Influential Factors on Reverse Knowledge Transfers in Multinational Organizations

Introduction

Knowledge plays a pivotal role in the competitiveness of firms as both a resource in itself – which is rare, firm-specific, and difficult to imitate or substitute – and an integrating factor that makes other intangible resources and capabilities unique, especially in dynamic environments.

Knowledge has also a social dimension within firms. Hence it is important that firms develop a positive culture so that the utilization of individual’s knowledge can be used and thereby makes firms compete favorably in the market. As such, firms need not only to develop a better knowledge base, but also need to manage knowledge better. For that, firms need to develop a teamwork effort so that the utilization of knowledge is useful for the firm (Omerzel & Gulev, 2011).

Globalization has turned organizations into highly complex and competitive environments where information and knowledge are the main sources of sustainable competitive advantage (Nonaka & Takeuchi, 1995; Teece, Pisano, & Shuen, 1997). With the globalization of the economy, the internationalization of the firms has become an increasingly important activity for their growth and survival (Dicken, 2015; Moreira, 2009). Although there are numerous theories that explain how firms internationalize, knowledge is almost taken for granted in most of them (Ribau, Moreira, & Raposo, 2015). Moreover, very few scholars address the importance of knowledge as a competitive advantage for multinationals to compete (Moreira, 2009; Ribau et al., 2015).

Multinational organizations need to be seen as global knowledge transfer systems where multiple knowledge flows happen simultaneously every minute between headquarters and local clusters, headquarter and subsidiaries and also among subsidiaries. Furthermore, in order to improve international positioning, these organizations must deal with and try to take advantage from different temporal, cultural, linguistic and spatial contexts (Demarest, 1997; Spender & Grant, 1996). Knowledge transfer involves sharing, filtering and presenting knowledge. This process is successful when the knowledge receiver changes its behaviour or performance, due to the knowledge sender’s transfer (Argote & Ingram, 2000).

On one hand, headquarters (thereby written HQs) are irreplaceable sources of new knowledge for the subsidiaries, since they possess valuable intangible assets and capabilities, which might be used by the subsidiaries in their local markets. However, on the other hand, the local knowledge created and transferred from the foreign subsidiaries to the headquarters has proved to be very beneficial to the productivity and local performance of the multinational, improving the formulation of global strategies, facilitating the access to external resources and supporting both research and development (R&D) and new products development activities leading to productivity gains to the multinational (Ghoshal, 1986; Ishihara & Zolkiewski, 2017).

Subsidiaries can contribute to the overall multinational knowledge with local expertise and market intelligence. The expertise concerns input, productivity and output processes. Whereas market and business intelligence refer to information about clients, competitors and suppliers, representing the most valuable knowledge to the firm but least transferred one (Ambos, Ambos, & Schlegelmilch, 2006; Gupta & Govindarajan, 1991). Although there are numerous researches on the importance of several types of knowledge flows within multinationals (e.g. Crespo, Griffith, & Lages, 2014; Yang, Mudambi, & Meyer, 2008), the aim of this chapter is to deepen the literature specifically on reverse knowledge transfers in which knowledge flows from the subsidiary (the sender) to the HQs (the receiver) that receives, absorbs and applies it to obtain and exploit global competitive advantage.