subsidiary knowledge transfer, we should recognize that countries and their cultures evolve over time. A society that is collectivist may begin to adopt individualistic values and this will affect the ability of MNCs operating in this society to pursue knowledge transfer goals. Anecdotal evidence suggests that many MNCs are locating their subsidiaries in areas where there are a signicant number of individuals with prior exposure to other cultures. Therefore, changes in the societys culture will affect how knowledge transfer goals are achieved (DeLong and Fahey, 2000; Enright, 2000; Zander and Solvell, 2000). This issue, which we refer to as cultural contamination, needs to be researched. The subject of identity also presents another opportunity for further research on knowledge transfer. Identity is closely linked to the willingness of individuals and organizations to be associated with certain activities (Albert and Whetten, 1985). Here, it reects the degree to which subsidiaries and the home ofce think they have the same afliation. Given the uniqueness of knowledge transfer and the uncertainty surrounding outcomes, subsidiaries will show varying degrees of willingness to engage in knowledge transfer. In the context of the MNC, higher degrees of identication among subsidiaries and with the home ofce will likely be associated with higher probabilities of successful knowledge transfer. Finally, let me reinforce the idea that knowledge transfer, while a generally complex issue, is further complicated when occurring in an MNC. Knowledge is transferred not for itself but for the competencies it provides. For transfer to take place, the environment for information exchange and action must be created. Such environments must recognize that there is no one size ts all policy. What works in one subsidiary is not necessarily appropriate for another.
References Albert, S. and Whetten, D. (1985), Organizational identity, in Cummings, L.L. and Shaw, B.M. (Eds), Research in Organizational Behavior, JAI Press, Greenwich, CT.

Allen, T.J. (1977), Managing the Flow of Technology: Technology Transfer and Dissemination of Technological Information within the R&D Organization, MIT Press, Cambridge, MA. Almeida, P. and Kogut, B. (1999), Localization of knowledge and the mobility of engineers in regional networks, Management Science, Vol. 45, pp. 905-17. Almeida, P. and Phene, A. (2004), Subsidiaries and knowledge creation: the inuence of the MNC and host country on innovation, Strategic Management Journal, Vol. 25, pp. 847-64. Chen, C.C. et al., (1998), How can cooperation be fostered? The cultural effects of individualism-collectivism, Academy of Management Review, Vol. 23, pp. 285-304. Cohen, W.M. and Levinthal, D.A. (1990), Absorptive capacity: a new perspective on learning and innovation, Administrative Science Quarterly, Vol. 35, pp. 128-52. Cullen, J.B. (2002), Multinational Management: A Strategic Approach, South-Western Publishers, Cincinnati, OH. DeLong, D.W. and Fahey, L. (2000), Diagnosing cultural barriers to knowledge management, Academy of Management Executive, Vol. 14, pp. 113-28. Doz, Y.L. et al., (1981), Global competitive pressures and host country demands: managing tensions in MNCs, California Management Review, Vol. 23, pp. 63-74. Enright, M. (2000), Regional clusters and multinational enterprises, International Studies of Management & Organization, Vol. 30, pp. 114-38. Gargiulo, M. and Benassi, M. (2000), Trapped in your own net: network cohesion, structural holes, and the adaptation of social capital, Organization Science, Vol. 11, pp. 183-201. Garud, R. and Nayyar, P.R. (1994), Transformative capacity: continual structuring by intertemporal technology transfer, Strategic Management Journal, Vol. 15, pp. 365-85. Gupta, A.K. and Govindarajan, V. (2000), Knowledge ows within multinational corporations, Strategic Management Journal, Vol. 21, pp. 473-96. Hall, G. and Johnson, R. (1970), Transfer of United States aerospace technology to Japan, in Vernon, R. (Ed.), The Technology Factor in International Trade, National Bureau of Economic Research, New York, NY, pp. 305-58. Hansen, M.T. (1999), The search-transfer problem: the role of weak ties in sharing knowledge across organizational subunits, Administrative Science Quarterly, Vol. 44, pp. 82-111. Hansen, M.T. (2002), Knowledge networks: explaining effective knowledge sharing in multiunit companies, Organization Science, Vol. 13, pp. 232-48. Hansen, M. and Lovas, B. (2004), How multinational companies leverage technological competencies? Moving from single to interdependent explanations, Strategic Management Journal, Vol. 25, pp. 801-22. Hedlund, G. (1994), A model of knowledge management and the N-form corporation, Strategic Management Journal, Vol. 15, pp. 73-90. Hofstede, G. (1997), Culture and Organizations: Software of the Mind, McGraw-Hill Co., New York, NY. Hofstede, G. (2001), Cultures Consequences, Sage, Beverly Hills, CA. Holtbrugge, D. and Berg, N. (2004), Knowledge transfer in multinational corporations: evidence from German rms, Management International Review, Vol. 44 No. 3, pp. 129-45. Inkpen, A.C. (1996), Creating knowledge through collaboration, California Management Review, Vol. 39 No. 1, pp. 123-40. Kedia, B.L. and Bhagat, R.S. (1988), Cultural constraints on transfer of technology across nations: implications for research in international and comparative management, Academy of Management Review, Vol. 13, pp. 558-71.

The role of culture on knowledge transfer 273

TLO 13,3

274

Kostova, T. (1996), Success of the transnational transfer of organizational practices within multinational corporations, unpublished doctoral dissertation, University of Minnesota, Minneapolis, MN. McDermott, R. and ODell, C. (2001), Overcoming cultural barriers to sharing knowledge, Journal of Knowledge Management, Vol. 5, pp. 76-85. Martin, J. (1992), Cultures in Organizations; Three Perspectives, Oxford University Press, New York, NY. Martin, X. and Salomon, R. (2003), Knowledge transfer capacity and its implications for the theory of the multinational corporation, Journal of International Business, Vol. 34, pp. 356-73. Nohria, N. and Ghoshal, S. (1994), Differentiated t and shared values: alternatives for managing headquarters-subsidiary relations, Strategic Management Journal, Vol. 15, pp. 491-502. Osland, G. and Cavusgil, S. (1996), Performance issues in US-China joint ventures, California Management Review, Vol. 39 No. 2, pp. 106-30. Pablos, P. (2004), Knowledge ow transfers in multinational corporations: knowledge properties and implications for management, Journal of Knowledge Management, Vol. 8 No. 6, pp. 105-16. Pak, Y. and Park, Y. (2004), A framework of knowledge transfer in cross-border joint ventures: an empirical test of the Korean context, Management International Review, Vol. 44, pp. 417-34. Phene, A. et al. (2005), Knowledge transfer within the multinational rm: what drives the speed of transfer?, Management International Review, Vol. 45, pp. 53-74. Polanyi, M. (1962), Personal Knowledge, University of Chicago Press, Chicago, IL. Rogers, E. (1983), The Diffusion of Innovation, The Free Press, New York, NY. Schein, E. (1985), Organizational Culture and Leadership, Jossey-Bass, San Francisco, CA. Schulz, M. (2001), The uncertain relevance of newness: organizational learning and knowledge ows, Academy of Management Journal, Vol. 44, pp. 661-81. Sherif, M. and Cantrill, H. (1947), The Psychology of Ego Involvements, Social Attitudes, and Identications, Wiley, New York, NY. Song, J. et al. (2003), Learning by hiring: when is mobility more likely to facilitate interrm knowledge transfer, Management Science, Vol. 49, pp. 351-65. Sorensen, O. and Stuart, T. (2001), Syndication networks and the spatial distribution of venture capital investments, American Journal of Sociology, Vol. 106, pp. 1546-88. Szulanski, G. (1996), Exploring internal stickiness: impediments to the transfer of best practice within the rm, Strategic Management Journal, Vol. 17, pp. 27-43. Triandis, H.C. (1995), Individualism and Collectivism, Westview Press, Boulder, CO. Trice, H.M. and Beyer, J.M. (1993), The Cultures of Work Organizations, Prentice-Hall, Englewood Cliffs, NJ. Trott, P. (1993), Inward technology transfer as an interactive process: a case study of ICI, unpublished doctoral dissertation, Craneld University, Craneld. Veiga, J. et al. (2000), Measuring organizational culture clashes: a two-nation post-hoc analysis of a cultural compatibility index, Human Relations, Vol. 53, pp. 539-57. Zander, I. and Solvell, O. (2000), Cross-border innovation in the multinational corporation: a research agenda, International Studies of Management & Organization, Vol. 30, pp. 44-67.

Zhao, H. and Luo, Y. (2005), Antecedents of knowledge sharing with peer subsidiaries in other countries: a perspective from subsidiary managers in a foreign emerging market, Management International Review, Vol. 45, pp. 71-97. Zollo, M. and Winter, S. (2002), Deliberate learning and the evolution of dynamic capabilities, Organization Science, Vol. 13, pp. 339-51. Further reading Gupta, A.K. and Govindarajan, V. (1991), Knowledge ows and the structure of control within multinational corporations, Academy of Management Review, Vol. 16, pp. 768-92. Corresponding author Leyland M. Lucas can be contacted at: llucas@moac.morgan.edu

The role of culture on knowledge transfer 275

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints