Towards an Integrated Knowledge Management Strategy
in Indo-U.S. International Joint Ventures
DISSERTATION
der Universität St. Gallen,
Hochschule für Wirtschafts-,
Rechts- und Sozialwissenschaften (HSG)
zur Erlangung der Würde einer
Doktorin der Wirtschaftswissenschaften
Vorgelegt von
Anita Subramanian
von
Riehen (Basel-Stadt)
Genehmigt auf Antrag der Herren
Prof. Dr. Li Choy Chong
und
Prof. Dr. Martin Hilb
Dissertation Nr. 2736
Salinas Press, Walisellen, 2003
II
Die Universität St. Gallen, Hochschule für Wirtschafts-, Rechts- und
Sozialwissenschaften (HSG), gestattet hiermit die Drucklegung der
vorliegenden Dissertation, ohne damit zu den darin ausgesprochenen
Anschauungen Stellung zu nehmen.
St. Gallen, den 10. Dezember 2002
Der Rektor:
Prof. Dr. Peter Gomez
III
Acknowledgements
Many individuals from different places and countries have been helpful to me during
the past few years in accomplishing this doctoral thesis and I would like to take the
opportunity to express my sincere thanks and gratitude.
Prof. Li Choy Chong, my mentor and dissertation supervisor has always been a huge
support to me during the research process and I greatly cherish the time I was able to
work for him in the Asia Research Centre. During this period, I had the privilege of
being able to participate in the lead for the course "Management in Asia", which
enabled me to further my knowledge in this area. Many valuable ideas were sown
for my doctoral thesis during this time.
My sincere thanks are due to Prof. Martin Hilb, my co-referant, who was always
willing to lend a patient ear during various stages of this dissertation and keep me on
track for my doctoral work.
My research work was amply supported by the Temple University, Philadelphia,
where I had the privilege to be a visiting scholar with Prof. Preet S. Aulakh for
almost one year.
A special thanks goes to the multitude of interviewees who had the graciousness to
support in my endeavor during the empirical research data collection in India and
later in the USA. The sincere help from various Indo-U.S. Joint venture companies
and their parent organizations is very much appreciated. This is especially true for
the substantial quality time they spent with me for the interviews, accommodating
my queries amidst their tight schedule. Many of the interviewees were directly
affected by the events of September 11, 2001 and my heart goes out to them.
Last but not least, I would like to thank my parents from my heart for their love,
dedication and support through joyous and trying times. I owe them everything.
Bottmingen, Dezember 2002
Anita Subramanian
IV
Table of Contents
A
THE RESEARCH FOCUS: CONTEXT DEFINITION.......................................1
A.1
Introduction ....................................................................................................................................... 1
A.2
Research Focus .................................................................................................................................. 3
A.3
Conceptual Framework .................................................................................................................... 4
A.4
Methodology ...................................................................................................................................... 9
B KNOWLEDGE MANAGEMENT IN INTERNATIONAL JOINT VENTURES:
THEORETICAL CONSIDERATIONS ....................................................................12
B.1
Defining the International Joint Venture (IJV) Framework....................................................... 12
B.1.1
IJV Theory ................................................................................................................................... 13
B.1.1.1
Why Firms enter IJVs ........................................................................................................ 15
B.1.1.1.1
Traditional Theories of the FIRM................................................................................. 17
B.1.1.1.2
The Knowledge Based Theory of the Firm................................................................... 18
B.1.1.2
The Formation and Structure of the IJV ............................................................................ 22
B.1.1.3
IJV Management................................................................................................................ 25
B.1.1.4
Longevity and the Transitory Nature of IJVs .................................................................... 27
B.1.1.5
Organizational and National IJV Culture........................................................................... 28
B.1.2
Information-based Service JVs .................................................................................................... 30
B.1.2.1
Global Professional Services ............................................................................................. 30
B.1.2.2
Information-based Service - IJVs ...................................................................................... 33
B.2
Knowledge Management Theory ................................................................................................... 36
B.2.1
Defining Organizational Knowledge............................................................................................ 36
B.2.2
Organizational Learning............................................................................................................... 42
B.2.3
Overview of the Knowledge Management Processes .................................................................. 52
B.2.3.1
Knowledge Evaluation....................................................................................................... 55
B.2.3.2
Knowledge Transfer Processes .......................................................................................... 57
B.2.3.3
Knowledge Creation .......................................................................................................... 60
B.2.3.4
Knowledge Retention ........................................................................................................ 65
B.2.3.4.1
Organizational Memory................................................................................................ 68
B.2.3.4.2
Tools for Knowledge Retention.................................................................................... 69
B.2.4
Knowledge Management Strategy ............................................................................................... 71
B.2.4.1
Barriers .............................................................................................................................. 72
B.2.4.2
Enablers ............................................................................................................................. 73
B.2.5
The Knowledge Management Environment................................................................................. 76
B.2.6
The Knowledge Management Architecture.................................................................................. 78
B.3
Knowledge Management within the IJV Framework .................................................................. 84
B.3.1
State of Research on Knowledge Management in IJVs ............................................................... 85
B.3.2
Knowledge Management Strategy in IJVs ................................................................................... 99
B.3.3
KM Processes in IJVs ................................................................................................................ 103
B.3.4
Developing the Framework........................................................................................................ 109
V
C CORE KNOWLEDGE MANAGEMENT PROCESS IN INTERNATIONAL
JOINT VENTURES..............................................................................................113
C.1
Introduction ................................................................................................................................... 113
C.2
Key Information on Case Study Partners ................................................................................... 118
C.2.1
DSP Merrill Lynch (DSPML) .................................................................................................... 118
C.2.1.1
Indian Parent - DSP Financial Consultants (DSP) ........................................................... 118
C.2.1.2
U.S. Parent – Merrill Lynch (ML) ................................................................................... 119
C.2.1.3
The IJV – DSP Merrill Lynch (DSPML)......................................................................... 120
C.2.2
JM Morgan Stanley (JMMS)...................................................................................................... 123
C.2.2.1
Indian Parent – J.M. Financials (JMF)............................................................................. 124
C.2.2.2
U.S. Parent – Morgan Stanley Dean Witter (MS)............................................................ 124
C.2.2.3
The IJV – JM Morgan Stanley (JMMS) .......................................................................... 125
C.2.3
Max New York Life (MNYL).................................................................................................... 127
C.2.3.1
Indian Parent – Max India Ltd (MI)................................................................................. 128
C.2.3.2
U.S. Parent – New York Life International Inc. (NYL).................................................. 131
C.2.3.4
The IJV – Max New York Life (MNYL) ........................................................................ 131
C.2.4
Birla AT&T Communications Ltd. ............................................................................................ 133
C.2.4.1
Indian Parent – Aditya Birla Group ................................................................................. 134
C.2.4.2
U.S. Parent AT&T Wireless Services.............................................................................. 135
C.2.4.3
The IJV – Birla AT&T..................................................................................................... 136
C.2.5
Sprint RPG ................................................................................................................................. 138
C.2.5.1
Indian Parent : RPG Enterprises ...................................................................................... 138
C.2.5.2
U.S. Parent - Sprint International / Global One ............................................................... 140
C.2.5.3
The IJV: Sprint RPG India Ltd ........................................................................................ 141
C.2.6
Ogilvy and Mather (O&M) ........................................................................................................ 141
C.2.6.1
Indian Parent – S. G. Benson ........................................................................................... 142
C.2.6.2
U.S. Parent – Ogilvy & Mather ....................................................................................... 142
C.2.6.4
The IJV – Ogilvy Consulting India Ltd. .......................................................................... 143
C.2.7
Analysis of the literature context and data ................................................................................. 144
C.2.8
Indian Economic Environment................................................................................................... 144
C.3
Strategic Planning: Implementing a Global Knowledge Management Strategy in the IJV ... 146
C.3.1
Global Knowledge Management Strategy ................................................................................. 146
C.3.1.1
The Knowledge Audit...................................................................................................... 152
C.3.1.2
Top Down KM Strategy .................................................................................................. 154
C.3.1.3
Creating the Environment for Global Knowledge Management within the IJV.............. 156
C.3.1.4
Implementing The KM Strategy ...................................................................................... 157
C.3.2
Types of KM Strategy................................................................................................................ 161
C.3.3
Organizational Knowledge Roles............................................................................................... 164
C.3.3.1
Knowledge Structure in the IJV Network........................................................................ 164
C.3.3.2
The Role of the Chief Knowledge Officer....................................................................... 166
C.3.3.3
Other Knowledge Roles in the IJV .................................................................................. 170
C.3.4
Incorporating KM Processes in Strategy.................................................................................... 171
C.3.5
Measuring the Success of KM Efforts ....................................................................................... 173
C.3.6
Transfer of Best Practices Across the IJV Network ................................................................... 174
C.3.7
Potential questions for further research...................................................................................... 177
C.3.8
KM Practices in IJV Case Studies: Strategic Planning .............................................................. 178
VI
C.3.8.1
C.3.8.2
C.3.8.3
C.3.8.4
C.3.8.5
C.3.8.6
DSP Merryl Lynch........................................................................................................... 178
JM Morgan Stanley.......................................................................................................... 178
Max New York Life......................................................................................................... 179
Birla AT&T ..................................................................................................................... 180
Sprint RPG....................................................................................................................... 180
Ogilvy & Mather.............................................................................................................. 181
C.4
Alliance Management: Inter-organizational Knowledge Sharing ............................................ 183
C.4.1
Knowledge Management during Different Phases of Alliance Management ............................ 183
C.4.1.1
IJV Negotiation Phase ..................................................................................................... 187
C.4.1.2
IJV Formation Phase........................................................................................................ 194
C.4.1.3
IJV Management Phase ................................................................................................... 199
C.4.2
Cross-cultural Management and Learning ................................................................................. 204
C.4.2.1
Cultural Context in the IJV .............................................................................................. 206
C.4.2.2
Learning and Culture ....................................................................................................... 214
C.4.3
Potential questions for further research...................................................................................... 218
C.4.4
KM Practices within the IJV Framework: Case Studies ............................................................ 218
C.4.4.1
DSP Merryll Lynch.......................................................................................................... 218
C.4.4.2
JM Morgan Stanley.......................................................................................................... 218
C.4.4.3
Max New York Life......................................................................................................... 220
C.4.4.4
Birla AT&T ..................................................................................................................... 221
C.4.4.5
Sprint RPG....................................................................................................................... 222
C.5
International Human Resource Management: The Global Knowledge Worker within the IJV
Framework .................................................................................................................................................... 226
C.5.1
Human Resource Management in IJVs ...................................................................................... 226
C.5.2
Knowledge Management Issues in IJVs .................................................................................... 227
C.5.3
Implementing Global Human Resources Guidelines in the IJVs ............................................... 236
C.5.4
Managing the Knowledge Worker ............................................................................................. 241
C.5.5
Human Resources Knowledge Activities in the IJVs................................................................. 243
C.5.5.1
Recruiting and Staffing.................................................................................................... 243
C.5.5.1.1
IJV Top Management ................................................................................................. 244
C.5.5.1.2
Expatriate Management .............................................................................................. 248
C.4.5.1.3
Expatriate failure: unrealized scope for learning ........................................................ 249
C.5.5.2
Training............................................................................................................................ 252
C.5.5.3
Personnel Movement ....................................................................................................... 256
C.5.5.4
Communities of Practice.................................................................................................. 256
C.5.5.5
Incentives and Compensation .......................................................................................... 260
C.5.5.5.1
Incentives.................................................................................................................... 260
C.4.5.5.2
Compensation ............................................................................................................. 264
C.5.6
Potential questions for further research...................................................................................... 265
C.5.7
Knowledge Management within the IJV Framework: Case Studies .......................................... 265
C.5.7.1
DSP Merryll Lynch.......................................................................................................... 265
C.5.7.2
JM Morgan Stanley.......................................................................................................... 266
C.5.7.3
Max New York Life......................................................................................................... 266
C.5.7.4
Birla AT&T ..................................................................................................................... 268
C.5.7.5
Sprint RPG....................................................................................................................... 268
C.5.7.6
Ogilvy & Mather (India).................................................................................................. 270
C.6
Technology Management: Implementing Global Knowledge Management Tools.................. 273
VII
C.6.1
Bridging Information Management, Technology Management and Knowledge Management . 273
C.6.1.1
Information Management................................................................................................. 274
C.6.1.2
Technology Management................................................................................................. 280
C.6.2
Supporting Global Knowledge Flow through Effective Technology Management ................... 284
C.6.3
Knowledge Management Tools ................................................................................................. 286
C.6.3.1
Repositories ..................................................................................................................... 286
C.6.3.2
Process Redesign ............................................................................................................. 286
C.6.3.3
Information Technology Applications ............................................................................. 289
C.6.4
Potential questions for further research...................................................................................... 293
C.6.5
Knowledge Management within the IJV Framework: Case Studies .......................................... 294
C.6.5.1
DSP Merryll Lynch.......................................................................................................... 294
C.6.5.2
JM Morgan Stanley.......................................................................................................... 295
C.6.5.3
Max New York Life......................................................................................................... 297
C.6.5.4
Birla AT&T ..................................................................................................................... 297
C.6.5.5
Sprint RPG....................................................................................................................... 302
C.6.5.6
Ogilvy & Mather.............................................................................................................. 304
C.7
Comparison of the Case Studies with respect to Key Research Questions............................... 309
C.8
Salient Points from Other Interviews (vide Annex ) .................................................................. 314
D
D.1
CONCLUSION .............................................................................................316
Key Findings .................................................................................................................................. 316
D.2
Contributions to KM literature.................................................................................................... 319
D.2.1
Implications for further Research............................................................................................... 319
D.2.2
Implications for IJV Management.............................................................................................. 320
E
ANNEX ........................................................................................................322
E.1
List of Abbreviations..................................................................................................................... 322
E.2
Annex on Govt. of India Policies and Rules ................................................................................ 325
E.3
Interview Formats ......................................................................................................................... 331
E.3.1
Parent Company Employees ...................................................................................................... 331
E.3.2
CEOs of the Indo-U.S. IJVs ....................................................................................................... 331
E.3.3
HR Heads of the Indo-U.S. IJVs ................................................................................................ 332
E.3.4
CIOs / CTOs of Indo-U.S. IJV................................................................................................... 333
E.4
Interview Partners from diverse Indian IJVs ............................................................................. 335
E.5
Case Study Companies.................................................................................................................. 338
F
BIBLIOGRAPHY..........................................................................................340
F.1
Bibliography Cited ............................................................................................................................. 340
VIII
F.2
Additional Literature ......................................................................................................................... 374
F.3
HTTP LINKS...................................................................................................................................... 405
IX
Table of Figures
Figure A.1 Literature Overview of Research Context ........................................................................................ 2
Figure A.2 Conceptual Framework I.................................................................................................................. 6
Figure A.3 Conceptual Framework II................................................................................................................. 7
Figure A.4 Towards an Integrated Knowledge Management Strategy............................................................... 8
Figure B.1 The IJV Framework ....................................................................................................................... 13
Figure B.2 The Reasons for Forming an IJV.................................................................................................... 16
Figure B.3 Process of Alliance Evolution......................................................................................................... 23
Figure B.4 Basic Assumptions made about IJVs ............................................................................................. 26
Figure B.5 The Globalization framework for Service Businesses................................................................... 30
Figure B.6 Industry Globalization Drivers for Service Firms ......................................................................... 32
Figure B.7 Knowledge Generative Cycle ......................................................................................................... 36
Figure B.8 Knowledge value chain................................................................................................................... 38
Figure B.9 Typologies of Organizational Learning........................................................................................ 48
Figure B.10 Knowledge Management Theories................................................................................................ 51
Figure B.11 Knowledge Management Processes within the Firm.................................................................... 53
Figure B.12 Outcomes of Explicating Knowledge........................................................................................... 56
Figure B.13 The Spiral of Knowledge ............................................................................................................. 62
Figure B.14 How Information-based Firms Manage Knowledge.................................................................... 67
Figure B.15 Common Pathologies and Challenges in Knowledge Accumulation and Knowledge Sharing in
IJVs ................................................................................................................................................................... 80
Figure B.16 Knowledge Management Architecture.......................................................................................... 81
Figure B.17 Importance of Knowledge Acquisition Goals .............................................................................. 87
Figure B 18. Key Issues in the Knowledge Management Processes............................................................... 112
Figure C. 1 DSP Merrill Lynch Key Data ...................................................................................................... 119
Figure C.2 JM Financial Morgan Stanley Key Data...................................................................................... 126
Figure C.3 Business Structure of JMMS......................................................................................................... 127
Figure C.4 Max New York Life Key Data....................................................................................................... 128
Figure C.5 Birla AT&T Key Data................................................................................................................... 135
Figure C.6 Sprint RPG Key Data ................................................................................................................... 139
Figure C.7 Ogilvy & Mather India Key Data ................................................................................................. 143
Figure C.8 Value Creation ............................................................................................................................ 148
Figure C.9 Developing a Knowledge Strategy .............................................................................................. 149
Figure C.10 Intangible Assets........................................................................................................................ 153
Figure C.11 Global Management Perspectives ............................................................................................. 165
Figure C.12 Knowledge Reporting Structure in the IJV Network ................................................................. 166
Figure C.13 The Model CKO........................................................................................................................ 167
Figure C.14 The Model CKO....................................................................................................................... 169
Figure C.15 Knowledge Management - Strategic Planning in IJVs.............................................................. 182
Figure C.16 Process Framework of the Development of Cooperative Inter-organizational relationships ... 185
Figure C.17 Bargaining Power .................................................................................................................... 188
Figure C.18 Alliance Knowledge Acquisition Process ................................................................................ 191
Figure C.19 Knowledge Model to Guide International Joint Venture Evaluation ........................................ 193
Figure C.20 Knowledge Acquisition and Instability..................................................................................... 194
Figure C.21 Joint Venture Development and Multicultural Features ........................................................... 195
Figure C.22 Cycle of Fair Processes........................................................................................................... 198
Figure C.23 Factors Affecting Technology Transfer Across Nations............................................................ 199
Figure C.24 Impact of Cross Cultural Training ............................................................................................. 207
Figure C.25 Western / Asian Values.............................................................................................................. 209
X
Figure C.26 Cultural Classification of Indian Management .......................................................................... 213
Figure C.27 Managing Cultural Differences................................................................................................ 216
Figure C.28 Knowledge Management – Alliance Management in IJVs ......................................................... 225
Figure C.29 HR Practices............................................................................................................................ 227
Figure C.30 HR Implications in the Four Stages of the IJV Process ............................................................. 229
Figure C.31 Importance of HRM in IJVs : Individual / Group Level ........................................................... 234
Figure C.32 Implications for Leveraging Knowledge through Communities of Practice ............................. 258
Figure C.33 Knowledge Management – Human Resource management in IJVs ........................................... 272
Figure C.34 How Managers view Effective Information Use......................................................................... 275
Figure C.35 Knowledge Management – Technology Management in IJVs.................................................... 308
Figure C 36. Integrated KM Strategies in Case Studies Indo-U.S. IJVs ........................................................ 309
Figure C.37 Comparison of case studies for the evidence of the presence or absence of .............................. 313
integrated knowledge management strategy................................................................................................... 313
Table 1. Foreign investment flows by category1 (US$ million)................................................................... 328
Table 2. Direct foreign investment: actual inflows vs. approvals................................................................... 329
Table3. FDI inflows, by host region (US$ million)......................................................................................... 330
1
A The Research Focus: Context Definition
A.1 Introduction
Over the last decade International Joint Ventures (IJVs) have gained increasing
importance in India, in the aftermath of economic liberalization, which has been an
ongoing process since 1991. IJVs are common, especially, in the high-growth, highknowledge service sector, such as financial services, telecommunications, and the
Information Technology (IT) sector.
Due to increasing liberalization of the service sector in India, IJVs with local firms
are viewed by U.S. firms and their Indian counterparts as a viable tool for access to
the resources they require. On the one hand, firms recognize the potential valueadded of such a venture, while at the same time faced with a high failure rate and the
coordination costs involved.
An IJV is defined as collaboration between two (or more) partners from different
countries, with an organizational and legal form separate from that of the parent
companies. IJVs in developing countries have a substantially more complex
environment, particularly if the foreign partner comes from a developed nation.
Factors influencing this are the very different cultures of the parent companies, the
differing objectives and goals of the partners, and the complex business environment
of the developing country.
The failure rate in international joint ventures is exceedingly high (in some studies,
up to 80%)1 due to their inherent instability2. The significant costs of control and
coordination needed to operate a successful IJV are often not sustainable over time
when faced with the realities of diminishing returns.
In today's knowledge-based economy, knowledge is viewed as the most strategic
resource of organizations. Furthermore, learning and acquiring the skills and
competencies of partners is a primary goal of IJVs, particularly in global service
firms. One key reason for the termination of IJVs stems from lack of further
„learning“ potential between the partners, when one partner feels that it has accessed
1 Bleeke, J. and Ernst, D., Harvard Business Review, 1991.
2 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.
2
sufficient knowledge from the venture and can operate on its own. In fact, a
successful learning environment is the exception rather than the rule1.
Knowledge management (KM) emerged, both in theory and in business practice,
towards the end of the 1990s. Knowledge Management is defined as the process of
adding or creating value by more actively leveraging the know-how, experience and
judgment resident within and in many cases outside of an organization.
The research on strategic processes in IJVs, intra- and inter-organizational learning
and KM within organizations forms the basis for the research on KM management in
IJVs.
Research Literature Overview
Research on Knowledge
Management in
Organizations
Research on Strategic
Processes in IJVs
•Bartlett / Ghoshal, 1991
•Beamish, 1985, 1988
•Buckey / Casson, 1988
•Contractor / Lorange, 1988
•Geringer, 1991
•Hamel / Prahalad / Doz, 1989
•Harrigan, 1985
•Killing, 1982, 82
•Tallman / Shenkar, 1994
•Goodman, 2002
•Kale et al, 2000
Knowledge Management
in IJVs
•Badaracco, 1991
•Hamel, 1991
•Inkpen, 1995, 1998
•Lyles, 1988
•Lyles / Salk, 1997
•Mowery / Oxley / Silverman, 1996
•Parkhe, 1991
•Pucik, 1991
•Tiemessan, Inkpen et al., 1997
•Bueckel et al, 1998
•Berdrow / Lane, 2002
•Davenport / Prusak, 199 8
•Fiol / Lyles, 1985
•Gupta / Govindarajan, 1991, 1994
•Hedlund, 1994
•Huber, 1991
•Kogut / Zander, 1991, 1992, 1995
•Nonaka, 1991, 1994
•Nonaka / Takeuchi, 1995
•Polyani, 1966
•Pfeffer et al, 2000
•Liebowitz, 1999
•Senge et al, 1999
•Von Krogh et al, 2000
•Dawson, 2000
•Tiwana, 2000
Figure A.1 Literature Overview of Research Context2
1 Inkpen, A. C., Academy of Management Executive,1998.
2 This literature listing is in no way exhaustive; the author wanted to showcase the most influential
studies done on the subjects at hand.
3
A.2 Research Focus
In light of the scenario above, the focus of the study is to determine the key strategic
processes of knowledge management within the framework of the IJV, and identify
inherent process weaknesses and barriers to effective knowledge management.
Furthermore it will be determined whether Indo-U.S. joint ventures were responding
to the need for an integrated knowledge management strategy. The aim is to
understand the specific processes that make up an integrated approach to knowledge
management within the IJV.
The objective of the research is to contribute to the existing research on KM in
knowledge-based IJVs. A business environment with increasingly difficult
competitive conditions is a fertile ground for a study of knowledge transfer and
creation. By focussing on IJVs between a developing and developed country, the
author aims to study the dominant external and internal factors of the specific IJV
framework, which constitute a highly complex business environment. Beyond that,
this dissertation aims to offer a holistic model for an integrated knowledge
management strategy for firms entering knowledge-based IJVs.
The study contains an in-depth analysis of the key processes in KM and the inherent
weakness and barriers to effective integrated KM within Indo-U.S. IJVs. The current
responsive measures of the various actors in the IJV framework are analyzed.
Finally, an integrated knowledge management strategy will be suggested for the IJV
framework, and its implementation discussed.
4
The primary research questions (PRQs) that will be addressed in this dissertation
are:
• What are the key strategic and organizational processes that constitute
knowledge management within the framework of the IJV? (PRQ1)
• What are A) the dominant internal and external factors in the IJV
environment, and B) the main barriers to effective knowledge management
and inherent weaknesses within these processes? (PRQ 2a/2b)
• Does an integrated knowledge management strategy within the IJV
facilitate effective knowledge management and how can it be developed and
implemented within the IJV framework? (PRQ3)
Developing the framework for an integrated knowledge management strategy and its
managerial implications was expected to shed more light on the topic and was the
building block of the research.
A.3 Conceptual Framework
The literature on inter-organizational relationships has tended to focus on antecedent
conditions, structural issues, and on relationships between antecedent conditions and
outcomes with structure as a mediating variable, or on comparative studies of
governance forms1. In this study, the IJV framework of the Indo-U.S. venture has
been defined as the IJV itself, the Indian and U.S. parent firms, as well as the AsiaPacific Headquarters (APHQ) of the U.S. partner, from which the IJV generally
receives a large part of its operation directives.
Understanding processes is central to the understanding of inter-organizational
relationships. Today, most IJV partners view knowledge as a key resource within
the alliance. The need for effective knowledge management has been realized and
most IJV partners are implementing measures to support intra- and inter-
1 Ring, P.S. Patterns of Process in Cooperative Interorganizational Relationship. In: "Cooperative
Strategies: North American Perspectives", 1997.
5
organizational knowledge flow, creation and retention. However, an integrated
strategy, which is incorporated within the parent firms and the IJV that links all
knowledge processes is lacking. This tends to lead to a sub-optimal learning
outcome within the IJV framework.
The channels through which knowledge flows and how it is created and retained
within the IJV framework were examined, and the organizational processes involved
were analyzed. This highlighted the key characteristics of KM processes in the
broadest sense, as well as allowing for the inherent barriers and key enablers to
effective KM to be determined.
In the first phase, the IJV framework and the direct and indirect knowledge flows
between the critical actors were identified (PRQ1). In the second phase, the
environmental analysis of the IJV framework and subsequent determination of the
dominant internal and external factors affecting the KM processes were identified
(PRQ2a). In the third and last phase, the measures and steps towards an integrated
KM strategy within the IJV framework and its influence on effective knowledge
management were identified (PRQ 3).
The first part of the conceptual framework deals with the inter-organizational
relationships between the different actors and examines the flow of knowledge
between the parent companies and the IJV. Here, the IJV framework and
environment of the Indo-U.S. IJV framework was defined.
In the second part of the conceptual framework the KM processes was described and
analyzed. Their characteristics and inherent weaknesses and barriers were identified.
This study aims to give a comprehensive overview of the specific organizational
processes that have a direct impact on knowledge transfer, creation, and
management within the IJV framework. These processes and their sub-processes
were determined and classified by their potential contribution towards effective
knowledge management. This constituted the primary research questions 1 and 2(b).
The second part describes the direct and indirect knowledge flows, as well as the
explicit and tacit knowledge management processes within the IJV framework.
6
Conceptual Framework I
Indian Parent
U.S. Parent
Indo-U.S. IJV
Direct and indirect knowledge
flow within the Framework
PRQ1
U.S. Parent
Asia-Pacific HQ
Dominant internal and external
factors of knowledge transfer
and creation
PRQ2
Figure A.2 Conceptual Framework I1
In this phase the weaknesses and barriers of the current knowledge management
processes were analyzed. The responsive measures of the IJVs were examined, and
the core knowledge management processes within the IJV framework were
identified and described.
In the third phase, the conceptual framework reflects the process analysis of the core
knowledge processes i.e., process description, process analysis, and process
restructuring.
1 Source: Author
7
Conceptual Framework II
Indian Parent
U.S. Parent
•Strategic Planning
• Alliance Management
• IHRM
• Technology Management
•Strategic Planning
• Alliance Management
• IHRM
• Technology Management
Indo-U.S. IJV
•Strategic Planning
• Alliance Management
• IHRM
• Technology Management
Direct and indirect knowledge
flow within the Framework
U.S. Parent
Asia-Pacific HQ
•Strategic Planning
• Alliance Management
• IHRM
• Technology Management
PRQ2b
Figure A.3 Conceptual Framework II1
Knowledge management was defined along the lines of:
• Strategic Planning (SM): Developing a global knowledge strategy
• Alliance Management (AM): Inter-organizational knowledge transfer
• International Human Resource Management (IHRM): Managing knowledge
workers in the IJV framework
• Technology Management (TM): Implementing global knowledge management
tools within the IJV framework.
1 Source: Author
8
Conceptual Framework III: The Knowledge Management Processes
Key Str ategic Processes in the IJV Fr amework
Strategic Planning
Alliance Management
IH RM
Technology Mana gement
Process Description: The Knowledge Perspective
Strategic Planning
Alliance Management
IH RM
Technology Mana gement
Process Analysis: The Knowledge Management Processes
Str ategic Pla nning
Alliance Management
I HRM
Technology Mana gement
Developing a global
k nowledge Strate gy
Inter-orga nizational
Knowledge Transfer
in the IJ V Frame work
Managing
Knowledge
Worker s in
I JVs
Implementing g lobal
Knowledge Manageme nt
Tools in the IJV F rame work
Str ategic Pla nning
Alliance Mana gement
IHRM
Technology Ma nage ment
KNOWL EDGE MANAGEMENT PROCESSES
IN T HE IJV F RAMEWORK
Towar ds an Integrated Knowledge Management Strategy in the IJV Framework
Figure A.4 Towards an Integrated Knowledge Management Strategy1
The framework for the study on knowledge management in Indo-U.S. JVs was
conceived as a multi-stage process describing:
• The direct and indirect knowledge flows within the IJV framework
• Determination of the core strategic KM processes within the IJV framework
• The dominant internal and external factors, barriers and enablers that affect the
flow, creation and retention of knowledge within the IJV framework
• Attempts to develop a model for integrated KM within the IJV framework.
In conclusion, a suggested blueprint for an Integrated Knowledge Management
Strategy for the IJV Framework was developed. Managerial implications for
implementation of these measures were then finally discussed. The goal of this work
1 Source: Author
9
was to contribute to the understanding of knowledge management in IJVs and
provide potential and plausible solutions for implementation.
A.4 Methodology
The choice of methodology is key to the success of an empirical study. The
methodological design chosen must enable the researcher to procure optimal data in
order to address the primary and secondary research questions. The methodology
selected should be aimed at avoiding “gross misfits” in the exploration of the
research questions at hand1.
The use of qualitative empirical research for the study of knowledge management
strategy in international joint ventures needs to be assessed before it is chosen as a
tool for the study. A brief overview of general qualitative research is presented
below.
Qualitative vs. Quantitative Empirical Social Research
“Empirical social research rests on the peculiar practice of representing the social
reality of others through the analysis of one’s own experience in the world of the
others“2. This holds true as much for quantitative, as for qualitative research.
For a long time, qualitative social research methodology was considered inferior to
the other forms of social research. Research based on qualitative data collection,
such as case studies, was judged less valuable than its quantitative counterparts, due
to perceived imprecision (as in quantification) and lack of objectivity3. Despite these
prejudices, qualitative research methods have become commonplace, especially in
fields such as psychology, sociology, and management strategy.4
The difference between qualitative and quantitative social research does not only lie
in the instruments and method of data collection and analysis, so a mere description
of these cannot build the basis for the choice of and critical reflection on the
empirical method and its consequences5. The discussion of methodology should
1 Yin, R.K. " Case Study Research: Design and Methods ", 1994.
2 Van Maanen, J. "Tales of the Field", 1988.
3 Yin, R.K. " Case Study Research: Design and Methods ", 1994.
4 Yin, R.K. " Case Study Research: Design and Methods ", 1994.
5 Morgan, G. "Beyond Method: Strategy for Social Research", 1983.
10
therefore include an analysis of the theoretical foundations and assumptions behind
it. While quantitative methods take a positivistic approach, qualitative methods are
generally characterized as being interpretative.
Methods of qualitative empirical research, such as case study analysis, structured
and unstructured interviews and document analysis or participant observation are
nowadays often seen as a key method for a detailed research of the firm1, in part due
to the undeniable impact of past qualitative studies. As far as objectivity is
concerned, the environment is a social construct, and an objective perception free
from one’s own perceptions and values is difficult to realize2.
According to MILES and HUBERMANN „ the one major feature of qualitative
research is that they focus on naturally occurring, an ordinary event in natural
settings, on what ´real life´ is like. That confidence is [supported] by local
groundedness, that fact that the data is collected in close proximity to a specific
situation."3
With regard to the research on cross-border knowledge transfer and management,
and the management of IJVs, the researcher can exercise no behavioral control over
the actors, so the experimental strategy cannot be used, as in a realistic simulation of
a highly complex situation. Due to the contemporaneous nature of the researched
subjects and their transitory nature, a historical analysis is not applicable as a
research method4. That leaves the survey, the structured and unstructured interviews,
and the case study.
There will be a discussion of concrete methodological design pertaining to the study
of knowledge transfer and management. Finally, a description of the choice of study
objects (IJVs and the respective parent firms), the process of data collection, the
instruments, and data analysis.
Due to the explorative nature of the research questions, interviews and following
case studies seem to be the most advantageous methodology, particularly in view of
1 Foddy, W. "Constructing Questions for Interview and Questonnaire",1993.
2 Bonss, W. and Hartmann, H. Soziale Welt, 1985.
3 Miles, M.B. and Hubermann, A.M. "Qualitative Data Analysis” – a source book of new methods
1984.
4 Yin, R.K. " Case Study Research: Design and Methods ", 1994.
11
the fact that research on knowledge management in cross-border joint ventures is
still in the early stages.
Methodology pertinent to rationale, selection of IJVs, collection of data relevant to
key focus of the research questions and analysis are detailed in section C.
The current thesis represents an exploratory attempt to find the gaps in literature and
fill in with the focussed case studies on integrated knowledge management strategy
in key areas of KM strategy within the Indo US IJV framework.
12
B Knowledge Management in International Joint ventures:
Theoretical Considerations
B.1 Defining the International Joint Venture (IJV) Framework
In the following section the existing theoretical literature on knowledge management
(KM) in International Joint Ventures (IJVs) is presented in detail. The aim here is to
provide a foundation against which the empirical findings that are presented in
section C can be examined.
With the accelerated business globalization in the last decade, the need to coordinate
organizational resources across national boundaries has increased manifold.
Management know-how, technology and capital flow from developed countries to
developing countries. IJVs have always been a popular way to do business in the
competitive global marketplace. Especially in Asia, the number of IJVs has risen
sharply, but so has the magnitude and scope of the investments in such ventures1.
For this study on knowledge flows between and knowledge creation within
organizations, the key actors have to be determined. INKPEN et al. defined the
critical actors in the KM process within IJVs as the IJV itself and the two parent
companies2. Within the context of the Indo-U.S. IJV, however, there are additional
factors. The Indian IJV of the U.S. parent firm falls under the operational directives
of the U.S. firm’s Asia-Pacific headquarters. Due to this dual reporting structure on
a strategic and operational level on the side of the U.S. parent firm, the AP
headquarters should play an integral role when examining processes of interorganizational KM in this context. The framework developed here for the study is
shown below:
1 Nam, S.H., International Journal of Human Resource Management, 1995.
2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North
American Perspectives”, 1997.
13
The IJV Framework
Indian Parent
U.S. Parent
Indo-U.S. IJV
U.S. Parent
Asia-Pacific HQ
= direct and indirect intra-organizational
knowledge flow
Source: Author
Figure B.1 The IJV Framework
B.1.1 IJV Theory
Joint Ventures are equity alliances that involve the transfer and creation
of equity ownership. International Joint Ventures are, by definition,
when the parent companies are located in different countries.
The IJV is collaboration between two (or more) partners from different
countries, with an organizational and legal form separate from that of the
parent companies.
Analyzing IJVs from an exchange perspective focuses attention on the interaction
and relationship dimensions of the inter-organizational relationship1, which are
necessary preconditions for a successful partnership. Theoretically, within the
context of an IJV, resources flow from the parent firms to the JV, where they are
1 Inkpen, A.C. and Beamish, P.W. Academy of Management Review, 1997.
14
transformed into resources of greater value, which are then partitioned and flow
back to the parent firms1.
Strategic alliances, which are defined as a sharing of resources, create unique
learning opportunities for partner firms. Knowledge is one of the firm’s most
important resources. A strong capability for organizational learning has been
identified as perhaps the only long-term source of and sustainable strategic
advantage for firms2.
A strategic alliance starts with a set of initial conditions that defines the tasks,
boundaries, interface structure, and expectations of the partners3. The partners cycle
through a sequence of learning, re-evaluation and readjustment stages. The alliance
partners then learn by interacting in joint activities, evaluate the alliance for
efficiency, and evaluate each other for equity and adaptability, and use these
assessments to revise the initial conditions.
In RING and VAN DE VEN4, IJV partners go through a sequence of negotiations,
commitments, and execution stages. If preliminary commitments are executed in an
efficient and equitable manner, the partners expand their mutual commitments to the
alliance. If not, they initiate corrective actions or reduce their commitment to the
alliance. Successful JVs progressively improve on upon the initial conditions of the
venture and make increasing commitments to the alliance. Unsuccessful alliances
are either constrained by initial conditions or fail in either the learning or reevaluation stages.
Differences in goals, values and company routines are sources of potential conflict,
which may make management of the venture difficult. IJVs cause additional
problems because individuals living in different countries also have different goals,
values and customs.
1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North
American Perspectives”, 1997; Beamish, P.W. In: “International Entrepreneurship:
Globalization and Emerging Businesses”, 1999; Louis, H. and Beamish, P.W. In “ Handbook
of Cross-cultural Management”, 2001.
2 Lei, D., Hitt, M.A. and Bettis, R. Journal of Management, 1996.
3 Doz, Y., Strategic Management Journal, 1996.
4 Ring, P.S. and Van de Ven, A.H., Academy of Management review, 1994.
15
Effective communication is vital for the successful management of IJVs because
partners enter a JV with a very limited knowledge of each other’s goals, capabilities,
and behaviors, and also because the initial agreement must be renegotiated due to
unforeseen changes in the IJV environment1. Difficulties in communication put an
additional strain on partner adjustment and can result in the unsuccessful demise of
the IJV.
The competitive advantage of an IJV stems from assets and capabilities that are
superior to those possessed by the relevant competition or alternative, or that are
combined and deployed in such a way as to confer a superior competitive position.
Advantages of the IJV are also relative to the arena or context - what provides an
advantage in one environment may not in another because of different competitive
surroundings and conditions2.
In summary, the advantages of an IJV are superior assets and capabilities,
knowledge of business environment, infrastructure, entrepreneurship, rates and
diffusion of innovation, influence with foreign leaders and links between the
industrial and financial sectors.
B.1.1.1
Why Firms enter IJVs
The primary motive in most cases for the creation of an IJV is to close the gap
between strategic intent and resource availability. As voluntary inter-organizational
relationships, firms enter IJVs to achieve a strategic objective not attainable by
acting autonomously. The strategic objectives behind the creation of an IJV include
the reduction of risk, economies of scale, access to technology or markets, and the
search for legitimacy3.
Non-transferability of competitive advantage occurs when the advantage or a key
component thereof is not mobile between the home country and the host country.
There are two basic causes of immobility- geographical specificity and the tacit
(non-codifiable) nature of much of knowledge, skills, and technology.
1 Doz, Y., Strategic Management Journal, 1996.
2 Hu, Y.S., California Management Review, 1995.
3 Contractor, F. and Lorange, P. “Cooperative Strategies in International Business”, 1988.
16
The transfer of an advantage fails to be successful if the mobile advantage or asset
loses its value in the target country. This can happen either because the advantage is
no longer relevant in a different context, or because it can easily be neutralized by
local competitors. Thus, superior management, skills and resources in the home
country may not be the same in the context of the target country. Technological
advantages can be neutralized by the weakness of intellectual property law and
leniency in enforcing the law. Whether an advantage retains its value depends on the
fit between conditions in the target country and the nature of the advantage.
Reasons for Forming an IJV
•
•
•
•
•
•
•
•
To gain knowledge, to learn and to transfer that knowledge back to the parent firm
Host government regulatory environment
To gain rapid market entry and access to a new customer base
Increased economies of scale
To gain local knowledge, local market image and distribution channel access
To spread risk
To improve competitive advantage in the face of increasing global competition
Cost-effective and efficient responses forced by globalization of markets.
Adapted from: Schuler, R.S. (2001): The International Journal of Human Resource Management (in
press) http://www.rci.rutgers.edu/-schuler/Hrissues.htm
Figure B.2 The Reasons for Forming an IJV
The transfer of an advantage is neither automatic nor easy, and may require
adaptation, investment, and reconfiguring the ingredients of the advantage.
Furthermore, there is an important parallel between the transfer of advantages and
the diffusion of innovations - neither advantages nor new products and processes
remain unchanged during the process of transfer of knowledge.
Key structural features of an industry may determine the relative weight that
contractual arrangements and processes play in inter-organizational collaborations1.
Large-scale reliance on inter-organizational linkages reflects a fundamental and
pervasive concern with access to knowledge. First, inter-firm cooperation
1 Powell, W.W., Koput, K.W. and Smith-Doerr, L., Administrative Science Quarterly, 1996.
17
accelerates the rate of technological innovation. Second, reliance on collaboration
has potentially transforming effects on all participants1.
Finally, collaboration may itself become a dimension of competition. As firms turn
to outside parties for a variety of resources, they develop a network profile or
portfolio of relationships to specific partners for certain activities. A firm’s portfolio
of collaboration is both a critical asset and a signal to markets, as well as to other
potential partners, of the quality of the firm's activities and products. If the members
in an industry are constrained in their choice of partners to a small set of potential
partners, competition is increased within a narrow sphere.
Regardless of whether collaboration is driven by strategic motives, such as filling in
missing pieces of the value chain, or by learning considerations to gain access to
new knowledge, or by embeddedness in a community of practice, connectivity to an
inter-organizational network and competence at managing collaboration have
become key drivers of a new logic of organizing. This view of organizations and
networks as vehicles for producing, synthesizing and distributing ideas recognizes
that the success of firms is increasingly linked to the depth of their ties to
organizations in diverse fields.
B.1.1.1.1
TRADITIONAL THEORIES OF THE FIRM
Two principal foci of research on various forms of collaboration have been the
transaction and the mutual exchange of rights, and the relationship and mechanisms
through which information flows and mutual adjustments take place. It is critical
whether common assets are pooled or different resources traded, which stage of
development an organization is in, and the nature of ownership2.
The second line of inquiry adopts a process focus, analyzing whether features of the
task require continuous communication and organizational learning, and the extent
to which the collaboration is embedded in multiple, ongoing relationships3.
1Harrigan, K.R., Strategic Management Journal, 1988.
2 Joskow, P., American Economic Review, 1987.
3 Prahalad, C.K. and Hamel, G., Harvard Business Review, 1990 ; Hamel, G., Strategic
Management Journal, 1991.
18
KOGUT1 defines three theoretical approaches for explaining international strategic
alliances: transaction cost theory, strategic focus, organizational learning. The
transaction cost approach suggests that firms act to minimize the sum of production
and transaction costs, with hybrid forms such as strategic alliances emerging when
the added cost of inter-firm coordination are lower than those involved in fully
internalizing an activity2. From this perspective, the knowledge sought in an IJV
arrangement includes patents, technical know-how, financial expertise, experienced
managerial personnel, and access to marketing and distribution channels.
Transaction cost analysis focuses on organizational efficiency, specifically where
market transactions involve higher complexity and significant uncertainty, such as
technological innovation or entering new markets.
Strategic considerations such as competitive advantage, market expansion and
extending product portfolios may be equally or more important as transaction costs.
Adopting a more strategic perspective on collaboration focuses attention on longterm organizational effectiveness, rather than short-term efficiency.
The strategic focus approach suggests that firms establish international strategic
alliances to maximize profits via their improved competitive position, thereby
deterring market entry by their competitors and enhancing their potential for
oligopolistic profit1.
B.1.1.1.2
THE KNOWLEDGE BASED THEORY OF THE FIRM
Knowledge has been recognized as a key resource and learning as a core
competency for global organizations. There has been little research on learning in
international collaborations that describes the channels and processes through which
learning takes places, or how to ensure adequate KM in the IJV. Furthermore, to
understand the KM process under the specific circumstances of the IJV, the
terminology used must first be defined.
PRAHALAD and HAMEL defined the resource-based view of the firm, stating that
firms should position themselves strategically based on their unique, valuable, and
inimitable resources and capabilities rather than the products and services derived
1 Kogut, B., Strategic Management Journal, 1988.
2 Hennart, J., Strategic Management Journal, 2000.
19
from those capabilities2. The strategic driver for the firm becomes leveraging those
resources and capabilities across its many markets and products. The resource-based
strategy is a long-term view, and more robust in an uncertain and dynamic
environment. It equips the firm to succeed in highly complex environments.
One of the central notions of Resource Base Theory is that companies in the same
industry compete with generally the same resources, but combine them in different
and disparate ways (making them idiosyncratic combinations of resources) –
because of their history, embedded processes and work practices, management
decisions, stage in organizational lifecycles, social complexity and organizational
culture, employees skills and know-how, pools of cumulative experience, and
knowledge transfer and knowledge embedding over time3.
The original idea behind the knowledge-based view of the firm is that "the central
competitive dimension of what firms know how to do is to create and transfer
knowledge efficiently within an organizational context"4. From the knowledge
perspective, in the resource based theory of alliance creation, it is the underlying
assumption that the partners should consider the other partner’s knowledge as a
valuable resource, and as a primary reason to enter into the alliance.
Strategic alliances are both a cause and effect of knowledge intensive competition5.
Collaboration enables firms to learn from each other and thus accelerates the
movement of knowledge. Established competitors must respond, and increasingly
often they do so by expanding their alliance network, in order to lower costs and
risks, to expand markets, and to learn or create new knowledge. The knowledgebased perspective directs firms to consider6:
• How good a firm is at doing something
• How good it is at learning specific capabilities
• The value of these capabilities as platforms for new markets
1 Contractor, F. and Lorange, P. "Cooperative Strategies in International Business", 1988.
2 Prahalad, C.K. and Hamel, G., Harvard Business Review, 1990.
3 April, K.A., Journal of Knowledge Management,2002 ; April, K.A. and Caradock, J. “Corporate
Landscape in South Africa”, 2000.
4 Kogut, B. and Zander, U., Organizational Science, 1992
5 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.
6 Op.cit.
20
Traditional approaches of viewing the JV formation process ignore the use of
organizational learning, memory and history as factors that have an impact on how
and why a firm will enter an IJV1. A firm whose activities cross boundaries must
acquire knowledge from its environment, or more precisely, from other
organizations in its environment. This includes knowledge about new technologies,
markets, and how to manage its own operations in adding value to the technology
and in dealing with the markets2.
Knowledge is becoming increasingly recognized as one of the most important
resource flow between the actors in the IJV formation, the two (or more) parents and
the IJV itself. GHOSHAL notes that one key asset of the MNC “is the potential to
learn from its many environments”3. Exploiting this potential to the fullest extent
possible by implementing viable processes for the acquisition and creation of
knowledge within the firm should be one of the top priorities of an IJV.
Competency development as a strategic goal of an organization requires a firm to
have an explicit policy or intent to use collaboration as an opportunity to learn rather
than to minimize cost or risk. Conceiving the firm as a bundle of competencies and
associated routines, rather than technology or products, suggest that a central
purpose of collaboration is the acquisition of new competencies and routines, rather
than access to discrete technology or markets.
The knowledge-based theory generally makes two basic assumptions about
organizational knowledge. First, organizational knowledge has a tacit component4
that is harder to transfer, and second individuals have bounded rationality5.
Therefore, an IJV represents an ideal vehicle for knowledge acquisition and
learning6. VAN GLINOW and TEAGARDEN consider the IJV an extremely
conducive structure for knowledge transfer, due to the high level of operative inter-
1 Lyles, M. A., International Business Review, 1994.
2 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.
3 Ghoshal, S., Strategic Management Journal, 1987.
4 Polyani, V., "The Tacit Dimension", 1966; for further discussion on knowledge categorization see
Chap. B.
5 Simon, H., "Theories of Bounded Rationality", 1972
6 Harrigan, K., Strategic Management Journal, 1988.
21
firm cooperation and commitment required1. STEENSMA and LYLES have tried to
explain IJV survival through social exchange and knowledge based perspectives2.
From this perspective, the knowledge sought in an IJV arrangement would include
market access and, in the context of developing countries, access to privileged
relationships with the government. In this context, the IJV as a longer-term, more
strategic relationship is necessary to acquire embedded or tacit knowledge3.
Strategic alliances for embedded knowledge involve the transfer of skills and
capabilities, rather than discrete packages of know-how. This requires the partnering
organizations to have direct, intimate and extensive exposure to each other's staff,
equipment, systems and culture.
Human capital represents the knowledge, skills and health embodied in individuals
(while) social capital refers to the norms and network facilitating cooperation either
within or between groups4 . KOGUT and ZANDER argue that firms exist because
people prefer the moral communities and shared identities that they supply. The
symbolic role of identity enables speed and efficiency in the creation and transfer of
knowledge5. A further perspective for the knowledge-based theory of the firm is the
argument that organizations have advantages over markets because they can
mobilize social capital embedded in human relations in order to create intellectual
capital. Organizations provide institutional settings for human interactions, which
also foster social capital.
The learning approach proposes that firms form IJVs primarily in order to gain
access to vital knowledge they are lacking. From this perspective, firms are neither
perceived as aggregates of complex organizational routines that cannot be efficiently
transferred in the marketplace, nor can be specified in a contractual arrangement, but
that require a replication of the organization itself6. This approach pinpoints the
knowledge assets as the key resources to be exchanged in an IJV relationship.
1 Van Glinow, B. and Teagarden, M., Human Resource Management, 1987.
2 Steensma, H.H. and Lyles, M.A., Strategic Management Journal, 2000.
3 Tacit knowledge here refers to organizational knowledge that is not easily accessible and not
formalized; According to Polyani, V. "The Tacit Dimension", 1966.
4 OECD, 2001.
5 Kogut, B. and Zander, U., Journal of International Business Studies, 1995
6 Kogut, B., Strategic Management Journal, 1988.
22
Learning in these circumstances is a complex, multilevel process. It involves
learning from and with partners under conditions of uncertainty, learning about
partners’ behavior and developing routines and norms that can mitigate the risks of
opportunism, and learning how to distribute newly acquired knowledge across
different projects and functions. In short, internal capability and external
collaborations are complementary. Internal capability is indispensable in evaluating
ideas or skills developed externally, while collaboration with external partners
provides access to news and resources that cannot be generated internally.
Knowledge-based theories of the firm traditionally deal with how members of the
organizational network, transfer, integrate, and create knowledge in its different
forms.
B.1.1.2
The Formation and Structure of the IJV
In a typical IJV, a new separate legal entity is established, and the parents own its
assets jointly. The ownership structure, i.e., the division of equity between the IJV
parents and the resulting control issues, is often determined by external factors, such
as government restrictions. It is also a strong indicator of the power balance within
the IJV. The venture reports to two administrative hierarchies, which are usually
represented by a joint board of directors. This dual reporting structure is one of the
elementary knowledge channels and a critical source of potential conflict.
Employees from the parents and the IJV work together across the social and
organizational boundaries of the parent firms. The contractual arrangements between
the parents, as extensive as they may be, cannot spell out every obligation for every
contingency.
LORANGE AND ROOS have defined the formation process of the JV in three
stages1, internal push, analytical scope and stakeholder strength. The formation
process involves an internal assessment of the firm’s needs, skills and competencies,
the development of the internal champions2, the determination of the organizations
goals and its strategic directions, and the negotiations with the stakeholders. The
influence of organizational learning on these processes is essentially what the firm
1 Lorange, P. and Roos, J., Management International Review, 1990.
2 Lyles, M.A., International Business Review, 1994.
23
has learned from these processes in the past, and what consequences this will have
on the future actions of the organization.
Revised Conditions
•Task definition
•Partners routines
•Interface structure
•Expectations of
•performance
•behavior
•motives
Leads to
Readjustment
Re-evaluation
•Efficiency
•Equity
•Adaptability
Allows
Initial Conditions
•Task definition
•Partners routines
•Interface structure
•Expectations of
•performance
•behavior
•motives
Facilitate or
hamper
Learning
•Environment
•Task
•Process
•Skills
•Goals
Source: Doz, Y.L. (1996): Strategic Management Journal, 17, 55
Figure B.3 Process of Alliance Evolution
The alliance negotiation phase is a crucial one in determining the learning outcomes
and the constraints of the individual partners to access to the different types of
knowledge inherent to the parent firms. This phase includes ownership and
intellectual rights questions and the contractual technology transfer agreements.
Acknowledging the importance of managing knowledge issues within the alliance is
essential to the success of an IJV1. The process of partner search, including due
diligence, alliance negotiation, and alliance formation must be examined as far as
their impact on effective knowledge transfer between the actors in the IJV
framework is concerned.
Internal issues like proprietary technology and ownership structure also play a big
role in the outcome of the IJV. At the time the IJV is formed, each partner is
dependent on the other for critical input2. The IJV partner has access to more
options, including terminating the venture.
1 Hamel, G., Strategic Management Journal, 1991.
2 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.
24
Effective knowledge evaluation in the alliance formation phase, such as accurate
assessment of the partner’s knowledge databases, and the firm’s own access to this
knowledge, and contractual negotiation form the cornerstone for an optimal learning
outcome in the IJV. Over time, there will be a shift in bargaining power in favor of
one or the other. Relationship between instability of the IJV and the foreign
partner’s bargaining power has been described elsewhere1.
International Transfer of Advantages
As stated above, one of the key reasons to enter an IJV is the transfer of competitive
advantages between the partners.
The competitive advantage of a firm can be:
• Unique or firm-specific advantages in the home country
• Assets in the home country (resources, capabilities, relationships, and corporate
characteristics)
• General attributes and general access shared by the industry and/or the nation
An international transfer of advantages is defined as the process whereby the firm
draws, from its home base, on some or all of its unique advantages (relative to home
competitors), its underlying assets and capabilities, or the general qualities enjoyed
by the home nation and /or industry. The firm makes use of these resources in order
to give its operations in a foreign country a competitive edge. Non-transferability
can occur for two reasons: the advantage (or key component thereof) is not mobile
internationally or the advantage itself loses values in the target community.
Immobility may be due to geographical specificity or the tacit nature of knowledge,
while the absence of value may be due to the lack of "fit" with the environment or to
competitors' moves to neutralize the advantage
In theory, the transfer of advantages can take place in several directions - from the
parent company (and the home nation) to the foreign venture, from the venture up to
the parent, from one subsidiary to another.
The foreign firm can only gain advantage if it is able to transfer some of its
advantages from outside the target country that are not available to indigenous
1 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.
25
players. This puts advantages and their transfer at the center of the analysis of the
firm's international operations.
B.1.1.3
IJV Management
Despite their increased popularity and strategic importance, most IJVs fail to
achieve their strategic objectives in the long run. Many western corporations seek
cooperative ventures as a “quick fix” to global competitiveness without
understanding the relationships being established and the behavioral and cultural
issues involved1. Many of the performance problems experienced by IJVs have
been linked to the unique managerial requirements of these ventures2. Due to the
increased complexity of IJVs, they are more difficult to manage and often result in
significant additional or unforeseen transaction costs incurred by problems in
coordination and communication. Domination based on financial ownership and
tight control is giving way to partnership based on mutual interests, trust and
management on ongoing relationships. IJVs may force a shift in executive behavior
towards improved skill in working collaboratively, communicating and gaining
consensus3.
IJV performance is determined to a large part by people and not by contracts.
Management of the people dimension, IHRM is an integral tool for influencing
interaction within the IJV. SCHULER has summarized the basic assumptions made
about IJVs in research so far.
An effective IJV control system is one that promotes the attainment of the strategic
objectives for the venture. These strategic objectives often differ significantly for the
parent firms as well as the IJV as a separate entity. Due to the unique feature of
shared ownership and decision-making, the control mechanisms deployed in IJVs
must account for all major stakeholders, most importantly parent firms, venture
management, employees and host government.
1 Lane, H. and Beamish, P., Management International Review, 1990.
2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
3 Palmer, I. and Hardy, C. " Thinking About Management: Implications of Organizational Debates
for Practice" , 2000.
26
Basic Assumptions Made About IJVs
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Joint ventures are challenging to run successfully
Joint ventures create opportunities for learning
The partners in a joint venture may not always seize these opportunities to
learn
Ability, motivation and capacity for learning at the individual, group and
organizational levels are critical to the success of the venture
Different types of knowledge are transferred by different types of methods
A venture with two foreign parents experiences different learning dynamics
from a venture with only one foreign parent
Sources of learning include the parents and the IJV itself
Learning and transfer of knowledge are essential for success of the
venture
There are unique issues and stages in the evloution of the IJV
There will be changing desire for control by the partners during the life of
the IJV
Staffing is a critical issue for success
Top management of the IJV may be the most important factor for success
Organizational structure is also critical for success
IJVs evolve in ways that are hard to predict at the outset
Joint ventures are learning systems and serve as vehicles for learning
Source: Schuler, R.J. (2001): The International Journal of Human Resource Management (in press)
http://www.rci.rutgers.edu/-schuler/Hrissues.htm
Figure B.4 Basic Assumptions made about IJVs
The factors affecting the performance of IJV's are manifold and have been the
subject of much research. The following factors have been recognized in the
literature as having the largest direct influence on the performance and success of
the IJV.
• Partner Choice: Knowledge is one of the main resources that partners
exchange, and the choice of IJV partner will determine how sustainable the
exchange relationship will be1.
• Control Mechanisms: Differences in corporate control affect the knowledge
flows in multinational corporations (MNC), being able to either hamper or
enhance them2.
• Motivation: Learning and knowledge creation as a primary motivation for
entering into an IJV termed as learning intent by HAMEL is an important
determinant of the efforts that a firm makes in learning from a JV partner1.
1 Beamish, P.W. “Multinational Joint Ventures in Developing Countries”, 1988.
2 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991.
27
• Expectations: Expectations change during the course of the IJV, depending on
the development of the venture2.
• Cultural Context: Often the methods by which the culturally diverse partners
learn and the way they manage their knowledge bases vary3.
• Experience: Finally, previous experience with IJVs, or partnering knowledge,
has an impact on performance, for learning processes and outcomes change and
develop as firms gain experience through learning by doing.
B.1.1.4
Longevity and the Transitory Nature of IJVs
A study of almost 900 JVs found that only 45% were mutually agreed to have been
successful by all partners4.
An alliance is likely to have a number of different objectives, and outcomes may be
planned or unplanned, explicit or implicit. Firms which view a JV as a series of
discrete projects with specific aims and objectives are more likely to evaluate the
success of the IJV in terms of cost, time and performance, rather than the overall
relationship. Firms, which develop JVs to learn and acquire new skills, will need
different measures of success5.
The primary motivation behind the creation of an IJV is value creation, consisting of
resource flows between the two parents and the independent entity of the IJV, and
the consequent harvesting of the revenues6. As soon as this value-added for either
partner is overshadowed by the transactional costs of the collaboration, the IJV is in
danger of being made redundant through the market. It is therefore important to
view the formation and operation of a JV as a constant change process, whereby
1 Hamel, G., Strategic Management Journal, 1991. PARKHE argues that longevity is an indicator
for the success of IJV, and other studies such as HARRIGAN have employed termination of
the alliance as a performance criterion. It is difficult to access the success of an IJV, and in
particular termination of a partnership does not necessarily indicate failure if the objectives
have been met. Alliances that have reached their strategic objective might be terminated and
still be considered a success.
2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
4 Harrigan, K. "Managing for Joint Venture Success", 1986.
5 Tidd, J. "From Knowledge Management to Strategic Competencies", 2000.
6 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
28
attention has to be continually paid to the shifts in bargaining power and value
creation, and the inherently transitory nature of IJVs. The transitory nature of IJVs
has an influence on research on IJVs; indeed it must be incorporated within any
study on IJVs.
INKPEN concludes that as long as the alliances serve the strategic objectives of the
firm, they should be safeguarded and nurtured. However, when alliances fail to
fulfill their promise or outlive their usefulness, they must be terminated. He
identifies reasons why organizations may persist with failing alliances and suggests
some mechanisms for countering these forces1. By following these ideas, firms can
better exploit the strategic potential of alliances and make the decision to terminate
when strategy is no longer being served.
B.1.1.5
Organizational and National IJV Culture
To analyze culture within the IJV, it is necessary to find a basic definition of culture.
Organizational Culture is the pattern of basic assumptions that a given group has
invented, discovered, or developed in learning to cope with its problems of external
adaptations and internal integration, and that have worked well enough to be
considered valid, and, therefore to be taught to new members as the correct way to
perceive, think, and feel in relation to those problems2.
National Culture is the collective programming of the human mind that
distinguishes the members of one human group from those of another. Culture is a
system of collectively held values and beliefs3.
Characteristics of Culture include ethnicity, country of origin, religion, gender, age,
educational / professional attainment and language.
1 Inkpen, A.C and Ross, J., California Management Review, 2001
2 Schein, E.H., Organizational Dynamics, 1983.
3 Hofstede, G. "Cultures Consequences", 1980.
29
Theories of Cross Cultural Management
• Uncertainty reduction theory: Reducing uncertainty has been found to be
central to intercultural effectiveness1. Uncertainty reduction is a construct that
relates to the capability of individuals to foresee and explain their own behavior
and that of others during interaction2. This ability is essential at the beginning of
the interaction, at various stages of the interaction and during several
interactions3.
• Contact theory centers on the assumption that negative attitudes towards
strangers are mainly caused by misunderstanding and/or misinformation as a
result of isolation. For this reason, experts have advised organization to redesign
jobs to facilitate cross-cultural interaction by encouraging common goals and
inter-group interdependence4. While examining cross-cultural interaction, it is
important not to forget the individual relationship between the people who
interact. Status, a casual versus a formal relationship, and the goals of the venture
need to be taken into consideration to analyze relationships accurately.
• Organizational socialization tactics: As a manager is confronted with new
situations, his/her own cultural identity changes in the process. There are four
types of “change tactics" that can be empirically validated5. The first
organizational tactic constitutes changing neither oneself nor the situation
(replication); second, changing oneself but not the situation (absorption); third,
changing the situation but not oneself (determination); and finally changing both
(explorations). Employees respond to organizational socialization tactics by
either accepting only some of the norms and values (creative individualism) or
by accepting them all (conformity). Differences in national culture have received
a great deal of attention in studies of cross-border alliances, and the consensus is
that national differences do exist and that these affect both the intent and the
ability to learn.
Relationship between organizational culture and national culture in IJVs has been
described by MESCHI and ROGER6
1 Gudykunst, W.B., Communication Quarterly , 1985.
2 Gudykunst, W.B., Culture and Intergroup Processes. In: "The Cross Cultural Challenge to Social
Psychology ", 1988.
3 Gudykunst et al., Western Journal of Speech Communication, 1987.
4 Pettigrew, T.F. and Martin, J., Journal of Social Issues, 1987.
5 Blochner, S. “The Social Psychology of Cross-cultural Training “, 1982.
6 Meschi, P.X. and Roger, A., Management International Review, 1994.
30
B.1.2 Information-based Service JVs
B.1.2.1
Global Professional Services
Service based businesses differ from goods-based businesses in a set of distinctive
characteristics. LOVELOCK and YIP set up the following framework for the
globalization of service businesses.
Globalization Framework for Service Businesses
Industry Globalization Drivers
Common Customer needs
Global Customers
Global Channels
Global economics of sale
Favourable logistics
Information Technology
Government policies and regulations
Transferable competitive advantage
Special Characteristics of Service Businesses
Performance not an object
Customer involvement in production
People as part of service experience
Quality control problems
Harder for customers to evaluate
Lack of inventories
Importance of time factor
Electronic channels of distribution
Industry
Globalization
Potential
Type of Service
People-Processing
Possession-Processing
Information-Based
Supplementary
Services
Global Strategy
Global market participation
Global services
Global value chain
Global marketing
Source: Lovelock,C.H. and Yip, G.S. (1996): California Management Review, 38(2), 67.
Figure B.5 The Globalization framework for Service Businesses
Services can be divided into three categories:
• People-processing services involve tangible actions to customers in person.
These include passenger transportation, healthcare, food service, and lodging
services. The customer needs to enter the service factory in order to receive the
service.
• Possession-processing services involve tangible actions to physical objects to
improve their value to customers. Examples are freight transport, warehousing,
equipment installation and maintenance, car repair, laundry and disposal.
31
• Information-Based services are perhaps the most interesting category from the
standpoint of global strategy development because they depend on collecting,
manipulating, interpreting and transmitting data to create values. Examples here
include accounting, banking, consulting, education, insurance, legal services, and
news.
Information-based services include "exclusive occupational groups that apply
somewhat abstract knowledge to particular cases"1. Information-based Service
Firms (ISFs) are hired for their expertise and skills, enabling them to produce an
outcome that clients either use or sell. Tasks in information-based services involve
individual expertise and group interdependence among ISFs for joint problem
solving2.
Service production and delivery systems can be divided into back office and front
office. Information based services by contrast have the potential to be much lower
contact in nature. The service offering of ISFs mostly include additional elements in
the form of supplementary services, "the service of the service". These
supplementary services not only add value and allow firms to differentiate
themselves from their competitors but also offer opportunities for firms to develop
effective globalization strategies.
There are eight categories of support services (information, consultation, order
taking, hospitality, care taking, exceptions, billing, and payment) encircling the core
product3. Many of these are based on informational processes that can be located in
one part of the world and delivered electronically to another. In practice, the nature
of the product, customer requirements, and competitive practices help managers to
determine which supplementary service must be offered and which might usefully
be added to enhance value. In developing a global strategy, management must
decide which, if any, supplementary elements should be consistent across all
markets and which might be tailored to meet local needs, expectations, and
competitive dynamics. This is the essence of standardization and customization, but
services offer much more flexibility in this respect.
1 Abbott, A. " The System of Professions: An Essay on the Division of Expert Labor, Chicago ",
1988.
2 Jones, C. et al., Organization Science, 1998.
3 Lovelock,C.H. and Yip, G.S., California Management Review, 1996.
32
LOVELOCK and YIP classify the following “Industry Globalization Drivers”:
•
•
•
•
•
•
•
Global Customers - As large corporate customers become global, they often
seek to standardize and simplify the array of services they consume. Telecom
providers, corporate banking, insurance, business logistics, and management
consultants are examples of ISFs that follow their customers globally.
Customers for information-based services may have a more diffused set of
needs, but these certainly include comprehensiveness, accuracy, and
accessibility.
Global Channels - The availability of electronic channels of distribution for
services provides nearly total global coverage for more and more service
offerings. These electronic global channels support not just information-based
services but augment people-processing and possession-processing services.
Internet technology can help sell any type of core product through informationbased supplementary services and can actually deliver many information-based
services directly to customers.
Global Economies of Scale - ISFs typically have to find global scale
economies by standardizing production processes rather than through physical
concentration, as well as by concentrating the upstream rather than the
downstream stages of the value chain. One common solution is to substitute
equipment for labor in order to achieve lower costs and better performance,
than local companies using traditional business systems.
Favorable Logistics - This is seldom a barrier to globalization for informationbased services. Using electronic channels to deliver such services allows
providers to concentrate production in locations that have specific expertise and
to offer cost savings or other meaningful advantages.
Information Technology - For information-based services the growing
availability of broadband telecommunication channels capable of moving vast
amount of data at a great speed is playing a major role in opening up new
markets. Significant economies may be gained by centralizing information hubs
on a global basis. The use of information technologies may allow companies to
benefit from favorable labor costs or exchange rates by consolidating
operations of supplementary services or back-office functions in just one or a
few countries.
Government Policies and Regulations - Nations may perceive both an
economic and a cultural threat in unrestricted information-based services
through electronic channels. For information based services special policies on
education censorship, public ownership of communications and infrastructure
quality may apply; technical standards may vary and government policies may
distort prices.
Transferable Competitive Advantage - The single most important
competitive globalization drive arises from transferability of competitive
advantage. Advantage in management systems can be a basis for globalization.
Figure B.6 Industry Globalization Drivers for Service Firms
33
Most industry globalization drivers do apply to services, but their impact varies by
service type and even by industry. This conclusion highlights the importance of
conducting a systematic evaluation of globalization drivers for individual industries,
rather than taking generalized views that service businesses can be more or less
easily globalized than can manufacturing businesses.
In addition to the globalization drivers stated by LOVELOCK and YIP, MOORE
and BIRKENSHAW argue that service firms benefit primarily from the ability to
manage their proprietary knowledge1. Elements include assimilating new knowledge
from around the world, building new knowledge through alliances and the
interaction of professional employees, and disseminating knowledge effectively
through the firm.
B.1.2.2
Information-based Service - IJVs
Information-based Services JVs have the potential to create economic value but they
are also distinguished by the fact that knowledge may be created and differently
appropriated by the partners involved.
• Global Location of Value Adding Service Activities: Location of a business's
activities and how to coordinate them constitute critical choices in global
strategy. Many service businesses need local presence for their downstream
activities. But at the same time, they can take advantage of differences in
national comparative advantage to build more efficient and effective value
chains.
• Global Marketing of Services: A worldwide business uses global marketing
when it takes the same or similar approach or content for one or more elements
of the marketing mix. Whether to use it depends on such industry globalization
drivers as common customer needs. In contrast, lack of inventories in many
service businesses means that such firms need worry less about using global
pricing.
• Global market participation: Some types of service business seem very easy to
spread around the world and others very difficult. In contrast, some essential
services such as banking, telecommunication, hospitals and airlines operate in
heavily regulated environments making it difficult to get rapid penetration of
foreign markets.
Historically, businesses that rely on the trust and reputation of their personnel have
found it difficult to demonstrate quality to potential customers and to adopt a
1 Moore, K. and Birkenshaw, J., Academy of Management Executive, 1998.
34
professional style that fits the local culture. By their virtual nature most informationbased ISFs should find it the easiest to locate globally.
A key point is that making broad generalizations about services cannot be expected
to provide useful insights into opportunities for globalization. Information based
services offer management greater flexibility to split the back office and front office
with opportunities to centralize the former on a global basis. Key issues in
globalization include the constraint imposed by language, culture and government
regulations.
Global service firms typically replicate the entire value chain in each country of
operation, rather than allocating resources globally for maximum cost efficiency1.
Competitive advantage is gained, not through the sharing of activities but through
the transfer of intangible assets from country to country, internally or through
strategic alliances such as IJVs. These intangible assets include corporate name,
image and reputation, proprietary services, operating procedures, and customer
knowledge. Increasingly, the sources of these intangible assets are not in the
headquarters (HQ) of the organization, but in various affiliates and partners around
the world2.
IT has emerged as a key driver for information-based services. In theory, a global
company could centralize its billing on a global basis using postal or
telecommunication distribution channels to deliver the bills to customers, suitably
converted to local currency. Like manufacturers, ISFs should be looking for
opportunities to exploit differences in national comparative advantages as they seek
to build more efficient value chains.
Difficulties in evaluating ISFs can lead to uncertainty but this problem can be offset
by strong branding and a globally consistent use of corporate design elements.
Hence, the primary task of the brand name of trademark for a service may be to offer
recognition and reassurance rather than performing other functions such as
positioning or local adaptation.
1 One prime example for this are the back-activities that can be located in low-cost countries, and
even in professional activities there are benefits to be gained from tapping into well-educated
but relatively low-salary countries such as India.
2 Moore, K and Birkenshaw, J., Academy of Management Executive, 1998.
35
Which are the benchmarks, the best practice leaders in the „knowledge“ business,
the firms whose source of competitive advantage resides in their capacity to tap the
collective intelligence of members and to work together to create value for
customers?
With their flat structures, service-oriented workforce and participative decision
processes, ISFs can provide a model toward which larger, more hierarchical
organizations can turn for guidance as they become leaner, quicker and more
flexible. ISFs represent a more pure form of knowledge-based business1.
ISF’s have mastered the capabilities for collaboration and learning that created value
for the firms beyond the value of each individual’s skills. They have achieved these
capabilities by creating a „generative cycle“ of mutually reinforcing, self-sustaining
employee and client development. For a global service firm, new knowledge comes
primarily from two important sources: interactions with team members within the
global organizational network, and interaction with clients.
Nowhere is potential strategic value of learning more evident than in ISFs. The
capability for collaboration across boundaries whether functional, geographical or
line of business, allows the firms to find broader solutions of today’s client
problems. Next, a capacity for collaborative learning unleashes the creativity
involved in joint exploration of solutions that transcend technical boundaries and
define tomorrow’s possibilities2. Even the ability to collaborate to achieve singleloop learning of an incremental nature is valuable; transformed by leveraging
diverse perspectives in double-loop learning that reexamines fundamental
assumptions, it can add tremendous value especially in changing environments3.
Service firms across a variety of industries mutually reinforce the processes of
employee and market development. Processes for recruiting, developing and
retaining professional staff develop a capability for collaborative learning explored
together within a strategic context. The processes of individual professional
development and business development reinforce each other to produce significant
strategic value. The key elements of the model are the process through which, and
1 Liedtka et al., Sloan Management Review, 1997 ; Quinn, J.B. "Intelligence Enterprise", 1992.
2 Lieonard-Barton, D. “Wellspring of Knowledge”, 1995.
3 For further discussion, see next chapter
36
the context within which a firm enhances and extends individual expertise through
collaboration and the process through which a firm leverages individual learning to
create a capacity for collaborative learning. BHATT argues that the interaction
between technologies, techniques and people allow an organization to manage its
knowledge effectively1. By creating a nurturing and “learning-by-doing” kind of
environment, an organization can sustain its competitive advantages.
Knowledge Evolution Mechanisms
GENERATIVE
VARIATION
Scanning
Recombination
INTERNAL
SELECTION
Kn. Articulation
Kn.Codification
External
Stimuli &
Feedback
Cognition
Action
RETENTION
Exp. Accumulation
Internal Feedback
REPLICATION
Kn. Sharing/Transfer
Adaptive Variation
Problem Solving
Figure B.7 Knowledge Generative Cycle
B.2 Knowledge Management Theory
B.2.1 Defining Organizational Knowledge
Knowledge is an organized flow of information that is anchored to commitment and
beliefs of its holder2. Organizational knowledge is represented as storage of belief
systems, collective memories of past events, stories, as well as frames of reference
and values3. It resides in the relations between individuals, interpreting them, and
therefore is more than the sum of all the individual knowledge databases1.
1 Bhatt, C.D., Journal of Knowledge Management, 2001.
2 Nonaka, I., Organization Science, 1994.
3 Lyles, M.A. and Salk, J.E., Journal of International Business Studies, 1996.
37
Knowledge is considered as one of the most important strategic resources of the
organization. Managing it effectively is essential to sustaining competitive
advantage2. Knowledge – especially context-specific, tacit knowledge embedded in
complex organizational routines – tends to be unique and difficult to imitate.
Acquiring knowledge takes time, and firms can greatly reduce their race for learning
by entering into strategic alliances with partner firms, especially in highly uncertain
environments.
Knowledge can be incorporated in language, stories, and rules, tools, resulting in an
increased capacity for decision taking and action to achieve some purpose3.
Organizational data, information, knowledge and wisdom, all of which emerge from
the social process of an organization are not private. To show the linkages between
them, the following definitions are provided and summarized.
According to DAVENPORT and PRUSAK4, knowledge is actually “a fluid mix of
framed experience, values, contextual information, and expert insight that provides a
framework for evaluating and incorporating a new experience and information”.
This definition on knowledge is parallel with what LANG has in mind. She has
pointed out that human beings are the main element in knowledge creation5. That
knowledge is constructed through circulation of knowledge and resides within the
individual (in informal, unwritten routine practice) in communities that are brought
together by common interests.
1 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995.
2 Kogut, B. and Zander, U., Journal of International Business Studies, 1995; Grant, R.M.,
Organization Science, 1996.
3 Wong, W.L.P. and Radcliffe, D.F., Technology analysis and Strategic Management, 2000.
4 Davenport, T.H. and Prusak, L., “Working Knowledge: How Organizations Manage What They
Know”, 1998.
5 Lang, J.C., Journal of Knowledge Management, 2001.
38
The Knowledge / Information Value Chain
Innovation
“Wisdom”
Knowledge
Information
Data
Adapted from :http://www.iftf.org/html/iftflibrary/humanresources/infotoknowledge.pdf
Figure B.8 Knowledge value chain
Data constitutes the values of observable, measurable or calculable attribute. Data
alone does not provide information. Information, in general terms, is data plus
conceptual commitments and interpretations. Information is data extracted, filtered
or formatted in some way.
Knowledge is a subset of information, which has been validated according to the
rules of its surroundings. Wisdom, finally, has a more active component than data,
information, or knowledge. It is the application of knowledge expressed in principles
to arrive at prudent, sagacious decisions about complex situations1. Once those
engaged in the field of KM become aware of the knowledge base on
“metaknowledge” (knowledge about knowledge and its management) it will enable
the field of KM to “multiply its options for designing its own future”2.
1 Bellinger, G., kmmgt.htm, 2000.
2 Carrillo, F.J. (1999).
39
Knowledge Categorization
Explicit and Tacit Knowledge
There is a multitude of knowledge categorizations based on POLYANI's
differentiation between tacit and explicit knowledge1. The most relevant to the IJV
framework are represented below. POLYANI first categorized the prominence of
knowledge as being either tacit or explicit. Explicit knowledge encompasses facts
that can be transferred through formal communication and is codifiable in a
systematic language2. Explicit knowledge can be expressed in words and numbers
and shared in the form of data, scientific formulae, specification manuals, and
similar forms. This kind of knowledge can be readily transmitted between
individuals formally and systematically.
Tacit knowledge, on the other hand, is difficult to formalize and accordingly to
communicate3. It is highly context-specific, has a strong emotional aspect and
includes underlying systems of rules and beliefs that guide actions4. Tacit
knowledge is anchored and constantly enhanced by personal experience. Indeed, it is
a product of this experience and cannot be learned any other way. Tacit knowledge
is a continuous activity and embodies an “analogue” quality5. In this context,
communication between individuals “may be seen as an analogue process that aims
to share tacit knowledge to build mutual understanding. This understanding involves
a parallel processing of the complexities of the current issues, as the different
dimensions of a problem are processed simultaneously”6. It involves intangible
factors embedded in personal beliefs, experiences, and values. An inability to
articulate or describe an organizational process indicates that the knowledge is
highly tacit. The tacit dimension is often implied in the use and implementation of
explicit knowledge, i.e. knowledge that is codified into procedures or hard data.
1 Polyani, M. “ The Tacit Dimension”, 1966.
2 op.cit.
3 Nonaka, J., Organization Science, 1994.
4 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
5 Bateson, G. "Steps to Ecology of Mind", 1973 ; Nonaka, I., Byosiere,C.C., Borucki, P. and
Konno, N., International Business Review , 1994.
6 Nonaka, I., Byosiere, P., Borucki, C.C. and Konno, N., International Business Review, 1994.
40
Many studies have gone on to use this differentiation between tacit and explicit
knowledge for further categorization and as the base for understanding KM
processes1.
Tacit knowledge is highly personal and hard to formalize, making it difficult to
communicate or share with others. Subjective insights, intuitions, and hunches fall
into this category of knowledge. Tacit knowledge is deeply rooted in an individual's
actions and experience as well as in the ideals, values, or emotions the person
embraces. There are two dimensions to tacit knowledge. The first is the technical
dimension, which encompasses the kind of informal personal skills or crafts often
referred to as know-how. The second is the cognitive dimension. It consists of
beliefs, ideals, values, schemata, and mental models which are deeply ingrained in
individuals and which are often taken for granted. While difficult to articulate, this
cognitive dimension of tacit knowledge shapes the way we perceive the world.
• Tacit knowledge is complex since it involves, by definition, the ability to cope
with complexity
• Tacit knowledge is acquired essentially through experience and through trial and
error
• The passing on of tacit knowledge is through demonstration, observation,
imitation, practice, and feedback (a process often labeled as apprenticeship and
socialization); These require close personal contact over a prolonged period of
time
• The tacit knowledge that results from organizational learning is collective
knowledge; this makes the transfer of tacit knowledge even more problematic
• The tacit knowledge that needs to be transferred may not be static but
continuously evolving
RYLE distinguishes between know how and know that2. SACKMANN takes this
differentiation one step further and differentiated between direction (knowing-what),
recipe (knowing-how), and axiomatic (knowing-why) knowledge3. Knowing what
describes the content of technical or social knowledge. This knowledge can often be
more easily codified and transferred. Knowing how refers to the functionality and the
1 The differentiation between tacit and explicit knowledge has been carried further in various
studies; see Hedlund, G. , Nonaka, J. Models of Knowledge Management in the West and
Japan. In “Implementing Strategic Processes, Change, Learning, and Cooperation” 1993
(articulated knowledge); Andersen Knowledge Management Study, 1998 ; Nonaka, I.,
Organization Science, 1994 ; Ryle, G. “The Concept of Mind”, 1958.
2 Ryle, G. “The Concept of Mind”, 1958.
3 Sackmann, S.A. “Cultural Knowledge in Organizations - Exploring the Collective Mind”, 1991.
41
relationships between the elements and direction of knowledge. This is often tacit,
and requires a „learning-by-doing“ approach, through which the „skills“1 can be
passed on. Finally knowing why constitutes the reasons and principles behind the
other types of knowledge. This is the most difficult knowledge to transfer, and it can
be created only over a longer period of time. Lack of axiomatic knowledge can lead
to causal ambiguity, whereby the reasons for success or failure of an activity remain
incomprehensible2.
BLACKLER distinguished five different types of knowledge3:
•
•
•
•
•
Embrained: depends on conceptual skills and cognitive abilities
Embodied: action-oriented
Encultured: the process for achieving shared understandings
Embedded: resides in systemic routines
Encoded: information conveyed by signs and signals
DUNNING differentiates four context-specific types of knowledge4 that are relevant
to identifying the knowledge gaps that are the motivation for firms to enter into
strategic alliances:
• Firm-specific knowledge pertains to the business itself such as “the technology
used, the products and operations, the services provided, the management of the
employees, the history of the firm, and the systems and structures supporting the
firm’s internal activities”5. Technological expertise also describes the „inputoutput“ processes of the organization’s daily business6.
• Market-specific knowledge is one of the classic motivations behind IJVs.
Foreign firms use the IJV as a mode of market entry, for the conditions for
transfer of market knowledge from the local parent firm hold the most promise in
the surroundings of an independent entity7. Common forms of market-specific
knowledge are knowledge of the IJVs customers and suppliers, local restrictions
and government policy, and local culture and customs.
1 Nonaka, I. and Takeuchi, H. “The Knowledge Creating Company”, 1995.
2 Rumelt, R.P. Towards a Strategic Theory of the Firm, In "Competitive Strategic Management",
1984. ; Simonin, B. Strategic Management Journal, 1999.
3 Blackler, F. Organization Studies, 1995.
4 Dunning, J.H. Journal of International Business Studies, 1988.
5 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997. p. 380
6 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991.
7 Hedlund, G. and Nonaka, I. "Implementing Strategic Processes, Change, Learning and
Cooperation", 1993.
42
• Partnering knowledge is learning and knowing how to conduct a successful
partnership and is an important source of comparative advantage for partners in
IJVs. Up-to date, the main focus has been on financial and control issues, and not
on the human and relational issues1. Partnering knowledge is a key benefit of the
IJV and other collaboration, for it seems close at hand to say that collaborating is
a learned skill as well as a critical success factor of IJVs, and that greater IJV
experience leads to higher rates of alliance success2.
• Resource integration knowledge encompasses the technical know-how required
to transform the available resources so that they function in the IJV context. The
resources that the IJV partners bring to the JV must be integrated to function
cohesively and effectively in the new environment3.
Each type of knowledge requires a different approach to knowledge transfer and
creation. In order to achieve optimal effectiveness of KM for all categories of
knowledge, it is essential that all KM processes be integrated within the
organizational framework.
B.2.2 Organizational Learning
The term learning refers to the development of insights, knowledge and associations
between past actions, the effectiveness of those actions, and future actions4.
According to CHAKRAVORTY5 and HEDBERG6 the learning process is reflected
in structural elements and outcomes that are the result of growing insights and the
successful restructuring of organizational problems. Hence learning comprises both
action outcomes and changes in the state of knowledge7.
1 Kanter, R.M., Harvard Business Review, 1994.
2 Conference Board. " Strategic Alliances Survey ", 1994.
3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
4 Fiol, C.M. and Lyles, M., Academy of Management Review, 1985.
5 Chakravorty, G.S. "Of Grammatology", 1981.
6 Hedberg, B.L.T. How Organizations Learn and Unlearn. In “Handbook of Organizational
Design”, 1981.
7 Lyles, M. A., International Business Review, 1994.
43
Organizational learning consists of the development of skills and knowledge to the
associations between past actions, the effectiveness of those actions and future
actions1. The translation of new knowledge into action is the basis for creating new
skills that underpin a firm’s competitive knowledge2. Among the many critical
aspects that make organizational learning of such high importance is the vision of
how knowledge migrates from the minds of individuals to a state where it is
mutually held in the minds of many.
Organizational learning is a systems-level concept that can become useful only when
its component parts are thoroughly understood and brought down to an operational
level in order to understand how knowledge travels and changes within
organizations and how these processes can be optimized for maximum
effectiveness3. Individual knowledge must be shared with other individuals and
groups in order for it to have an impact on organizational effectiveness and
performance.
New knowledge provides the basis for organizational renewal and sustainable
competitive advantage. In various studies, knowledge acquisition has been linked
with organizational performance as well with the performance of specific
organization tasks. Understanding knowledge means an appreciation for the
complexities of acquiring, transferring, and integrating knowledge in a learning
environment, and increasing complexity due to cross-border knowledge and the
challenge of renewing organizational skills in various different settings.
There are currently two major views on the nature of knowledge. The cognitivist
perspective is the most firmly established and well known. "Learning" means the
development of increasingly complete representations, and the cognitive system
works when its representations correspond to the objects or events "out there". To
the cognitivist, knowledge is explicit, capable of being encoded and stored, and easy
to transmit to others4.
1 Fiol, C.M. and Lyles, M. A., Academy of Management Review, 1985.
2 Inkpen, A., Academy of Management Executive, 1998.
3 Hedlund, G. and Nonaka, I., Models of Knowledge Management in the West and Japan. "
Implementing Strategic Processes, Change, Learning, and Cooperation", 1993.
4 Van Krogh, G., California Management Review, 1998.
44
ARGYRIS defines organizational learning as the process of "detection and
correction of errors." In this view, organizations learn through individuals acting as
agents for them: "The individuals' learning activities, in turn, are facilitated or
inhibited by an ecological system of factors that may be called an organizational
learning system"1.
ARGYRIS differentiates between three types of organizational learning:
• Single-loop Learning: With single-loop learning, organizational learning occurs
when errors are detected and corrected, but the generative values, i.e. the
underlying assumptions remain the same. The fundamental nature of the
organization's activities remains intact.
• Double-loop Learning: Double-loop learning is when, in addition to single-loop
learning, the organization questions and modifies existing norms, procedures and
policies. This involves changing the organization’s knowledge base or firmspecific competencies. Strategic Learning is the “process by which an
organization makes sense of its environment in ways that broaden the range of
objectives it can pursue or the range of resources or the actions available to it
for processing these objectives.”
• Deutero-learning: Deutero-learning occurs when organizations learn how to
carry out single-loop and double-loop learning. The first two forms of learning
require that organizations must know that learning must occur. Deutero-learning
incorporates this “learning to learn” and the creation of the appropriate
environment and processes.
Relationship between single and double loop learning has been described by
ARGYRIS2.
HUBER considers four constructs as integrally linked to organizational learning. He
clarifies that learning need not be conscious or intentional. Furthermore, learning
does not always increase the learner's effectiveness, or even potential effectiveness.
Moreover, learning need not result in observable changes in behavior1.
The current view of organizations is based on adaptive learning, which is about
coping. Adaptive learning or single-loop learning focuses on solving problems in
the present without examining the appropriateness of current learning behaviors.
Adaptive organizations focus on incremental improvements, often based upon the
past track record of success. In principle, they don't question the fundamental
1 Argyris, C. "On Organizational Learning", 1992.
2 Argyris, C., Journal of Management Education, 1977.
45
assumptions underlying the existing ways of doing work. The essential difference is
between being adaptive and having adaptability.
The learning organization is in many ways, a natural evolution of older management
themes, culminating in the emphasis on empowerment and self-management of the
recent past.
A learning organization, as defined by SENGE, is characterized by "transformation
of the relationship of the organization to the individual and increased capacity for
adaptation and change."2 SENGE defines the Learning Organization as the
organization "in which you cannot not learn because learning is so insinuated into
the fabric of life."3 Also, he defines Learning Organization as "a group of people
continually enhancing their capacity to create what they want to create", that is a
concern for learning by all organizational members on behalf of the organization.
The concept of ‘Learning Organization’ is increasingly relevant given the increasing
complexity and uncertainty of the organizational environment. As SENGE remarks:
"The rate at which organizations learn may become the only sustainable source of
competitive advantage."
McGILL et al. define the ‘Learning Organization’ as "a company that can respond
to new information by altering the very "programming" by which information is
processed and evaluated."4 The following table summarizes the five key issues of
the learning organization:
McGILL et al. do not distinguish between ‘Learning Organization’ and
‘Organizational Learning’. They define ‘Organizational Learning’ as the ability of
an organization to gain insight and understanding from experience through
experimentation, observation, analysis, and a willingness to examine both successes
and failures.
The current view of organizations is based on adaptive learning, which is about
coping. SENGE notes that increasing adaptiveness is only the first stage and that
1 Huber, G.P. Organization Science, 1991.
2 Senge, P., Sloan Management Review, 1990.
3 Op.cit..
4 McGill et al., Organizational Dynamics, 1992.
46
companies need to focus on generative learning or "double-loop learning"1.
Generative learning emphasizes continuous experimentation and feedback in an
ongoing examination of the very way organizations go about defining and solving
problems. In SENGE's view, generative learning is about creating - it requires
"systemic thinking," "shared vision," "personal mastery," "team learning," and
"creative tension" [between the vision and the current reality]. Generative learning,
unlike adaptive learning, requires new ways of looking at the world.
In contrast, adaptive learning or single-loop learning focuses on solving problems in
the present without examining the appropriateness of current learning behaviors.
Adaptive organizations focus on incremental improvements, often based upon the
past track record of success. Essentially, they don't question the fundamental
assumptions underlying the existing ways of doing work.
The exercise of these 5 "Disciplines" increases organizational effectiveness, greater
capacity for organizational adaptation to a complex environment, and a fuller
utilization of the knowledge within the organization.
ARGYRIS suggests that there are "deeper" reasons behind the failure to implement
Management Information Systems (MIS), especially when the technology was used
to deal with the more complex and ill-structured problems faced by the organization.
He suggests that the MIS and other KM tools need to be viewed as a part of a more
general problem of organizational learning. He avers that an organization may be
said to learn to the extent that it identifies and corrects error. This requirement, in
turn, implies that learning also requires the capacity to know when it is unable to
identify and correct errors.
He further argues that the overwhelming amount of learning done in an organization
is single loop because the "underlying program is not questioned": it is designed to
identify and correct errors so that the job gets done and the action remains within
stated policy guidelines. "The massive technology of MIS, quality control systems,
and audits of the quality control systems is designed for single loop learning". The
trouble arises when the technology is not effective and when the underlying
objectives and policies must be questioned.
1 Argyris, C. "On Organizational Learning", 1992.
47
WEICK argues that the defining property of learning is the combination of same
stimulus and different responses, however it is rare in organizations; meaning either
organizations don't learn or that they learn but in nontraditional ways. He argues that
organizational learning perhaps involves a different kind of learning than has been
described in the past. "The process within the organization by which knowledge
about action-outcome relationships and the effect of the environment on these
relationships is developed"1. In his view, "a more radical approach would take the
position that individual learning occurs when people give a different response to the
same stimulus, but organizational learning occurs when groups of people give the
same response to different stimuli2."
The link between manager’s understanding of a changed program, commitment and
involvement is described by SAVOLAINEN3.
To maintain adaptability, organizations need to operate themselves as
"experimenting" or "self-designing" organizations. They should maintain themselves
in a state of frequent, nearly continuous change in structures, processes, foci, and
goals. Even in the face of apparently optimal adaptation HEDLUND and
NONAKA4 argue that operating in this mode is efficacious, perhaps even required,
for survival in fast changing and unpredictable environments5. They reason that
probable and desirable consequences of an ongoing state of experimentation are that
organizations learn about a variety of design features and remain flexible and
attuned to their business environment.
• Lower level learning is the result of repetition and routine. It results in standard
operating procedures or success programs or in new management systems that
handle repetitive, unchanging systems.
• Higher level learning involves an adjustment of overall missions, beliefs and
norms. It results in new frames of reference, new skills for problem formulation
or issue perception, new values, unlearning of past success programs and
discrimination skills.
1 Duncan, R. and Weiss, A., Research in Organizational Behavior , 1979.
2 Weick, K.E., Organization Science, 1991.
3 Savolainen, T. Journal of Workplace Learning, 2000.
4 Hedlund, G. and Nonaka, I. “Implementing Strategic Processes, Change, Learning, and
Cooperation”, 1993.
5 Nystrom et al., “The Management of Organization Design”,1976; Hedberg et al.,Administrative
Science Quarterly, 1976; Starbuck, W.H., American Sociological Review, 1983 ; Hedberg et
al., International Studies of Management and Organization”, 1977.
48
The following table summarizes the most relevant typologies of organizational
learning.
Source
Lower Level
Higher Level
Argyris &
Schon (1978)
Single- loop learning :
solves a problem or
reacts to a change in its
environment without
changing the underlying
norms
Double- loop learning :
occurs when more radical
solutions are required. An
organization modifies its
underlying norms, rules,
policies, objectives or
procedures in response to
external stimuli.
Fiol and Lyles
(1985)
Lower level learning:
short- term, superficial
and temporary
formation of
associations.
Higher level learning :
responses to changes in the
environment requiring a
change in action.
Senge (1990)
Adaptive learning :
coping and dealing with
the current environment
in new and better ways,
and equates well with
single- loop learning.
Generative learning :
moves beyond adaptation,
requiring individuals and
organizations to develop
new ways of looking at the
world.
DiBella (1998)
Incremental learning :
focusing knowledge on
what is already known
or being done.
Transformational learning :
knowledge that challenges
the assumptions about what
is known or being done.
Pedler,
Burgoyne and
Boydell
(1997).
Implementing : doing
things well;
conforming; dependent
and passive
Improving : doing things
better; competing;
independent and active
Comments
Single- loop learning reinforces
established ways of working and
problem solving and will not lead to
significant changes in ways of
working in the long term. In double
loop learning the organization
questions and re-frames the models
which guide decision making and
behavior in response to a change in
their external environment and
consequently develops new ways of
working.
Lower level learning is relatively
simple and may be no more than
repetition of past behavior. Higher
level learning results in the
development of new complex rules
and associations which change
behavior.
Adaptive learning can essentially be
seen as representing organizations
and individuals propensities to
behave in a ‘conservative’ manner.
Generative learning can be
characterized as the development of
new skills and new ways of
working. Essentially generative
learning may also be thought of as
a propensity to ‘innovate’.
Incremental and transformative
modes seen as complementary
rather than competing
Organizations may have a
preference for one mode but ‘a
sound learning system can benefit
from using both approaches’.
They identify a third level of
learning which they label
integrating’ which occurs through
‘changing the context or
relationships. A holistic approach
- doing better things by seeing and
creating new possibilities.
Equivalent to Bateson’s and Argyris
and Schon’s triple loop or deutero learning.
Figure B.9 Typologies of Organizational Learning
49
Knowledge Management Theories
"Knowledge Management deals with the critical issues of organizational adaptation,
survival and competence in face of increasingly discontinuous environmental
change. Essentially, it embodies organizational processes that seek synergistic
combination of data and information processing capacity of information
technologies and the creative and innovative capacity of human beings"1.
The Role of Management in the Learning Organization
The leadership role in the learning organization is that of a designer, teacher, and
steward who can build shared vision and challenge in the prevailing mental models.
He / she is responsible for building organizations where people are continually
expanding their capabilities to shape their future -- that is; leaders are responsible for
learning.
The management has to support the transition of the organizational network to a
knowledge-based one, encourage and manage each step of the knowledge creation
chain.
1 Malhotra, Y., Knowledge Management in Inquiring Organizations. In. "Proceedings of the 3rd
American Conference on Information Systems”, Indianopolis, 1997.
50
Author
Nonaka (1994)
Von Krogh et al
(2000)
Types of Knowledge
Classification
Tacit Knowledge
Explicit Knowledge
Global innovator
Gupta and
Integrated Player
Govindarajan
(1991, 2000, 2002) Local innovator
Knowledge
Transfer
Transfer of
expertise or
strategic market
data
Knowledge
Management processes
Away from static and
passive Processes
derived from knowledge
conversion
Use of formal
integrative
mechanisms
Global mindset
Inkpen and
Beamish (1997)
Inkpen (2000)
Local knowledge
Product knowledge
Instability as factor Knowledge acquisition
from IJV partners
in knowledge
transfer
Inkpen (1998,
1998, 2000, 2000)
Tacit knowledge
Explicit knowledge
Through
knowledge
connections
Inkpen, Crossan et
al. (1995)
Szulanski (1996)
Tacit knowledge
Explicit knowledge
Parkhe (1991)
Spender (1992)
Pucik (1991)
Technology
Product knowledge
Establishment of
knowledge connections
through generic
management processes
• Personnel transfers
• Alliance-parent
• Interaction
• Technology sharing
• Strategy linkages
Internal transfer of best
practices
Stickiness of
knowledge is
critical factor for
transfer
Interfirm diversity Building of trust
Collaborative learning
as a factor in
knowledge transfer mindset
Culture(Corporate
and national)
Strategy of
partners
Knowledge generation
Knowledge application
Technology
transfer as
Knowledge creation
Knowledge conversion of
explicit and tacit
knowledge: Socialization,
Combination
Internalization,
Externalization
Knowledge Spiral up
through individual, Group,
Organizational and Interorganizational level
Amplification, modification
and clarification
Interpreting, Integrating
institutionalizing
51
knowledge transfer
Simonin (1999)
Simonin &
Helloloid (1993)
Ambiguity as a
factor for
knowledge transfer
Organizational learning in
IJV
Firm knowledge
Product knowledge
Market knowledge
Huber (1991)
Hamel (1991)
Skill based view of
the firm
Vertical transfer through
language (individual
level)
Higher order
organizational principles
Formal / informal
structures
Horizontal knowledge
transfer through
boundary spanners
Kogut and Zander
(1992, 1996)
Kogut (2000)
Blackler (1995)
SA as
opportunities for
Internalization of
partner’s skills
Intent,
Transparency
Receptivity, As
determinant of
sustainable
learning
“grafting” new
knowledge
internalization process
Knowledge acquisition,
information distribution,
information
interpretation, and
organizational memory.
IJV as “race to learn”,
fundamentally
transitory, Value
creation , Value
appropriation, Creation
of a collaborative
membrane
Embodied
Embrained
Encultured
Embedded
Encoded
Figure B.10 Knowledge Management Theories
52
B.2.3 Overview of the Knowledge Management Processes
In a report on the link between KM and organizational learning, the Conference
Board emphasized the following definition of KM:
Knowledge Management is an integrated, systematic approach to identifying,
managing, and sharing all of an enterprise's information assets, including databases,
documents, policies, and procedures, as well as previously unarticulated expertise
and experience held by individual workers. Knowledge management is an approach
to adding or creating value by more actively leveraging the know-how, experience
and judgment resident within and in many cases outside of an organization1.
An effective KM strategy must aim to excel at two central tasks: creating and
acquiring new knowledge, and sharing and mobilizing that knowledge throughout
the corporate network. GUPTA and GOVINDARAJAN quantify a firm’s
intellectual capital as the stock of the knowledge held by individuals and corporate
units multiplied by the velocity at which this knowledge flows and is disseminated
throughout the organization2. KM is a collective endeavor that is open to social and
political processes that can result in conflict from different organizational
subcultures and ideologies3.
The task of accumulating knowledge can be divided into 3 subtasks:
• Knowledge creation
• Knowledge acquisition
• Knowledge retention (organizational memory)
The task of mobilizing knowledge can also be divided into a set of subtasks
• Knowledge identification (uncovering opportunities for knowledge sharing)
• Knowledge outflow ( motivating potential senders of knowledge to share it)
• Knowledge transmission (building effective and efficient channels for the
transfer of knowledge)
• Knowledge outflow (motivating potential receivers to accept and use the
incoming knowledge)
1 Ruggles, R., California Management Review, 1998.
2 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991.
3 DeLong, D. and Seeman, P., Organizational Dynamics, 2000.
53
ALMEIDA and GRANT1 classify two categories of knowledge activities.
According to SPENDER2, these increase the stock of knowledge as knowledge
generation, and those, which involve the utilization of that stock of knowledge
application. Their knowledge-leveraging model of the MNC implies a more
complex view of the KM processes within the firm. An empirical survey by
CHONG identified KM as “a process of leveraging and articulating skill and
expertise of employees, supported by IT”3 . BHATT sees KM as “a process of
knowledge creation, validation, presentation, distribution and application”4.
Knowledge Management Processes within the Firm
Knowledge Creation
– Knowledge Creation
– Learning-by-doing
– External Learning
Knowledge Application
– Knowledge Replication
– Knowledge Integration
Creating new (mainly technical and
scientific) knowledge through research
Accumulating know-how (especially that
relating to processes of
experience(“moving down the learning curve”)
The transfer of both explicit and tacit
knowledge from outside the firm’s
boundaries
Duplicating existing organizational
knowledge(typically in a different
location) in order knowledge ecos of
scale
Combining different types of knowledge
to transform inputs into outputs
Figure B.11 Knowledge Management Processes within the Firm
DAVENPORT and SHORT5 define business process as "a set of logically related
tasks performed to achieve a defined business outcome." A process is "a structured,
measured set of activities designed to produce a specified output for a particular
1 Almeida, P. and Grant, R.M. International Corporations and Cross Border Knowledge Transfer
in the Semiconductor Industry. "A Report to the Carnegie-Bosch Institute", 1998.
2 Spender, J. -C., Management of Technology III, 1992.
3 Chong, C.W. et al., Journal of Intellectual Capital, 2000.
4 Bhatt, C.D., Journal of Knowledge Management, 2001.
5 Davenport, T.H. and Short, J.E., Sloan Management Review, 1990.
54
customer or market. It implies a strong emphasis on how work is done within an
organization"1. In their view processes have two important characteristics:
• They have customers (internal or external)
• They cross organizational boundaries, i.e., they occur across or between
organizational sub-units. One technique for identifying business processes in an
organization is the value chain method proposed by PORTER and MILLAR2.
The knowledge value chain treats human systems as key components that engage in
continuous assessment of information archived in the technological systems. In this
view, the human actors do not implement 'best practices' without active inquiry.
Human actors engage in an active process of sense making to continuously assess
the effectiveness of 'best practices.' The underlying premise is that 'best practices' of
yesterday may not be taken for granted as 'best practices' of today or tomorrow.
Hence, double-loop learning, unlearning and relearning processes need to be
designed into the organizational business processes.
Processes are generally identified in terms of beginning and end points, interfaces
and organization units involved. High-impact processes should have process
owners, a sole individual responsible for the end-to-end process.
McELROY has pointed out the differences between what he has identified as two
generations of KM. First generation KM focuses on knowledge sharing – on how to
distribute existing organizational knowledge, usually through technology. In
contrast, second generation KM focuses on knowledge creation – how to satisfy
organizational needs for new knowledge, usually through processes of learning and
value creation3.
Second-generation researchers on KM see knowledge creation, or innovation, as the
product of KM processes, the understanding and management of which can lead to
dramatic increases in organizational creativity and competitive advantage4. Research
along the lines of SENGE view knowledge within its lifecycle, and through the
understanding of this life cycle, structure and dynamics of KM processes can
1 Davenport, T.H. “Process Innovation”, 1993.
2 Porter, M. and Millar, V., Harvard Business Review, 1985.
3 McElroy, M.W., Journal of Knowledge Management, 2000.
4 Senge, P., Sloan Management Review, 1990.
55
enhance an organization's ability to learn and adapt in highly complex and fastchanging environment.
Business processes can play a similar role. Ideally, processes should allow groups,
through negotiation, to align themselves with one another and with the organization
as a whole. Business processes can enable productive cross-boundary relations as
different groups within an organization, negotiate and propagate a shared
interpretation. The processes provide some structure, the negotiations provide room
for improvisation and accommodation and the two together can result in
coordinated, loosely coupled, but systemic behavior1.
This process perspective can be applied to what can be managed about knowledge,
proposing eight major categories of knowledge focussed activities.
•
•
•
•
•
•
•
•
•
Generating new knowledge
Accessing valuable knowledge from outside sources
Using accessible knowledge in decision making
Embedding knowledge in processes, products, and/or services
Representing knowledge in documents, databases and software
Facilitating knowledge growth through culture and incentives
Transferring existing knowledge into other parts of the organization
Measuring the value of knowledge assets and/or impact of KM
The Knowledge Life Cycle
There are three basic stages in the knowledge life cycle: knowledge acquisition,
Knowledge creation, and knowledge retention.
B.2.3.1
Knowledge Evaluation
An important factor of the KM processes of a firm is the constant need for
evaluation and re-evaluation and benchmarking, as this knowledge provides primary
opportunities (and constraints) from which to compete and grow over the near-tointermediate term. ZACK also develops the knowledge-based SWOT analysis,
mapping the firm’s knowledge resources and resource gaps against its strategic
opportunities and threats, to understand their strengths and weaknesses.
Organizations can use this map to strategically guide their KM efforts. KM strategy
can be thought of as balancing knowledge based resources and capabilities to the
knowledge required for attaining a sustainable competitive advantage. Success
1 Weick, K., California Management Review, 1997.
56
requires dynamically aligning those knowledge-based requirements and its own
capabilities.
First the firm has to categorize the various types of knowledge according to the
guidelines shown above. Having performed a strategy evaluation of knowledgebased resources and capabilities, an organization can determine which knowledge
should be developed or acquired. The strategic focus of KM within a firm should be
to close the knowledge gap, while striving to exploit any “excess knowledge”.
Ultimately, the ideal strategy for most companies is to maintain a balance between
exploration and exploitation within all areas of strategic management1.
No
Exploited
Opportunity
Yes
Explicable ?
Outcomes for Explicating Knowledge
Inappropriately
explicated
Yes
Lost
Opportunity
Appropriately
unexplicated
No
Explicated ?
Source: Zack, M.H. (1999): Sloan Management Review, Summer 1999, 47.
Figure B.12 Outcomes of Explicating Knowledge
1 Zack, M.H., California Management Review, 1999.
57
The creation of unique, strategic knowledge takes time, forcing the firm to balance
short- and long-term strategic decisions, and allocating knowledge creating and
processing efforts accordingly.
B.2.3.2
Knowledge Transfer Processes
The central challenge the organizations face is how to reduce the cost of inter- and
intra-firm knowledge transfer while protecting that knowledge from imitation by
competition.
Transferring the knowledge while minimizing the risks of both partners, the rate of
knowledge dissipation, openness of the organizational culture of the parent
companies are all linked to a variety of factors. Such factors include the
organizational resources committed to learning1, the type of knowledge creation
mechanisms institutionalized within the organization structure of the alliance.
Knowledge transfer is defined as the movement of knowledge between firms, either
directly through the IJV, through activities such as buying technology, observing
and imitating technology used by the partner, or changing existing technologies
according to the directions given by the partner2.
The IJV is in this sense a mode of transfer, a knowledge acquisition channel for the
partner firms.
Transfer is also an import and determinant of IJV performance, as the IJV needs to
acquire knowledge from the parent in order to carry out the activities the parent
intends1. Knowledge that is easily transported, interpreted and integrated is logically
the easiest to transfer which would be easily codifiable explicit knowledge. But due
to the inherent interdependency between explicit and tacit knowledge, transferring
1 Hamel, G., Strategic Management Journal, 1991.
2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
58
the explicit part while neglecting the underlying tacit knowledge is unlikely to fulfill
the organization's learning objectives. In addition, there is the problem integrating
the transferred technical knowledge with existing systems, particularly marketspecific systems based on different tacit knowledge2.
Barriers and Enablers to Knowledge Transfer
Knowledge faces barriers and is relatively immobile3. KOGUT and ZANDER point
to the “inertness of knowledge”4. Knowledge transfer depends on how easily that
knowledge can be transported, interpreted, and absorbed5. Knowledge ambiguity
emphasizes the more subtle aspects of knowledge. REED and DeFILLIPI observed
that a strong barrier to imitation originates from the inability of competitors to
comprehend the competencies that are sources of competitive advantages6. In the
1997 study, ERNST & YOUNG found that firm’s main acknowledged barriers to
effective knowledge transfer as cultural differences, lack of top management support
for knowledge initiatives, organizational structures, and a lack of standardized
processes for effective KM7. Internal “stickiness” of knowledge is defined as the
difficulty of transferring knowledge within the organization, similar to “difficult to
imitate”8.
As in all management processes, problems also exist in the various KM processes.
In the transfer phase, for example, barriers to knowledge enhancement can occur at
all levels of learning9. At the individual level, the IJV managers in the IJV network
may not be able to grasp and interpret the input offered by each other.
Communication might be distorted, given different points of view, and the different
1 Lyles, M. and Salk, J., Knowledge Acquisition from Foreign Parents in IJVs. In: “Cooperative
Strategies: European Perspectives”, 1997.
2 Tallman, S. and Shenkar, O., Journal of International Business Studies, 1994.
3 Attewell, P., Organization Science, 1992.
4 Kogut, B. and Zander, U., Organizational Science, 1992.
5 Hamel, G., Strategic Management Journal, 1991.
6 Reed, R. and DeFillipi, R. J., Academy of Management Review, 1990.
7 Ernst and Young, “Executive Perspectives on Knowledge in the Organization “, 1997.
8 Szulanski, G., Academy of Management Best Papers Proceedings, 1995.
9 Lyles, M.A., International Business Review, 1994.
59
cultural and societal context1. In addition, the systems and structures of the parent
organizations may impede the transfer of knowledge2.
Different interpretations of knowledge also hamper the transformation of knowledge
to create knowledge. Often, institutionalized “learning” patterns of the partners have
to be unlearned and adapted to the new situation of the IJV, before the KM process
can be initialized.
Rather than being enablers, motivation and expectations can become significant
barriers to the KM process when they do not distinguish between learning and
performance. Expectations focussed only on the visible achievement of productivity
and financial performance neglect the other, more intangible, but future-oriented
gains achieved through an IJV, such as created partnering knowledge and marketspecific knowledge that can be “re-used” in a later venture.
“Habits of mind”3 as described by MARGOLIS also often impede learning. Deeply
entrenched and institutionalized thought processes are often subconscious and must
be unlearned proactively. Learning can be defined as the changing of these thought
patterns4. Changing these corporate habits is a difficult task, requiring recognition of
the need to change and adapt to new circumstances, overcoming of the reluctance in
the organization to change, and a conscious effort requiring practice and repeated
experience to adapt habits in order to coordinate with those of others5. In summary,
the following factors encourage knowledge transfer within the organizational
network.
• Cultivate empowerment and provide organizational “slack”: Goals and
incentives stimulate a demand for new ideas. On the supply side, empowerment
and slack play a key role in facilitating knowledge creation.
• Equip each unit with a well-defined “sand-box” for play: Creating a culture
that values experimentation means encouraging people to take risks. To keep
these risks calculable, people must be given set perimeters in which to try out
new ideas, such as, one department, or one set of guidelines.
1 Parkhe, A., Journal of International Business Studies, 1991.
2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
3 Margolis, H. "Paradigms & Barriers: How Habits of Mind Govern Scientific Beliefs", 1993.
4 Op.cit.
5 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A. C. “Cooperative Strategies; North
American Perspectives”, 1997.
60
• Cultivate a market for ideas within the company: The company must have a
screening mechanism for innovative ideas, in order to prevent the “garbage in,
garbage out” syndrome. Most often these mechanisms are in place, but
inadequate.
• Ban knowledge hoarding and turn “knowledge givers” into heroes: To
maximize knowledge sharing, companies must treat knowledge as a valuable
corporate resource; it can be hoarded in one unit. It is important to recognize,
honor and reward proactive knowledge giver who facilitates the adoption of
knowledge by individuals and other units within the organizational network.
• Rely on group-based incentives: Investing in codifying tacit knowledge can
have high payoffs. However, there is a limit to which knowledge can be codified.
Nevertheless, a company can reap many rewards from codification. An explicit
mapping of the organization’s knowledge is necessary in order to identify its
knowledge gaps.
• Match transmission mechanisms to type of knowledge: Transmission
mechanisms such as transfer of documents, electronic repositories,
conversations, coaching and the transfer of teams must be tailored to the different
types of knowledge, both in terms of effectiveness and efficiency.
NEHAPIET and GHOSHAL identified four conditions necessary for the exchange
and combination of intellectual capital1:
•
•
•
•
The opportunity to make the exchange and combination must exist
Parties involved must expect some value-added from the transfer
Parties involved must be able to appropriate this value-added to some degree
The organization must have the capability to combine the knowledge transferred
B.2.3.3
Knowledge Creation
The knowledge-based literature has focussed heavily on issues of knowledge
generation. Traditionally, this has meant knowledge creation though innovation.
Only in recent years has the interest shifted to firms‘ acquiring knowledge though
organizational learning.
The dynamic theory of knowledge creation relies heavily on the idea that an
organization's primary role is the integration and explication of tacit knowledge on
all organizational levels. It sees the main function of organizations in amplifying the
knowledge created by individuals and integrating it into the knowledge network of
the organization.
1 Nehapiet, and Ghoshal, Academy of Management Review, 1998.
61
According to HAMEL the important distinction between gaining access to skills and
actually internalizing a partner’s skills has seldom been drawn1. This distinction is
crucial; as long as the partner’s skills are embodied only in the specific outputs of
the venture, they have no value outside the narrow terms of the agreement. Once
internalized, they can be applied to new geographic markets, new products and new
businesses2. This phase of the KM process is called transformation.
NONAKA identified four different types of interaction between tacit and explicit
knowledge. These patterns essentially define knowledge creation, the ways in which
existing knowledge can be “converted” into new knowledge. The four different
“modes or outcomes” of knowledge conversion are3:
• Tacit knowledge to tacit knowledge: as mentioned before the key to acquiring
tacit knowledge is experience. Without some form of shared experience, shared
emotions, and beliefs it is hardly possible for people to be able to draw the kind
of “analogous” conclusions that are the base of tacit knowledge. This mode of
knowledge conversion is called “socialization”.
• Explicit knowledge to explicit knowledge: explicit knowledge is “interchanged”
by partners through various social and formal processes, such as meetings and
reports. Here knowledge can be created through the “combination”, i.e., sorting,
adding, and reconfiguring of existing available explicit knowledge.
• Tacit knowledge to explicit knowledge/ explicit knowledge to tacit knowledge:
the attempt to formalize tacit into explicit knowledge is known as
“externalization”, the inevitable transformation of explicit knowledge into an
inherently tacit form through experience4 is “internalization”.
These modes of transformation incorporate the idea that tacit and explicit knowledge
is complementary over time through a process of mutual interaction and can expand
over through a process of mutual interaction5.
To capture the dynamic movement of knowledge across the various levels,
NONAKA developed the concept of a spiral of knowledge creation. In this upward
spiral, knowledge moves through the organization, starting at the individual level,
1 Hamel, G. Strategic Management Journal, 1991.
2 op.cit.
3 op.cit.
4 Similar to the traditional notion of “learning”; Nonaka, I, Byosiere, P., Borucki, C.C. and Konno,
N., International Business Review, 1994.
5 Nonaka, I., Organization Science, 1994.
62
moving on through the group level, up to the firm level1. As the knowledge spirals
up the organization, it may be enriched and amplified as individuals interact with
each other and with their organizations2. As individual knowledge becomes accepted
by other organizational members and is re-utilized in future processes, knowledge
creation occurs due to the multiple perspectives on it3.
The SECI model does not, however, takes fully into account that tacit and explicit
knowledge is strongly inter-linked. According to SPENDER, the SECI model does
not explain how individuals generate tacit knowledge, how agency problems are
resolved, and what the closure means for knowledge creation in organizations1.
Enabling conditions
Intention
Autonomy
Fluctuation / Creative chaos
Redundancy
Requisite variety
Tacit knowledge in
Organizations
Explicit knowledge in
Organizations
Socialization
Combination
Externalization
Sharing
tacit
knowledge
Creating
concepts
Justifying
concepts
Building an
archetype
Crosslevelling
knowledge
Internalization
Market
Sharing
tacit
knowledge
Tacit
knowledge
From users
Internalization by users
Explicit knowledge in
advertisements, patents,
product and/or service
Nonaka, I and Takeuchi, H. The Knowledge-Creating Company, Oxford University Press, New York, 1995, p 84
Figure B.13 The Spiral of Knowledge
1 op.cit.
2 Inkpen, A. C., "Cooperative Strategies: North American Perspectives ", 1997.
3 op.cit.
63
Socialization
Tacit knowledge can only be shared if the self is freed to become a larger self that
includes the tacit knowledge of the other. In practice, socialization involves
capturing knowledge through physical proximity and direct interaction. Examples
include walking around inside the company and at the actual job site within the
company.
Externalization
Externalization requires the expression of tacit knowledge and its translation into
comprehensible forms that can be understood by others. In practice externalization is
supported by two key factors. First, the articulation of tacit knowledge involves
techniques that help to express one's ideas or images as words, concepts, figurative
language, and visuals. Dialogue "listening and contribution to the benefit of all
participants"2, strongly supports externalization. The second factor involves
translating the tacit knowledge of customers or experts into readily understandable
forms.
Combination
Key issues are communication and diffusion processes and the systemization of
knowledge. In practice, the combination phase relies on three processes: First,
capturing and integrating new explicit knowledge is essential. Second, the
dissemination of explicit knowledge is based on the process of transferring this form
of knowledge directly by using presentations or meetings. Third, the editing or
processing of explicit knowledge makes it more usable.
Internalization
Learning by doing, training, and exercises allow the individual to access the
knowledge realm of the group and the entire organization.
The four modes of knowledge creation allow the conceptualization of the
actualization of knowledge within social institutions through a series of selftranscendental processes.
1 Spender, J., Strategic Management Journal, 1996
2 Bohm, D. " Wholeness and the Implicate Order", 1980.
64
In the process of knowledge creation, different learning processes are at work at
every level. At the individual level, the critical process is interpreting1, before that
the subconscious intuiting; at the group level, integrating; and at the organization
level; integrating and institutionalizing. As individual knowledge becomes
accepted by other organizational members and is re-utilized in future processes,
knowledge creation occurs due to the multiple perspectives on it2.
Knowledge creation: Enablers
Reciprocity is a feature of what LAVE and WENGER refer to as " legitimate
peripheral participation"3. People learn by taking up a position on the periphery of
skill practice and being allowed (hence the importance of legitimacy) to move
slowly from the periphery into the community and the practice involved. New
communications technologies provide intriguing forms of peripherality. They allow
newcomers to "lurk" on the side of interactions in which they are not taking part and
of communities of which they are not members.
The rewards of reciprocity are high. Technologies that can recognize and to some
extent integrate how relations within communities differ from those between
communities may actually help to extend reach between communities without
disrupting reciprocity within. A significant issue for new design-of both
technologies and organization- will be to understand the challenges of the between
relations, as in the IJV.
The process of knowledge creation is further enabled by three factors4:
• Creative chaos: this involves reflection on the contradictions in the environment
and inside organizations,
• Redundancy of information: this is sharing of tacit knowledge among
organizational members
• And requisite variety: the constructing of organizational information processing
channels that match the information imposed by the environment.
SOO et al., (2002) have investigated factors contributing to organizational
knowledge creation, incorporating various concepts from the literature such as social
1 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995.
2 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997.
3 op.cit.
4 Nonaka, I. and Takeuchi, H., "The Knowledge-creating Company", 1995
65
network theory, absorptive capacity and organizational learning The results present
significant and empirical contribution towards KM and Strategy literature while
providing recommendations for managers to enhance knowledge creation in
organizations1.
VON KROGH determines care as one of the key enablers of knowledge creation2.
He identified the five dimensions of behavior that signaled care as mutual trust,
active empathy, access to help and lenience in judgment and courage. He believes
that low care organizations would have trouble in integrating and creating
knowledge, whereas in high care organizations, individual's knowledge would be
exchanged through indwelling, which involves joint commitment.
However, in order to be able to exploit their own and their partner’s knowledge
resources to the fullest, the tacit dimension of knowledge must be completely
integrated into the KMS of the firm and the alliance. Technical and organizational
initiatives, when aligned and integrated, can provide a comprehensive infrastructure
to support KM processes3.
B.2.3.4
Knowledge Retention
Since KM as a conscious management practice is so young, executives have lacked
successful models that they could use as guides. The ISFs such as investment
bankers, advertising companies or software companies are forerunners here because
knowledge is the core asset of these companies.
Determining when to make articulable knowledge explicit (i.e. exploiting an
opportunity) and when to leave inarticulable knowledge in its native form
(respecting its inherent strength and value) is central in managing an appropriate
balance between tacit and explicit knowledge.
According to HANSEN et al., firms employ two very different KM strategies4:
1 Soo, C.W., et al., INSEAD Working Paper, 2002.
2 Von Krogh, G., California Management Review, 1998
3 Zack, M.H., Sloan Management Review, 1999.
4 Hansen, M., Nohria, N. and Tierney, T., Harvard Business Review, 1999.
66
• Codification strategy: Here, KM centers on the use of information technology.
Knowledge is carefully codified and stored in databases, where it can be
accessed and used easily by anyone in the company.
• Personalization strategy: Here, knowledge is closely tied to the person who
developed it and shared mainly through direct person to person contacts. The
chief purpose of computers is to help people communicate knowledge, not to
store it.
Knowledge is codified using a people-to-documents approach: it is extracted from
the person who developed it, uncoupled from its source and reused for various
purposes. This development of “knowledge objects” allows the possibility of scale
in knowledge reuse. In personalization, there is focus on dialogue between
individuals and one-on-one brainstorming sessions.
Codified knowledge is essential for companies that deal with the same situations and
problems over and over again. The firm can gain a competitive advantage by
building a reliable, high-quality information system faster and a better price than its
competitors. Personalized knowledge is needed when a highly customized solution
to a unique problem is required.
To remain competitive, an organization must efficiently create, locate, capture, and
share knowledge and expertise in order to apply that knowledge to solve problems
and exploit opportunities. A firm’s resources and capabilities must be leveraged in
order to manage its codified knowledge1.
1 Zack, M., Sloan Management Review, 1999.
67
How Information-based Firms Manage Knowledge
Codification
Competitive Strategy
Provide high quality, reliable
and fast information-system
implementation reusing
codified knowledge.
Reuse Economics
Economic Model
People-to-Documents
Hire new college graduates
who are well suited to the
reuse of knowledge and the
implementation of solutions.
Train people in groups and
through computer-based
distance learning.
Reward people for using and
contributing to document
databases.
Expert Economics
Charge high fees for highly
customized solutions to
unique problems.
Use small teams with a low
ratio of associates to
partners.
Focus on maintaining high
profit margins.
Invest once in knowledge asset
and re-use it many times.
Use large teams with a high rate
of associates to partners.
Focus on generating large
overall revenues.
Develop an electronic
document system that
codifies, stores, disseminates
and allows reuse of
knowledge.
Invest heavily in IT. The goal
is to connect people with
reusable codified knowledge.
Personalization
Provide creative, analytically
rigorous advice on high-level
strategic problems by
channelling individual
expertise.
KM Strategy
Person-to-Person
Develop networks for linking
people so that tacit
knowledge can be shared.
Information
Technology
Human Resources
Invest moderately in IT. The
goal is to facilitate
conversations and the
exchange of tacit knowledge.
Hire M.B.A.s who like
problem solving and can
tolerate ambiguity.
Train people with one-on-one
mentoring.
Reward people for directly
sharing knowledge with
others.
Figure B.14 How Information-based Firms Manage Knowledge
A company’s KM strategy should reflect its competitive strategy, how it creates
value for customers, how that value supports an economic model, and how the
company’s people deliver on the value and the economics. To make their
personalization strategies work, firms invest heavily in building networks of people.
Knowledge is not only shared face-to-face but also over the telephone, by e-mail,
and via video-conferencing.
68
B.2.3.4.1
ORGANIZATIONAL MEMORY
Truly improving business performance demands more than just capturing the
organization’s knowledge into databases for later reference; it requires leveraging
the many ways that knowledge can migrate into the organization and strengthen
business performance1. In today’s knowledge-based economy, managers can
improve performance deliberately by developing organizational memory and using
the growing stores of knowledge to guide organizational activities and decisionmaking2.
The concept of organizational learning can be made more succinct by viewing it as
the development of an organization’s memory3. Organizational structures, physical
layout, cultural values, or tacit routines are forms of memory that change only
slowly and bear an indirect relationship to business performance. Managers need to
know where important forms of memory reside, and companies can leverage
learning from key experiences and improve business performance4.
Information technology (IT) is only one of many ways in which learning from an
organization’s significant experience can be captured and integrated into its
operations. By embedding learning, companies can reduce the information overload
of their employees and improve the consistency and effectiveness of knowledge use
throughout the organization.
Organizations remember lessons from the past in a variety of ways. An
organization’s memory resides in the heads of its employees, and in the relationships
between them. It also resides in a codified form in the electronic repositories.
Memory is embedded in work processes, and product and service offerings. All
these things reflect lessons learned from the firm’s past experiences.
Individual memory and organizational memory
The tacit and explicit knowledge of a firm's employees is crucial to its ability to
solve problems and create new knowledge. This knowledge is primarily absorbed
1 Cross, R. and Baird, L., Sloan Management Review, 2000.
2 Fortune, 1998.
3 Stata, R., Sloan Management Review, 1989.
4 Partnership Knowledge
69
through one or the other form of social interaction. Often, without opportunities to
learn, people are in danger of intellectual stagnation. However, a firm’s most
knowledgeable people are those with the least new learning opportunities. They
must be given the opportunity to enrich their own knowledge, through external
means if no more internal options are available for them.
Employees must be constantly encouraged to develop new and complementary
skills, which should be also used as a reward and not just catching up a lag. A high
attrition rate also endangers organizational memory, as people are taking what they
know with them. While efforts should be made to lower employee attrition,
organizations can also combat the problem with programs to capture tacit
knowledge. Alternatively, firms are beginning to compensate experts for knowledge
sharing in the form of incentives and to offer them new, exiting job arrangements. In
addition to this within the knowledge based industries, knowledge sharing is
understood as an integral part of the employees' job description.
Knowing how to find and apply relevant information is more practical than trying to
master vast amount of information. Often employees turn to an informal network of
relationships for advice1. However technology is certainly a central tool for
facilitating efficient transfer of knowledge between members of the organization
Two important features are useful for building organizational memory. First, there
must be a sense of reciprocity and trust between colleagues, to build up social
capital. Second, by working closely together, colleagues build an understanding of
each person’s particular knowledge and skills2.
B.2.3.4.2
TOOLS FOR KNOWLEDGE RETENTION
The recent advancement in IT has significantly reduced the data management cost3.
There are a multitude of tools that organizations can avail of, in order to build up
and maintain their organizational memory. The following provide an overview of
the most important KR tools.
• Databases: Distributed technology is at the heart of KM efforts and preserving
organizational memory. Early KM initiatives to date concentrated on identifying
1 Kim, G. and Rogers, E. “Diffusion of Innovations”, 1995.
2 Op.cit.
3 Civi, E., Marketing Intelligence and Planning, 2000.
70
relevant pockets of knowledge in order to build and implement technical
infrastructure that will capture and disseminate knowledge, regardless of time or
geographic location.
• Work Processes and Support Systems: Experiential lessons become part of
organizational memory by means of alterations in process or support systems
(i.e. Total Quality Management, TQM). Many organizations have wellestablished methods for establishing learning into recurring processes. A few
knowledge conscious organizations make an ongoing systematic effort to learn
from less structured events such as new product development or previous
strategic directives.
• Products and Services: Parent firms transfer specific product knowledge to their
partners, respectively the IJV by documenting the processes and the different
barriers and enablers, and by transferring and incorporating this into the
organizational memory.
CROSS and BAIRD differentiate five types of organizational memory, each with
their own set of opportunity and issues1. Employees should learn from experience in
a way that will benefit the organization’s future and their current project. Individual
learning needs to be maximized and processes have to be in place making that
learning available to the rest of the organization. Once individual learning occurs,
lessons can be aggregated, validated, and synthesized to produce organizational
learning.
Teams accomplish much of the important work in organizations. These relationships
and networks are the cornerstone of an organization’s memory. Unfortunately, most
management interventions emphasize shared vision and process skills but do little to
educate team members about each other’s skills and abilities. Most groups focus on
common points: common goals and experiences make it easier to converse with new
people. The amount of “unshared knowledge” and lack of realization of the team
members’ individual skills and abilities is a large and common problem.
Inter-organizational initiatives that cross organizational boundaries promote
networks of relationships. These relationships build the basis for knowledge
diffusion between organizations.
Instruments of Learning
Communities of practice - informal groups of individuals that interact regularly
around work-related issues and challenges – facilitate collaboration in information-
71
based services and play an important role in sharing knowledge. Communities of
practice can be particularly useful for organizations that have made the transition
from functional to cross-functional team structures.
The ultimate aim in inter-organizational knowledge transfer in an IJV would be to
reintegrate the knowledge of these specialists back to the parent company with
relatively low cost. Firms must be willing to invest these resources in the form of
organizational slack and technology investments, such as an inter-organizational
intranet, or relevant access to parents’ intranets and extranets in order to create
knowledge synergies.
Organizations that effectively leverage IT to support organizational memory do two
things. First, they have the technologies, policies, and procedures to endure that
lessons and reusable materials such as legal documents or sales presentations are
screened by panels of experts and reentered into the system for later use, so that
others can benefit from the knowledge in the system. Second, they have begun to
leverage the knowledge contained in databases and the technology that enables
employees to engage in dialogues.
Many firms have sophisticated ways to improve routine work processes based on
continuous improvement and TQM practices. However, the rapidly diminishing
half-life of work processes especially in the knowledge based industries calls for
more retained knowledge as projects and processes are disbanded and reorganized.
Organizations must to be able to learn from work processes and support systems of
the past in order to leverage knowledge for the future.
B.2.4 Knowledge Management Strategy
To create processes that optimally support effective KM, the conditions that
facilitate and hinder knowledge flow and creation within the IJV must be
determined.
Strategic integration is the linking of an alliance strategy of the parent organization2.
COHEN and LEVINTHAL suggested that effective integration at the learning
1 Cross, R. and Baird, L., Sloan Management Review, 2000.
2 Harrigan, K.R. and Newman, W.H., Journal of Management Studies, 1990.
72
interface would augment an organization’s learning capacity1. An IJV considered
closely related to the parent’s strategy may receive more attention from the parent
organization, leading to substantial parent-JV interaction and a greater commitment
of resources to the management of the collaboration2.
In the ERNST & YOUNG KM study3, at least a third of the study participants have
an effort underway. It is quite apparent that firms are concentrating on technology.
The following are the top three necessary initiatives:
• Mapping sources of internal expertise (33%)
• Creating networks of knowledge workers (30%)
• Establishing new knowledge rules (28%)
B.2.4.1
Barriers
Intensifying competition also makes it more difficult for firms to transfer technology
overseas through wholly owned subsidiaries. Government regulations often
encourage alliances between local and foreign firms, in order to facilitate knowledge
transfer into the country. Finally, there are also cases in which the firms themselves
propagate widespread use of their own technology. Their strategy is to grow stronger
and more prosperous by encouraging other companies to use their own technology.
Barriers to knowledge transfer include:
• There is no incentive for anyone to invest time and energy to solve other people's
problems.
• Content Management - if no process is in place to monitor the quality of the
written contribution there is the danger of the "garbage in, garbage out"
syndrome. Screening mechanisms, such as a creating a community submission
process, would be a solution involving a network of experts that on a rotating
basis review, comment on and request contribution to the knowledge base.
• Focussing too much on IT tools - Expecting new technology and reengineering
of processes to produce a collaborative sharing culture, instead of trying to create
a "knowledge friendly" environment. The greatest need often was not new
technology but a culture modification program to prepare for a KM initiative.
• Fear of commitment - If the organization and the senior management are not
ready to commit themselves whole-heartedly to the KM processes, these
initiatives are doomed to fail. If the member of the organization still tend to
1 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997 : Cohen, W.M. and
Levinthal, D., Administrative Science Quarterly, 1990.
2 op.cit..
3 Ernst & Young, Executive Perspectives on Knowledge in the Organization, 1997.
73
hoard knowledge then management may not be ready to move fully into KM,
regardless of stated objectives to rhetorical commitments.
• Lack of communication and compatibility - An effective KM initiative must cut
across organizational, geographical and technical boundaries. Systems and
processes must be compatible, if not uniform, across the whole organizational
network
Whenever employees are encouraged to experiment, there is the possibility of
failure. A company that does not tolerate failure will severely inhibit creativity,
whereas a company that experiences nothing but failures will not survive.
SIMONIN links the intrinsic nature and dimensionalities of knowledge to
transferability, and its properties to its transfer across organizational boundaries. He
states as knowledge attributes that impede respectively facilitate the transferability
of knowledge across organizational barriers as1 a) Tacit vs. explicit, b) Nonteachable vs. teachable, c) Not articulated vs. articulated, d) Not observable in use
vs. observable and e) Complex vs. simple
Business pressure is another barrier to the implementation of KM, because it reduces
the amount of time available to translate good practices to other parts of the
company.
B.2.4.2 Enablers
• Knowledge acquisition: Firms must be first movers.
• Knowledge retention: Companies often lose sizeable chunks of their knowledge
through the departure of employees. It is important that they cultivate a high
degree of loyalty and commitment among its personnel, and strength on the spirit
of trust and respect within the company.
• Identifying opportunities to share knowledge: The routine measurement and
distribution allowed individual units and corporate headquarters to uncover
myriad opportunities to share best practices.
The link between organizational learning, KM and organizational performance is
further verified by a survey of the Conference Board2, according to which 80% of
the world's biggest companies have KM efforts underway, and organizational
1 Simonin, B. Strategic Management Journal, 1999.
2 Conference Board, Knowledge Management Survey, 2000
74
learning and KM "are increasingly similar in terms of the tactics and tools they
employ." 1
A great deal of what people learns results from interactions among workers. It is the
informal, socially constructed communities of practice that form within
organizations that are the true mechanisms through which people learn and through
work which gets done. Whether formalized or not, such networks are excellent
mediums for knowledge exchange2. A gap exists between the rhetoric of KM and
how knowledge is actually managed in organizations3. ”We provide pretty much the
same services in every location. But the regional managers would rather die than
learn from each other4.”
Factors that facilitate knowledge transfer and creation5 and provide the basis for a
two-way learning environment are a) flexible learning objectives, b) leadership
commitment, c) climate of trust, d) tolerance for redundancy, e) creative chaos and
f) an absence of performance myopia.
Group-based incentives are necessary at every level of the organization. Incentives
should ensure that one individual’s performance has a minimal impact on the
person’s bonus if the performance of the other individuals remains below par. The
incentives should motivate people to share their best practices for the betterment of
the whole group.
A company’s knowledge base encompasses a wide spectrum of different types of
knowledge from highly structured, codified and thus mobile knowledge to highly
unstructured, tacit and embedded knowledge. IT is a highly effective and efficient
mechanism for the transmission of codified knowledge and must be exploited to its
fullest potential.
Sharing unstructured knowledge is one of the key drivers for building and
leveraging core competencies in today’s business world. Transferring tacit
knowledge requires rich, interactive transmission channels, such as face to face
1 KPMG. "Knowledge Management", 1998, 2000.
2 Communities of Practice
3 Gupta, A. and Govindarajan,V.J., Sloan Management Review, 2000.
4 Interview, Ogilvy & Mather, Mumbai, India, 1999.
5 Simonin, B., Strategic Management Journal, 1999.
75
and/or informal methods of communication and the transfer of people, which is very
important in the IJV network.
In order to facilitate intra-unit knowledge transfer, the “not invented here” syndrome
must be countered. To maximize knowledge creation and acquisition, companies
need to set stretch goals, and provide incentives. Employees must be empowered,
and organizational slack provided for experimentation. Knowledge-conscious
organizations cultivate a market for ideas within the company. The potential reward
has to match the risk else a competent employee won’t stay with the company.
BROWN and DUGUID1 attribute this failure to organizations' ignorance of ways in
which knowledge workers communicate and operate through the social processes of
collaborating, sharing knowledge, and building on each other's ideas.
In contrast, KM facilitates continuous and ongoing processes of learning and
unlearning thus ensuring the need for imposing top-down initiatives. It is ingrained
in the day-to-day operations of the business at the grassroots level and driven by the
people who interact with the external environment on the frontlines of the business.
These are the people who are directly in touch with the dynamically changing reality
of the business environment.
Intensifying competition is also making it more difficult for firms to transfer
technology overseas through wholly-owned subsidiaries. Government regulations
often encourage alliances between local and foreign firms, in order to facilitate
knowledge transfer into the country. Finally, there are also cases in which the firms
themselves propagate widespread use of their own technology. Their strategy is to
grow stronger and more prosperous by encouraging other companies to use their
own technology.
Interestingly, the “should do” project types focus much more on people issues than
the more technology centric “current projects”. And yet when asked whether their
organization’s abilities to compete based on knowledge depends more upon people,
process or technology issues, the aggregate responses placed the emphasis heavily
on people (50%), with the other two areas carrying equal secondary weight (25%).
1 Brown, J.S. and Duguid, P., California Management Review, 1998.
76
When asked about the biggest difficulties managing knowledge in their
organizations, 56% of the study participants cited changing people’s behavior. The
biggest impediments to knowledge transfer were deemed as lack of change in
“culture”. Technology should support not merely the diffusion of know-what, but
development of know-how and know-why.
DAVENPORT and PRUSAK argue that an organization should devote a third of its
time developing technology initiatives for KM1. The other two-thirds include
culture, organizational roles and responsibilities, focussing on the knowledge
content itself, strategy and economics, and so forth. Most technological knowledge
projects involve building electronic repositories of knowledge—either structured
document-based knowledge, informal discussion-type knowledge, or knowledge
maps.
B.2.5 The Knowledge Management Environment
Most KM activities cost too much and achieve too little and many top managers are
wary of such initiatives that ostensibly bring little fiscal rewards. Knowledge is an
emergent property of interpersonal relationships, and the only way to manage it is to
create any environment in which open collaboration is the norm, not the exception.
Industrial KM deals with techniques in project and document management rather
than dealing with fundamental culture issues.
At a fundamental level, the objective is to achieve the synergy of data and
information processing capacity of information technologies, and the creative and
innovative capacity of their human members. Hence, the knowledge workers need to
be well versed in the applications of new technologies to their business contexts.
Such understanding is necessary so that they can delegate 'programmable' tasks to
technologies to concentrate their time and efforts on value-adding activities that
demand creativity and innovation. More importantly, they should have the capability
of judging if the organization's 'best practices' are aligned with the dynamics of the
business environment. Such knowledge workers are the critical elements of the
1 Davenport, T.H. and Prusak, L. " Working Knowledge: How Organizations Manage What They
Know", 2000.
77
double-loop learning and unlearning cycle that should be designed within the
organizational business processes1.
The knowledge workers need to have an overall understanding of the business of
their organization and how their work contexts fit within it. Such understanding is
necessary for their active involvement in the organizational unlearning and
relearning processes. They need to act in an intrapreneurial mode that involves a
higher degree of responsibility
Social ecology refers to the social system in which people operate. It drives an
organization’s formal and informal expectations of individuals, defines the types of
people who will fit into the organization, shapes individuals’ to pursue actions
without prior approval, and affects how people interact with people both inside and
outside the organization. The social system should not be viewed as a selection of
individual elements, but as a whole in which the various elements work together
with each other. Building an effective social ecology is a crucial requirement for
fostering a culture of knowledge sharing, for accumulating and mobilizing
knowledge.
The determinants of social ecology are:
• A culture of knowledge sharing within partnerships
• Structure: A top-down KMS should be invoked and organizational “knowledge
roles” clearly defined.
• IT systems: The technical infrastructure tools as well as experts and trainers
should be in place in the organization.
• Reward systems: knowledge workers within the IJV should be provided with
incentives for knowledge creation and diffusion.
• Processes: The core KM processes should be identified and designed for
maximum effectiveness.
• People: People management is core to effective KMS
• Leadership: senior management should show their full support of the KM
initiative.
Success in knowledge creation range from three elements of its social ecology:
superior human capital, high-powered incentives and a high degree of
empowerment, which includes a high tolerance for failure and a high degree of
accountability. Furthermore, the firm must invest in continuous, on-the-job,
multifunctional training. Incentives should be in place to motivate employees, to
1 Argyris, C. "On Organizational Learning", 1992.
78
push the boundaries of traditional process and product know-how in order to boost
efficiency and effectiveness.
The most important issue for companies is to ensure that they focus on the synergy
of data and information processing capacity of information technologies, and the
creative and innovative capacity of their members. The human sensors that are
interacting continuously on the front lines with the external environment have a rich
understanding of the complexity of the phenomena and the changes that are
occurring therein.
Knowledge Management Roles
KM programs often overemphasize information technology at the expense of well
defined KM roles and responsibilities. KMRs address the cross-functional, crossorganizational aspect of KM processes. The CKO’s role is to map knowledge, and
integrate the technical and organizational resources allocated to the KM programs
and initiatives critical to the KM architecture.
B.2.6 The Knowledge Management Architecture
This framework is a coherent approach to begin designing a capability for managing
explicit knowledge.
Knowledge architectures exist within four primary contexts:
• Strategic context: This aspect addresses an organization’s intent and ability to
exploit its learning and knowledge capabilities better than the competition, in
order to gain a sustainable competitive advantage1. For this, the members of the
organization must be convinced that superior knowledge and KM will lead to a
competitive advantage (mission and vision). Successful firms interviewed were
able to articulate the link between the strategy of their organization and what
members must know, share and learn to execute that strategy.
• Knowledge context: the competitiveness of an organization’s knowledge. KM
efforts should be directed at closing the organization’s knowledge gaps.
• Organizational context: Organizational context reflects the organization KM
role within the organization framework and structure – formal and informal - as
well as the socio-cultural factors affecting KM such as culture, power relations,
norms, reward systems and management philosophy.
1 Zack, M.H., California Management Review, 1999.
79
• Technology context: This addresses the technology infrastructure and
capabilities necessary for efficient KM. One viewpoint is that KM is 80% people
and 10% technology. However, without the ability to seamlessly collect, index,
store, and distribute knowledge electronically whenever and wherever needed, an
organization will not fully exploit its capabilities and incentives.
IT is a key enabler for successful KM. However, most firms chose standardized IT
solutions for their knowledge / information management needs1. Therefore, IT
platforms are mostly neither unique nor proprietary, and provide at best a temporary
advantage over the competitors. Sustainable competitive advantage depends on how
smart the firm is at using the technology and how smartly it chooses the appropriate
IT, an investment for its firm.
A great deal of new technology attends primarily to individuals and the explicit
information that passes between them. To support the flow of knowledge, within or
between communities and organizations, this focus must expand to encompass
communities and the full richness of communication.
However, it is a mistake to conclude that knowledge networks, which require a
social context, will spread in the same fashion. Technology to support the spread of
new knowledge needs to be able to deal not with the reach involved in delivery so
much as with the reciprocity inherent in shared practice.
This disconnect between IT expenditures and the firms' organizational performance
may be attributed to an economic transition from an era of competitive advantage
based on information to one based on knowledge creation. The earlier era was
characterized by relatively slow and predictable change that could be deciphered by
most formal information systems. During this period, information systems based on
programmable recipes for successes were able to deliver their promises of efficiency
based on optimization for given business contexts.
1 e.g., Lotus Notes, SAP etc.,
80
Element of the KnowledgeManagement Process
Knowledge Questions
Common Pathologies and Challenges
•
•
•
•
•
•
•
A track record of past success
Employees are given little discretion to make decisions (knowledge
empowerment)
Absence of an internal market for ideas
How to be an early mover in knowledge acquisition
How to integrate and utilize external knowledge
Employee turnover (attrition- also learning through job transfer)
Diffusion of propriety knowledge to competitors
Knowledge Identification
•
•
The halo effect (strong in indo-U.S. -- On the U.S. side)
"Garbage in, garbage out" (no filter or 'best practice' websites)
Knowledge Outflow
•
•
•
"How does it help me?" syndrome
"Knowledge is power" syndrome
Incentives tied to internal relative performance (Is knowledge sharing
reflected in performance based measuring systems)
Knowledge Transmission
•
Mismatch between structure of knowledge and structure of transmission
channels (The effectiveness and efficiency of different communication
channels -- such as face-to face vs. e-mail communication -- varies
across different types of knowledge.
Knowledge Inflow
•
•
"Not invented here" syndrome
Reluctance to acknowledge the superiority of peers (* here important willingness to receive information from the JV partner)
Knowledge Acquisition
Knowledge Retention
Source : Gupta, A.K. and Govindarajan. (2000): Sloan Management Review, Fall, 2000, 73.
Figure B.15 Common Pathologies and Challenges in Knowledge Accumulation
and Knowledge Sharing in IJVs
The two components of knowledge are structure and content. The structure provides
the context for interpreting the accumulated content. The organizational network has
many perspectives on the knowledge repository. The base unit of the repository is
the knowledge unit. The knowledge unit can be codified, indexed and retrieved in
the repository. The unit sizes and formats vary, depending on the type of knowledge.
81
TRI Knowledge Management Architecture
Repositories
Databases
Acquire
Telephone calls and
surveys
• Reports
• Newsletters
• Bulletins
Repository of Research
Results
Refine
Store
Distribute
Present
Analyze, interpret
and report
Actions
Edit and format
Decompose into
knowledge units,
index and link units
Tools /
IT Org
Index and link
knowledge units
PCs and desktop software
Lotus NotesTM
Analyst
Editors
Post on-line via
Web-enabled Lotus
NotesTM
Interactive selection
of knowledge units
Web browser or
Lotus NotesTM client
Information systems
Group
Customers
Source: Zack, M.H. (1999): Sloan Management Review, Summer 1999, 52.
Figure B.16 Knowledge Management Architecture
Firms must strive to record in their repositories:
•
•
•
•
Meaningful concepts, categories, and definitions (declarative knowledge)
Processes, actions, and sequences of events (procedural knowledge )
Rationale for actions or conclusions (causal knowledge)
Circumstances and intentions of knowledge development and application
(Contextual knowledge)
The refinery knowledge represents the process for creating and distributing the
knowledge in the repositories.
• Acquisition: Knowledge can be acquired from various internal and external
sources
• Refinement: Refinement involves cleansing, labeling, abstracting, standardizing,
integrating, and re-categorizing.
• Storage and retrieval: This is the bridge between knowledge creation (upstream)
and knowledge distribution (downstream)
• Distribution: these are mechanisms and channels an organization institutes to
make repository content available.
82
• Presentation: The context that knowledge is presented in influences its value.
The firm must develop the capability and flexibility in arranging, selecting, and
integrating the knowledge.
The information technology infrastructure provides a seamless “pipeline” for the
flow of explicit knowledge through the five stages of the refining process.
Organizations capture and store units of knowledge in forms that assign various
labels, categories, and indexes to the input. Effective use of IT to facilitate
knowledge processes requires that an organization (in this context the interorganizational network) share an interpretive context. Knowledge can flow through
electronically mediated channels1, such as a central electronic repository. An
organization can thus disseminate explicit, factual knowledge within a stable
community, sharing a high degree of contextual knowledge. When context is not
well shared, and knowledge is primarily tacit, firms can support knowledge flows
through the richest and most interactive modes, such as videoconferencing and faceto-face conversation.
According to ZACK, the firm can categorize the knowledge processes within the
network into two broad classes: the integrative and the interactive processes. They
support well-structured repositories for managing explicit knowledge, while
enabling interaction to integrate tacit knowledge.
With the advent of new technologies, such as data mining, intranets, video
conferencing, and web casting, several technology vendors are offering such
products as holistic solutions for the business challenges of the knowledge era.
Some technology experts and academic scholars have, however, observed that there
is no direct correlation between IT investments and business performance or KM.
Advanced information technologies can increasingly accomplish 'programmable'
tasks traditionally done by humans. However, checks and balances need to be built
into the organizational processes to ensure that such programs are continuously
updated in alignment with the dynamically changing external environment.2
The creation of technology tools for KM must necessarily be constrained by the
technology environment within which it will operate. Rapid advancements in
1 Zack, M.H., Information and Management, 1994.
2 Information week 1996
83
technologies must be coupled to existing or legacy systems to bring satisfaction to
the user.
STRASSMANN concludes that there is no relationship whatsoever between IT
expenditures and company performance1. On a similar note, BROWN underscores
that in the last 20 years U.S. industry has invested more than $1 trillion in
technology but has realized little improvement in the efficiency or effectiveness of
its knowledge workers2.
• Translators: Organizational translators are individuals who can frame the
interests of one community in terms of another community's perspective. The
translator must be sufficiently knowledgeable about the work of both
communities to be able to translate.
• Knowledge Brokers: The role of internal brokers in contrast to that of translators
involves participation rather than mediation. GRANOVETTER argued for the
"strength of weak ties", suggesting that it was often people informally linked to
several communities who facilitated the flow of knowledge among them3.
• Boundary Objects: Boundary objects are another way to forge coordinating links
among communities, bringing them intentionally or unintentionally into
negotiation. Boundary objects are objects of interest to each community involved
but viewed or used differently by each of them. These can be physical objects,
technologies or techniques. Contracts, documents, plans and blueprints are
examples of boundary objects.
For knowledge acquisition, creators, finders and collectors are needed; to some
degree interviewers and transcribers. Furthermore a librarian or knowledge “curator”
is necessary to manage the repository. Electronic repositories have additional IT
responsibilities (such as the “intranet/Web manager”).
Interactive applications focus primarily on supporting interaction among the
members of the organization with tacit knowledge. These applications vary
according to the degree of expertise and the complexity of knowledge. Distributed
learning is the interaction between expert and novice, which centers on a discrete
problem, or problem area4. In contrast, applications among those performing routine
tasks (nonetheless tacit) seem to be more emergent. These applications are referred
1 Strassmann, P.A. " The Squandered Computer", 1997.
2 Brown, J., Xerox Park Research Center, 1998.
3 Granovetter, M., American Journal of Sociology, 1976.
4 Zack, M.H., California Management Review, 1999
84
to as forums. They create a central marketplace for specific information, brokerage,
and the exchange of opinions and experiences.
Interactive applications play a major role in supporting integrative applications. Best
practice databases typically require some degree of forum interaction. Attempting to
adopt a practice (explicit), one has the opportunity to discuss its reapplication with
its creators (tacit), and troubleshoot potential problems. Organization roles here
include communicators, recruiters and enablers, who encourage use of these forums,
and aid by problem solving. For these knowledge "motivators", for whom
knowledge sharing is only a part of their job description, this is an added
responsibility.
Their role is to devise an organization of network-wide knowledge strategy
appropriate to the firm’s business strategy and implement an organizational and
technical architecture appropriate to the network’s knowledge processing needs.
B.3 Knowledge Management within the IJV Framework
In the knowledge-based economy, firms that pursue an aggressive knowledge
strategy tend to outperform those competitors who pursue less aggressive ones over
time1. In various studies, KM has been linked with organizational performance as
well as with the performance of specific organization tasks. Understanding
knowledge means an appreciation of the complexities of acquiring, transferring, and
integrating knowledge within a learning environment. Increasing complexity due to
cross-border knowledge adds the challenge of renewing organizational skills in
various different settings.
IJVs can be a powerful source of new knowledge, which would not have been
possible without the alliance. Partners acquire knowledge that can be used to
enhance partner strategy and operations.
85
B.3.1 State of Research on Knowledge Management in IJVs
Even though knowledge has been recognized as a key resource and learning as a
core competency for global organizations, there has been little research on learning
in international collaborations that describes the channels and processes through
which learning takes places, or how to approach an adequate KM in the IJV1.
In the last decade, firms have increasingly begun to create knowledge links: alliances
through which a company seeks to learn or jointly create new knowledge and
capabilities2. The learning and creation of knowledge define knowledge links. For
one organization to acquire knowledge embedded in the routines of another it must
form a complex, intimate relationship with it. If two companies want to create new
capabilities by combining their knowledge and skills in a unique way, they must
create knowledge interfaces to enable personnel and systems from both firms to
work together closely1.
Organizations should strive to use their learning experiences to build on or
complement knowledge positions that provide a current or future competitive
advantage. By using a knowledge map to prioritize and focus its learning
experiences, an organization can create leverage for its learning efforts. The
knowledge goal of an alliance should be to combine its learning experiences into a
“critical learning mass” around particular strategic areas of knowledge. Due to the
long lead-time of creating knowledge, strategic alliances are considered a potentially
quicker means for gaining access to knowledge2.
In bringing together firms with different skills, knowledge bases, and organization
cultures, alliances create unique learning opportunities for the partner firms. A
strategic alliance in a difficult to access environment is an effective form of
knowledge acquisition. To gain maximum value-added from the alliance in the form
of learned competencies the firms must analyze their knowledge gaps, and
understand their knowledge requirements. Failure to execute the specific
1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
2 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.
1 op.cit
2 Zack, M.H., Sloan Management Review, 1999.
86
organizational processes needed to access, assimilate and disseminate knowledge
will result in premature failure of the IJV, i.e. the IJV objectives will not be met.
Among international collaborative ventures, the IJV is the form that facilitates the
transfer of tacit and embedded knowledge most1. This tacit knowledge is
"imperfectly imitable", and its transmission cannot be effectively achieved via
contractual channels that do not permit a replication of the organization itself2.
From a learning perspective, the IJV is the most effective vehicle for the transfer of
knowledge, because it allows for prolonged intensive interaction of managerial and
technical personnel and facilitates the replication of organizational routines. Direct
interfaces at multiple organizational levels permit direct observation of operations
and enable the gradual and experiential learning that is a prerequisite for the
successful and efficient transfer of tacit knowledge3. Equity control and profit and
loss sharing serve to align the interests of parent firms, reduce opportunism, and
eliminate the need for complex ex ante specification of ongoing activities and
behavior. The IJV also allows for superior monitoring, since owners are typically
entitled to access independently verified information and are also able to observe
operations directly4.
The aim is to develop a framework of collaborative learning that should prove
instructive for managers trying to exploit alliance learning opportunities and provide
practical insights into knowledge creation within the IJV5. Focussing on the IJV
allows for a clear delineation of the partner relationship and the nature of alliance
knowledge. IJVs are more effective for the acquisition of knowledge than other
forms of alliances6 due to the higher level of inter-organizational commitment of
resources at all levels.
In the following figure SI and BRUTON summarize the most important knowledge
acquisition goals of the IJV and its parent firm.
1 Kogut, B., Strategic Management Journal, 1988
2 op.cit.
3 Killing, J.P. "Strategies for Joint Venture Success", 1983
4 Harrigan, K. "Strategies for Joint Venture Success", 1985.
5 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997.
6 Mowery, D.C., Oxley, J.C., and Silverman, B. S., Strategic Management Journal, 1996; Inkpen,
A.C. and Madhok, A. “Valuation of Intangible Assets in Global Operations, 2001.
87
Importance of Knowledge Acquisition Goals
(In Order of Importance)
Governmental
•
•
•
Understanding Government Behavior
•
•
•
Learning more about the Partner Firm’s National Culture
Learning the Negotiation Styles of the Partner’s Nation
Gaining Knowledge of New Managerial Types and Styles
•
•
•
•
Learning more about the Partner Firm’s Market Characteristics
Gaining Understanding of Labor Resources
Gaining Understanding of Capital Resources
Learning New Technologies
Learning National Policies, Rules & Relevant Laws
Understanding the Partner’s Economic System
Culture
Market
Source: Si, S.X. and Bruton, G.D. (1999), Academy of Management Executive, 13(1), 89.
Figure B.17 Importance of Knowledge Acquisition Goals
The theoretical explanation for the relationship between knowledge acquisition and
IJV performance centers on the question which channels provide for the most
efficient acquisition of knowledge with and between firms1. MAKINO and DELIOS
postulate that local (market-specific) knowledge transfer is comparable to that of
technological (firm-specific) knowledge due to the inherent intangibility of all types
of knowledge2. Local knowledge, such as investment regulations, supplier practices,
labor laws, and cultural traditions, can be classified primarily as cognitive
knowledge. Local knowledge can be accumulated via experience or from other
firms3, and is usually a key resource of local IJV partners. As a foreign partner
increases its knowledge of the local market, instability of the IJV becomes more
1 Kogut, B. and Zander, U., Organizational Science, 1992; Makino, S. and Delios, A. “Cooperative
Strategies: Asian Pacific Perspectives”, 1997.
2 Makino, S. and Delios, A. “Cooperative Strategies: Asian Pacific Perspectives”, 1997.
3 Chang, S.J., Academy of Management Journal, 1995.
88
probable, because the foreign firm gains bargaining power. MAKINO and DELIOS
define three distinct local knowledge channels for IJVs1, first by forming an IJV
with a local firm, second by learning from the foreign parent's past host country
experience and, finally through the accumulation of operational experience in the
host country.
Research on Knowledge Transfer in IJVs
The skills of the foreign firm consist of tacit and explicit knowledge; the explicit
knowledge in expressed schemata, diagrams and so on is relatively easy to transfer,
provided the local partner has the bargaining power to gain access to it. The tacit
dimension, the “difficult” one, is the glue that holds together the organizational
routines associated with foreign partners skills2. MÜLLER-STEWENS and
OSTERLOH argue that the transfer of knowledge context is often needed for
successful knowledge transfer3. Finally, INKPEN and BEAMISH postulate that
“skilling” of the local partner is less likely in IJVs than in other types of alliances,
most notably technology sharing relationships or R&D alliances. This is because a
JV is a separate entity, in which the local partner may have difficulty penetrating the
venture’s boundaries to gain access to the foreign partner’s skills. The foreign
partner will most likely put up barriers to keep the local partner outside specific skill
areas4. Even if local partners have unhindered access to the foreign partner’s skills,
the knowledge required to eliminate a dependency on the foreign partner is usually
more difficult to acquire for the local partner than for the foreign one5. Because
firm-specific knowledge is often contained in “cognitive knowledge in the form of
mental constructs, skills and knowledge embodied in products and well-defined
services”6, these skills, the core firm-specific knowledge, are the most difficult to
transfer from local to foreign partner in IJVs. Also, the foreign partner can and does
take concrete measures to protect the transparency of its skills7. Acquisition of tacit
1 Makino, S. and Delios, A. “Cooperative Strategies: Asian Pacific Perspectives”, 1997.
2 op.cit.
3 Müller-Stewens, G. and Osterloh, G., “Wissensmanagement”, 1996
4 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997.
5 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997.
6 Hedlund, G., Strategic Management Journal, 1994.
7 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997.
89
knowledge is highly contact and interface dependent; as the IJV takes place in the
local partner's environment, it is easier for the foreign partner to gain access to their
tacit knowledge.
Management skills are taken to represent tacit or embedded knowledge1.
Management skills are not highly codified and cannot be readily reduced to written
formulas. Those skills are difficult to teach because they require gradual and
experiential learning, and based on direct observation over a longer period of time.
This is particularly true of IJVs in transitional economies, where learning requires an
attitudinal, cognitive and behavioral change2. Management skills cannot be easily
copied via reverse engineering the way technology can3. It is complex and
dependent on groups of experienced executives.
VON GLINOW and TEAGARDEN4 concluded that quantifiable technologies
transferred more easily than the "soft", particularly behavioral technologies that are
also part of the transfer. Marketing can be classified as "partly tacit"5 as it combines
"people skills" with elements of technological knowledge. Managerial skills, by
virtue of their integrative function in the IJV, complement marketing and product
skills, and hence constitute one of the key ingredients of the firms' absorptive
capacity. Organizations represent patterns of interactions among individuals that
endure even when individuals leave6.
The difficulty of transferring tacit knowledge helps to explain why dynamic firms
are more inclined to transfer abroad the exploitation of new technology than to
transfer its creation. What are being transferred are the results of the innovation
process, not the process or the capabilities itself. The innovation process also
requires dynamic interactions with (and stimulus from) the components of Porter's
"national diamond"7 or "the national system of innovation"1.
1 Shenkar, O. and Li, J., Oragnization Science, 1999.
2 Child, J., "Management in China", 1994.
3 Kogut, B. and Zander, U., Organization Science, 1992.
4 Von Glinow, M. and Teagarden, M., Human Resource Management, 1988.
5 Makhija, M. V. and Ganesh, U., Organization Science, 1997.
6 Hedberg, B.L.T. How Organizations Learn and Unlearn. In "Handbook of Organizational
Design", 1981.
7 Porter, M. "The Competitive Advantage of Nations", 1990.
90
Organizational members are seldom rewarded or culturally motivated to have as
much concern about another organization as for their own. Even though it may be
viewed as advantageous for their organization to collaborate, the existing
organizational culture more often than not favors more taking than giving2. The
systems and structures of the parent organizations may impede the transfer of
knowledge3.
Different interpretations of knowledge also hamper the transformation of knowledge
to create knowledge. Often, institutionalized “learning” patterns of the parents have
to be unlearned and adapted to the new situation of the IJV, before the KM process
can be initialized. Here top management support plays a key role: liaisons of the IJV
to the respective parent firms need the support of senior management to facilitate the
integration of created knowledge back into the parent firm. Institutionalized thought
processes are often entrenched in the subconscious and must be unlearned
proactively.
GHOSHAL pinpoints the three major reasons why learning doesn’t take place in
IJVs4: First, subsidiaries may not be sufficiently sensitive, analytical or responsive
enough to local environments to learn from them. Second, a tight rein on decisionmaking by the parent companies is less conducive to sustainable knowledge transfer,
than autonomous IJVs who can prioritize at their own discretion. Third, firms may
lack the necessary knowledge transfer channels, which are a pre-requisite for a
functioning KM process.
Factors that affect knowledge management are:
•
•
•
•
•
•
•
Tacitness
Asset specificity
Complexity
Experience
Partner protectiveness
Cultural distance
Organizational distance
1 Freemen, C., Cambridge Journal of Economics, 1995.
2 Larrson, R. et al., Organization Science, 1998
3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
4 Ghoshal, S., Strategic Management Journal, 1987
91
• Theoretical Model
• Knowledge/ causal ambiguity and knowledge transfer
Moreover, in strategic alliances, the partner whose advantages rest on more codified
knowledge may lose to the partner whose advantages are based on more tacit
knowledge, because the latter will learn more easily from the former than vice versa.
In the communication model, intra-firm knowledge transfer is seen as a transmission
from a source to a recipient in a given context. According to DINUR and INKPEN1,
the process follows four stages:
• Initiation, where transferred knowledge is recognized
• Adaptation, where knowledge is changed at the source location to the perceived
needs of the recipient
• Translation, where more alterations occur at the recipient unit as part of the
general problem-solving process of adaptation to new context
• Implementation, where knowledge is institutionalized to become an integral part
of the recipient unit
Knowledge generated within the firm is especially valuable because it tends to be
unique, specific and tacit. Knowledge from outside the firm can provide for a new
perspective and a context benchmarking for internal knowledge. JVs provide an
important means to obtain external knowledge that is tacit, has not been widely
distributed, and therefore retains its competitive advantage2. Many hi-tech, higrowth industries thrive on this sort of collaboration.
Grafting is described as the process by which firms internalize knowledge not
previously available within the organization1. This knowledge can either be acquired
by individual managers or by organizational sub-units. Depending on the valuation
of the local knowledge by the foreign parent, the resource contribution of the local
parent and the effectiveness of the partner in acquiring knowledge, the IJV's
objectives will not be met.
Knowledge creation should be the result of the operational activities of the IJV. The
two types of knowledge created in the IJV are resource integration, when the
knowledge bases of the partners are combined to synthesize new (IJV-specific)
knowledge, and partnering knowledge, which is created as both partners gain more
1 Inkpen, A., and Dinur, A., CBI Working Papers, 1998.
2 op.cit..
92
experience in operating an IJV. Viewed as a process, collective knowledge
development becomes a tradeoff between different learning strategies to which there
is no self-evident solution. The partners in the IJV must be motivated to share their
collective knowledge before any knowledge transfer and creation processes can even
begin to be effective.
The creation of organizational knowledge requires the sharing and dissemination of
individual experiences. INKPEN classified processes he deemed fundamental to
knowledge creation and management in IJVs into four categories2. Each process
provides a channel for IJV and parent company managers to gain exposure to
knowledge and interaction with other actors within the IJV framework.
• Technology sharing: The most common approach is the most straightforward –
meetings between IJVs and parent companies. Within technology sharing
agreements, there can be explicit terms on licensing and royalties only for
product technology. The need for contractual agreements and reciprocal
commitment is foremost here.
• JV-parent interactions: JV-parent interactions can provide the basis for
communities of practice. A community of practice is a group of individuals that
is not necessarily recognizable within strict organizational boundaries. The
members share community knowledge and may be willing to challenge the
organization’s conventional wisdom3. Communities of practice emerge not when
the members absorb abstract knowledge, but when the members become
“insiders” and acquire the particular community’s subjective viewpoint and learn
to speak its language.
• Personnel movement: The rotation of personnel between the alliance and the
parent can be a very effective means of “mobilizing” personal knowledge. It
helps to understand the business from a multiplicity of perspectives. Job rotation
schemes, external training projects and international personnel transfer all fall
under this category.
• Strategy linkage: A JV viewed as important may receive more attention from the
parent organization, leading to substantial parent-JV interaction and a greater
commitment of resources to the management of the collaboration. To maximize
exposure to partner knowledge, alliance partners must go beyond the narrow
confines of the JV agreement and work towards expanding cooperation and
learning.
1 Huber, G.P., Organization Science, 1991.
2 Inkpen, A.C. An Examination of knowledge management in international joint ventures.
"Cooperative Strategies: North American Perspectives", 1997.
3 Brown, J. S. and Duguid, P., Organization Science, 1991.
93
Two of the KM processes, JV-parent interactions and strategy linkages, create the
potential for both explicit and tacit knowledge to be created. Technology sharing
provides access primarily to explicit knowledge. Personnel movement, while it
could be associated with explicit knowledge, will be most effective as a means of
gaining access to tacit knowledge1.
Inter-organizational Learning
Organizational learning is the development of skills and knowledge to the
associations between past actions, the effectiveness of those actions and future
actions2. When individual knowledge is incorporated into the organization’s
collective database this can be later retrieved from the organization’s history and
translated into action.3. The translation of new knowledge into action is the basis for
creating new skills that underpin a firm’s competitive knowledge4.
HEDLUND5 recognized the fact that most of the literature on knowledge flows
between the IJV and their parent companies focussed on transfer of “raw”
knowledge back to the parents, if at all. The transformation of this knowledge to
adapt to the parent surroundings and creation of new knowledge in the parents’
database has been relatively neglected. One reason for this is probably the only
recent acceptance of the perspective of network relationships as a two-way flow of
resources.
Knowledge acquisition is not a random process. Organizations can institute policies,
structures, and processes to facilitate learning and knowledge acquisition6. Various
collaborative activities have merged as the basis for accessing and exploiting
alliance knowledge.
Although the literature focuses to a large extent on the outcome of the learning
process, the process of organizational learning and knowledge creation is equally
1 Inkpen, A.C. In "Cooperative Strategies: North American Perspectives", 1997 ; Inkpen, A.C.,
Academy of Management Review, , 1998.
2 Fiol, C. A. and Lyles, M.A., Academy of Management Review, 1985.
3 Walsh, J.P. and Ungson, G.R., Academy of Management Review, 1995.
4 Inkpen, A. C., Academy of Management Executive, 1998.
5 Hedlund, G., Strategic Management Journal, 1994.
6 Nevis, E.C., DiBella, A. and Gould, J.M., Sloan Management Review, 1995.
94
important. Studying the processes of KM within the organizational framework will
provide a valid basis for understanding and leading towards a more efficient
knowledge flow and creation1. Deciding what to invest time and effort in as well as
determining what to act upon is a critical task for management.
The "leakiness" of knowledge out of - and into - organizations, however, presents an
interesting contrast to its internal stickiness2. Knowledge often travels more easily
between organizations than it does within them. Moving knowledge among groups
with similar practices and overlapping memberships can thus sometimes be
relatively easy compared to the difficulty of moving it among heterogeneous groups
within a firm.
Time is not only important with regard to the life cycle of an alliance but also with
regard to the factors influencing knowledge transfer. Even an inter-organizational
culture can develop over time. An understanding of time provides an important
foundation for understanding of inter-organizational learning in alliances3.
Technology Transfer in IJVs
Factors that have an impact on knowledge creation and encourage the transfer of
technology from the parent to the IJV are:
• Success programs are decisions that become standard operating procedures due
to past success rates. In IJV formation, firms develop success programs that
define the structure of the IJV in question, and all JVs relating to the
organization.
• Organizational knowledge structures are the “filing cabinets” of the “belief
systems, memories of past events, legends, stories, frames of references and
values” of the firm4. As firms face the challenges of change and growth, the past
successes and experiences are not lost in the creation of new generations of
management and leadership5. They are called up on again and extended upon to
reach “analogue” decisions and strategies.
1 Hedlund, G., and Nonaka, J. Models of Knowledge Management in the West and Japan. In:
“Implementing Strategic Processes, Change, Learning, and Cooperation:”, 1993.
2 Grant, R.M., and Spender, J.-C., Strategic Management Journal, 17 (1996) ; Szulanski, G.,
Strategic Management Journal, 1996.
3 Levinson, N. and Asahi, M., Organizational Dynamics, 1999.
4 Lyles, M.A., International Business Review, 1994.
5 op.cit.
95
• Discrimination skills go one step further in the strategic decision process of the
firm. These skills are necessary to interpret the situation correctly and distinguish
the current situation from the ones before. Discrimination can be applied to JV
formation when decision rules are used to define the attributes of one JV
situation versus another1.
• Unlearning/innovation: Two big impediments to knowledge creation in IJVs are
institutionalized beliefs and learning mechanisms of the parent firms, which can
hinder sustainable KM. Unlearning is often only triggered after the failure of an
IJV, and is one of the most challenging processes in KM. Here the channels
between senior management and IJV managers must be wide open both ways
and the impetus for change must come from the top down.
• Superstitious learning is composed of statements that make broad judgments
based on past experiences that create new rules-of-thumb2 for the futures
strategic orientation of the organization. These are often based on one-time
experiences that become “branded” into the corporate memory. MARCH and
OLSEN define it as when “organizational behavior is modified as a result of an
interpretation of the consequences, but the behavior does not affect the
consequences significantly”3.
Organizational Culture and Inter-organizational Learning
LEVINSON and ASAHI4 define four levels of culture that affect interorganizational learning in alliances: national, organizational, occupational and small
groups.
Clearly, national culture influences organizational culture, although the degree of
influence varies with culture. Occupational culture differs from group culture in that
its values and beliefs come from the occupation and training, where as group culture
is the result of interaction among individuals who work together in a small group5.
In order to examine the origin of organizational culture, it is necessary to examine
the nature of a culture and its key values; this view looks at the degree to which a
culture embraces change and the concomitant learning that can ensue. The degree to
1 op.cit.
2 Van der Ven, " Innovation Outcomes, Learning and Action Loops", 1989.
3 March, J.G. and Olsen, J., European Journal of Political Research , 1975; Lyles, M.A.,
International Business Review, 1994.
4 Levinson, N. and Asahi, M., Organizational Dynamics, 1999.
5 For further discussion on inter-organizational "knowledge groups" see Chapter C. Communities of
Practice.
96
which an organization's culture is institutionalized influences its propensity to
learn1.
Structure
The actual structure of an alliance influences both organizational and interorganizational learning. Two main dimensions of structure in particular influence
learning. The first is patterns of structure, and the second is the number of
organizations in an alliance network. If there are just two participating organizations
in an alliance, there is less ability to identify a large range of new ideas. There is a
greater tendency, however, for exchange and adoption of new ideas.
Location within a network plays a key role in terms of placement for picking up new
ideas and adopting these ideas. There are multiple linkages across organizations
when one is linked to the other at different levels. These linkages ensure a more
rapid flow of information as well as more stability in the alliance over time. Personal
attachments develop at these interfaces.
Technology
New technologies also promote collaborative learning. These technologies can,
according to LEVINSON and ASAHI2, assist and even facilitate interorganizational learning. Culture plays an important role in influencing whether and
how new technologies are successfully used in inter-organizational learning.
Absorptive Capacity
An alliance partner’s effectiveness at learning and acquiring knowledge is equally
important. Absorptive capacity is a firm’s capability to recognize the value of
knowledge and assimilate the knowledge for commercial purposes3.
Another aspect of general absorptive capacity is the degree to which individuals and
individual roles within a participating organization focus on identifying ideas from
other organizations. Benchmarking, the practice of comparing one's own activities to
1 For example, many Indian partner firms wish to get a higher absorptive capacity through
institutionalizing and raising the level of professionalism in their internal structures.
2 op. cit.
3 Cohen, W. and Levinthal, D., Administrative Science Quarterly, 1990.
97
those of other organizations and then identifying and implementing best practices
constitutes an essential component in the absorptive capacity that is requisite for
organizational learning. It is also important to adopt an inter-organizational
perspective and examine the absorptive capacity as a whole to determine whether it
is more than the sum of the participating organizations. Often, one member of an
alliance will have a greater absorptive capacity with regard to organizational
learning. Over time, overall absorptive capacity expands.
The relatedness of knowledge produced by the internal activities affects the ease to
internalize external knowledge. Also, the more extensive the knowledge of an
organization, the higher the probability that internalizing the knowledge will
succeed.
Factors that influence absorptive capacity are knowledge connections between a
firm and its alliance1 and that the knowledge may be further developed and moved
upward in the organization. Knowledge connections occur through both formal and
informal relationships between individuals and groups.
The argument that new knowledge acquisition is facilitated by having a knowledge
base in that area was first suggested by PENROSE2 and taken further by COHEN
and LEVINTHAL3 to form the principle of absorptive capacity. The principle
suggests that "prior knowledge permits the assimilation and exploitation of new
knowledge"4.
From an IJV perspective, absorptive capacity constitutes capabilities, which affect a
firm's ability to learn and which make them "effective repositories of embedded
knowledge"5. The firm's ability to monitor, process, integrate and deploy new flows
of knowledge will depend, among other things, on its ability to link this knowledge
to its existing knowledge base. HAMEL1 notes that a firm must already have
knowledge and understanding in a given area if it is to learn from its alliance
partner.
1 Inkpen, A. C., and Crossan, M. M., Journal of Management Studies, 1995.
2 Penrose, E.T. "The Theory of the Growth of the Firm", 1995.
3 Cohen, W. and Levinthal, D.A., Administrative Science Quarterly, 1990.
4 op.cit.
5 Baddaracco, J. "The Knowledge Link", 1991.
98
Being a "good" partner may actually invite opportunistic behavior that can
undermine the strategic alliance2. Partners should therefore manage their level of
transparency in the alliance interface in order not to lose the learning race.
This inter-organizational learning dilemma stems from it being individually rational
for an organization to pursue the maximum organizational share of the joint learning
by taking more knowledge than it gives back. At the same time, this relative
withholding of knowledge reduces the total amount of joint learning from which the
organization appropriates its share. This "competitive" learning3 will turn the IJV
partner into a competitive learner as well ensuring that there is hardly any joint
learning due to the fact that neither partner is willing to contribute to the collective
learning process.
LEVINSON and ASAHI4 identified four steps in inter-organizational learning: The
first stage is knowledge acquisition followed by knowledge transfer and then
transferring and interpreting this new knowledge. The third phase brings the
organization to first-order learning5, and involves knowledge utilization processes.
Knowledge institution or second-order learning according to AGYRIS6 is the fourth
stage. This involves complex interaction between the new knowledge and the
culture, history, power, technologies, and the needs of the receiving organizations.
Relatively little is known about the knowledge-seeking behavior of prospective
partners in collaborative ventures, especially where local firms in developing
countries are concerned7. In addition to the time delay, measuring the subjective
outcomes such as adaptability and responsiveness, and the objective outcomes such
as patents, brands, trademarks, capital expenditure and R&D programs are
problematic8. Therefore it is necessary to show a relationship between processes and
1 Hamel, G., Strategic Management Journal, 1991.
2 Williamson, O.E. "The Economic Institutions of Capitalism", 1985.
3 Larson B. et al, Organization Science, 1998.
4 op. cit.
5 Argyris, C. "Organizational Learning", 1992.
6 op. cit.
7 Inkpen, A. and Beamish, P.W., Academy of Management Review, 1997; Kogut, B. and Zander, U.,
Organization Science, 1992; and Li, J. and Shenkar, O., In: "Management Issues for China",
1996 ; Shenkar, O. and Li, J., Organization Science, 1999.
8 Mintz, S.L., CFO, 2000.
99
performances in other ways. Particularly in situations of risk and uncertainty, for
example, financial performance indicators are not as good at evaluating outcomes as
qualitative measures such as productivity, financial resource indicators or the ability
to adapt and innovate.
According to the learning perspective, a firm will seek knowledge it considers
lacking but vital for the fulfillment of its strategic objectives1. In applying and
seeking relevant knowledge, a firm will seek knowledge complementary to its own,
especially when this facilitates the absorption of other knowledge2. The learning
perspective pinpoints the IJV as the preferred vehicle for the transfer of tacit and
embedded knowledge, because that mode alone offers both organizational
replication and cohabitation, which are vital for the effective learning of such
knowledge3. SHENKAR and LI4 introduce as a principle the governing the
relationship between knowledge possession and knowledge search between
prospective partners.
B.3.2 Knowledge Management Strategy in IJVs
KM has to be grounded in the firm’s business strategy, so that the firm can prioritize
and focus their investments in KM and come out ahead of competitors5. Competence
substitution through knowledge sharing is based on the resource based view of the
firm, the objective is to show how knowledge sharing can avoid competence
substitution, and loss of competitive advantage6. Unique knowledge is believed to be
most fundamental source of above normal returns7.
The successful exploitation of a competitive advantage internationally requires
adaptation of the technology, the system, or the management practices, to the local
environment8, especially given different cultural and national contexts in the
1 Harrigan, K., "Strategies for Joint Venture Success", 1985.
2 Beamish, P.W., "Multinational Joint Ventures in Developing Countries", 1988; Harrigan, K.,
op.cit.
3 Kogut, B., Strategic Management Journal, 1988.
4 Shenkar , O. and Li, J., Organization Science, 1999.
5 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997.
6 McEvily, S., Das, S. and McCabe, K., Academy of Management Review, 2000.
7 Teece, T.J., California Management Review, 1998.
8 Casson, M. “Coalitions and Collaborations in international Business “, 1993.
100
different countries. Hence, collaborating with a local partner helps ensure correct
adaptation and also allows the management team to improve its own capabilities1.
Aggressive firms take a Schumpeterian view of knowledge as an ongoing process of
creative destruction. These firms continually seek to obsolete their own knowledge,
always staying one step ahead of the competition. They protect their own knowledge
resources by recruiting and developing intelligent, loyal, and committed employees
and support them with a culture of learning, commitment and collaboration.
Generate New Ideas - Globally
Realizing and recognizing the potential knowledge sources available to them and
setting up appropriate processes and structures to exploit them fully will prove one
of the largest challenges to global managers in the future2. In fact, in a survey of
chief executives, knowledge management was put second on their “must do” list
after globalization3.
Internal knowledge may be resident within peoples’ heads; embedded in behaviors,
procedures, software and equipment; recorded in documents, and stored in databases
and online repositories. Knowledge from outside the firm can provide for a new
perspective and a context for benchmarking internal knowledge. IJVs provide an
important means to obtain external knowledge that is tacit, has not been widely
distributed, and therefore retains its competitive advantage4. Many knowledge-based
industries thrive on this sort of collaboration. In knowledge intensive industries,
firms that pursue an aggressive knowledge strategy tend to outperform those
competitors who pursue less aggressive ones over time5.
The ability to cross technical boundaries to find multidisciplinary solutions
represents only part of the collaborative value. When collaboration facilitates
learning at organizational and individual levels, the solutions tend to be more
1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North
American Perspectives”, 1997.
2 Hamel, G. and Prahalad, C.K., Harvard Business Review, 1989.
3 Laszlo, K.C. and Laszlo, A., Journal of Knowledge Management, 2002; TFPL, 1999.
4 Badarocco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.
5 Bierly, P. and Chakrabarty, A., Strategic Management Journal, 1996.
101
innovative and more integrated. Significant innovation is possible only by bringing
together diverse experts who can educate and learn from each other.
The capability for collaboration extends to a capability for organizational learning,
and nurtured through professional development processes and leveraged into value
for clients. Another benefit of the generative cycle is the increasingly valuable
enhanced ability for successfully adapting to a changing market. The quality of the
relationships across the formal network allows for the continual reconfiguration of
work groups, as demand necessitates. The same context and processes that sustain
collaboration and learning about client issues also sustain it for internal management
issues.
Transferring the knowledge while minimizing risks of both partners, rate of
dissipation, openness to organizational learning of the parent companies are all
linked to a variety of factors. Such factors include the organizational resources
committed to learning, the type of knowledge creation mechanisms institutionalized
within the organizational structure of the alliance. This is part of the KMS of the
alliance1.
Integration of knowledge across different contexts opens an organization to different
insights. Knowledge that is applied in different contexts increases its scope and
value to the organization. By being able to combine experiences across communities
and organizations, the scope of experience is broadened, as is the ability to learn
from these collaborative experiences and understanding the organization's strategic
knowledge requirements within the IJV network.
A wide spectrum of inter-organizational linkages is critical to knowledge diffusion,
learning, and technology development. The ability to first leap from information to
knowledge, and then from individual level learning and expertise to organizational
level learning and routine is key. In short, knowledge of how to collaborate means
that information is filtered by a specific context and an ongoing relationship, by
experience and reflection, and by interpretation. When multiple participants are
involved, and their availability varies, making knowledgeable decisions is a
challenge.
1 Hamel, G., Strategic Management Journal, 1991.
102
It is ineffective to force all decisions about collaboration to go forward after a
committee composed of staff from different business functions has approved them.
Such a move can result in a needless delay, which is fatal in a fast moving field, and
which can also dampen initiative. Another side effect of formalizing the approval
process is to force external relationships underground, into informal linkages, as
savvy managers opt to pursue relationships without risking going through the
bureaucracy of formal approval. But covert efforts may run risks that key intellectual
property or process issues are not addressed at the outset.
A firm whose activities cross national boundaries must acquire knowledge from its
environment, or more precisely, from other organizations in its environment,
knowledge about new technologies and markets as well as knowledge about how to
manage its own operations by adding value to the technology and in dealing with the
markets. In this context, strategic alliances are becoming an indispensable
mechanism for learning.
A key driving factor of the rush to „learning“ in international alliances is the
increasing globalization of knowledge. The globalization of knowledge can be
summarized in four propositions1: First, there is a vast pool of potentially
commercializable knowledge in the world, and it is expanding rapidly, perhaps at an
accelerating pace. Second, there are now more facts about the world that are known,
more know-how, more branches of knowledge, and more information about
customers, markets, and sources. Third, some of this knowledge is migratory. It can
move very quickly and easily because it is encapsulated in formulas, designs,
manuals, books or databases, or codified in some other way. Fourth, some of the
knowledge being created is embedded knowledge, and it moves slowly.
Following an input-process-output model, with the preconditions of the IJV being
the input, followed by the KM process, the logical outcome of the KMP processes
would be the question whether knowledge has been transferred to, created in the IJV
and / or subsequently returned to the parent firms. The key performance indicators
(KPIs) used to measure the outcome must be identified. The possible learning
1 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.
103
outcomes of an IJV are as follows1: there can either be no learning in either of the
partners’ knowledge bases from the cooperation, nor there can be learning just in the
situational framework of the IJV. In the best case scenario, the KM processes in
place ensure that any knowledge created in the IJV finds its way back and is
institutionalized in the parent organization. A highly receptive KMS requires the
organization to assert both intent and ability to absorb knowledge.
KPIs are the result of a number of often interrelated factors, so that enhanced
performance, in the form of profitability or longevity2, may arise from factors other
than knowledge creation, such as changes in the business or macroeconomic
environment. Further, the impact of organizational learning on performance is
generally on a long-term basis, for knowledge generated in the IJV and brought back
to the parent might find use only in the future activities of the organization.
B.3.3 KM Processes in IJVs
As mentioned above, the role of top management for creating an impetus for
knowledge flow back to the parent organization is quintessential. Its role here is also
to prioritize knowledge flows from its international collaborations, and to realize and
exploit the learning opportunities as well as put the insights generated through
partnering knowledge to good use in the future3. Retrieving knowledge that has
already been created and tested from the IJV sources in which it resides, and then
internalizing it into the parent firm so it can be recalled and used in other
applications4 is known as harvesting.
Externally acquired knowledge is of potential strategic value to the IJV partner only
to the extent that this knowledge can be institutionalized into the organization. This
involves the integration of knowledge acquired by international managers at the
alliance level into the parent’s collective knowledge base5. The intensity of the
1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. , “Cooperative Strategies; North
American Perspectives”, 1997.
2 op.cit.
3 op.cit.
4 op. cit.
5 Inkpen, A.C. " Cooperative Strategies: North American Perspectives ", 1997.
104
parent firm’s learning efforts reflects the degree to which the parent is actively
trying to internalize the skills and capabilities of its partners1.
BERDROW and LANE describe creating value through successful KM in IJVs and
summarize six descriptors that differentiate successful and unsuccessful cases. These
descriptors are mindset, controls, strategic integration, training and development,
research contributions and integrations, a relationship development. According to
this study, those IJVs that were able to successfully transform the knowledge
transferred by the parents and to create new knowledge did achieve positive sales,
operational and financial performance. In these joint ventures knowledge resources
were created and harvested that led to competitive advantage for the IJV and
parents2.
Finally, GHOSHAL pinpoints the three major barriers to IJV learning3. First, IJVs
may not be sufficiently sensitive, analytical, or responsive enough to local
environments to learn from them. Second, a tight rein on decision making by the
parent companies is less conducive to sustainable knowledge transfer than
autonomous IJVs who can prioritize at their own discretion. Third, firms may lack
the necessary knowledge transfer channels, which are a prerequisite for an effective
KM strategy.
POWELL's claim is that learning from collaboration is both a function of access to
knowledge and possession of capabilities for utilizing and building on such
knowledge is not a claim that individuals and organizations are exceedingly
calculating or far-sighted4. POWELL is building on research that stresses that skills
are embedded in the exercise of routines. The development of these routines is a
key feature in explaining the variability of organizations' capacity for learning. Only
by building these skills can knowledge be transferred from one project to another,
from one unit to another, in a manner that allows insights gained from one set of
experiences to shape subsequent activities.
1 op.cit.
2 Berdrow, I. and Lane, H.W., Working Paper Academy of International Business, 2002.
3 Ghoshal, S., Strategic Management Journal, 1987.
4 Powell, W.W., California Management Review, 1998.
105
MARCHAND describes, in the framework of IJV management, the importance of
interpersonal relations among managers or employees in a company1. Managers at
the network interfaces provide the glue that sustains the partner's intentions and
efforts. The participants in collaboration often learn at very different speeds,
prompting each side to wonder if it is benefiting equally. There are numerous
situations for monitoring and interventions are needed to maintain balance in
collaboration.
Human Resource Management in the IJV
Trust in a relationship is important, as are the personal interactions of key principles
at the executive level and operations level. However, they are still involved in their
own companies, whether the parents or the IJV, and it is not always possible to pay
the necessary attention to the relationship; other responsibilities and activities
prevail. Putting the management of the relationship into the hands of one individual
whose role is to act as a liaison and protect that relationship, with an understanding
of the different perspectives and the common goals, ensures that the relationship
does not suffer because of other priorities2. Individuals function within their own
context, which does not always center in the partnership. Placing an individual in the
context of the partnership, the boundary between parties, ensures a balance between
individual and joint priorities. It also places difficult decisions in the hands of a
party who is respected by all but has primary allegiance to the partnership.
The interaction between people from different cultural background is intense and
challenging. Successful implementation requires both an understanding of the
business and the partners’ cultures3. Too much emphasis on operative and strategic
objectives and ignoring interpersonal relationships with the people can lead to
failure of the IJV4. The International Human Resource Management (IHRM)
perspective has concentrated on the selection of executives and their adjustment to a
foreign setting independently of the business context, and the international business
1 Marchand, D.A., “Competing with Information”, 2000.
2 Berdrow, I. and Lane, H.W., Working Paper Academy of International Business, 2002.
3 Lane, H.W. and Beamish, P., Management International Review, 1990.
4 Harris, P. and Moran, R.T., " Managing Cultural Differences ", 1991; Evans, P. and Pucik, R.,
“The Global Challenge: Framework for International Human Resource Management”, 2002.
106
literature has concentrated on strategy and structure issues independently of the
implementation/behavioral processes involved1.
Building on a model developed by CLARKE and STAUNTON2, SOLIMAN and
SPOONER proposed a model of the HRM role in KM3. The main tasks of HRM are
to monitor, measure and intervene in construction, embodiment, dissemination and
use of knowledge by the employees.
A major influence factor of parent companies is their prerogative to staff the IJV’s
key positions. The extent to which the IJV team can successfully operate in an
autonomous manner will depend heavily on the skills and motivation of the
individuals selected4.
The potential for influencing IJV performance through recruitment and staffing is
not limited to top management. The number and quality of human resources, which
are devoted to the JV, influence the nature and extent of organizational learning
within the IJV environment. Since critical technology often resides in non-patentable
know-how or know-who, careful staffing of these key positions may enable the IJV
to more rapidly learn from its parents and transfer the basic concepts necessary for
establishing and maintaining competitive advantage. By ensuring that the people
selected for these positions have the requisite technical and managerial skills,
cultural sensitivity, as well as the learning capability to transfer the knowledge
within the IJV.
Given the many challenges facing employees working in an IJV, such as dual
parenting demands, complexity and multiplicity of goals, multiple cultural and
language differences as well as geographic differences, realistic recruitment is an
effective tool. It would help ensure that the individuals who are selected will work
effectively within, and cope with, the demands and pressures of the IJV
environment5. The ability to staff a venture with individuals who will be sufficiently
flexible in thought and action is a fundamental prerequisite for successful IJV
1 Lane, H.W. and Beamish, P., Management International Review, 1990.
2 Clarke, P. and Staunton, N., “Innovations in Technology and Organization”, 1989.
3 Soliman, F. and Spooner, K., Journal of Knowledge Management, 2000.
4 Geringer, M.J. and Frayne, C.A., Management International review, 1990.
5 op.cit.
107
performance1. Particularly for the venture’s top management, it will generally be
necessary for the individuals to evidence stronger skills in networking, diplomacy
and cultural sensitivity than might be the case for a wholly owned subsidiary. These
managers must be capable of functioning effectively within the different national
and corporate cultures, which constitute the IJV’s operating environment2.
Employee training and development includes any attempt to improve current or
future employee performance by increasing (through learning) an employee’s ability
to perform, usually by changing the employee’s attitudes or increasing their skill
level and knowledge. Training can also be used to encourage people to think and
behave in ways consistent with the parents’ and other stakeholders’ cultures,
objectives and interests3. In order to be effective, it is critical that training be
specific to the trainee’s locations, customs and way of thinking, as well as to the
actual problems, which are being confronted.
Not all executives are expatriates in the IJV, but IJV employees are more likely in
the future to be functioning as part of multi-cultural teams particularly as the use of
cooperative ventures increases4.
KM Tools in the IJV
Technical and organizational initiatives, when aligned and integrated, can provide a
comprehensive infrastructure to support KM processes5,6,7. This is an essential link,
the first step to an integrated, top-down KM strategy in the IJV framework.
The interactions and the managers’ exposure to their partner’s knowledge may lead
to the recognition of partner skill differences embodied in the alliance operation,
which in turn may lead to knowledge creation at the alliance level. The second
1 Cobbe, G. " Building an Alliance in Korea. Paper Presented at the Strategic Alliance ", 1989.
2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
3 op.cit.
4 Adler, N.J., " International Dimensions of Organizational Behavior ", 1991.
5 Zack, M.H. California Management review, 1999.
6 Duffy, J., Information Management Journal, 2000.
7 Martenssen, Journal of Knowledge Management, 2000.
108
process involves the integration of knowledge acquired by individual managers at
the alliance level into the partner’s collective base1.
The IJV managers can communicate their alliance experiences to others and form
the foundation of their parents’ and the IJV’s knowledge bases. Although the KM
processes are not complex or difficult to understand, the lack of complexity should
not be associated with a lack of effectiveness. The processes deal with both
operational and strategic knowledge and taken together, provide a comprehensive
view as to how alliance knowledge can cross organizational boundaries and become
the basis for knowledge creation within the IJV network2.
Only few firms have had the insight that developing routines for the transmission of
information and experience does not necessarily entail formalization. Information
can be conveyed routinely through informal means. Formal repositories and
powerful task forces can be useful but they are not a forum in which outside entities
is allowed. Building routines for regular contact without formalization allows for the
possibility that participants not only contribute ideas, but also spread lessons learned
in unexpected and unobtrusive ways.
Much less refined is the more mundane but difficult and vital task of transferring
information and knowledge obtained from external parties throughout the
organization. All these activities reflect efforts to see that information becomes more
widely diffused and that with reflection and interpretation becomes "thickened" into
organizational knowledge. Developing routines for knowledge dissemination is
always a double-edged sword. Informal mechanisms may preclude wide
dissemination, while formal procedures can inhibit learning. The challenge is to
develop regular venues for the informal transmission of information so that the
process itself becomes tied to knowledge seeking and creation.
An enormous amount of information and knowledge resides in the minds and
electronic mail of key people, but this material is rarely organized in a fashion that
allows for its transmission to others. Some firms build repositories, where contracts,
milestone agreements, working papers, publications, press releases and overheads
are stored. Discussion databases are more active sources, where key participants
1 Inkpen, A. Academy of Management Executive. 1998.
2 op.cit.
109
record their experiences as well as respond to others, and are potentially quite
valuable.
Informal seminars on lessons learned from a partnership, particularly when staff
from multiple functions are involved, are a good way to transmit experience across
projects and partnering knowledge back to the parent firms. Only limited effort
needs to be made to organize such presentations, so they have the advantage of
freshness and a hands-on feel.
B.3.4 Developing the Framework
Strategic planning: Developing a Global Knowledge Strategy
Organizational learning should be a top management priority in order to facilitate a
receptive learning environment1. The top management should be the initiator and the
architect of the organization’s KM strategy2. The top-down approach is also crucial
in integrating the strategies of both parent companies. Top management creates the
organizational intention by asking questions on behalf of the entire organization and
creating the challenges of intellectual growth3.
The aim of the top management in the parent firms should be to provide vision,
focus and guidelines for a global knowledge strategy encompassing the whole IJV
framework and beyond.
Alliance Management: Inter-organizational Knowledge Management in the IJV
A second key issue influencing KM specific to alliance management is crosscultural management. The manner in which individual managers deal with the
challenge of integrating members of culturally diverse backgrounds into a coherent
organization provides insight into the sources of competitive advantage of an
international organization. The transfer of organizational knowledge necessarily
involves an examination of how factors in the cultural environment will influence
the implementation of new organizational practices and routines.
1 Hamel, G., Strategic Management Journal, 1991.
2 Hedlund, G., Strategic Management Journal, 1994.
3 Nonaka, I., Organization Science, 1994.
110
In IJVs, cultural differences produce additional difficulties and challenges for
managers, who must allocate more time on communication, design of compatible
work routines and development of common managerial approaches1. As this aspect
is especially pertinent in cross-border alliances, it should be integrated into the
management of international alliances. The importance of knowledge can also be
determined at the level of a country’s cultural environment.
In contrast, a cultural knowledge approach places the study of national culture
within the broader strategic framework of international management.
IHRM: Managing Knowledge Workers in the IJV Framework
The importance of the human element in KM is key; accessing embedded
knowledge and skills in the highly complex IJV environment is a difficult task, and
must be approached with sensitivity. According to GERINGER and FRAYNE, the
failure of IJVs is at least in part due to the managerial complexity involved in
dealing with two often contrasting corporate and national cultures. The management
costs attributed to this increased complexity, the lack of productivity due to friction
at the workplace, and the costs involved in getting the employee motivation needed
for a successful venture are often substantial2.
In this regard, IJV performance is largely affected by the ability to manage human
resources in multicultural contexts. It remains to explore the role of national /
cultural affiliations in shaping the commitment of local employees to the IJV3. It
would be apparently a major mistake for parent company managers, unaware of the
cultural differences, to adopt a strategy developed in the parent company culture to
elicit commitment from local employees. Managers of IJVs, then, need to be trained
1 Olk, P. and Xin, Journal of International Technology Management, 1997.
2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
3 Nam, S.H., International Journal of Human Resource Management, 1995. For example, in his study on
U.S. –Asian IJVs by Nam, he found that top management sets out to find the most technically
competent and qualified people to manage the firm in a belief that hiring the best people (in terms
of qualification) would result in a profitable and dynamic company. Asians, on the other hand,
wanted to focus on effective recruitment and training of new managers and staff who exhibited
exemplary interpersonal skills and who were committed to enhancing corporate success.
111
to be able to select an appropriate mix of determinants of organizational
commitment depending on the cultural orientation of their employees.
Expatriate management is a key issue in IJV management, especially when the
assignment is in a highly complex environment such as a developing country. They
can be essential to the process of transferring embedded, tacit knowledge to the IJV
from the foreign parent company. Expatriates, while in a good position to implement
the parent firm’s policies and values in a diplomatic manner and a channel for
knowledge, can also be a major source of friction if they handle things insensitively.
Technology Management: Implementing Global Knowledge Tools in the IJV
Though it is a common mistake of organizations to equate it with KM, technological
knowledge tools are undoubtedly an integral part of KM strategy. On the one hand,
such global tools can bring together and form a united platform throughout the
organizations overcoming geographical and structural constraints. On the other
hand, implementing technology on a global basis poses its own set of complex
problems.
Within an IJV, both parent firms’ technology strategies have to be integrated and
compatible with each others to a certain degree. The IJV has to be connected to both
parents, and issues such as accessibilities have to be tackled. Furthermore,
infrastructural constraints in the foreign setting have to be taken into consideration.
112
Key Issues in the Knowledge Management Processes
(not exhaustive)
• Strategic Planning: Developing a global knowledge Strategy
Finding a strategic fit between the parents’ knowledge strategies
Implementing the global knowledge strategy in the IJV
Incorporating the IJV in the global organization
• Alliance Management: Inter-organizational Knowledge Transfer
Alliance Negotiation
Alliance Formation
Defining knowledge channels between the actors
Cross-cultural management
• IHRM: Managing Knowledge Workers in the IJV Framework
Implementing global parent IHRM guidelines in the IJV
Expatriate management
Managing local knowledge workers
Job rotation
•Technology Management: Implement global Knowledge Tools in the IJV
Global knowledge tools
Implementing parents’ knowledge strategies in the IJV
Environmental/ Cultural factors affecting knowledge tools
Figure B 18. Key Issues in the Knowledge Management Processes
113
C Core Knowledge Management Process in International
Joint Ventures
C.1 Introduction
In Chapter B the theoretical aspects of knowledge management in IJVs was dealt
with. In line with the conceptual framework and research focus of this dissertation,
this section attempts to examine the theoretical considerations for the core
knowledge management process and the status of knowledge management in the
knowledge-based Indo-US JVs1.
This Chapter is structured to address the four key processes in KM, i.e., Strategic
Management (SM), Alliance Management (AM), Human Resource Management
(HRM) and Technology Management (TM). In each section the theoretical aspects
of the core processes are considered followed by empirical evidence on how these
processes are handled in the Indo-US IJV’s with in-depth case studies.
Methodology and Data collection
A number of case studies with Indo-US JV firms focussing on professional service
sectors (IT, advertising, telecommunication, insurance, banking and financial
services)2, following the methodology outlined below, formed the basis of the
analysis of the KM processes within the Indo-US JVs. While this provided valuable
and rich information on various aspects of knowledge management in informationbased Indo-US IJV's and gave ground for theory building, the author considered it
appropriate to focus on selected case studies to give a realistic picture of core KM
processes in Indo-US JVs3.
The six Indo-US IJV firms chosen for case studies were as follows:
1. DSP Merrill Lynch
2. JM Morgan Stanley
3. Max New York Life
1 In this chapter an IJV represents an Indo-US JV - the main focus of this study.
2 See Annex (E) for list of interview partners
3 The sample size in a multiple-site study cannot be large. Eisenhardt (1989) recommends a sample
size of four to ten organzations (sites).
114
4. Birla AT&T
5. Sprint RPG
6. Ogilvy & Mather
Key information and data on the selected Indo-US IJVs are given in the next section.
The case studies were chosen on the basis of the full sets of information provided by
all key actors of the IJV framework. Choosing IJVs from the key sectors defined in
the conceptual framework (Chapter A), the author aimed to capture and assess as
many aspects of knowledge flows and processes as possible. The case studies were
examined within the principal objectives presented and discussed in the previous
chapters. The goal (research question at hand) was to determine whether the IJVs
(here Indo-US IJVs) had initiated knowledge management initiatives and / or
recognized the need for an integrated approach to knowledge management within
the IJV framework. The figure below recapitulates the research questions posed at
the beginning of the research.
• What are the key strategic and organizational processes that
constitute knowledge management within the framework of the IJV?
(PRQ1)
• What are the dominant internal and external factors in the IJV
environment, and B) the main barriers to effective knowledge
management and inherent weaknesses within these processes? (PRQ
2a/2b)
• Does an integrated knowledge management strategy within the IJV
facilitate effective knowledge management and how can it be
developed and implemented within the IJV framework? (PRQ3)
An analysis of the data gathered with regard to the research questions was followed
by the presentation of the empirical data obtained. Finally the key findings with
respect to the research questions all case studies were compared.
To allow valid comparison across cases, the selections of IJVs used in this study
have the following criteria:
• Indian and U.S. parents
• Joint venture located in India
115
• A professional services firm, in either financial services (including insurance),
telecommunications, or advertising.
• A greenfield joint venture
• the parent companies should have made first steps into the analysis of their own
knowledge management processes, and that this has direct impact on the
knowledge management processes within the IJV and between the IJV and the
parent companies
Qualitative research instruments chosen for the study and the process of data
collection are described below. The use of different types of data collection
instruments is key to a qualitative study1:
• semi-structured interviews
• secondary information
• expert interviews2
Preliminary open-ended and expert interviews were aimed at identifying important
areas of knowledge management and to form the basis for the hypotheses. Primary
and secondary data was collected during the research period from January 1999 to
November 2000.
For the interviews with the actors within the IJV framework semi-structured
interviews were chosen for the format of the interviews. In the semi-structured
interview, the interview skeleton gives the interview structure and focus3. The
interview questions were open and non-scaled, which reflected the explorative
nature of the research.
The interviews were conducted in Indo-U.S. JVs in India, as well as the Indian and
U.S. parents companies, and in the U.S. firms‘ AP headquarters. Interviewees within
the JVs held the positions of CEO (Corporate Executive Officer), COO (Corporate
Operating Officer), CIO/ CTO (Corporate Information Officer), and HR heads.
Managers as well as international and functional heads from both the parent
1 Glaser, B.G. and Strauss, A.L. "Discovery of Grounded Theory: Strategies for Qualitative
Research", 1967.
2 These consisted mostly of interviews with management consultants in India, as well as members
of the academia who advised the IJVs and parent firms on various aspects of strategy in India. This
instrument allows for a different focus for interpretation of the collected data.
3 The interview skeletons for the different participants, differentiated by competency, can be found
in Appendix.
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companies were involved in strategic planning for the firms‘ overall corporate
strategy. As interfaces between the parent companies and the JV, these managers are
expected to have an important influence on parent’s access to and management of
alliance knowledge.
The interview data was collected through personal and telephone interviews in India,
the United States, Hong Kong and Singapore. The timeframe for the interviews was
from September 1999 to October 2000.
The questions are segmented into key areas, which address the core processes of the
knowledge management strategy. The interview checklist had six groups of
questions: background data, history and rationale for the IJV, questions regarding
the four core knowledge management processes:
•
•
•
•
Implementing a global knowledge management strategy
Knowledge transfer within the IJV network
Managing the knowledge worker in the IJV
Implementing global knowledge management tools.
The final set of questions concerned lessons learned and future potential of the IJV.
The interview skeletons were differentiated according to the expertise area of the
interviewee (strategic planning, alliance management, international human
resources, and technology management). Due to the open nature of the questions,
interviewees possessing specific knowledge of certain areas were permitted to
elaborate, if they so wished. The skeletons for the “expert interviews” also had a
different emphasis, focussing on a more „objective“ and general perspective. The
answers of the interviewees to these specific questions were documented precisely,
along two categories: factual answers (descriptive), and opinions and quotes
(subjective views). Finally, the interview was summarized with the key statements
to the relevant core processes of the knowledge management strategy being restated.
After conducting the semi-structured interview, it was then transcribed to allow for
preliminary data analysis. At the beginning of the interview transcript, there is a
short biography of the interviewee followed by a synopsis of the history of the IJV.
117
The interview write ups were based on a classification scheme approximating the
main analytic concepts1, such as parent experience, parent interactions, IJV
organization, the knowledge management processes, linked core processes and IJV
performance. The secondary data provided further information on the firm and the
IJV. Interviews from the individual JVs and the parent companies were grouped to
provide integrated sets of data for a flow analysis on the knowledge management
process within the Indo-U.S. joint venture framework.
Adjacent to the interviews, different sources of firm-specific secondary data were
used. The idea behind this was to gain a complete picture of the firm-specific
context and surroundings of the interviewee. This secondary information includes
documents, memos, as well as information from the firm-internal Intranet, and other
externally accessible information.
In the second stage of data collection a multiple case study approach was used,
based on theoretical replication2 because the choice of cases is directed by the
emerging theory developed from stage one. A set number of cases of U.S.
companies involved or in the process of entering IJVs in India, with local companies
were specified. The data for these cases was collected through interviews with
parent company executives (host and home) and IJV executives. The cases were
chosen based upon the integrated sets of data available.
The study of process requires an approach to data collection that differs from the
conventional survey methods, or from reliance on secondary data sources, that
typifies much of the process research in IJVs. The case study method, especially if
derived from the first interview stage is most likely to capture the dynamic elements
of the processes in the integrated knowledge management framework. As during the
interview process four sets of interviews were conducted within each IJV
framework, these will build the base for all case studies.
Qualitative data from this mixture of methodologies provided a realistic picture of
the processual linkages between cross-cultural management and knowledge transfer
and management within the IJV. Questionnaires and structured interviews
1 Miles, M.B. and Hubermann, A.M. " Qualitative Data Analysis – a source book of new methods
1984.
2 Yin, R.K. " Case Study Research: Design and Methods ", 1994.
118
completed in numerous companies provide a necessary breadth of understanding the
types of problems managers' experience in the IJV. Clinical research provides an
important depth of understanding of individuals, their motivations, problems,
decisions, and their operating environments1.
C.2 Key Information on Case Study Partners
C.2.1 DSP Merrill Lynch (DSPML)
DSP Merrill Lynch (DSPML) is an IJV between DSP Financial Consultants Ltd
(DSP) and Merrill Lynch (ML) with a 60:40 ownership structure. There are three
main divisions within DSPML: Merrill Lynch Securities Ltd., Investment Banking
and Asset Management. One quarter of all DSPML business comes from
multinational companies. DSPML does receive clients from abroad but this is
usually under ML AP directives. DSPML has been the largest mobilizer of funds for
the past four years, covering all types of instruments and all issuer categories. The
net worth of DSPML for the financial year 2000 (9 month period) was 214.70
Crores Rs, with a profit after tax of 49.34 Crore Rs2.
C.2.1.1 Indian Parent - DSP Financial Consultants (DSP)
The Indian parent company, DSP Financial Consultants was newly formed
from DS Prabhoodhas & Sons, a reputable 130-year stockbroker house and
merchant bank, and one of the major players in the Indian financial market.
DSPML’s current chairman is a 4th generation broker of the family, as well as being
the president of the Bombay Stock Exchange (BSE).
1 Lane, H.W. and Beamish, P., Management International Review, 1990. As is typical of theory
building research, this study used an iterative approach of data gathering, analysis, and
examination of the literature (Eisenhardt, 1989; Glaser & Strauss, 1967). At the beginning of
the project, the researcher had no particular theoretical frame. The interviews were
intentionally left open-ended to allow any findings to emerge from the data.
2 DSPML Financials shown correspond to 9 month period ended 31.12.2000 DSP Merrill Lynch
Securities Limited., DSP Merrill Lynch, Annual Report,2001 ; 1 Crore = 10 million ; I US$ =
~ 57 Rs.
119
DSP was one of the first private banks to enter the investment-banking field1. In the
1980s, DSP envisioned several potential partnerships with foreign banks2 wishing to
enter the Indian market.
C.2.1.2 U.S. Parent – Merrill Lynch (ML)
ML has a proven past of international experience and leadership. It is one of the
"most global investment banks of the new Millennium"3. It has an extensive resource
base and a well-structured organization. ML has the strong commitment to
principles essential for success in the global financial sector. These principles are
Client Focus, Respect for Individuals, Teamwork, Responsible Citizenship and
Integrity.
DSP Merril Lynch (DSPML)
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions):
Revenues* ($ in millions)
DSP Financial Consultants and Merril Lynch
1993
60% DSP, 40% Merril Lynch
Equal, under ML Asia Pacific directives
Aligned to Merril Lynch
Hong Kong
Merril Lynch
407,200
DSP
<25
Merril Lynch
44,872
DSP
<2
* As per financial year 2000
Figure C. 1 DSP Merrill Lynch Key Data
1 At this time equity pricing was still controlled by the Indian government.
2 DSP considered partnerships with Dresdner Bank, Nextaxis, and the Swiss Bank Corporation
(SBC).
3 http://www.Globalf.vwh.net, Global Finance, 1998: Merrill Lynch, Morgan Stanley Dean Witter,
and Goldman Sachs are determined as the three most global investment banks (based on
revenue outside the U.S.).
120
C.2.1.3 The IJV – DSP Merrill Lynch (DSPML)
The complementary sets of strengths of the two partners have been essential in order
to overcome each other's weaknesses. DSP, an owner-driven, family based business
aimed to be more institutionalized and professional. ML, on the other hand, was
trying to gain access and expertise in a lucrative but highly complex market.
The fit between product offerings was given, with DSP dealing with equity, debt,
and retail distribution, and Merrill Lynch with its product palette of equity, debt,
advisory services, asset management and private clients. ML was not operating in
India before the IJV, and DSP has no operations outside the country. The objective
was to achieve critical size and leadership at low cost, saving ML the effort of
building operations from the ground up and allowing DSP access to ML's
considerable resources. ML accords to a relationship of mutual trust, which was
established through a long relationship. There are minimal conflicts, and both
partners are comfortable in the partnership.
DSP’s partnership with ML started in 1984. In 1986 the first country fund was
launched, and ML started managing funds at that point.
After the beginning of economic liberalization in 1991 the capital markets in India
offered great potential for foreign investors. In 1993 the MOI1 was signed between
DSP and ML. The two companies had similar history and organizational culture. In
1994 the IJV was formed and a major re-organization took place within DSP in the
form of an ownership structure.
Milestones of the IJV were:
• 1974 - Formation of DSP Financial Consultants Ltd. (DSP) by the promoter of a
130-year old stockbroker house (DS Prabhoodas & Sons) partner in various
deals.
• 1984 - DSP Financial Consultants Ltd. and Merrill Lynch (ML) worked closely
• 1993 - Merrill Lynch takes 29% equity stake in DSP
• 1994 - Merrill Lynch and DSP form the IJV
• To date - Continuance of a thriving relationship between Merrill Lynch and
DSP2
1 MOI - Memorandum of Intent
2 ML has also invested in a separate joint venture with DSP ML – DSP Merrill Lynch Investment
Managers Ltd (DSPMLIM) ; http://www.dspml.co.in/
121
Motives - One of the main motives for the IJV between DSP and ML was the FDI
regulations that MNCs from abroad reduce their ownership of wholly owned
subsidiaries to minority shareholders1. To tackle the threats of the competition, ML
aims at global diversification, while DSP hoped to gain access to its partner's large
resource and skill base. The strategic objective of the IJV was to exploit the
opportunities thrown open by liberalization and globalization. DSPML was an
addition to the long list of successful strategic expansions by ML, and an important
part of its Asian strategy in the late 1990s.
A key driver for the formation of the IJV was the convergence among the many
national markets for financial services and the erosion of international trade barriers,
among other things through the revolution in IT. With increasing globalization and
liberalization, the Indian business environment became competitive for Indian firms
and potentially lucrative for international ones. The financial institutions had an
opportunity to help Indian players tackle competition from outside the country and
to help international players enter and grow. The relevance of international financial
products has increased considerably in the Indian context.
For ML, the globalization of capital markets led to the realization of the need to
pursue a "think globally, act locally" strategy. The global nature of its business
allowed it to reap full benefits of globalization of capital markets, while the local
aspect required ML to enhance the capability to participate in rapidly growing key
local market activities.
DSP has an impressive history in the Indian Capital markets. It had a strong client
base consisting of both local corporate and government institutions and state
governments. DSP also has an impeccable reputation in the local financial circles,
and a widespread network of connections in the Indian business and political
environment.
DSP felt the need to gain access to international experience and market place. A
perfect strategic fit between DSP and ML led to the joint venture. The four firmspecific factors contributed to this were:
• Complementary set of strengths
• Economic rationale
1 See Annex : E.2.
122
• Commitment to identical principles and values
• Mutual trust established through a long relationship
The organization of DSPML was structured along the business model and structure
of ML. The board representation is equal on both sides, even though it is a minority
joint venture (therefore non-consolidated) for ML and the consensus approach is
taken to all major decisions. The business model did not require much local
adaptation.
The big challenge in the restructuring and formation of DSPML was changing from
a family firm to a professional financial-services institution. DSPML had to re-align
the "ML way" integrating the relationship within the two companies and expanding
the services to new areas and a bigger product range.
ML is characterized by a tight structuring and guided by strict decision-making
processes and empowerment of the divisional heads. It required a mind-set change
of local management through observation of and learning from expatriate top
management. ML (US) brought the professional approach to the IJV, which is
necessary for one of the largest global financial companies. DSP, on the other hand,
had the family culture and the expertise of the local Indian market as well as the
large network of relationships in the local business and regulatory environment.
Among the adaptations to the local environment were the integration of back office
services and the offering of financial corporate services customized for Indian firms.
For DSPML it was critical to enable and facilitate global, contribution-based
strategies as they felt it was a common purpose and communication that drive
success in a relationship.
DSPML is one of the leaders in the Indian capital markets, for both local as well as
international products, and is the largest fundraiser in the domestic markets1. They
have been advisors to unique and path-breaking transactions and are leaders in
managing international capital market offerings by Indian companies.
In India, DSPML is the leading underwriter and broker for debt and equity securities
and a leading advisor to corporations, institutions and state governments. For private
customers, the platform of products and services provides access to a robust range of
1 1995-96 and 1998-99
123
investing and wealth building tools with the personal guidance of financial
consultants. DSP ML is also among the first firms to set up a full-fledged research
team in India. The Company is among the major players in the debt and equity
markets and is also a primary dealer of Government Securities. DSP Merrill Lynch's
credentials are best supported with accolades received from highly respected
institutions. Finance Asia has ranked DSP ML as "The Best Domestic Investment
Bank" for 2000. Also Euromoney voted DSP ML " Best Domestic M&A House in
India" as well as "Best Domestic Equity House in India" in their Awards of
Excellence for 2000.
The IJV has been successful in continually reinventing itself, launching new
business initiatives such as the Private Client Group, Asset Management,
Management & Advisory services, and establishing primary dealership over a
variety of products.
Voices on the IJV1
The CEO of DSPML points out, "It's continuous innovation, ability to deliver,
execution of capabilities and integrity of a firm that makes all the difference".
DSPML recognizes itself to be a full service investment bank, offering a wide and
complete range of services under one roof. "Today, every client wants their own
solution. A full service investment bank, like us, plays a key part in the corporate
strategy and in the execution of the financial strategy of a company" says the
executive Chairman of DSPML.
The vice-Chairman, DSPML remarks "There could be competition from someone
who puts up an investment bank from the Net, so we can't be complacent."
C.2.2 JM Morgan Stanley (JMMS)
JM Morgan Stanley (JMMS) is a joint venture between the investment banking
division of Morgan Stanley Dean Witter (MSDW) and JM Financial & Investment
Consultancy Services (JMF). JMMS is a fully integrated investment bank offering
services for resource mobilization, privatization, corporate structuring, capital
structuring, valuations, joint ventures and investment structuring.
1 http:// www.india-today.com/btoday/20001006/ef.html
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JMMS is the only IJV between two corporate partners of MS in the world1. MS was
present in the Indian financial market with a wholly owned subsidiary from 1993.
However, MS top management in New York realized with the Indian CEO’s (an
U.S. Indian expatriate) help that an IJV with a well known merchant banking firm in
India would be the most promising, if not the only way to break in to the
exceedingly difficult investment banking market in India.
C.2.2.1
Indian Parent – J.M. Financials (JMF)
The KAMPANIs are veterans in Mumbai’s financial scene, with excellent business
and political networks, among other premier Indian business groups like the Tatas
and the BIRLAs, and even with transnational firms entering the national market and
seeking financial advisory services. J. KAMPANI set up JM Financials in 1973.
C.2.2.2
U.S. Parent – Morgan Stanley Dean Witter (MS)
MSDW was established in 1935 and has consistently maintained leading positions in
Resource Mobilization, Financial Advisory, Mergers & Acquisitions, Securities,
Asset Management and Credit Card Transaction Services. MSDW began Indian
operations in 1989 with the India Magnum Offshore Fund. The fund catered
principally to institutional investors at the time it was established.
MS was the biggest financial investment institution in India with over 1.7 billion
US$ transaction through offshore mutual funds.
Activities of MS in India included investment banking and stock brokerage. MS
soon realized that contacts and government connections as well as personal
networking were needed to gain a foothold in the investment-banking sector. MS
had the international expertise but realized that it would not be able to create a
sufficient market share within a reasonable period of time. So MS was faced with
three alternatives:
• Expand, but the potential turnover did not make the investment lucrative
• Close down the subsidiary in India
• Enter into partnership with a local investment banker.
1 The other one is in China, which is with a government partner and in a highly controlled
regulatory environment.
125
C.2.2.3
The IJV – JM Morgan Stanley (JMMS)
JMMS was established in 1999, with an 18-month integration phase. The
management model and organizational structure were those of MS. Integration is
very slow especially in IB as the vast majority of investment bankers are ex-JM
workers1. The organizational structure that is now in place at JMMS is somewhat
different from the MS structure as they feel that sudden changes are contraproductive and adaptation is necessary e.g., JMMS has more levels of hierarchy and
different designations2 for hierarchical and pay structure. Day to day business of the
JV has been relegated to COO of MS, who is also in charge of the integration phase,
and the ex-second in command to the CEO.
JM financials merged completely into MS (India) to become JMMS. There are two
entities in the JV i.e., investment banking and asset management, which are split in
to two different companies.
Several foreign banks were looking to partner with JM, for they had a very good
reputation and a large network within Indian corporate and regulatory environment.
In the early 1990s, JM had an MOI with Credit Suisse First Boston (CFSB) but the
IJV did not materialize.
Investment banking is the most lucrative sector in the financial environment but MS
was lacking the deal flow and necessary local knowledge to gain an adequate market
share. When the CSFB / JMF MOI started to break up, JMF started looking out for a
new partner and the Head of MS India could convince MS management in New
York to start negotiations with them.
1 In the investment banking 65 are from JM and only 4 from MS
2 VP, Executive Director vs. GM
126
JM Financial Morgan Stanley (JMMS)
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions)
Revenue * ($ in millions)
JM Financial & Investment and Morgan Stanley
1999
JM Financial merged to Morgan Stanley (India) ;
IB Division - JMMS & JMF 51%, MS 49%
AM Division - MS 51%, JMF 49%
6 MS and 4 JMF
Aligned to Morgan Stanely
Singapore
JM Financial Consultants
~ 50
Morgan Stanley
426,794
JM Financial Consultants
Morgan Stanley
< 25
26,427
* As per financial year 2000
Figure C.2 JM Financial Morgan Stanley Key Data
MS learned from the IJV the importance of local access and knowledge of the local
surrounding and the advantages of buying a good local brand name for shorter time
to market share. The IJV has proven a valuable source of partnering knowledge for
future MS endeavors and other MS affiliates. From the beginning, both partners
were determined to make the partnership long-term and earn the trust they put in the
IJV.
127
Figure C.3 Business Structure of JMMS1
"We are able to give a complete solution and the best option to the client, be it in the
global market or the domestic market"2, CEO, JMMS.
"We are a full service banker, with strong domain knowledge, distribution, and
ability to innovate, which translates trends into transactions that create value3."
Vice-Chairman, JMMS.
C.2.3
Max New York Life (MNYL)
Max New York Life Insurance company (MNYL) is a partnership between Max
India, one of India's leading multi-business conglomerates and New York Life, a
Fortune 100 U.S. company based in New York. Through a wide network of highly
competent "insurance advisors" providing "innovative products", Max New York
Life is looking to create a "partnership for life" with its customers in India.
1 http://www.jmmsdirect.com/aboutus/business.php3
2 http://www.india-today.com/btoday/20001006/ef.html
3 http://www.india-today.com/btoday/20001006/ef.html
128
Max New York Life (MNYL)
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions):
Revenue* ($ in millions)
Max India and New York Life
2000
Max India 74%, New York Life 26%
Represents ownership
Aligned to New York Life, standardized to Indian
Hong Kong
Max India
48
New York Life
138,242
Max India
N.A.
New York Life
11,676
* As per financial year 2000
N.A. Not available
Figure C.4 Max New York Life Key Data
Milestones of the Partnership
• In November 1999 Max India Limited entered a joint venture with New York
Life International Inc., the global arm of New York Life Insurance Company
USA, to offer life insurance products in India. The IJV-MAX New York Life
Insurance Company Ltd -- the partnership between Max India Ltd and New York
Life -- became the first joint venture insurance company to register under the
Indian Companies Act.
• In October 2000 Max New York Life was given in principle approval by
Insurance Regulatory and Development Authority (IRDA) to commence
business.
• The IJV put up a core team of professionals to prepare the business plan and was
in business by 2Q 2001. MNYL aims to be India’s premier private sector life
insurance company.
C.2.3.1
Indian Parent – Max India Ltd (MI)
Max India, a young, modern and entrepreneurial Indian company had its major
growth phase in the period of liberalization, free markets and partnerships after
129
1991. The Max conglomerate concentrates its business activities on the high-growth
knowledge industries. Max’ strategic mission has been to be progressive and willing
to take on fresh challenges in newer high-growth markets. It has grown
independently on its own and by joining hands in partnerships with major
international companies where specific business opportunities are best addressed
through joint ventures. Therefore, Max India has a long and varied history of
partnering experience.
Max India was established in 1984, with its roots in the pharmaceutical and
chemical bulk production. In 1989, the first diversification of Max India’s business
activities took place. New windows of opportunity were explored through
partnerships with foreign firms, which were seen as the best way of expanding and
strengthening the business. The first partnerships were in Max India’s core business
in bulk pharmaceuticals. Here the primary learning between the partners was in the
transfer of technology to the IJV’s manufacturing facilities. Avnet Max, Max IJV
with Avnet Corporation, is a world leader in electronic component distribution.
In 1994-95, after the Indian Telecom Bill was passed, Max India decided to enter the
telecom services market. Max India entered a partnership with Comsat International,
the satellite communications provider and Hutchinson, the Hong Kong based
telecom provider. Max India’s partners in the telecom industry had the firm-specific
expertise and financial backing that Max India lacked, while Max India had the
market knowledge and connections with local regulatory authorities, as well the
brand recognition with mass consumers in India.
In addition Max India has a significant presence in the most vital & fast growing
sectors of the Indian economy, telecommunication services, electronic components
distribution, specialty plastic films and bulk pharmaceuticals. These diversified
businesses are organized as Max India's 100% owned Business Units (BU) and
equity IJVs. Each of these is fully empowered to lead their operations, have grown
and obtained leadership position in their respective industries by providing high
quality products and services, working closely with their customers. The Max India
of the next century strives to provide high-value global products and services,
designed and delivered by global talent, for global markets.
Max India is the Indian partner in a number of IJVs, both up and coming. In 1999,
Max India was involved in three Indo-American IJVs, Avnet Max, an electronic
130
component distributor in partnership with Avnet, Comsat Max, a satellite
communications IJV with Comsat International, USA; and Max Atotech, one of
Max India’s oldest IJVs. Max Atotech is situated in Max’s former core business area
of chemical manufacturing, and is now in a partnership with Elf Aquitaine of
France.
Starting early 1999, Max India has refocussed itself into building a corporation
based on the knowledge platform that India represents, and has exited from IJVs that
were no longer part of its new core business. Today, Max India is building
businesses in the emerging knowledge-based areas of healthcare, financial services
and IT. In each of these areas Max India plans to innovate to deliver products and
services in a manner that is effective and unique. By being an early entrant into these
sectors Max India will proactively work to influence industry trends and contribute
to the development of these early stage service businesses1.
Max New York Life was given in principle approval by the IRDA, the Indian
Insurance Panel, in October 23, 2000 subject to the capitalization of the company.
The Vice-Chairman Max India and Chairman MNYL said, "Our focus has been on
building our new business areas of healthcare, life insurance, and IT. The creation
of the IJV is an important milestone in [Max'] vision to excel in the knowledgebased, people oriented service businesses. I am confident that Max New York Life
will emerge as the life insurance brand of first choice."
Max India sees its core competencies in the area of identifying new business
opportunities, finding the suitable format, allowing for autonomous management at
the strategic level. Max India sees the role of the top management in a scanning
function restricted primarily to the strategic direction of the group as a whole.
1 Max India Annual Report, 2000.
131
C.2.3.2
U.S. Parent – New York Life International Inc. (NYL)
New York Life International Inc., (NYL) is a Fortune 100 company, and in 1998 the
company had total revenues amounting to almost US $ 20 billion, and was rated the
number one provider of new life insurance policies in the United States. In the same
year, New York Life was also the leader in insurance sales to the growing Indian
community in the United States.
New York Life's move into the international marketplace began in 1870 with the
appointment of a general Agent to Great Britain and Europe. Headquarters for the
European region was established in London. The opening of offices in France,
Germany, Belgium, Russia, Italy, Switzerland and Austria in the 1870s quickly
followed this. Elsewhere in the world other branches were opened in rapid
succession. A West Indies operation established in 1873 was quickly followed by
operations in Mexico, British Guyana and Venezuela. In Asia, operations were setup in India, China, Australia, and the Philippines and in Japan. By 1898, New York
Life had inscribed on its policies and on its official company letterhead, "The Great
International Life Insurance Company." The following year it had operations in 83
countries and one billion dollars of insurance in force. The worldwide agency force
of 8,000 men and women operated out of 208 branches by 1905.
International business was an important part of the company's financial growth and
stability from the beginning. After World War I, New York Life confined its
operations to North America until 1988, when it reentered the world marketplace by
establishing New York Life Worldwide Holding Company, Inc., later renamed New
York Life International, Inc.
NYL brings to the joint venture financial strength and acknowledged expertise in
developing and selling life insurance products that appeal to a broad market.
C.2.3.4
The IJV – Max New York Life (MNYL)
Max India (MI) wanted to enter the insurance industry with an experienced global
partner in the life and non-life sector and New York Life was looking for a partner
with a good track record in IJVs, a strong brand name and reputation in India.
During the partner evaluation NYL actively sought references from MI's current and
former IJV partners. Both partners had various past JV experience and large stock of
partnering knowledge.
132
MI entered into an IJV in November 1999 with NYL, the global arm of New York
Life Insurance Company USA to address the life insurance sector in India and went
into business in November of 2000, when the Indian Insurance Bill was finally
passed with a delay of 11 months. The alliance has great potential to grow and
become one of the leading players in the industry, with the regulatory environment
now allowing private insurance companies to participate in this sector.
As specified by the IDRA Bill of India, 1999, the Indian partner MI has 74% and
NYL will subscribe to 26% of the equity. New York Life International brings to the
joint venture financial strength and acknowledged expertise in developing and
selling life insurance products that appeal to a broad and heterogeneous market.
From the beginning both partners were committed to a long-term relationship. The
key alliance inputs were from the side of Max India - knowledge of the Indian
market, management expertise and government connections and from the New York
Life - experience in the life and non-life insurance sector and financial backing.
Together, Max India Limited and New York Life aim to become India's preferred
insurance brand. This vision is mirrored in the IJV's mission statement which
underlines the following values:
• Offer the customers the best information possible enabling them to take decisions
that better their lives.
• Understand the customers and their needs thoroughly.
• Be transparent in dealings with the customers.
• Offer innovative solutions with an objective professional advice and a highly
personalized service.
This mission statement is derived in language and format from the NYL mission
statement, even though it is in accordance with the principles of MI.
Voices on the IJV:
The CEO of the company's Asia region "Establishing a significant presence in the
Indian market is a cornerstone of New York Life's strategy to grow our global
business in high-potential emerging markets around the world." He goes on to say
"India is a complex and varied market. Having an Indian national as the head -
133
someone who knows the market and knows Indian consumers - is extremely
important." 1
The Managing Director, Max India Ltd, said: ``Max New York Life is a partnership
that is committed to the Indian insurance sector. It is our endeavor to set industry
benchmarks and provide the highest standards of service to the Indian public. This
requires us to make investments in human resources. We are proud to be the first
insurance joint venture company to register in India, as it will give us the
opportunity to create a team of service leaders.2''.
The Chairman and Chief Executive Officer, New York Life International Inc, said:
``The announcement of a policy framework to the final awarding of licenses is
expected to be completed in the next six-eight months. However, insurance is a
service industry, which requires huge investments in manpower training and
development over a period of time. The registration of the new company will enable
Max New York Life Insurance Company to employ and effectively train the best
talent in the Indian market and so ensure that we are ready to operate in India when
we get the license. '' He further adds, "We look forward to fulfilling that trust and are
exited to be in the forefront of the changing Indian Insurance market.3"
"We are working towards developing and launching mass-customized life insurance
products and solutions for our consumers,” said the new CEO of Max New York
Life. He also highlighted the cooperation he witnessed between the two companies.
"By law, Max New York Life is a 74-26 joint venture, but the spirit here is of a 50-50
partnership from beginning to end1".
C.2.4
Birla AT&T Communications Ltd.
The coming together of the Aditya Birla Group with AT&T in 1995 marked the
making of one of India's largest partnerships in the telecommunications sector.
Birla-AT&T Communications Ltd., is a joint venture between the Aditya V. Birla
Group (51%) and AT&T Wireless Services (49%).
Milestones in the formation of IJV
1 http://www.indiacore.net/news/finnenews12.html
2 Interview, Max India Ltd., New Delhi, India, 2000.
3 http://in.biz.yahoo.com/001115/18/bxpu.html
134
•
•
•
•
•
1995 – Aditya Birla Group and AT&T start negotiations for an IJV.
1996 – The MOU for the JV was signed.
1997 – Startup of Birla AT&T
1999 – Telecom bill ratified to allow AT&T to have a majority stake.
2000- Birla AT&T and Tata Communications to merge2
C.2.4.1
Indian Parent – Aditya Birla Group
The Aditya V. Birla Group is the second largest industrial houses in India, with
extensive overseas operations, knowledge and experience in implementing large
projects and annual revenues of US$ 4 billion3. It has manufacturing and marketing
operations in man-made fibers, aluminum, cement, petroleum products, carbon
black, chemicals, fertilizers, sponge iron, caustic soda and insulators. Some of the
better known companies in the Group are Grasim Ind. Ltd, Indo-Gulf Fertilizer and
Chemicals Corporation, Mangalore Refineries and Petrochemicals Ltd., Century
Textiles and Century-Enka Ltd.
The group has operations spread across Egypt, Indonesia, Philippines, Thailand,
Poland, Rumania, Russia, and Vietnam. It is the world's largest producer of viscose
fiber and possesses the world's largest palm oil refinery.
K. M. BIRLA inherited a $5 billion empire in 16 countries on the untimely death of
his father Aditya in 1995. Birla Group's flagship Grasim Industries Ltd. makes
everything from fabric to chemicals to cement and may find tough competition in
these industries down the road. Group profits have been soft, and the consensus is
that the company is stretched too thin. BIRLA has had the foresight to put new
projects--such as a paper pulp plant--on hold. The BIRLA group aims to be future
oriented, while maintaining its long tradition as a major force in the Indian business
environment. And despite his Western education, his empire remains closed and
1 op.cit.
2 http://www.adityabirla.com/companies/grtelecomm.html ; The Aditya Birla Group, AT&T and
Tata Industries Limited have signed a Memorandum of Understanding expressing their intent
to merge the cellular properties owned by Birla AT&T Communications Limited and Tata
Communications Limited. This combination will result in a joint venture company wherein
each of the three partners will have an equal holding.
3 http://www.adityabirla.com/group/index.html
135
secretive. In some cases, deregulation could give the large groups new businesses
for the future.
Birla AT&T
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions):
Revenue* ($ in millions)
Aditya Birla Group and AT&T Wireless
1997
Aditya Birla Group 51%, AT&T 49%
Aligned to AT&T, standardized to own IJV Indian model
Hong Kong
Aditya Birla Group 1,213
AT&T
242,223
Aditya Birla Group
AT&T
910
>200,000
* As per financial year 2000
Figure C.5 Birla AT&T Key Data
C.2.4.2
U.S. Parent AT&T Wireless Services
AT&T has 120 years of experience in the telecommunications industry and earned
communications services revenues in 2000 of US$ 51 billion. AT&T Wireless
Services is the world's largest cellular company1. It employs over 12'000 people and
has more than 6.5 million subscribers. AT&T provides a full range of
communications services to business, consumers, telecommunication service
providers, and government agencies, including advanced voice, data, wireless,
electronic and consulting services.
AT&T consists of 4 business groups, which include cellular, messaging, wireless
data, and aviation communications. AT&T currently has 107 licenses and offers
cellular services in more than 5000 cities throughout the North American cellular
1 http://www.att.com
136
network and worldwide. AT&T Asia-Pacific provides a broad range of wired
wireless and online services to customers across Asia-Pacific. AT&T has offices in
14 countries across the region and joint ventures in China, Australia, Hong Kong,
India, Japan and the Philippines.
AT&T does business in approximately 200 countries and is the world's networking
leader, providing communication services to businesses, consumers, and
government agencies. Their worldwide intelligent network carries 185 million voice,
data, video, and fax messages every business day.
AT&T is a major player in long distance communication services. They expanded
into wireless services as they bought McCaw communications in 19941. They
started their international thrust in AP and South America after home growth started
stagnating. AT&T needed an IJV partner in most countries. They opted for a cascade
structure in most regions and in Asia-Pacific started out in Singapore. AT&T
Telecom in AP is experiencing phenomenal growth and the business environment is
constantly changing.
AT&T Wireless Services' partnership in India is an important step of the company's
extensive Asian presence. AT&T has further IJVs in strategic locations in AsiaPacific region.
C.2.4.3
The IJV – Birla AT&T
Birla was AT&T’s partner of choice. AT&T approached all the large industrial
houses e.g., TATA’s, Birla’s etc., but the reasons for choosing Birla’s was the
following. Birla had as of yet no exposure in the service sectors and they were
always in their core sector. Shortly before this time A. BIRLA, the founder of the
group, wanted to get into the service sector, his prime choices being insurance and
telecom sector as these are on their way to privatization.
The MOI for the joint venture between the Aditya Birla Group and AT&T was
signed in 1996, and the companies came together in 1997. The telecom policy of
1994 mandated a minority interest for foreign telecommunications companies so the
ownership of the IJV was 49% AT&T and 51% the Aditya Birla group. AT&T was
uncomfortable with its minority stake and while using its brand name to the product.
1 Note: McCaw management still have a large influence in AT&T wireless IJV’s
137
The activities of the joint venture are as of yet restricted to AT&T wireless service
but the real strength of AT&T, such as long distance services, will be expanded into
as soon as the appropriate telecom bill is ratified by the government1.
The coming together of the Aditya Birla Group with AT&T in 1995 marked the
making of one of India's largest partnerships in the telecommunications sector.
AT&T thought that the TATA’s were too bureaucratic and assumed that the
BIRLA’s had the financial power to invest and backup in IJV. During the IJV it
became clear that AT&T could manage on its own as far as the finances were
concerned. Control issues were agreed upon. These funds were used for increasing
network coverage, improving network quality, and bringing in state of the art
product delivery and back office enhancements. "This tranche of investments takes
Birla AT&T's total investments in its cellular venture to Rs. 1,700 crore, which will
catapult Birla AT&T to becoming a world-class network provider", says Birla
AT&T president and CEO.
Gearing up to establish India's largest cellular network, Birla AT&T plans to set up
300 cell sites, 5 MSCs (Mobile Switching Centres) and cover half of all district
headquarters that come within its area over the first three years. Upon completion of
the network, Birla AT&T will have one of the largest private microwave
communication systems in India.
Apart from strengthening the domestic coverage, Birla AT&T is all set to become
the leading international roaming service provider in the country with access to over
200 GSM networks worldwide with special emphasis on the US continent.
This announcement marks the completion of the major aspects of the first phase of
the US$ 1.5 billion project to build India's largest cellular network.
Voices on the IJV:
"The joint venture is committed to building a world-class cellular network in the two
states, providing quality of service that will exceed the expectations of our
customers"2.
1 Note. Done in October 1999; stable BJP govt.
2 AT&T News Release, Oct. 24, 1996
138
"The Birla AT&T joint venture is a critical element of AT&T's global wireless
strategy", said the Vice President-international, AT&T Wireless Services. "We are
pleased to be offering cellular services in India that meet the highest international
standards."
Its performance in the last fiscal year has been very good as it has grown by about
70 % in terms of revenues and by over 58 percent in terms of subscriber base in both
the circles put together. From Rs 54.38 crore in 1997-98 Birla AT&T’s revenues is
estimated to have gone up to Rs 92.85 crore in last fiscal and the total subscriber
base has gone up from 54,363 in 1998 to 86,017 by April 19991.
C.2.5
Sprint RPG
Sprint RPG India Ltd is a 50:50 joint venture between Sprint International, USA,
and RPG Enterprise. Sprint RPG India is the provider of business communication
services, which include integrated network solutions and global traveler services.
Integrated network solutions services cover services like network systems
integration and E-mail.
• 1994: The company launched its E-mail service—SprintMail, which offers
reliable, cost-effective, and a faster communication service. The company's Email service has already acquired a name in the world.
• 1995: introduction of its second global voice service, prepaid calling cards. In
this, the customer can pay in advance for a fixed amount of long distance
international calling over Sprint's global fiber optic network.
C.2.5.1
Indian Parent: RPG Enterprises
RPG Enterprises is India’s 4th largest industrial family2. There are 30-35 companies
in the RPG group ranging from tire manufacturers, agricultural business to
supermarkets chains to telecom providers (e.g., Ceat and Dunlop tyres, Foodworld,
RPG Sprint).
R.P. GOENKA, Founder of the Group, presently the Chairman Emeritus, is a
pioneer of Indian business. H.V.Goenka is the Chairman of the US $ 1.6 billion
RPG Enterprises which is amongst the five largest groups in India. He is a past
1 Crore = 10 million ; 1 US$ = ~ 47 Rs.
2 http://www.rpgnet.com
139
president of the Indian Merchant's Chamber, Bombay Chamber's Best Manager of
the year 1995, and Committee member of Federation of Industries Chamber of
Commerce. SANJIV GOENKA, youngest son of R.P.GOENKA, is the ViceChairman of the Group. RPG Enterprises is one of India's best-managed group of
companies with a diversified but integrated presence. The group's operating style
seeks to achieve the right fusion of professional management and entrepreneurial
drive. The group's financials and sector wise turnover show its enormous strength in
forging a strong economic path for itself.
Sprint RPG
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions)
Revenue* ($ in millions)
RPG Enterprises and Sprint International / Global One
1994
RPG Enterprises 50%, Sprint Global One 50%
Aligned to Sprint Global One, standardized to own IJV
Indian model
Hong Kong
RPG Enterprises
1250
Sprint Global One
42,601
RPG Enterprises
1220
Sprint Global One
23,643
* As per Financial Year 2000
Figure C.6 Sprint RPG Key Data
RPG has a turnover of 6 billion US$, assets of 2.1 billion US$, and employs over
63000 people1
In the mid-1990s, the RPG Group set a major strategic redirection, as the
international competition intensified in the wake of Indian economic liberalization.
1 http://www.rpgnet.com/
140
After restructuring, RPG led its business activities along specific company lines. For
the new decade, RPG is aiming its sights at the knowledge-based sectors such as the
insurance and Internet technology industries.
RPG sees the core competency its partner brings to the IJV as technological skills,
leadership skills and industry specific skills. RPG feels that the management of
Indian human capital is the core strength of the corporation and as RPG pronounces
"our knowledge is easily transferable"1.
C.2.5.2
U.S. Parent - Sprint International / Global One
Global One was launched as a joint venture of Deutsche Telekom, France Telecom
and Sprint in 1996. In January 2000, France Telecom announced it was acquiring
Global One in its totality. Since then, Global One has reorganized and operated as an
independent company within the France Telecom Group2.
At that time, Global One will fully integrate its operations and personnel with those
of Equant, creating a company numbering 13,000 employees and approximately
3,700 large business customers, including more than three-quarters of the world's
top 100 companies. Pro-forma annualized revenues for the combined company was
predicted to be US$ 2.5 to 3 billion for the year 2000. In the period leading up to the
merger, Global One will continue to provide its customers the full range of its
world-class services and meet all of its contractual commitments3.
Global One offers a single source for high quality IP, data and voice
telecommunication services worldwide, with a primary focus on the multinational
business market. A recognized leader in providing integrated e-business solutions to
meet customers' enterprise-wide needs, Global One has one of the world's most
advanced global networks to support convergent services and applications. Global
One has a local sales presence in more than 70 countries and had revenues of US$
1.1 billion in 1999.
1 Interview quote, RPG Group, Mumbai, India, 1999
2 On November 20, 2000, France Telecom and Equant -- the Amsterdam-based carrier with a
network spanning 220 countries -- announced an agreement to create a world-leading global
provider by merging Global One with Equant. France Telecom will be the majority
shareholder with a 54.3 per cent stake in the combined Equant/Global One company.
Regulatory approval for Equant/Global One is expected by mid-2001.
3 http://www.global-one.net/
141
C.2.5.3
The IJV: Sprint RPG India Ltd
Sprint RPG's main business is to provide e-mail service within India for business
customers using leased lines. Sprint RPG does not export any services, and does not
import parts of services except for maintenance services from Sprint and
maintenance parts from Tandem, the supplier of the computers that power the e-mail
service.
Sprint Fax, a dedicated, high-speed data network with a single message multiple
destinations facility, was introduced also in 1995.It has some novel features like
broadcast, paper-free transmission, and deferred delivery options. Its state-of-the-art
software center in Delhi has already reached its full capacity. The workstations on
LAN are connected to the IBM mainframe in the US. At its head office in Delhi, it
has got a modern messaging center, which houses the Tandem mainframe host
computer. This is the main center for the control of Sprint RPG's messaging
solutions. Another important service, which is provided by Sprint RPG, is Help
Desk for customer support round-the-clock.
Now, Sprint RPG provides consultancy and turnkey services for enterprise-wide
networking in partnership with RPG Satcom. Already it has acquired a respectable
position in the highly competitive Indian value-added services market1.
Three years ago, while the critics speculated the economic viability of setting up an
electronic network in India, Sprint RPG was among the first few who took the bold
step of setting and started building a countrywide X.25 Electronic network. Today,
after three years, Sprint RPG is not only the market leader in the corporate segment
but also showed that such a business is economically viable for Sprint RPG India
Ltd2.
C.2.6
Ogilvy and Mather (O&M)
Ogilvy & Mather, India (O&M India) is a joint venture between S.G. Benson, which
was integrated into the JV, and Ogilvy & Mather world wide, which is part of the
EEP group.
1 http://www.sprintrpg.com
2 http://www.royans.net/v1/articles/other/srilarticle.shtml
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C.2.6.1
Indian Parent – S. G. Benson
Core competency of O&M India is brand management. Local clients are Unilever,
Tata’s and Cadbury Schwepp among others. O&M sometimes adapt worldwide
O&M brand strategies to local environment. As a sign that O&M India is gaining
recognition in O&M worldwide, the next worldwide board meeting will take place
in India.
C.2.6.2
U.S. Parent – Ogilvy & Mather
Ogilvy and Mather (O&M) is one of the largest marketing communications
networks in the world. O&M services more Fortune Global 500 companies in five or
more countries than any other agency.
The key message of O&M has been “One brand, One voice”, “360º Branding” with
over 50 years of brand building. Over the past 50 years, O&M has helped to build
some of the most recognizable brands in the world: American Express, Sears, Ford,
Shell, Barbie, Pond's, Dove, and Maxwell House among them, and more recently,
IBM and Kodak. As brand stewards, O&M works to leverage the brands of their
multinational clients by combining local know-how with a worldwide network,
creating powerful campaigns that address local market needs while still reinforcing
the same universal brand identity. O&M’s history is the evolution of its founder’s
thoughts, talents, and work ethic translated into a company culture and a defining
business strategy1.
The hallmark of their brand-building capabilities is a balance of global and local
brands. Their local clients keep them in tune with local market nuances, which is
critical for the success of their multinational accounts, and the source of O&M's
largest knowledge database. O&M is a member of the WPP Group plc, one of the
largest communication services companies in the world. There are more than 60
companies in the group, including J. Walter Thompson, Hill and Knowlton, Ogilvy
Public Relations, Millward Brown, Research International, Mindshare, and
Enterprize IG. Through the WPP family, O&M has access to top-rated expertise in
the communications spectrum, such as design, research, public relations, identity,
retail marketing, sales promotion and new media.
1 http://www.ogilvy.com/history/default.asp
143
Ogilvy & Mather (O&M)
Parents:
Year of creation:
Ownership Structure:
Board representation:
Business Model:
Asia Pacific HQ:
Assets* ($ in millions):
Revenue* ($ in millions)
S.Benson (merged to O&M India) and Ogilvy & Mather
(worldwide)
1998
49% merged S.G. Benson O&M (India), 51% Ogilvy and
Mather (worldwide)
O&M (worldwide) 3 and O&M (India) 2
Aligned to O & M (worldwide)
Hong Kong
O & M (India)
N.A.
WPP plc (O&M parent)
8,116
O&M (India)
WPP plc(O&M parent)
4.5
547
*As per financial year 2000
N.A. = Not available
Figure C.7 Ogilvy & Mather India Key Data
C.2.6.4
The IJV – Ogilvy Consulting India Ltd.
Milestones of the Partnership:
• 1972 – Ogilvy & Mather buys 40% of SG Benson
• 1996 – Equity ratio 60:40 in favor of Ogilvy & Mather
• 1998 – Ogilvy Consulting created out of a division of Ogilvy & Mather
O&M bought 40% of SG Benson in India in 1972. Ownership structure is 51 %
OM, 49% Management, before 1996 ratio was 60:40 in favor of O&M.
Ogilvy Consulting (OC) was created out of a division of O&M in the beginning of
1998. It is a knowledge-based consultancy to advice clients on brand strategy and
innovation. OC functions as multidisciplinary solution provider as they can draw on
OM’s vast global experience (wants to be in the league of McKinsey & Co). OC was
conceived in India as a thinktank for clients to provide knowledge in the local
environment. O&M India acquired new products etc. from its parent in New York.
Main interaction is with O&M AP.
144
C.2.7
Analysis of the literature context and data
In addition, this analysis includes reactions to the relevant literature, as they related
to the interviews and emerging insights.
A) Classification of literature according to the elements of the theoretical
framework, i.e. IJV theory, knowledge management in organizations, and interorganizational knowledge management
B) According to the actors in the IJV Framework, i.e. parents, and IJV, knowledge
givers and receivers, top and middle management.
C) According to knowledge management processes, i.e., strategic planning, alliance
management, international human resource management, and technology
management.
Eventually, this effort involved categorizing, combining, and eliminating insights
until a parsimonious but accurate representation of the overall data emerged for each
process.
C.2.8
Indian Economic Environment
The Indian economic environment increased significantly in interest for foreign
MNCs when the Controller of Capital Issues was abolished in 1992, as a first step
towards Indian economic liberalization. The following year access to international
markets was allowed and many restrictions on the interest rates on debt issuance
were lifted.
Changing patterns of demand is driving the rise of the service sectors. But after a
decade of liberalization, the service boom is also a competitive response to
globalization. The high cost of capital, caused by vast government borrowing, is
India's biggest source of competitive disadvantage.
There are two main types of Indian companies favored and in a position to be
suitable IJV partners to US multinationals. Of the first, the family- owned industrial
conglomerates are rapidly sinking into decline, while new investor-friendly
businesses in high-growth, knowledge-based sectors have burst into prominence.
RATAN TATA of Tata Sons, and K. BIRLA of Aditya Birla, India's two largest
industrial houses, are in the process of adapting their business strategy in line with
the requirements of the knowledge-based industry. Media, advertising, retail,
145
personal financial services, entertainment, tourism, leisure are the most growthdriven segments of the economy.1
Under the aspect of the value of the individual firms’ knowledge assets and
protection, Indian intellectual property rights protection laws, though perceived to be
very poor in global business rankings2, appear to adhere to WTO standards in most
respects except patents and the uncertainty of actual enforcement. In recent years,
this fear has been somewhat allayed by higher transparency in legal issues,
particularly in new, high growth industries.
The telecommunication industry is sizeable, with a total expenditure on telecom
services and equipment of 6.5$ billion US in 19953. Telecommunication
infrastructure enjoys fiscal benefits such as tax holidays and subsidized import
duties. It is a high growth industry, since India has one of the lowest telephone
densities in the world, and the fact that economic growth has been rapid since the
1991 liberalization of the basic telecommunication - local and domestic long
distance telephone and fax service through fixed wires - is provided by government
monopolies. Value-added telecommunication - e-mail, cellular mobile telephone,
radio paging, and satellite data transmission - was first available in India in 1995,
and is supplied by private sector companies and most of these are joint ventures with
foreign MNCs.
1 Financial Times, India, April 27, 1999.
2 Mansfield, E, "Intellectual Property Protection", 1994
3 Voice and Data, 1997
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C.3 Strategic Planning: Implementing a Global Knowledge
Management Strategy in the IJV
"Any company that depends on smart people and the flow of ideas must choose a
KM strategy"1
Thomas Stewarts' conclusion about the role of knowledge is typical: „The new
economy is about the growing value of knowledge as an input and an output, making
it the most important ingredient what people buy and sell“ 2.
"What is important is not what we do but why we do it- the underlying philosophy
and view of people on the business that provides foundation for the practices. The
emphasis should be placed on the tangible explicit aspects of knowledge that
characterizes most KM projects is unlikely to provide much value and maybe, at
worst a diversion from where and how companies should be focussing their
attention"3.
External or inter-organizational possibilities, such as IJVs, may be at least as
attractive and ultimately more important.
First, KM is a people-to-people process; relationships precede and are required for
meaningful sharing and transfer. Second, learning and knowledge transfer are
interactive, ongoing and dynamic processes that cannot rest on a static body of
knowledge. Finally, it all comes back to a personal and organizational willingness
and desire to learn.
C.3.1 Global Knowledge Management Strategy
One of the major challenges of managing knowledge in an information-based
services environment is the fact that value lies locked in peoples’ heads. This should
be one of the key aspects of KM techniques used to implement a global KM
strategy.
1 Hansen M.T, Nohira, N., and Tierney, T., Harvard Business Review, 1999.
2 Stewart, T., Fortune, 10.12.1998.
3 Pfeffer, J. and Sutton, R. I., California Management Review, 1999.
147
KM involves the definition, capture, creation and retention of knowledge in order to
create value for the organization. Strategic planning activities can be classified as
dealing with the complexity, uncertainty and unpredictability of the future of the
organization. If knowledge is deemed as the service firm's most important resource,
then KM should be a priority in the strategic planning activities of an organization.
The need for a defined KM strategy arises when there is:
• Lack of attention to the explicit or formal management of knowledge in the
current organization
• Failure to leverage the implicit value of knowledge in business development and
strategic planning
• Failure to learn from past failures and successes in corporate decision-making
• Creation of value-added or „making money“ from knowledge embedded in
products, processes or held by employees
Corporate or organizational knowledge reveals not just what an organization does,
but also how and why it does and what it does. Knowledge is not confined to
systems and documents, but exists in the firm culture and in the minds and
interactions of its people.
An IJV KM strategy requires a philosophy or set of guidelines about how an IJV
will operate, and its core values and core assumptions. IJVs learn and change and do
things consistently while implementing their general principles to enhance
organizational performance, operating on the basis of a general business model or
theory of organizational performance. A set of core values and an underlying
philosophy for the IJV framework would permit organizations to avoid the problem
of becoming stuck in the past or mired in ineffective ways. Consequently, these
firms are able to learn and adapt, to communicate with partners and across large
geographic distances, and to do so in ways consistent with their basic understanding
of what creates success and high performance in their particular business.
148
Relationships among Value Creation, Value Innovation,
and Technology Innovation
Value Creation
Value
Innovation
Technology
Innovation
Source: Kim, W.C. and Mauborgne, R. Sloan Management Review, Summer 1999, 45.
Figure C.8 Value Creation
Organizations need to acknowledge new sources of knowledge that can stimulate
innovation. The real payoff comes from capturing knowledge that lies outside
traditional boundaries and can spur change1.
Companies need to look beyond standard corporate processes and structures to
capture and act on the insights of employees away from the established center of the
organization. While measuring the resources and gaps empirically, it must be
defined that each firm has its own approach to describing and classifying its strategic
and competitive knowledge.
Coordination and a common approach require the leadership of the CEO and the
firm's strategic planning taskforce. When strategically managing knowledge within
the IJV of the parent company and the IJVs, the CEOs should be sure about the
149
priority given to KM. Top-down commitment is necessary to choose, implement and
overcome resistance to a new KM strategy. The top management of the organization
should be committed to the implementation of the KM strategy.
Having performed a strategic evaluation of knowledge-based resources and
capabilities, an organization can determine which knowledge should be developed or
acquired.
On the other hand a firm must strive to exploit any “excess knowledge”. Ultimately,
the ideal for most companies is to maintain a balance between exploration and
exploitation within all areas of strategic management. The creation of unique,
strategic knowledge takes time, forcing the firm to balance short- and long-term
strategic decisions, and allocate knowledge creating and processing efforts
accordingly.
Linking Knowledge with Strategy
What firm
must know
Knowledge
Gap
What firm
knows
What firm
must do
Strategic
Gap
What firm
can do
Source: Zack, M., Developing a Knowledge Strategy, CMR Spring 1999
Figure C.9 Developing a Knowledge Strategy
Knowledge is essentially dynamic, so what is innovative knowledge today will
ultimately become the core knowledge of tomorrow. To gain maximum value added
from the alliance, firms must analyze their knowledge gaps, to understand what they
need to expect from a potential partner in order to fill external knowledge gaps2.
1 Brown, J.S., Management and Information Technologies, 1998.
2 Zack, M.H. California Management Review, 1999.
150
This constitutes the strategic knowledge map of the parent firms should be
complementary to each other to have the maximum learning gain from the alliance1.
Global KM Efforts
In the 1997 DELPHI study2 of 300 companies and their knowledge initiatives, the
KM mandate in over half of them came from the corporate executive offices. Only
in 51 companies did IT management sponsor the KM initiative.
Collaboration means that „the result is the product of common effort, the goal is
shared, and each members' success is linked with every others…ideas and materials
too, will be shared, labor will sometimes be divided and everyone in the group will
be rewarded for successful completion of the task“3. Turning knowledge into action
is easier in organizations that have driven fear and internal competition out of the
culture. Instead of confusing motivation with competition, there should be an
interest in enhancing organizational performance and winning the battle in the
marketplace.
There are two principal foci of KM within the IJV framework. The first is the better
transfer and sharing of existing knowledge. The second approach is that of creating
new knowledge and converting it into valuable products, services or processes and
transferring the knowledge back to the parent company. Here the focus is on better
and faster innovation.
Information-based services focus on two key knowledge levers.
Knowledge in processes: This is vital meta-knowledge that can help an organization
be much more effective.
Knowledge in people: Perhaps 90 % of information-based services organizational
knowledge lies with the people. Many professionals feel that it is their knowledge
that makes them valuable. When this knowledge is shared and integrated into the
organization it becomes much more valuable to the firm as a whole. Personal, hardwon knowledge is not readily shared in the highly competitive information-based
1 For complementary vs. identical knowledge in strategic alliances see Levinson, N.S., and Ashahi,
M., Organizational Dynamics, 1999.
2 Delphi Study, 1997.
3 Kohn, A., " No Contest: The Case Against Competition ", 1992.
151
services sector. This is a fundamental cultural and behavioral issue, where an
organization needs role models. The top management must support all incentives for
encouraging employees to share their knowledge with others and encourage a
"knowledge-sharing" environment.
DAVIS et al1 define organic knowledge as "a set of activities using individual and
external knowledge to produce outputs characterized by information content".
In the knowledge integration phase, barriers arise “because individuals in the parent
organization have often had very little interaction with the IJV, and therefore have
difficulty interpreting its highly specific and sometimes newly created assets”2. Here
top management support plays an important role: liaisons of the IJV to the
respective parent firms need the support of senior management to facilitate the
integration of created knowledge back into the parent firm.
KM systems seem to work best when the people who generate the knowledge are
also those who store it, explain it to others, and coach them as they try to implement
knowledge. The fact that knowledge is acquired through experience and is often
intangible and tacit produces a further problem in turning knowledge into action.
Although specific practices are obviously important, such practices evolve and make
sense only as part of some system that is often reorganized according to some
philosophy of performance and critical mass. Until recently, KM efforts could be
characterized by the following guidelines.
• KM efforts mostly emphasize technology and the transfer of codified
information
• KM tends to treat knowledge as a tangible thing as a stock or a quantity and
therefore as something from the use of that thing.
• Formal systems can’t easily store or transfer tacit knowledge.
• The people responsible for transferring and implementing KM frequently don’t
understand the actual work being documented.
• KM tends to focus on specific practices and ignore the importance of a holistic
strategy.
1 Davis, G. et al., MISRC Working paper, 1991.
2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North
American Perspectives”, 1997.
152
A KM strategy that does not try to be "all things to all people", but still is based on
an integrated approach, is most likely to be credible and successful.
This recognition enhances the importance of contributions that experienced
employees make but still KM is more than knowledge it captures. It also identifies
the nature of that cannot be captured by knowledge, disseminates the information
about it so people can query those resources - those experts - as needed and
incidentally provides good reasons to retain them in the enterprise.
C.3.1.1 The Knowledge Audit
Know your assets
A specialized enquiry what knowledge the partner has, where it is located, and how
it flows through the enterprise are required. A knowledge audit can show what
changes are needed in organizational and personal behavior, business processes and
enabling technologies so knowledge can be applied to improve competitive
advantage. A successful audit can identify intellectual assets of value to the
company.
The audit should cover explicit and tacit knowledge assets of both partners. To begin
an inventory of tacit knowledge assets, the experts within the organization must be
identified - employees who seem to do their jobs better, more efficiently or more
intelligently than others do.
A knowledge audit is a more qualitative valuation than a quantitative one. A
complete knowledge audit must evaluate, in ascending order of difficulty, the state
of the company's technology, how well its processes support knowledge sharing, and
the work styles and culture of its people. Knowledge Mapping captures the patterns
of knowledge flow within the organization. This knowledge flow audit examines
how people process information, since ultimately that determines how well an
organization uses and shares its knowledge.
153
Source: Knowledge Management Magazine, 1999
Figure C.10 Intangible Assets
The goal of knowledge due diligence is to examine people's attitudes toward and
habits concerning knowledge sharing in the firm and learn with whom they
collaborate, how they get the information they need, whether and when they
document their own knowledge, how they store and distribute knowledge. It often
includes a written survey, facilitated group discussions and individual interviews.
When all levels are involved, findings better reflect reality because the perspectives
of workers at a single level cannot skew overall results. Multilevel involvement also
reveals the expectations and perceptions of both senior and middle management. "If
there is a big gap between management and employee thinking in the organization,
it might be a sign that leadership is giving lip service to KM but isn't providing a
place for it in the daily life of the corporation."1
1 Herzog, M., Managing Director KPMG, New York, Knowledge Management Magazine, 1999.
154
Tools to measure knowledge
The knowledge audit can also reveal how knowledge is shared across departments.
The audit may also determine whether business processes are designed to support
intra- and interorganizational knowledge sharing. For example, audits ask whether a
company provides time for knowledge capture within workflow1.
A knowledge audit can also uncover best practices within the organization2. Often,
knowledge initiatives are launched too quickly, in response to executive pressure
inspired by the projects of competitors or because due to an interesting analyst report
or journal article. Without the kind of understanding of an individual organization's
KM strengths and weaknesses that an audit provides, initiative may seek solutions to
non-existent problems or ignore problems that need immediate attention.
Audit tools, such as the knowledge-based SWOT analysis, which maps
organization's knowledge resources and gaps against the firms' strategic
opportunities and threats are helpful to understand the organization's strengths and
weaknesses.
The knowledge goal of an alliance should be to combine its learning experiences
into a “critical learning mass” around particular strategic areas of knowledge. By
using a knowledge map to prioritize and focus its learning experiences,
organizations can create leverage for their learning efforts.
C.3.1.2 Top Down KM Strategy
Top management must come to the realization that knowledge needs to be nurtured,
supported, enhanced, and cared for. Thinking in terms of systems and ecology1 can
help provide for the creation of platforms and cultures in which knowledge can
really emerge. Executive commitment, sponsorship, and leadership are critical
success factors for KM initiatives to succeed and realize business value.
The top management of the organization, whom LYLES describes as “the key
decision makers”, initiates higher level learning. She argues that as top management
undoubtedly has a large influence on the attitudes and beliefs of others in the firm,
1 DELPHI study
2 See C, TBP
155
they determine the “core area” of the organization’s knowledge structure2. As top
management also determines the strategic direction of the organization, they should
articulate the global knowledge strategy, design the change initiative and
communicate these changes to the rest of the organization.
Knowledge is manageable only insofar as leaders embrace and foster the dynamic
nature of knowledge creation. The role of the top management of the IJV is as the
providers of a supporting environment for knowledge creation and manage
knowledge emergence. Leaders must support emerging processes with visionary
proposals and a personal commitment of time and power. The success of knowledge
creation depends on management's assumption of responsibility, justification,
financial backing and commitment.
As with change processes in most organizations, it is not essential that the leaders
initially endorse it, only that they don’t subvert the pockets of innovation as they
occur. This first requires that the leadership itself be convinced that transfer has
merit and real impact.
One of the main reasons that KM efforts are often divorced from day to day
activities is that the internal and external individuals who design, build and
implement the systems have limited often inaccurate views of how people actually
use knowledge, so-called „working knowledge“ in their jobs3. This validates a
knowledge audit as a preliminary step to implementing KM in the IJV.
The following factors may be indicator of the commitment of an organization’s
senior executives towards KM.
Power: Even those studies that do look at the motivation to learn have not typically
investigated the role of power4. Organizational learning and the flow of knowledge
will have many more barriers when senior managers do not actively influence a KM
initiative.
1 Brown, J.S. and Duguid, P., Organization Science, 1991.
2 Lyles, M. A., International Business Review, 1994.
3 Harper, D., Quantitative Sociology, 1997.
4 Szulanski, G., Strategic Management Journal, 1996.
156
• Culture: Moving towards a knowledge sharing environment is primarily a
cultural change and senior executives must actively sponsor and guide the
organization's journey towards a knowledge-sharing environment.
• Commitment: It is not enough for executives to set the direction and make sure
the organization is headed that way. Top management cannot "push" others in
the organization to change. Senior managers must be at the front of the change,
and motivate the others to follow by setting an example. They must also use the
knowledge that has been contributed by others, and make this known. Organizing
reward and recognition processes to celebrate knowledge sharing achievements
are also powerful motivators for human performance. In summary, executives
must demonstrate leadership in their behavior; consistency in action is a
powerful signal to help steer an organization forward. As in any large-scale
initiative, if top management does not change, there is little incentive for
employees to follow.
• Funding and Resources: In addition to providing leadership through sharing of
knowledge, senior managers must lead the efforts by securing support to others.
In a highly competitive global economy, it is no longer sufficient to have a single
executive for a fundamental change initiative. Developing a sponsorship strategy
that aligns agreement to the change journey, strategy objectives, initiatives,
expected value, success measures, risks and constraints is a critical condition for
ensuring support and acceptance by key stakeholders. Global efforts and
resources, as well as global communication can only ensure the success of global
KM initiative
• Credibility: Support and public commitment by top management can also be
important for the credibility of the initiative. It underscores the fact that the
initiative is part of an integrated KM strategy.
C.3.1.3 Creating the Environment for Global Knowledge Management within
the IJV
Good, prior, personal relationships—what organizational sociologists have called
social capital or embeddedness1—are critical to the success of KM. That is, the
relationship effect seemed to derive from the presence of a common language and a
higher degree of comfort with the people involved. One reason for this result is that
close ties, as in partnerships, facilitate the transfer of complex knowledge2. A critical
aspect for creating an environment that supports the implementation of KM
1 Granovetter, M., American Journal of Sociology, 1985; Uzzi, B., Administrative Science
Quarterly, 1997.
2 Ghoshal, S., Korine, H. and Szulanski, G., Management Science 1994; Hansen, M.T.,
Administrative Science Quarterly, 1999; Szulanski, G., Strategic Management Journal,1996;
Uzzi, B., Administrative Science Quarterly, 1997.
157
initiatives should be the facilitation of networks of individual connections and to
create the conditions needed to grow and share robust contextual knowledge.
C.3.1.4 Implementing The KM Strategy
Research indicates that implementation of KM strategy is more difficult. Diffusion
proceeds slowly and fitfully and backsliding is common. Senior Management must
play a very active role in navigating the cultural change around knowledge
initiatives and settling milestones initially by defining the course and direction for
the initiative. By working to define a clear vision for KM within their organization,
executives will set and keep their organizations on track.
There is a tendency to let planning, decision making, meetings, and talk to substitute
for implementation. Preparing a white paper layout and the associated processes
such as analysis, writing, critique and revision for key procedures is important but
action is more critical.
What is the company’s response? Does the firm provide soft landings? Or does it
treat failure and error so harshly that people are encouraged to engage in perpetual
analysis, discussion, and meetings, but not to do anything because they are afraid of
failure? All learning involves some failure, something from which one can continue
to learn and reasonable failure should never be received with anger.
For effective KM processes, a key element benefiting the flow of knowledge is the
support of powerful and influential actors in the organization. While there are
several potential sources of organizational power—e.g., location in the
communication network, reputation, performance1, two stood out for these
knowledge-intensive linchpins:
(1) hierarchical power, especially senior
management support, and (2) structural power of key business units or technical
experts.
HAMMER and CHAMPY’s aggressive methods are at one end of a continuum for
improving knowledge processes2. At the other extreme is a laissez-faire approach to
KM in the organization. Neither extreme seems appropriate for most companies’
knowledge work environments. The laissez-faire approach might be characterized as
1 Pfeffer, J." Managing with Power: Politics and Influence in Organizations ", 1992.
2 Hammer, M. and Champy, J. “Reengineering the Corporation”, 1993.
158
finding good knowledge workers and leaving to their own devices only to measure
performance.
The need for knowledge worker participation was cited in order to secure their help
for the implementation of a new process. For example, organizations attempting to
improve knowledge creation processes should steer toward the laissez-faire end of
the continuum. These knowledge workers are perhaps the most autonomous and
resistant to micro-level activity design. At the other extreme, firms wanting to
reduce or eliminate the amount of administrative activity in knowledge work
processes might employ change approaches closer to the reengineering end of the
spectrum. Laissez-faire approaches take longer to implement but involve lower risk
of obvious failure. Reengineering approaches are more visibly risky but can be fully
implemented within a year or two.
People or sub-units that play a central role among the task interdependencies in an
organization’s division of labor can be said to have structural power1.
Pressure and fear often make managers do erratic inconsistent, even irrational
things2. They build cultures in which even the concept of failure is not particularly
relevant. Fear starts or stops at the top. Leaders who inspire respect, affection, or
admiration but not fear frequently lead organizations that are successful in turning
knowledge into action.
Professionals in service organizations say that initiatives like KM fail in their
organizations due to the fact that the correct, supportive culture is not in place3, and
because the realization wasn't there that different parts of the organization are
unlikely to recognize the larger benefits of the corporation creating more integrated
types of knowledge. There is a difference in the kind of business environment that
supports initiative such as KM, and the commitment to creating a culture which
supports the client-oriented processes and structures necessary to ensure their
implementation.
The answer to the question of whether the “knowing-doing gap” actually matters for
organizational performance is not as obvious as it might seem at first. It is possible
1 Astley, W.G. and Zajac, E.J., Organization Studies, 1990.
2 Brennemann, G., Harvard Business Review, 1998.
3 Interview quote, Morgan Stanley, India, 1999.
159
that differences in organizational performance come from differences in what firms
know – the quality and depth of their insights about business strategy, technologies,
products, customers and operations – rather than from their ability to translate that
knowledge into action. There are important differences in knowledge across firms,
such as differences in the sophistication of their understanding of management and
operations. But such differences are only part of the reason for the differences in
performance of firms; a much larger source of variation in performance stems from
the ability to turn knowledge into action1.
Organizations use a combination of information technology tools such as e-mail,
"best practices databases," data warehousing, internal directories, and Groupware to
support employees seeking knowledge and collaboration across the organization.
But they should not rely on the technology tools to create their own market. After
all, although people have telephones, they don't automatically "reach out and touch"
someone they don't know. The knowledge sharing culture has to be instilled within
the organization, not just the culture.
Typical KM strategy and processes focus instead on the stock of knowledge, the
number of patterns, the compilation of skills inventories and knowledge captured on
overheads or reports and made available over some form of group ware. Such
systems certainly don’t capture whether or not this knowledge is actually being used.
Organizations that are serious about turning knowledge into action should measure
the knowing doing gap itself and focus knowledge activities specifically.
The explicit attempts to manage knowledge as a strategic resource include:
• Designing and installing techniques and processes to create, protect and use
known knowledge.
• Designing and creating appropriate „knowledge friendly“ environments.
• Articulating the purpose and nature of managing knowledge as a resource and
embodying it in other initiatives and programs.
People need incentives to participate in the knowledge sharing process. Different
KM strategies call for different incentive systems. In fact, the level and quality of
employees' contributions to the document database should be part of the job
description and the annual performance review. During performance appraisals,
1 Pfeffer, J. and Sutton, R., California Management Review, 1999.
160
employees are evaluated along a "knowledge dimension" according to their
contribution to and utilization of the knowledge assets of the firm.
Leadership can help by promoting, recognizing, and rewarding people who model
sharing behavior, as well as those who adopt best practices. It helps to design
approaches that reward for collective improvement as well as individual
contributions of time, talent, and expertise. It is necessary to constantly reinforce the
need for people at all levels to take responsibility for voluntarily participating in this
activity of sharing and leveraging knowledge. Managers should ask regularly what
people are learning from others and how have they shared with management ideas
they think are worthy and be sure to support teams that invest or "give up" resources
to make this sharing happen, especially if they do not directly benefit.
Organizational learning theory has been geared largely towards organizational
information processing, decision-making, and learning skills as barriers and
enablers of a KM strategy1 from the concepts of ability, comfort and power more
concrete to implementation of KM strategy.
What factors within the IJV framework cause a resistance to learning? Who is
resistant to learning? Which incentives and enablers can decrease resistance to
learning? These are questions that must be answered before the KM strategy can be
implemented.
The most effective IJV knowledge initiatives are those that are demand-driven (the
pull to learn and change comes from the person or unit that has a problem or need)
rather than push or laissez-faire (if you let them know about it, they will seek it out)
approaches. Leadership can help create and support demand, but it can't make it
happen. Leaders can encourage collaboration across boundaries of structure, time,
and function. Ways to do this are to:
• Promulgate success stories,
• Provide infrastructure and support, and
• Change the reward system to remove barriers.
Indeed, a useful way to understand any organizational action, including the flow of
knowledge, is to focus on both the desire and ability of the organization or of its
1 Huber, G. P., Organization Science, 1991.
161
members to perform that action1. When we say that organizational learning and the
flow of knowledge can only occur if the people involved want to and are able to do
so, it seems, in retrospect, almost self-evident. For it may not be enough for
organizational learning to take place if there is only an ability to absorb new
knowledge and a high degree of comfort in doing so. Rather, supporters had to have
the power and influence in the organization to make the knowledge flow happen, to
overcome inertia2 and resistance3. Initiating this culture change and the acceptance
of KM is a crucial factor for success.
C.3.2 Types of KM Strategy
Organizations that use knowledge effectively pursue either codification or primarily
personal and use the second strategy to support the first. Eighty percent of their
knowledge sharing follows one strategy, 20% the other. Executives who try to excel
at both strategies risk failing at both, and extol far too many valuable resources on
the process.
Business strategy must be the driver for KM strategy. It is important for managers to
make the explicit connection between their company's competitive strategy and how
they use and manage knowledge to support it. A few of the basic questions the IJV
must ask itself are:
• Are our knowledge requirements standardized or customized? This decision is
to be made depending on the services that the organization offers4.
• Are our services mature or innovative? For mature services a codification
strategy would increase efficiency and eliminate redundancies and for innovative
services, a personalized approach to KM would ensure a high quality and costefficient service.
• Is our knowledge base primarily explicit or tacit? For explicit knowledge
codification would offer the most benefit and for the extraction of tacit
knowledge, a personalization strategy would prove most effective.
1 Levin, D.Z. and Shortell, S.M. " Desire to Implement and Ability to Implement: The Case of Total
Quality Management", 1996; Zajac, E.J and Kraatz, M.S., Strategic Management Journal,
1993; Zajac, E.J. and Shortell, S.M., Strategic Management Journal, 1989.
2 Hannan, M.T. and Freeman, J., American Sociological Review, 1984
3 Dougherty, D. and Hardy, C., Academy of Management Journal, 1996; Maidique,M.A., Sloan
Management Review, 1980.
4 Some knowledge-intensive products and services - e.g., Investment banking, mature over time and
become standardized commodities. In effective companies the KM model stays the same even
as new services mature.
162
COHEN noted „in the US, most knowledge practice focuses on collecting,
distributing, reusing, and measuring codified knowledge and information.
Practitioners often look to information technology to capture and distributes this
explicit knowledge; firms measure success by near term economic returns on
knowledge investment“1.
Surveys indicate that organizations are according KM an increasingly higher
priority2. The technology aspect and the explicitness of a major part of corporate
knowledge are the two elements that receive the most attention. Technologies that
support data warehousing, data mining and portals (single, browser-based points of
entry to internal and external information), that disseminate knowledge throughout
an organization, and that allow for real-time communication across geographic and
functional boundaries are considered staples of the KM discipline. Knowledge
categories such as best practices, customer requirements, competitive intelligence
and transactional history are typically cited as cornerstones of KM content
initiatives.
The sharing of tacit knowledge in informal, personal settings can also have
dramatically positive effects. Together, the explicit and the tacit, the complexly
technical and simply personal combine to create a holistic approach to KM in order
to get closer to customers, to become more responsive (and, coincidentally, more
efficient) and lead to the success of the IJV.
Most of first generation KM efforts put the emphasis on technology and the storage,
and transfer of codified information such as facts, statistics, presentations and
written reports. GREENGARD asserted that „it is clear that an Intranet is one of the
most powerful tools for achieving results within the KM arena“3.
HANSEN et al. found that providers of highly specialized services also needed to
choose a KM approach that fits their needs and goals4.
Knowledge initiatives in organizations include:
• Redesign strategies for knowledge work processes
1 Cohen, D., California Management Review, 1998.
2 Ernst & Young, DELPHI, KPMG
3 Greengard, S., Workforce, 1998.
4 Hansen M.T, Nohira, N., Tierney, T., Harvard Business Review, 1999.
163
• Firms can change knowledge themselves by reducing a unit of knowledge that
workers can reuse or access or by improving knowledge capture techniques.
• Firms can improve knowledge work by changing the physical location of where
and with whom people work.
• Firms can use technology to bolster knowledge work by, among other things,
creating knowledge bases and enabling telecommunications, infrastructure and
applications.
• Make knowledge more portable, modular, accessible and recordable. Firms also
address knowledge work improvement by changing the way they captured and
stored knowledge e.g., a book of process knowledge for cross-reference.
• Changing where and with whom people work
• Business planners: Often, shared physical experience is essential for a shared
view of the process. These should be from different business functions.
• Cross-functional team of HQ marketers, field managers, and representative
franchise supervisors.
When the improvement goal is better creation of knowledge, design strategies
involving where and with who people interact are more likely to be effective.
Knowledge orientation is only one aspect in the choice of a design strategy. Other
factors such as culture, strategy, competitive environment and IT infrastructure can
significantly affect design efficacy.
Information-based Service Firms (ISFs) offer their clients advice that is rich in tacit
knowledge. The process of sharing deep knowledge is time consuming, expensive
and slow and can't truly be systemized and requires one-on-one training.
Nevertheless, their highly customized offerings allow them to charge much higher
prices than firms offering more standardized services can.
In a personalization strategy, technical knowledge must get transferred to product
development teams, in a timely fashion through person-to-person exchanges, and
encouraging travel and visits1.
1 Hewlett Packard took the person-to-person approach and sent experts from Product Development
teams to meetings and divisions to a global conference. Strategic planners had to choose of the
two distinct KM strategies namely, codification or personalization. Highly customized service
offerings or a product innovation strategy invested in person-to-person knowledge sharing and
also in the development and training of productive knowledge workers
164
C.3.3 Organizational Knowledge Roles
C.3.3.1 Knowledge Structure in the IJV Network
CEOs set strategic priorities by highlighting a small set of business priorities whose
importance they consistently reinforce over a period of time in their words and
behaviors.
They recognize that IT investments and applications may be needed to support
business strategy. This is often characterized as the alignment problem - ensuring
that the right IT applications and technical infrastructure are in place to support the
current business strategy and prevent inappropriate investments in technology.
CEOs differ from other members of their organization in one important aspect: the
CEOs beliefs are communicated to the rest of the IJV framework. In speeches,
documents, meetings, and daily interactions, the CEO signals individual’s beliefs.
Positive signals about the importance of KM - and what is expected of the members
in the organization - are critically important. Of course, internal communication
must support external messages to be credible. The CEO must be able to
communicate the value-added to everyone involved.
Actions that provide top down signaling effectiveness will help promote KM
throughout the organizational network.
A good relationship, formal or informal, between the CIO and CEO is key to
ensuring that IT is regarded and exploited as an asset1. The same goes for the CKO
and the HR Heads, as well as other senior managers. Such value added relationships
are vital for the KM strategy to filter down and be implemented in the whole
organization.
Reflecting and talking extensively to others on how those technologies might impact
their own industry and business is key. The initial emphasis is on grasping the
concepts and trends in knowledge technology, be they Intranet, and Extranet
technology in data warehousing or virtual reality. What are the development
1 Earl, M.J. and Feeny, D., Sloan Management Review, 1994.
165
directions and trends in each case and what is the forecast of changes in the
technology's functionality and price/performance?
CUSTOMER FOCUSED
STRATEGY
ENTERPRENEURSHIP
AND
INNOVATION
LEADERSHIP
FLEXIBLE
ORGANIZATION
MULTICULTURAL
TECHNIQUES
APPROACHES
GLOBAL MANAGEMENT PERSPECTIVES
Source: Hirsch, H. and Swierczek, F. (1994): European Management Journal, 12(2), -207.
Figure C.11 Global Management Perspectives
Keeping abreast of new technologies is not just about envisioning new applications
and possible implications for the business strategy. It means knowing which
questions to ask about current initiatives and sensing when and how to ask experts
about them. Analysis of industry trend, environmental scanning, and organizational
capabilities go hand in hand. Classically, the process involves a cross- business
management team taking one or two components of the wider future vision of the
business and thinking through how to achieve step-change performance
improvements in those components.
The CEO should engage with the firm's executive team in a collective education and
development exercise, which confronts the industry's future, works out the firm's
future and starts to build it objectively.
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The Knowledge Reporting Structure in the IJV network
CIO
US Parent
Indian Parent
CEO
CEO
CKO
CKO
VP HR
VP HR
CEO IJV
IT
CIO
VP HR
Source : Author
Figure C.12 Knowledge Reporting Structure in the IJV Network
C.3.3.2 The Role of the Chief Knowledge Officer
The first task of the Chief Knowledge Officer (CKO) of the first generation is to
articulate a global KM program for the organization. The CKO must emphasize the
value potential of knowledge and the need for effective KM and has to sell the
individual’s concept on a local as well as on a global scale, to corporate and to line
management. CKOs need to engage and gain support from senior executives in both
parents so that they are able to identify individual and local knowledge gaps or
opportunities. CKOs therefore spend a lot of time „walking around the
organization“. They interact with four types of managers1:
• Knowledge champions: „knowledge-friendly“ individuals who are excited about
a particular KM project, have seen the potential for improvement and are open to
new ideas.
• Sponsors: The CKO also needs the support of senior level executives. These
sponsors are convinced by the idea of KM and are willing to publicly support it.
1 Earl, M.J. and Scott, I.A., Sloan Management Review, 1999.
167
• Knowledge skeptics: CKOs also identify executives who are hostile to KM
and/or question the need for a CKO (know your enemy). Doubters and
reactionaries must be converted to the cause or avoided.
• Knowledge partners: The CKO needs allies in implementation of the KM
strategy throughout the organization. Typically these are CIO, the HR Head, and
in the case of implementing the KM strategy in an IJV, the support of the CEO of
the IJV, and the HR and CIO.
The Model CKO
Knowledge
Champions
Knowledge
Sponsors
CKO
Knowledge
Partners
Knowledge
Skeptics
Source: Earl, M.J. and Scott, I.A. Sloan Management Review, Winter 1999, 31
Figure C.13 The Model CKO
CKOs are designers of knowledge directories and infrastructure, knowledge-based
systems, and knowledge-intensive business and management processes. They offer a
vision for effective KM (with its value for the future of the business), provide its
conceptualization, and oversee its implementation. They inject thinking into the
process of change from the emerging KM practice.
Sometimes CKOs promote and contract manage the construction of meeting, eating,
and resting places to encourage informal social interaction, reflection, and chance
conversations. They drive initiatives to both measure and protect intellectual capital.
The CKOs interviewed believed that early opportunities to exploit knowledge exist,
and this is where they look for champions and sponsors. One CKO described the
ratio of technology change to cultural change as „20 to 80“. The KM initiatives can
168
be categorized according to the type of knowledge that they address, and whether
the initiatives are of an organizational nature or of technological nature.
One common phenomenon is the isolation KM “champions" feel in their companies,
frustrated at the lack of acceptance for KM initiatives as a tool for improving
business performance. Part of the frustration is no doubt due to the difficulty in
measuring the "direct" gain of KM initiatives.
According to EARL and SCOTT1, CKOs have two principal design competencies;
as technologists and environmentalists. They encourage and initiate investments in
IT and also in the social environment, the CKOs must be enterprising and excited by
business development. They must have an in-depth knowledge of the ideas and
projects behind KM. The CKOs have a greater depth of knowledge in their field than
is expected of the CEO, and a more holistic perspective of KM in the organization
than the CIO (or HR Head).
The entrepreneurial and consulting dimensions of being a CKO suggest the
importance of organizational reputation and credibility. Knowing the organization,
its culture, and its key players probably renders acceptability and yields advantages
in the consulting and influencing aspects of the job. CKOs are open-minded and
curious about knowledge related phenomena and reflective about their CKO
experiences to date. They need to be goal-oriented and interested in change, yet
neither naïve nor driven by self-glorification.
Ideally, any KM projects or investments are corporately funded if organizationwide, locally funded at the business unit or individual level (cost allocation). Most
CKOs envisage their role as finite, for the ultimate aim is to achieve embedded
knowledge capabilities. But CKOs emphasize the quality of the resources available.
Perhaps the most important „resource“ is CEO support and sponsorship, and
organizational slack.
1 Earl, M.J. and Scott, I.A., Sloan Management Review, 1999.
169
The Model CKO
Entrepreneur
Environmentalist
Technologist
Managing
Leading
Consultant
Source: Earl, M.J. and Scott, I.A. Sloan Management Review, Winter 1999, 33
Figure C.14 The Model CKO
The CKO must make the senior executive team and prominent line managers believe
in KM. Some knowledge projects are comprised of a long term agenda, such as
those that require substantial technology infrastructure implementation.
The role of the CKO is created by companies, to initiate, drive and coordinate KM
programs1. Most CKOs agree on the following points.
• Knowledge today is a necessary and sustainable source of competitive
advantage. Several sectors, such as the information-based service sectors, depend
on knowledge as their principal way to create value, and classify it as a basic
economic resource2.
• It is widely realized that companies have increasing difficulties managing the
volume and effectiveness of the knowledge within the firm. Firms often
underinvest in knowledge initiatives, not realizing their full potential.
1 Earl, M.J. and Scott, I. A., Sloan Management Review, 1999.
2 Nonaka, I., Harvard Business Review, 1991.
170
Recognizing the potential of knowledge in value creation and the failure to fully
exploit it, some corporations have embarked on KM programs1.
C.3.3.3 Other Knowledge Roles in the IJV
The role of the CIO is quite different. CIO has distinct responsibilities – IT strategy,
IT operations, and managing the IT function – and so far has not formally taken on
the full range of KM activities2.
First, because there are too many activities and organizations involved in acquiring
and disseminating knowledge to plausibly maintain that there are performance
„secrets“. Thus knowledge brokers make a business of transferring performance
knowledge.
A firm dedicated to effective KM must define and reward roles that facilitate
knowledge capture refinement, retrieval, interpretation, and use. Perhaps the most
important role for explicit knowledge is that of subject matter expert, to ensure the
quality and validity of the content of the knowledge circulated. The repository
manager assures the quality of the context in which explicit knowledge is abstracted
and passed on.
Other knowledge roles in organizations include knowledge editors, knowledge
engineers, knowledge navigators, knowledge brokers, and knowledge stewards, with
responsibilities ranging from repository management to coaching and facilitation.
The knowledge strategist’s job is to focus on the role knowledge plays in shaping
the organization and its strategic direction.
1 Earl, M. J. and Scott, I. A., London Business School and IBM Inc., Research report, 1998.,
http://www.skyrme.com
2 see C.4.x : CIO
171
C.3.4 Incorporating KM Processes in Strategy
An important factor of the KMS of a firm is the constant need for re-evaluation, and
benchmarking, as this knowledge provides the primary opportunity (and constraint)
from which to compete and grow over the near-to-intermediate term1.
Improving Organizational Knowledge Routines
What does it actually mean to say in the context of the core KM processes that an
organization has the ability to absorb new knowledge? Indeed, it is probably more
useful for both research and practice to step down a level from the broad area of
“ability” to look at its key sub-components. There are likely numerous subcomponents that make up an organization’s ability to absorb knowledge—also
known as “absorptive capacity”2 - as part of a knowledge-intensive process. For
one, it means that the organization has sufficient technical competence in the
relevant domain. For example, when people in an organization are skilled and
capable in a particular domain, then they understand and can better absorb new
knowledge pertaining to that domain3. Besides this issue, though, some of the
sample firms found additional ways to boost their ability to absorb knowledge
without the often prohibitive expense of adding more skills or more people. Two
such ways in particular emerged from the case studies as critical. People were better
able to absorb knowledge when they were able to develop a common language
across different groups or functions and when they found intelligent ways to reduce
the complexity of the situation. Each of these three sub-categories will now be
discussed in greater detail.
Technical Competence: Skills
One useful definition of this concept is the organization’s ability to understand
enough of how a technology works so that it can incorporate it into its processes.
This concept is, in much way, closely related to notions of core competence4 and
1 Zack, M.H., California Management Review, 1999.
2 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990.
3 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990.
4 Prahalad, C. K., and Hamel, G., Harvard Business Review, 1990.
172
capabilities1, as well as absorptive capacity2. In practice, technical competence
often takes the form of tacit knowledge and so its transfer across sub-units to where
it is needed is rarely easy or straightforward3.
The knowledge in question must be strongly desired, even actively sought after, by
the knowledge receivers. These situations had much more favorable outcomes. At
the other end of the spectrum is “castor oil” knowledge transfer in the case where an
organization or its members do not want to learn or transfer knowledge. The
knowledge in question was supposedly good for the organization, at least in some
people’s eyes, but the potential receivers saw either the knowledge or its
implications as undesirable. This "anti-learning" culture is one of the main barriers
to the implementing the KM strategy within the IJV framework.
Much of the literature depicts organizational learning as a kind of sterile, anonymous
process of building organizational skills and competencies. This research finds
organizations that have the knowledge and skills in place are still not fully
successful at implementing a knowledge-intensive routine.
Organizational processes form the basis for organizational learning4, yet “much
remains to be done at both the empirical and the theoretical level”5. Focussing on
the routine, or process - defined here as a repeated set of related activities - results in
research that
• Better reflects the reality of organizational life,
• Better understands the terminology, jargon, and thought patterns (i.e., the
“cognitive categories”) that organizational members use to describe their
organization and how work gets done,
• Better discerns how firms adapt in a dynamic way to rapidly changing
environments,
• Better connects strategic (macro) and project (micro) levels of analysis6, and
1 Stalk, G., Evans, P. and & Shulman, L.E., Harvard Business Review, 1992.
2 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990.
3 The KM cases in this research also exhibited evidence supporting the beneficial effects of
reducing complexity, especially in terms of effectiveness and efficiency. Moreover, complexity
reduction seems particularly helpful for converting tacit knowledge into explicit knowledge
4 Levitt, B. and March, J.G., Annual Review of Sociology, 1988.
5 Grant, R.M., Organization Science,1996.
6 Burgelman, R.A., Administrative Science Quarterly, 1983.
173
• Better translates rigorous research into findings that are useful to practitioners, a
goal recently endorsed by several organization science leaders1.
By studying these processes, we delve into the “heart” of an organization’s efforts to
manage the flow of knowledge.
Each year more than 60 billion US$ is spent on training in and by organizations
particularly in management training. Much of this training is based on knowledge
and principles that are fundamentally timeless – unchanged and changing.
Nevertheless, the training is often repeated. Regardless of the quality of the content
the delivery, or the frequency of repetition, management education is often
ineffective in changing organizational practices2.
In the study, the top three business drivers cited are 1) to improve knowledge- and
information-sharing across operating units, 2) to improve competitive response, and
3) to accelerate an organization’s rate of innovation. Respondents indicate that
primary providers are still technology providers, including Lotus, Oracle, Microsoft
and IBM. For consultancy companies, that’s a signal that KM is already blending
with e-business, and encompassing Web-based initiatives using either Intranets,
extra-nets or both3.
C.3.5 Measuring the Success of KM Efforts
No organization would like to undertake a knowledge initiative as an experiment. It
will need to know what kind of return to expect from the effort to find and share its
knowledge assets. Competitive advantage tops the list of potential benefits. Most
payoffs of a KM effort will not be measured in direct cash dividends.
According to DAVENPORT, when KM benefits can be measured, they usually are
found in process-oriented improvements4. For KM in the IJV to be successful, the
partner organizations have to encourage their employees to share explicit and tacit
knowledge across organizational boundaries. The key to success is to build
structures that support the creation and exchange of organizational knowledge.
1 Galunic, C.D. and Rodan, INSEAD Working Paper, 97/89/OB/SM.1997; Hambrick, D.C.,
Academy of Management Review, 1994 ; Mowday, R.T., Academy of Management Review,1997.
2 Pfeffer, J. and Sutton, R. I., California Management Review, 1999.
3 Ernst & Young Study, 1998
4 Davenport, T.H., “Process Innovation”, 1993.
174
The vast majority of CKOs and CEOs still rely on anecdotal data to justify their
investments. To quote one CKO:" There are no financial measures of success, but
we know that's its working, because we have the success stories."1 Another quote
from an IJV CEO: "Measuring the success of the KM initiative is the hardest issue.
How can we get quantitative measures for improving the efficiency of
management?’"2
For managers, the three major theoretical components—ability, comfort, and
power—could serve as leading indicators of optimization for key KM processes.
This characteristic is an important contribution because one of the most intractable
problems in the technology management and innovation arena is the question of how
to measure results3. What CKOs need is a set of metrics that can act as leading
indicators, so they can take appropriate action today.
C.3.6 Transfer of Best Practices Across the IJV Network
„you would think that …better practices would spread like wildfire in the entire
organization, they don’t4“
Internal benchmarking and Transfer of Best Practices (TBP) are core knowledge
management tools in order to leverage internal knowledge. External benchmarking,
with all of its power, overlooks the vast amount of untapped knowledge and best
practices already residing inside organizations, which can be determined through
internal benchmarking.
The barriers to TBP fall into three major categories: 1) lack of motivation to adopt
the practice; 2) inadequate information about how to adapt the practice and make it
work; 3) lack of absorptive capacity, the resources and skill to make it work.
Before one can deploy TBP, it is necessary to define and find best practices within
the organizations. The four approaches for this are:
• Best Practice Teams may be an enduring part of the networking infrastructure of
an organization.
1 CKO, Modi Group, New Delhi, India, 2000.
2 CEO, Sprint RPG, Mumbai, India, 1999.
3 Berry, S., Kortum, S. and Pakes, A., Proceedings of the National Academy of Science, 1996.
4 Ogilvy & Mather, Mumbai, India, 1999.
175
• Knowledge and Practice Networks emerge as a grass-roots response to the
breakup of former networks due to downsizing, reengineering and restructuring.
Once an organization creates the environment and technology to support
networks, they often emerge.
• Internal assessment and audits can range in form from formal technical
assessments (often art of benchmarking and best practice teams) to internal
award programs1
• Benchmarking Teams often start their benchmarking efforts by trying to
compare measures and results in order to identify best practices.
The natural desire to share knowledge is thwarted by a variety of logistical,
structural, and cultural hurdles and deterrents in organizations. These include:
• Organizational structures that promote „silo“ thinking. People have little
incentive to overcome other obstacles that time and space creates.
• A culture that values personal technical expertise and knowledge creation over
knowledge sharing. Another cultural barrier is the „not invented here“ syndrome
and the lack of experience learning in from outside ones own small group.
• The lack of contact, relationships, and common perspectives among people who
don’t work side by side. There is a need to create and catalogue the corporate
memory of an organization’s expertise and abilities so others can build networks
and solutions together.
• An over reliance on explicit rather then tacit knowledge.
• Not allowing or rewarding people for taking the time to learn and share and help
each other outside of their own area.
TBP is necessitated through
• A compelling call to action
• A demonstrated success
• Decentralization and downsizing has tripped out corporate support networks and
forced operating units to take responsibility for improvement.
• Benchmarking evidence
• Recognition of the potential gain
Knowledge of how to enhance performance doesn’t transfer easily or readily even
within firms. In the study by RICKETTS there was not much consistency in
management practices or philosophy across different facilities within the same
company2.
1 Malcom Baldridge National Quality Award
2 Ricketts, R., Oil and Gas Journal, 1994.
176
Technology is no longer a major barrier to identifying and notifying the organization
of best practices. All the necessary software solutions already exist (Lotus Notes,
Intranet, e-mail etc.).
Research on TBP in organizations has led to the following insights:
• The really important and useful information is too complex to put online: Too
much tacit knowledge is required to make a process work. So, most firms have
turned to directory and pointer systems that can supplement the search for best
practices.
• The database is not designed to replace existing sharing mechanisms but to
enhance and support them. It gives all users a wider range of information than
has ever been available before but does not offer a specific solution for every
problem.
• There has to be a framework for classifying information, such as the Process
Classification Framework1 by American Productivity and Quality Center
(APQC).
• Entering information into the system must be made part of someone’s job. Busy
managers and professional will rarely take the time to enter a practice unless it is
mandatory2.
• Culture and behaviors are the key drivers and inhibitors of internal sharing. The
real issues aren’t technical. How do you get people to contribute and use the
system? What are the people systems surrounding the network? How do you
reward people for sharing their knowledge with others?
Seven Keys to Effective Transfer:
• Competitive or best-in-class benchmarking can create a sense of urgency as well
as demonstrate the value of looking outside for ideas and comparison.
• Focus initial efforts on critical business issues that have high payoff and are
aligned with organization values and strategy. Real action-learning and transfer
is a time- and talent-consuming activity.
• Make sure that every plane allowed to take off has a runway available for
landing. In the initial zeal and excitement that come from imagining the
improvements and gains possible from the transfer of best practices, there is a
tendency to forget that an organization can only invest in and support a finite
amount of change at any one time.
• Don't let measurement get in the way. Comparative measures will improve over
time, but only if acted upon.
• Change the reward system to encourage sharing and transfer. Real internal
transfer is a people-to-people process and usually requires personal generosity or
enlightened self-interest.
1 see C 6.1.2
2 e.g., In Ogilvy & Mather the role of a knowledge sponsor within each department was created.
177
• Use technology as a catalyst to support networks and the internal search for best
practices, but don't rely on it as a solution.
• Leaders will need to spread consistently and constantly the message of sharing
and leveraging knowledge.
If there is widespread diffusion of information on „best“ (or at least „better“)
practices, the evidence suggests that many successful interventions rely more on
implementation of simple knowledge than on creating new insights. This conclusion
means that although knowledge creation, benchmarking, and KM may be important,
transferring knowledge into organizational action is at least as important to
organizational success1.
C.3.7 Potential questions for further research
Senior management support is critical for nearly any significant organizational
action and change initiative. Still there is a gap in theory that stems from the
difficulty researchers have in imagining that any factor other than ability would
affect organizational learning.
"Senior management support does not necessarily take the form of active
involvement, or championing, but it does mean, at a minimum, approval by the
senior managers in the various units involved. Examples of top management include
initiative and involvement, for global KM strategy in the IJV (secondary, the IJV
leadership is the responsible one for the integration of the IJV in the two corporate
knowledge strategies2".
Literature on KM activities in strategic planning in an IJV environment is quite
extensive as detailed in the review. However, pertinent aspects of integrated KM in
strategic planning in an IJV scenario, in particular from a network perspective have
not been researched sufficiently. This can be ascribed to the lack of an organized
study in the area. One area for further research is the relevance of parent company
global KM strategies on the IJV KM strategy. Further, the importance placed on the
various knowledge roles has to be examined, as well as the communication of KM
initiatives throughout the IJV framework and the nature and role of external factors
in the IJV KM strategy. Any light shed on these areas could serve as an
1 Skyrme D. http://www.skyrme.com/pubs/lawlib99.htm
2 Earl, M.J. and Scott I. A., Sloan Management Review, 1999.
178
augmentation of the literature on KM in IJVs and be of practical use to the IJV
managers. In the current exploratory study answers to these questions were sought
from the IJV case studies.
C.3.8 KM Practices in IJV Case Studies: Strategic Planning
C.3.8.1 DSP Merrill Lynch
After the formation of the IJV, DSPML was organized after the ML model and took
on the ML worldwide mission statement.
"It is a seamless organization where you don't know where DSP begins and Merrill
Lynch ends", says the CEO1.
The drivers behind the successful and thriving IJV are its power, processes and
people. The equity partnership is 60:40 (DSP:ML), but both the partners have got
equal representation on the board of directors. The management structure minimizes
the conflicts, maximizes the integration, communication and co-ordination, and
enhances the mutual trust and comfort. For strategic direction a 3-year plan is
formulated with ML and then signed off by the board.
C.3.8.2 JM Morgan Stanley
MS' strategic objectives in the IJV were to raise their deal flow and turnover in the
IB market in India i.e., achieve a market share that they would otherwise not be able
to achieve in such a short time and to build up their client network in India. J.
KAMPANI and JM top management’s primary objective was to initiate the
institutionalization of the business from personal and family run to structure, role
and process-oriented.
The most positive results of the IJV during its short history, the much higher and
much smoother deal flow in place, were noticeable even in the preparatory phase,
indicating the attainment of its strategic objectives. MS brings the institutional
expertise and experience as well as the corporate culture to be a major player in the
financial environment to the IJV.
1 http://www.india-today.com/btoday/20001006.cf.html
179
JMMS functions on an executive committee basis for most operational strategic
decisions so as to avoid going to the board of directors for all decisions. The
executive committee consists of the CFO, COO, and HR Head of the IJV and
relevant invitees. These meetings are described as formal/informal as far as seeking
a primary solution suitable to all participants. The difference to this structure to the
regular MS subsidiary model is that it is lot more formal than the MS matrix
structure with dual reporting lines. Information and decision-making channels are
more institutionalized, than in the rest of the MS global network, due to the
integration phase and the still vested interest between JM and MS. In due course, the
strategic aim of the IJV top management is to deformalize information flows within
the IJV network and instill the knowledge culture of MS within the employees in the
IJV. In time, Asia Pacific headquarters has also come to accept the IJV as an
integrated part of the MS global network.
C.3.8.3 Max New York Life
MI has set up an integrated network of "sharing best practices" which evolved over
time. The best practice network came about part due to introspection and part to the
external consultants within the framework of an integrated knowledge sharing
strategy within MI's JVs and businesses. However, Transfer of Best Practices does
take place between the IJV and the parent affiliates, and between the various
companies of the MI network.
MNYL is a minority i.e., non-consolidated partnership of NYL. Therefore the
reporting structures to its U.S. parents are less direct. MYNL officially started
business as of November 2000. Quarterly board meetings are held where strategic
targets and rolling business plans are set up by the IJV's top management and
sanctioned by the board of directors.
The life insurance business unit redesigned customer interfaces and experiences to
increase loyalty, to enhance cross-selling of multiple products, and to better retain its
customers. To do so, it decided to expand its call center customer service teams,
making them a primary vehicle for customers to interact with the company. By
taking a knowledge-focussed approach, and by surfacing and capturing the tacit
knowledge of high-performance, highly effective customer service representatives,
the organization was able to accomplish several objectives: increased asset retention:
180
improved hiring and training result; and customer service workstations better able to
support decision making and customer service.
C.3.8.4 Birla AT&T
In the organizational structure of Birla AT&T there is a division of functions
between the parent companies. The engineering department, Sales and Marketing,
and customer care are run by AT&T while finance, information systems and
personnel development are the managerial responsibilities of Birla.
The transfer of technology was a contract to AT&T. The JV uses the GSM network,
which is the same technology as in Europe, and they have very close links with the
TDMA, which is the wireless association in Europe.
C.3.8.5 Sprint RPG
The RPG group management believes in empowerment at the company level. RPG
strategic planning taskforce sees its role in the management of the Group’s portfolio,
setting up long term plans, and monitoring Group activities. It also sets the future
strategic direction for the Group as a whole.
The RPG Group has initiated a group wide knowledge management program,
termed “knowledge integration”. Initiatives launched under this umbrella include
benchmarking, TBP, knowledge flow-back and encouraging the group wide
dissemination of knowledge. Along with the knowledge integration program a range
of technology initiatives were launched in the course of 2000. The Group’s first CIO
was hired in 1999, the first step in a definite thrust toward leveraging IT
technologies for the Group’s business success. Other knowledge initiatives include a
quality council, responsible for strategic intervention on the part of the group
companies. RPG is divided among six sectors and the executive committee is made
up of Chairman and Vice Chairman, the strategic planning taskforce, made up the
head of SP (COO) and the CFO, as well as the individual sector heads. The CIO is
placed at company head level.
The CEOs report to Sector Head and Head of Strategic Planning. The strategic
planning taskforce is responsible for anything that has to do with the strategic
direction of the Group company.
181
RPG, a household name in India, brings to the joint venture its brand reputation.
They have a big group leverage, and extensive market knowledge of mass
consumers (for telecom services). The strategic planning unit sees itself as a
“knowledge scanner” for the whole group, monitoring the business environment for
opportunities.
Explicit knowledge within the corporation is in the form of blue prints and
proprietary knowledge assigned through contractual agreements. Tacit knowledge is
transferred through the movement of people and unified trading strategies and senior
management with the correct skillsets.
C.3.8.6 Ogilvy & Mather
OM (India) has 700 employees in 4 offices all across India and no expatriates. They
have a MD. The board of directors comprises of 5 directors 3 of which are from
O&M. MD and CEO is on the board. Below the board of directors there is an
executive management committee, which consists of the head of departments, and
the heads of Strategic Business Units (SBU’s) such as Ogilvy Consulting. The
executive management committee consists of 14 people.
Limited access New York Life
infrastructure. Max India TBP
conferences.
AT&T KM: Marketing,
Quality control, Products.
Birla: Controlling , Legal
RPG group has a wide KM program.
No data available
•
•
•
•
•
•
JM Morgan
Stanley
Max New
York Life
Birla AT&T
Sprint RPG
Ogilvy &
Mather
CIO is from MNYL
CEO, CKO and IJV Brand Manager
•
•
No data available
•
•
•
•
•
•
•
•
•
•
down
through
No data available
No data available
No data available
No
Symptomatic KM
Lacking communication
Chairman
Top
Seamless integration
COO,
Top down from CEO, Chairman
Connected to ML intranet
How are KM initiatives communicated
throughout the IJV framework?
Figure C.15 Knowledge Management - Strategic Planning in IJVs
•
No data available
CKO from NYL. CKO is from MI
•
•
Limited integration through IT
•
Brand,
COO is a go-between, no knowledge
role in IJV.
•
CKO is from MS, CIO (Technology)
•
strategy
CEO of IJV has taken on role of
knowledge integrator.
Technology liaison committee to
introduce ML KM strategy into DSP.
global KM strategy.
CEO, CKO of ML responsible for
(technology)
KM
•
•
What organizational knowledge roles are
represented in the IJV framework?
adapted to Indian circumstances. JM
had no knowledge strategy.
MS
worldwide strategy.
KM tools are integrated in ML
•
the IJV?
What influence do the parent company’s
KM strategies have on the KM strategy of
DSP Merrill
Lynch
IJV
182
•
•
•
•
•
•
•
•
•
restricted
access
No data available
No data available
No data available
Specialized, regulated industry
Anti-learning culture (secretive)
Indian family firm mentality
knowledge due to IJV status
Bandwidth,
Closed personal relationship between
CEOs
India is a key market
to
What external factors influence the IJV KM
strategy?
183
C.4 Alliance Management: Inter-organizational Knowledge Sharing
C.4.1 Knowledge Management during Different Phases of Alliance
Management
"One must have a common understanding of the receiver’s requirements and the
sender’s capabilities from the start1"
A key element of the ability to absorb knowledge is the existence of a common
language between the partners in a knowledge-intensive IJV. The more orthodox
and sterile view of knowledge flows, with its emphasis on technical skills, core
competencies and capabilities, often overlooks the aspect of an organization’s ability
to absorb knowledge; namely, the ability of one group in the organization to
understand what the other group is talking about. Bridging this gap is not a trivial
matter, since different functions have been shown to inhabit very different “thought
worlds”2. One technique to bridge this gap is to use boundary-spanning individuals3.
The knowledge perspective presented here stresses the entrepreneurial rather than
the administrative side of corporate governance. Accordingly, boundary issues are
not determined by transactions cost considerations alone. Rather, they are strongly
influenced by tacit knowledge and imitability and replicability considerations4. The
tacit component of knowledge cannot frequently be transferred without the transfer
of personal and organizational systems and routines. Tacit knowledge and its
transfer properties help determine the boundaries of the firm and may well swamp
transaction cost considerations (they function as "protection costs"). Competitive
advantage can be attributed not only to the ownership of knowledge assets and other
assets complementary to them but also to the ability to combine knowledge assets
with other assets needed to create value.
New forms of business organizations - and new management styles that enable
intangibles to be developed and dynamic capabilities to be practiced - are clearly
1 Interview, Morgan Stanley, Hong Kong, 2000.
2 Dougherty, D., Organization Science, 1992.
3 Allen, T., Managing the Flow of Technology: Technology Transfer and the Dissemination of
Technological Information within the R&D Organization 1977.
4 Kogut, B., Strategic Management Journal, 1988.
184
critical. Moreover, modern information technology clearly enables a greater variety
of transactional structures than was hitherto thought possible.
A firm's decision to enter into an IJV is associated with a multitude of decisions, the
first of which is to determine the goals and scope of the venture. It is critical to the
success of the IJV that all lines of communication be open from this early stage on.
There is an absolute necessity at this point for a clear enunciated, shared,
understood, and accepted business objective1.
The detailed IJV agreement should focus on some or all of the following areas:
• Governance
• Contributions
• Responsibilities and risks
• Intellectual property
• Technology transfers
• Force majeure
• Governing laws concerning all aspects of the IJV
• Formalization
The Pre-IJV Phase
This is the stage that requires the ability to sense and then to seize new
opportunities, and to reconfigure and protect knowledge assets, competencies, and
complementary assets and technologies to achieve sustainable competitive
advantage.
During "sense making" the organization receives and interprets messages about new
markets, new technologies, and competitive threats. This information is evaluated in
the light of the organizations' experience and knowledge. 'Sensemaking' tools
(Knowledge Tools) include tools such as scenario planning can assist making sense.
1 Business Laws Inc., "Overview of Transactional Joint Venture", 1999
185
Negotiations
Commitments
of joint expectations
risk and trust through
for future action through
formal bargaining
formal legal contract
informal sense-making
psychological contract
Assessments
based on
efficiency
equity
Execution
of commitments through
role interactions
personal interactions
Source : Ring, P.S. and Van De Van, A.H.(1994): Academy of Management Review, 19(1), 90
Figure C.16 Process Framework of the Development of Cooperative Interorganizational relationships
The fundamental challenge to making sense is bounded rationality1. One cannot
learn all there is to learn about a situation or an opportunity, and action must
proceed, based on hunches and informed guesses about the true state of the world.
The openness of markets, stronger intellectual property protection, increasing
returns, the unbundling of artifacts and information, and the possibility for
integration using new IT are important factors in environmental scanning.
Information receipt and interpretation is by no means restricted in its importance to
the understanding of business, market and technological trends. There is also the
need to identify relevant external technology and bring it into the firm.
1 Simon, H.A., Models of Bounded Rationality. Vol. 3, In: " Empirically Grounded Economic
Reason", (1997).
186
The Decision to form the Venture
It is important to understand the motivation and ultimate objectives behind the
decision to form an IJV. Most ventures are poorly conceived and probably should
never have been formed in the first place1. Strategic and economic benefits should
be prerequisites for entering an IJV, but other considerations should definitely be
taken into account. Even if there are sound strategic and economic reasons for the
venture, the firm’s and the employees’ capability and commitment to function in a
cooperative mode must be realistically assessed2. This would allow prediction of
how the firm would respond to difficult situations that are common in international
business ventures.
Partner Selection
Identifying and selecting a partner is possibly the most important consideration in
establishing a cooperative venture. Many firms are impatient to find a partner in
order to attain short-term goals. As a result, they are careless in their selection
process and mistakenly trade incompatibility for quick action. Partners are often
selected only for short-term and political reasons. When the situation changes and
the partner has nothing more to offer, the relationship ends3.
Major differences in the performance of JVs relate whether the long-term need and
commitment between the partners exists. Firms that recognize their specific longterm needs and recruit partners to fill these needs accordingly4 aim for a strategic
and a cultural fit. In the case of IJVs, in which knowledge acquisition has been set as
a primary goal, partners need to have a more complex skill set.
Often foreign firms deem local (market) knowledge a short-term need that can be
accessed quickly. In-depth market knowledge has a lot of tacit aspects that require a
higher level of intimacy and commitment.
1 Bleeke, J. and Ernst, D., Harvard Business Review, 1991.
2 Lane, H. W. and Beamish, P., Management International Review, 1990.
3 Lane, H.W. and Beamish, P., Management International Review, 1990.
4 Beamish, P.W. "Multinational Joint Ventures in Developing Countries", 1988.
187
Knowledge Due-Diligence
Potential partners should be visited in their environment to see how they plan,
reformulate and operate. Often, working together on smaller projects before actually
forming an IJV with all its organizational and legal implications provides a good
“testing ground” for a future partnership1. Also, prior experience with a potential
partner can prove to be a source of valuable knowledge, but it is not a prerequisite.
Cultural attitudes towards business differ significantly from country to country. In
developing countries, the business environment is much more formalized. The firms
are often very closely held by the owners who are heavily involved in decisionmaking. There is often a distinct lack of professionalism and institutionalized
structures. Unequal partners can also create conflict through an unintended power
imbalance, or slow and inflexible decision-making processes in large partner firms2,
where the JV does not have such a high priority.
The most important link between the partner selection process lies in the selection
and preparation of the venture partner “evaluators”, the managers in charge of
finding an appropriate venture partner. They must know more than the financial
aspects and operations. They must be sensitive to the impact of culture on behavior
and have some background on the social, economic, political environment and
history of the potential host country3. They must be able to assess the full
knowledge potential of their partners within the course of the due diligence.
C.4.1.1 IJV Negotiation Phase
Negotiating the IJV formation is difficult and costly. Not surprisingly, the quality of
IJV contract negotiations during the formation can have an impact upon three
consequences of importance namely, IJV formation, satisfaction and IJV process4.
1 Lane, H.W. and Beamish, P., Management International Review, 1990.
2 Di Stefano, J.J. and Lane, H.W. " International Management Behavior", 1988.
3 Lane, H.W. and Beamish, P., Management International Review, 1990.
4 Lei, D., Slocum, J.W. and Pitts, R.A., Journal of World Business, 1997
188
Instability of the IJV and Bargaining Power
Individual
and
Structural
Attachment
Between the
Partners
Valuation of
Local Knowledge
by the Foreign Partner
The Foreign
partner’s
Intent for the IJV
Resource
Contributions:
Local Knowledge
Responsibility of
the Foreign Partner
Shifts in Balance
of Bargaining
Power
Instability
of the IJV
Effectiveness of the
Foreign Partner’s
Knowledge
Contribution
Source: Inkpen, A./ Beamish, P., AMR 1997
Figure C.17 Bargaining Power
Central to the success of the contractual agreement are the bargaining processes and
strategies used by both partners.
Essentially, parent firms and the IJV need the right people who are willing and able
to learn trust and transfer and / or share knowledge between them1. They need
communication systems that can deal with the complexity of the IJV relationship.
The bargaining power perspective is particularly appropriate for examining the
stability of the IJV, because all JVs involve a negotiated bargain between the
partners2. The relative bargaining powers of the potential JV partners are based on
the resources each partner has to offer to the JV3. The consequences of the shift in
bargaining power are clear, the need for cooperation becomes greater for one party
1 Westney, E., In: "Cooperative Strategies in International Business", 1988
2 Inkpen, A.C. and Beamish, P.W. Academy of Management Review, 1997.
3 Harrigan, K.R. and Newman, W.H., Journal of Management Studies., 1990.
189
than for the other, until the point where one of the partners’ transactions costs
outweigh their costs of internalization, and they no longer see the need for the
alliance.
HAMEL identified learning as the most important element in determining relative
bargaining power1. Substantial knowledge acquisition by one partner over another
can erode the value of the knowledge contributed by the other one, shifting the
bargaining power towards a more unstable relationship.
The main classes of assets that are not tradable today are location assets, knowledge
assets and competencies2.
• Recognition of trading opportunities - partners typically don't know who owns
what, and who might be interested.
• Disclosure of performance features3 - Partners4 may be reluctant to negotiate
because their intellectual property rights are problematic. Partners may be
reluctant to negotiate because of fear that disclosure, even if pursuant to a nondisclosure agreement might inadvertently lead intellectual property rights to be
jeopardized.
• Uncertain legal rights - Partners may be uncertain about factors such as the
enforceability to use restrictions and sublicensing right or simply about the
ability to measure and collect royalties.
• Item of Sale - The "item of sale" may be know-how, or intellectual property
rights, complete or partial. Ownership requires special policing powers for value
preservation. Confidence in contracting and the legal system is necessary to
support value.
• Unit of consumption - Intellectual property is rarely exchanged as a whole.
Hence financial arrangements of some kind must be devised. The value is a
function of other intellectual property located alongside the intellectual property
at issue.
An evolving calculus of the applicable laws shapes the JV relationship, the
confidence each party has in each other, and the cultural and business systems of the
relevant countries. By carefully examining the issues before negotiations begin, the
1 Hamel, G. Strategic Management Journal., 1991.
2 Competencies may in turn be embedded in other corporate assets, including assets complementary
to knowledge assets.
3 See C = contractual agreements
4 Note that instead of sellers, I have incorporated partners as knowledge traders in this instance
190
strategic issues associated with joint venturing can be addressed during the
negotiation and formation processes.
As a potential JV partner, the question remains to be asked whether there is a mutual
value creation perspective that respect and supports the counterpart's collaborative
objectives. JV longevity does not influence JV value creation and many firms view
JVs as intentionally temporary and recognize that their ventures will not last
indefinitely.
The partners may have nothing to share if they do not create value jointly. In the
absence of a mutual value creation perspective during the negotiation, there is a
much higher probability that commitment and trust will be lacking in the
negotiation.
Although some authorities argue that mutual value creation is an inappropriate
focus, given the often transitional nature of JVs, recent research and interviews with
alliance managers indicate that a focus solely on "what is in it for me?" will not lead
to successful collaboration.
New JVs that start with an existing stock of "relationship assets" may begin with a
honeymoon period that effectively buffers the firm from early break-up of the JV.
The firms must ensure that the need for relationship building is clearly established
and understood prior to negotiations, regardless of past relationships.
Ideally, firms will be able to enter the negotiation process with substantive
knowledge about their potential partners, including the other firm's motivation for
the IJV, the firm's strengths and weaknesses and the firm's reputation and experience
with JVs. Detailed knowledge about the potential partner can help in planning the
negotiation strategy and increase the probability of collaborative success.
Knowledge about the partner can also be a source of bargaining power in the
negotiation process.
191
How valuable is the
alliance knowledge?
Low value, no
partner
learning efforts
High value, knowledge
acquisition is an
objective
Is the alliance
knowledge
accessible?
How protective is the alliance partner
of its knowledge
How tacit is the knowledge?
Are there learning connections
between the alliance and the partner?
Is the firm effective
at learning?
Is the alliance knowledge related to
what is already known?
Is the managerial culture in the
alliance aligned with the managerial
culture in the partner?
The Alliance Knowledge Acquisition Process
Figure C.18 Alliance Knowledge Acquisition Process
One especially useful technique used to bridge the “language barrier” is to use
structured process templates. A common language in the form of structured,
codified1 templates is critical for productive talks. The result is a means “to view
and present the data…in a way that is not only attractive but very understandable to
the people looking at it”. That is, it gives all actors involved the ability to absorb the
knowledge.
Is prior experience with the partner the answer to generating comfort in a
knowledge-intensive alliance? Interestingly, the answer appears to be, no, but it
192
does make it easier. Thus, while experience might be helpful2, it is not sufficient for
generating a trust in relationship. In fact, several cases used various comfortinducing mechanisms to increase teamwork as well as trust.
Managers often lose sight of the reality that partner trust and forbearance are directly
linked to the strength of inter-personal relations. In any alliance, the strength of
inter-firm relationships is largely a function of the relationships between individual
managers who are involved in the day to day venture management. The individuals
who are involved in JV negotiations should be chosen carefully. INKPEN and LI3
strongly suggest that firms involve operational managers in the JV formation
process, beginning with initiation of potential ventures through to formation and
start-up.
Ideally, managers involved in the formation process will also become part of the JV
management team. These are the people expected to produce results when the JV is
formed and, therefore, they will want answers to key operational and strategic
questions during a negotiation.
The preliminary decisions about JV management must be made before negotiations
begin. As a high level of trust develops, safeguarding procedures and monitoring
costs can be reduced.
After IJVs are formed, it is inevitable that the partners will learn more about each
other, which may lead to an expansion or reassessment of the IJV. As a result,
INKPEN and LI4 believe that firms should plan on building into their agreements as
much scope as possible for uncomplicated and non-legalistic changes.
The danger is that the issues that have been identified - venture management,
governance, risk, culture, and so on - are not given sufficient attention, with the
result that the partnering firms end up in reactive rather than proactive states.
The checklist for both partners to run through during the course of the negotiation
phase in regard to knowledge goal is as follows:
1 Nonaka, I., Organization Science, 1994.
2 Allen, T., Managing the Flow of Technology: Technology Transfer and the Dissemination of
Technological Information within the R&D Organization 1977.
3 Inkpen, A. and Li, K.Q., Organizational Dynamics, 1999.
4 Inkpen, A. and Li, K.Q., Organizational Dynamics, 1999.
193
• Are there clearly understood and agreed upon objectives before venture
formation?
• How will the IJV be integrated within the parent firm's KM strategy?
• Will there be cultural compatibility and organizational fit between the partners?
• Does the IJV leverage the complementary skills and competencies?
• Will an exit strategy be defined upfront?
• Is there a monitoring process for the new IJVs?
• Have all the partnering risks and potential sources of conflict been identified and
accounted for?
Managers have to recognize that a knowledge gathering phase in alliance
management is essential, not an option.
Knowledge Model to Guide International Joint Venture Evaluation
India
Knowledge
Strategic
Performance
Gap
Limited
Resources
Devoted to
Knowledge
Acquisition
Goals
Partner
Characteristics
Evaluate Knowledge Goals
and Their Impact on Joint
Venture Success
Technology
utilized
Market for
Output
Incorporate
Knowledge
Acquisition Goals
Through
Investment of
Resources for
Joint Venture
Success
Adapted from: Si, S.X. and Bruton, G.D. (1999). Academy of Management Executive,
13(1), 84.
Figure C.19 Knowledge Model to Guide International Joint Venture Evaluation
Intellectual Property
Patents are, in one sense, the strongest form of intellectual property because they
grant the ability to exclude, whereas copyright and trade secrets do not prevent firms
that make independent but duplicative discoveries from practicing their
inventions/innovations. This also applies to competencies, which can be thought of
as clusters of know-how assets.
194
Knowledge Acquisition and Instability
Local Partner’s Evaluation of
Foreign Partner’s Knowledge
Access
Foreign Partner’s Access
Evaluation of
Local Partner’s
Knowledge
Acquisition
Very Stable
Cooperative
Acquisition
ble
sta
n
u
lly
tia
n
e
t
Po
Very Unstable
Competitive
Race to Learn
Source: Inkpen, A./ Beamish P., Academy of Management Review, 1997
Figure C.20 Knowledge Acquisition and Instability
C.4.1.2 IJV Formation Phase
Many of the performance problems experienced by IJVs have been linked to the
unique managerial requirements of these ventures1. Due to the increased complexity
of IJVs, they are more difficult to manage and often result in significant additional
or unforeseen transaction costs incurred by problems in coordination and
communication. The ultimate objective of an effective IJV human resource
management would be to minimize these costs. Domination based on financial
ownership and tight control is giving way to partnership based on mutual interests,
trust and management on collaborative knowledge based relationships. IJVs may
force a shift in executive behavior towards improved skill in working
collaboratively, communicating and gaining consensus2.
1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
2 Palmer, I and Hardy, C. " Thinking About Management: Implications of Organizational Debates
for Practice", 2000.
195
Negotiation
Uncertainty
(Risk)
Management
Agreement
Power
Distance
Implementation
Performance
and
Control
Individual
and
Group
Complementarity
Achievement
&
Affiliation
Joint Venture Development and Multicultural Features
Source: Hirsch, H. and Swierczek, F. (1994): European Managemtn Journal, 12(2), -200.
Figure C.21 Joint Venture Development and Multicultural Features
The overall costs incurred through faulty management can be quite substantial. In
addition to consuming large amounts of management time, money and other scarce
resources, this may also expose critical aspects of the IJV's strategy, technology or
other know-how to competitors, thereby threatening to compromise the parent’s
long-term competitive position1. Although many IJV performance problems have
been linked to poor design and execution of learning issues2, companies often fail to
adequately plan for and utilize their knowledge resources.
The advancement stage of the IJV process involves:
• Learning from the partner
• Transferring knowledge and learning to the parents
• Transferring knowledge and learning to other locations
Consequently, parent firms need to establish conditions:
• Reduce the possibilities of differential learning
• Increase the chance of forbearance behavior when differential learning occurs
• Increase the levels of trust in and knowledge of each other.
1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
2 Shenkar, O. and Zeira, Y., Academy of Management Review, 1987.
196
Partner firms should jointly assess their learning capabilities and their overall goals
of the IJV process; and they should continue to ensure that formal and informal
communication channels remain open and are used constantly.
Just as knowledge about the strategy and objectives of potential partners are critical,
so is knowledge about the partner's national culture if the proposed JV is
international1. Ideally, individuals slated to negotiate and manage the IJV should
have a solid cross-cultural knowledge base. If not, firms must ensure that either
internal or external expertise is obtained.
In their study of Australian-Indian IJVs, AS-SABER et al.2 found that significant
freedom of decision making by the JV management was a critical HRM related
factor in the venture's success. The non-hierarchic, egalitarian sharing practices of
more competitive Indian and foreign firms are having their impact.
Board composition
In all the IJVs examined except one, CEOs were not members of the board of
directors. According to Indian Company law, a full-time board member cannot hold
a full-time management position in a company and receive compensation for both
positions. Thus there is a negative incentive for CEOs to serve as board members as
they do not receive remuneration for it.
Higher demand for experienced local managers
With the rapid growth of the Indian economy, the demand for skilled managers is
increasing at a rapid pace. This affects the remuneration of local managers.
According to a survey of global compensation trends, India has been experiencing
rapid increase in managerial compensation packages during the last few years3.
During the implementation stage, the problem of hiring and retaining staff became a
critical issue. This scenario is particularly common in high-growth industries, such
as telecommunications and computer software development.
1 Inkpen, A ., and Dinur, A., Working Papers CBI, 1998.
2 As-Saber, S., et al., International Journal Human Resource Management, 1998.
3 Koretz, G., Business Week., 1996.
197
IJV Control
In the IJVs the selection of the CEO was usually made with the prior approval of
both the host and foreign partners. In most of the cases, foreign parents play
significant roles in selecting people for key IJV positions such as IJV general
managers and financial controllers.
In designing the venture, decisions must be made about the equity structure, how
and by whom the venture will be staffed, and who has the decision-making
responsibilities and, in which area. The most important issue is to establish a fair,
equitable and workable commercial relationship1. Decision-making can either be
shared, or dominated by one of the partners.
Shared control does not mean that each decision is made jointly by the partners.
More practicably, the decisions are split up among the partners based on knowledge,
skill, experience and understanding of the particular issue. The foreign partner may
have more firm specific knowledge, whereas the local partner has the necessary
market knowledge. Some decisions will still have to be jointly made, arrived at
through consensus after discussions. Consensus decision making takes time and
creates potential conflict even within a single culture. The potential for
misunderstanding and conflict across cultures can be enormous.
It requires a shift from control to influence through creating relationships and
behavior interaction. Ownership and other legal considerations of a venture are often
complicated, structural issues that are critical to the success of an IJV. However, it
has been observed that these issues often divert attention and effort from the even
more important, dynamic, but less tangible, human relationships2.
The use of a large proportion of local managers rather than expatriates is
recommended to ensure the foreign parent acquires the necessary knowledge of the
local economy, politics and culture. This also increases the need for training
executives in the foreign parent company’s headquarters in cross-cultural issues3 to
enhance the flow of knowledge back from the IJV.
1 Lane, H.W. and Beamish, P., Management International Review., 1990.
2 op.cit.
3 op.cit.
198
The Positively Reinforcing Cycle of Fair Processes
Strengthens
desire for fair
process
Fair Process
• Engagement
• Explanation
• Expectation Clarity
Idea Sharing and
Voluntary
Cooperation
Organizational Confidence
and Respect for
Colleagues’ Intellectual
and Emotional Worth
Value Innovation
Plans and Rapid
Execution
Strengthens
ability to value
innovate
Source: Kim, W.C. and Mauborgne, R. Sloan Management Review, Summer 1999, 52.
Figure C.22 Cycle of Fair Processes
Majority ownership and expatriate top management often reflects a lack of trust in
local nationals and may be also a lack of understanding of the local culture. It is the
role of IHRM to make up for this gap in skills. Learning to work as part of a
multicultural management team is being recognized as an important management
skill. The more successful cross-cultural JVs are those engaging in mixed
management teams and cross-cultural training1.
Technology Transfer
The need to translate between the language of marketing and technology is a
frequent hurdle related to the question of a common language. Moreover, this
translation needs to be done at a detailed level to be useful. Technical competence is
of great importance to the technology transfer process.
1 Radway, R. J. , The Currency Forecasters Digest,1986.
199
Antecedent
Societal Culture-Based
Differences in Terms of
Characteristics of
Technology Involved
Product-embodied
Process-embodied
Person-embodied
Uncertainty avoidance
Power distance
Individualism vs.. femininity
Abstractive vs. associative
Effectiveness of
Technology Transfer
Across Nations
Antecedent
Differences in
Organizational
cultures between
the transacting
organizations
Absorptive Capacity of the Recipient
Organization
Local vs. cosmopolitan orientation
Existence of an already sophisticated
technical care
Strategic management process
Presumed casual
influences
Presumed
moderating
influences
Source: Kedia, B.L. and Bhagat, R.S (1988): Academy of Management Review, 13(4), 559-571.
Figure C.23 Factors Affecting Technology Transfer Across Nations
C.4.1.3 IJV Management Phase
Most firms enter into an IJV where knowledge acquisition is one of a complex set of
goals. Shared ownership and joint decision making often serve to significantly
complicate both the management and the control of IJVs as compared to more
conventional forms of ownership. Yet GERINGER and FRAYNE1 have argued that
parent companies typically do not need to exercise full control over all aspects of an
IJV in order to ensure that it meets their interests2.
When both parents place high value on the IJV success, they get involved in all the
key decisions made early on. Under these conditions, the board of directors is likely
to be composed equally of representatives of the parents and the IJV.
1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
2 Janger, A.R., "Organization of International Joint Ventures", 1980 ; Kobrin, S.J., In : "Cooperative
Strategies in International Business", 1988 ; Geringer, M. J. and Hebert, L., Journal of
International Business Studies, 1989 ; Geringer, J.M. and Woodcock, P., Business Quarterly,
1989.
200
The challenge for the parents then is to select a high-quality top management team
and provide them with appropriate autonomy. The higher the quality of the top
management teams, the greater is their ability to manage the operations and respond
to the multiple stakeholders at the local level. The better the IJV's top management,
the greater likelihood the absorptive capacity of the IJV will develop, and the higher
the likelihood of organizational learning and knowledge transfer within the IJV
network.
Attitudes towards business differ significantly between U.S. and India. Indian family
firms are often very closely held and the owners heavily involved in decisionmaking. Size differentials between the firms can also create conflict through an
unintended power imbalance, or slow and inflexible decision-making processes in
large partner firms1.
Further, managerial values that are national culture-based, organizational culturebased and firm ownership-based can enhance or inhibit individual and
organizational performance and satisfaction. Some specific Indian managerial values
relating to power, decision-making, ethical priorities and ethical work climate pose
HR challenges (especially when trying to implement foreign guidelines and / or
combine Indian and US guidelines). Indian managerial values that centralize rather
than decentralize power, reduce rather than share decision making information,
neglect the ethical infrastructure and moral climate of workplaces, and avoid
improvement of extra-organizational support for principled practices, can encumber
the creation of a “knowledge-friendly” Indo-U.S. IJV environment.
LEI, SLOCUM and PITTS describe one type of formal communication channel and
knowledge transfer used by IJV parents across national and organizational
boundaries:
Smooth implementation to facilitate learning requires all levels of management to
work on developing "alliance protocols" that enable careful knowledge creation and
sharing among the partners. In their simplest form, alliance protocols represent the
communication channels by which the alliance's managers and technical staff share
technologies, skills and managerial expertise. Some alliances use "gatekeepers" or
"collaboration" departments that serve as a structural mechanism by which partner
1 DiStefano, J.J. and Lane, H.W., International Management Behavior", 1988.
201
can access each other's technologies, jointly developing and agreeing to these
protocols early on. This is important for maintaining a balanced relationship,
whereby neither partner feels that their contributions or opportunities to learn from
the other are neglected or undervalued. Protocols are instrumental in setting up the
mental "parameters" that limit what partners can ask from one another in terms of
what constitute proprietary vs. non-proprietary technologies or processes. Protocols
provide an "invisible fence" that defines the boundaries between co-operation and
competition1.
The partner firms may also jointly assess their belief systems and assumptions. The
more the partners are able to discard their own belief systems, and assumptions, and
revise, if necessary, the more likely that there will be useful learning from the
knowledge transferred. PFEFFER2 suggests many socio-psychological barriers that
exist in transferring information from one organization to another and that these can
be some of the most challenging to overcome.
For parent firms, building trust with the IJV itself is important. Without trust, the
IJV may try to avoid transferring knowledge back to the parent, reducing interaction
to the periodic reporting3. Notable U.S. firms doing well at transferring knowledge
from the IJV to the parent use two different techniques: either through largely oral
(but not informal) communication, or through a disciplined written (online)
approach.
Mechanisms for knowledge and information transfer between IJV and parent
include4,5:
•
•
•
•
•
•
Top management support
Staff rotation
Staff training and development
Site visits
Rewards and recognition
Repatriation management
1 Lei, D., Slocum, J.W. and Pitts, R.A., Journal of World Business., 1997.
2 Pfeffer, J., Organizational Dynamics, 1996.
3 e.g, production reports, quarterly balance sheets and income statements.
4 Inkpen, A. and Crossan, M., 1995; Lei, D., Slocum, J.W. and Pitts, D., Journal of World Business,
1997.
5 See Chapter C.5 for elaboration on these knowledge acquisition channels.
202
DOZ found that successful alliance partnership were highly evolutionary, going
through a series of interactive cycles of learning, reevaluation, and adjustment. As
new knowledge is obtained and levels of inter-partner trust shift, JV managers must
be willing to make changes in the balance and foci of their cooperative relationship1.
Best practice transfer was defined by SZULANSKI2 as “a replication of an internal
practice that is performed in a superior way to alternate internal practices and
known alternatives outside the company".
The "stickiness" of the knowledge, or the difficulty involved in the transfer, is
concentrated mainly at the knowledge-receiving unit. Lack of motivation at the
recipient location and its lack of absorptive capacity were found to be positively
correlated with stickiness of knowledge transferred.
Local Knowledge Transfer
Globalizing Knowledge Flow
Viewing individuals as knowledge nodes creates a framework for evaluation of how
the network as a whole performs, so that weaknesses in capability can be evaluated
across the whole company and interventions can be targeted to increase capabilities
and strengthen the entire organization.
Differing goals of the parent firms do not automatically lead to JV dissatisfaction,
nor do the differences necessarily need to be eliminated. The lack of understanding
each partner's knowledge needs may be the root cause of an IJV's performance
problems.
U.S. firms seek to learn about the market and how to compete in it, while Indian
firms desire knowledge about relevant new technologies or management skills.
Firms lean heavily on their past JV experiences and use them to direct present and
future actions, building on their understanding of markets, technologies, or
management styles each time they ally with another firm. As part of three broad
categories that typically summarize knowledge acquisition in mature economies:
• Knowledge of governmental issues
• Knowledge of culture
1 Doz, Y., Strategic Management Journal, 1996.
2 Szulanski, G., Strategic Management Journal, 1996.
203
• Knowledge of market characteristics1
A firm with prior experience in India may have built relationships and internal
knowledge and can therefore overcome these problems without devoting new
resources.
When both the Indian and the U.S. partner are also from the same industry, there is
greater potential and desire to obtain knowledge from each other. Firms where the
knowledge goals of both parties were in harmony throughout the JV processes were
found to have prospered. In a successful IJV, the firms actively state their
knowledge needs to its partner and inquires directly as to its partner's needs. The IJV
records these issues and they become part of the firm's performance evaluation
process.
Accordingly, there is a relatively free flow of information between the partners, and
the latest technology is employed in the IJV. Consistent with this outlook, when the
IJV holds training sessions, it invites not only the employees of the JV, but also
employees of the partner2.
There are various explicit mechanisms to enable knowledge sharing on a more
operational basis between the IJV parents and the IJV. The most evident approach is
the institutionalization of regular meeting between IJV and parent managers. By
having regular monthly, bi-annual and annual meetings at different organizational
levels, knowledge sharing on a formal and informal basis is encouraged3.
When the JV is technology-intensive, there is a strong need for good communication
and working relationships between partners because of the faster pace of change and
greater complexity4. Partners must communicate fully and work together toward all
of their goals if they are to avoid conflict. Additionally, this IJV is aided by a
continued escalation of the technological level of the operations. A local partner may
leave a JV once it has learned all it can from the international partner, but if the
technology employed is at the cutting edge, there is less incentive to leave. For the
1 Hamel, G., Strategic Management Journal, 1991; Parkhe, A., Journal of International Business
Studies, 1991.
2 See C.5
3 Inkpen, A., California Management Review, 1996
4 Singh, K. Academy of Management Journal, 1997
204
IJV be on par, which is fully integrated in the IJV framework, technology must be
compatible at all level and across the organization.
Over time, JV-experienced firms tend to learn what works and what doesn't for their
organizations. These firms will have internalized a set of firm-specific guidelines
based on prior partnering experience.
C.4.2 Cross-cultural Management and Learning
Increased internationalization in the economic, political, and social arenas has led to
a greater frequency of, and depth in, cross-cultural interactions. These are defined as
contacts between two or more people from different cultural backgrounds. An IJV
by definition has a high density of cross-cultural interactions, which can be a source
of potential and conflict. In the IJV, unsuccessful cross-cultural interactions are even
more significant, for the costs of failure are much higher than in short term
involvement.
Although capturing learning and institutionalizing skills is key, in most companies
learning is unstructured and the transfer of skills inefficient1.
Cross-cultural research usually examines cultural effects from a static perspective:
societies, and individuals from within those societies, are assumed to maintain
consistent preferences over time and across contexts. In contrast, a cultural
knowledge approach places the study of national culture within the broader strategic
framework of international management.
There is the recognition of the need to address behavioral and cultural issues that
underline how knowledge is created, shared and used. IJV performance is
determined to a large part by people, not contracts. Management of the people
dimension, IHRM, is an integral tool for influencing interaction within the IJV2.
Attainment of a firm’s objectives within an IJV is contingent upon its ability to
implement a strategy, which exploits distinctive competencies along one or several
critical dimensions of corporate activity3. An effective IJV control system is one
1 Schuler, R.S., Human Resource Management, 2001; Harbison, J.R. "Strategic Alliances", 1996.
2 The core KM processes do overlap; for example, cross-cultural diversity training is an integral
part of IHRM and alliance management in IJVs.
3 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
205
that promotes the attainment of the strategic objectives for the venture. These
strategic objectives often differ significantly for the parent firms as well as the IJV
as a separate entity. Due to the unique feature of shared ownership and decisionmaking, the control mechanisms deployed in IJVs must account for all major
stakeholders, most importantly parent firms, venture management, employees and
host government.
Cross-cultural interaction takes place in the overlap of one’s own familiar culture,
customs and patterns of thought and the unknown ones of a partner from a different
cultural background. Cross-cultural interaction stems from the cultural differences
between the partners, their own individual differences, and their past cross-cultural
experience1. Cultural differences and diversity determine the length of adaptation
difficulties. Here factors such as age, cognitive capabilities, and education play a
role. Cross-cultural experience plays a major role at the beginning of the interaction.
The more an individual has had to deal with different cultures, the quicker the
individual can adapt to new circumstances.
The contexts within which adaptation and inter-cultural communication skills take
place must be analyzed to construct a framework for cross-cultural management.
A cross-culturally effective employee can be defined as one who feels good about
and is capable of interacting with other groups (minority or majority), where tasks
requiring interaction (with various degrees of intensity) are completed effectively
with neither of the party suffering from invisible stress-related symptoms2 or
conflict.
A detailed treatise on factors affecting cross-cultural effectiveness and culture
theories is given in section B.
1 Bergemann, N. and Sourisseux, A.L. " Interkulturelles Management., 1992.
2 Brislin,R.W. et al., " Intercultural Interactions: A Practical Guide, Cross-Cultural Research and
Methodology Series", 1986.
206
C.4.2.1 Cultural Context in the IJV
Measures to overcome cultural tension but also maybe even more importantly to
understand cultural diversity, such as programs to promote inter-cultural awareness
will increasingly become more cost-effective, especially in view of the enormous
costs of failed IJVs1. The cross-cultural interactions found in global alliances bring
together people who have different patterns of behaving and believing, and different
cognitive blueprints for interpreting their surroundings2. Corporate culture on the
other hand is of firm-specific nature based on the ideologies, beliefs and values that
characterize an organization3.
Developing awareness of the impact of culture and management systems on business
behavior and decisions4 requires constant training and senior management attention.
Business or technical skills are only part of the required package of skills for
executives involved in cooperative ventures. Without cultural sensitivity,
adaptability, interpersonal and communication skills, the executives from the foreign
parent may not survive long enough in the new setting to utilize their other skills5.
Even if they do, their relationships are sure to be under a lot of strain. Training and
skill development must address the need for technical and cross-cultural skills and
be tied as closely to the specific situation as possible.
1 Parkhe, A., Journal of International Business Studies, 1991.
2 Black, J.S. and Mendendall, M., Academy of Management Review, 1990.
3 Peters, T.J. and Waterman, R.H. " In Search of Excellence ",1982.
4 Hofstede, G. " Culture’s Consequences: International Differences in Work Related Values ",
1980.
5 Lane, H.W. and Beamish, P., Management International Review, 1990.
207
Individual Differences
Locus of Control
Efficacy Expectations
Outcome Expectations
Motivation
Adjustment
Cross-Cultural
Training
Training rigor,
gradual modelling
processes, symbolic
and participative
modelling processes
Attention
paid to the modelled
behaviours and to
anticipated and
experienced
consequences
during crosscultural training
Retention
of the learned
behaviours
appropriate in the
future cross-cultural
situation
Reproduction
Skill Development
of the learned
behaviours by
cognitive and
behavioural
rehearsal in
preparation for and
during crosscultural interactions
Self Dimension
Relational
Perceptional
Performance
Incentives
Source: Stewart Black, J. and Mendenhall, M. Academy of Management Review, 15(1), 127
Figure C.24 Impact of Cross Cultural Training
The skills deemed necessary to function effectively in a multi-cultural setting (the
IJV) can be categorized into three dimensions1.
• The self dimension, skills related to the maintenance of self, such as mental
health, psychological well-being, stress reduction, and confidence2
• The relationship dimension, relating to the fostering of relationships with host
nationals
• The perception dimension, consisting of cognitive skills that promote a correct
perception of the host environment and its social systems
The limited literature on concrete skills that an IJV manager should possess, i.e.
what characteristic they should have to start out with, and what they can be trained
for, states the most obvious characteristics as3:
1 Mendenhall, M. and Oddou, G. Academy of Management Review, 1985.
2 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990.
3 Bergemann, N. and Sourisseux, A.L., "Interkulturelles Management ", 1992.
208
•
•
•
•
•
•
flexibility and ability to adjust in building social networks
no ethnocentric predisposition
open-mindedness, tolerance, and respect
willingness to learn
high consciousness of own culture
cultural empathy
Inter-cultural adaptation is facilitated by knowledge of those aspects of cultural
diversity that quick to meet the eye, such as1:
•
•
•
•
•
•
Language
Paraverbal communication (gestures, signals and signs)
Social norms and customs (i.e. greeting, presents, punctuality, courtesy etc.)
Social relationships (family, hierarchy, class and caste system)
Motives and motivation
Values and ideologies
Studies have found that between 16 and 40 % of all expatriate managers who are
given foreign assignments end these assignments early because of their poor
performance or inability to adjust to the foreign environment2.
To overcome the inevitable problems and maintain the high level of trust,
commitment towards each other and the long-term objectives of the IJV is
imperative from both sides. Some foreign parents take an arm’s-length, investment
approach to the IJV. On the other extreme, the foreign parent manages the IJV as if
it were a wholly owned subsidiary3. Both show an inherent unwillingness to
confront the other partner and their culture, and an aim to keep the relationship to a
minimum.
1 Bergemann, N. and Sourisseux, A.L. "Interkulturelles Management ", 1992.
2 Black, J.S., Journal of International Business Studies., 1988.
3 Lane, H.W. and Beamish, P., Management International Review, 1990.
209
BASIC VALUES
WESTERN
INDIVIDUAL
LEGAL
CONFRONTATION
ANALYTIC
ASIAN
GROUP
TRUST
COMPROMISE
FLUID
MANAGEMENT
WESTERN
STYLE
ORGANIZATION
WESTERN
FORMAL
FRAGMENTED
HIERARCHIAL
COMPETITIVE
RATIONALITY
STRUCTURED
DIRECTIVE
DOING
ASIAN
INFORMAL
GENERALIST
INTEGRATED
CO-OPERATIVE
ASIAN
RELATIONSHIPS
FLEXIBLE
ADAPTIVE
UNDERSTANDING
ACTION
WESTERN
SHORT TERM
ASIAN
CONTROL
CONFLICT
ONE PRODUCT
SERVICE
FOCUSED
LONG TERM
HUMAN
RESOURCE
COLLABORATIVE
CUSTOMER
FOCUSED
Source: Hirsch, H. and Swierczek, F. (1994): European Management Journal, 12(2), 203.
Figure C.25 Western / Asian Values
In the contemporary context, multiple layers of values have emerged where societal
values remained very much rooted to the ancient traditions, while institutional and
corporate values reflected values of the colonial era. Among the most important
factors creating the change in Indian management are the homogenization of social
structure1, foreign investment changing infrastructure and urbanization of values.
With respect to the Indian corporations, a striking feature is evident in the
differences of managerial values espoused by large tradition-bound organizations
and born global new generation organizations.
To understand the diversity of firm practices in India, it is necessary to appreciate
the broader socio-economic and cultural environments that shape them, while
recognizing the growing diversity of sub-cultural influences.
Historically, three broad socio-economic forces shaped work organizations in India:
The traditional caste system, British colonization, and post-Independence
1 Anthropological Survey of India, People of India Report, 1992.
210
Socialism1. The caste system originally was comprised of inter-dependent
occupational groups, which later evolved into a stratified, hierarchical socioeconomic class system. The British colonization resulted in administrative
bureaucratization and polarization of manager and non-manager groups. PostIndependence, development goals with socialistic ideology strongly influenced the
business community.
While it is difficult to characterize a common Indian cultural pattern, because of its
heterogeneous demographics, some generic attributes were identified2. Predominant
were submissiveness, fatalism, and clan-orientation with in-group/out-group
distinctions and power consciousness. In addition were willingness to delegate but
not accept authority, possessiveness towards subordinates, fear of independent
decision making and resistance to change3. Decisions were ad hoc varying with the
personalities of individuals at the top, rather than being impersonally
institutionalized into policies and practices to be uniformly followed. Traditional
authority and relationships based on power, social position and personal and group
orientation were in conflict with the dictates of a globally competitive economy
where relationships are based on competence, impersonal task roles and
organizational commitment4.
Such overall collectivism, however, has weakened over the years due to various
influences such as urbanization, changes in the economy, government affirmative
action programs in education and employment and competitive pressures. This
compel organizations to redefine their management values and HRM practices, and
changes in the demographics whereby the young, educated and trained employees including women - emerged at all levels with new expectations, particularly among
professional and managerial groups5.
1 Virmani, B. and Guptan, S. "Indian Management", 1991
2 Sharma, I.J., Management and Labour Studies, 9(2), 1984; Sinha, J.P., "Work Culture in the
Indian Context", 1990.
3 Sharma, I.J., Management and Labour Studies, 9(2), 1984; Kakar, S., Administrative Science
Quarterly, 1971.
4 Parikh, I.J. and Garg, P.K., "Managing in Developing Countries", 1990; Venkata Ratnam,
"Employment Relations in the Growing Asian Economies", 1995.
5 Venkataratnam, C.S. In: "Employment Relations in the Growing Asian Economies", 1995.
211
As a further step, cultural integration within the IJV should be viewed as an
important function of alliance management, and must be addressed specifically1.
Tradition and modernity have combined to transform the managerial mindset in a
unique way and this has created dualities of value that is often difficult for others to
understand2. It was suggested that the Indian managers gave much more importance
to organizational stability than in other countries3. Indian managers generally feel
comfortable with the traditional system of hierarchy in all spheres of life and a sense
of discomfort with the managerial culture of instant feedback, performance and
empowerment.
Managers regarded physical work conditions and convenient work hours as the least
important of their work goals. Also of low importance was salary and job security.
CHATTERJEE observed that the Indian managers placed work quality ahead of all
of the other items, which are commonly stereotyped and have greater priority in the
Indian context. Such ambivalence points to a definite shift and confirms a transition
in the perceptions of societal values amongst senior managers. In the emerging
competitive Indian marketplace managers are being increasingly confronted with
ethical dilemmas. This suggests the need for both a guiding framework as well as
managerial education to reduce the gap between standards and normative societal
conceptualization of ethical codes.
There is an emergence of global value paradigms amongst the senior level Indian
managers. CHATTERJEE and PEARSON4 suggest that Indian managerial work
goals tend to be in line with attributes needed in a market-dominated business
culture.
The traditional Indian hierarchic values that emphasize power distance run counter
to progressive and egalitarian US management trends, and the extend of resistance to
1 Maddox, R.C. " Cross-Cultural Problems in International Business: The Role of the Cultural
Integration Function ", 1993.
2 Garg, P.K. and Parikh, I., "Crossroads of Culture", 1995.
3 England, G.W., Columbia Journal of World Business, 1978.
4 Chatterjee, S.R. and Pearson, A.L., Management International Review, 2000.
212
or acceptance of such Western management values is one indication of the
transformational pressures that exist in Indian firms today1.
The traditional Indian perspective calls for business conduct that acknowledges and
recognizes moral duties. The concept calls for one's obligation to the primary group
as well as to social welfare2. On the contrary, other argues that the dharma,
obligation, applies only to the primary group (kinship and caste), that is, limited to
in-group loyalty3.
Recently, however, the business community in India has expressed concern about
the erosion of ethical values in business over the last two decades, with personal
values of managers compromised in business decisions. Evidence was lacking about
practices in family firms, where more control over workplace moral decisions
existed but fewer resources to resolve issues were available. The ethical values and
work climate issues, therefore, warrant exploration, as Indian managers are now
confronting intense global external market competition and domestic privatization of
government enterprises and sectors.
The growing lack of support for hierarchic work values and the endorsement of
more democratic work practices may well indicate that "authoritative bearing" may
be socially desirable in India in some traditional work contexts. However, modern
workplace expectations are being transformed to encourage competent input, trust
and initiative from lower level managers and their employees.
1 Amba-Rao, S.C., Petrick, J.A., Gupta, J., Von der Embse, T.J., International Journal of Human
Resource Management, 2000.
2 Sinha, D.P. "Management: Asian Context", 1994
3 Gopalan, S. and Riveira, J. International Journal of Organizational Analysis, 1997.
213
HOFSTEDE1
•
•
•
•
•
Low uncertainty avoidance at work
commensurate with Hindu belief in
karma, which promotes a sense of
fatalistic
acceptance
of
current
uncertainty rather than proactive efforts
to reduce it.
High power distance reflective of
traditional Indian social respect for
paternalistic, hierarchic authority by
age, caste, family status and gender.
Medium
collectivist
orientation
influenced by extended family, caste,
religious and linguistic affiliations, with
the resultant in-group and out-group
relationship orientation.
Medium
masculinity
reflected
in
moderate levels of assertiveness, interest
in acquiring money and things, relative
to affiliation and social relationship.
Strong long term time orientation as
opposed to short term horizons consistent
with cultural respect for past traditions
and wide spread belief in the forces
controlling the future outcome of events3.
TROMPENAAR2
•
•
•
•
•
In the human nature orientation, the
belief humans are evil, unchangeable and
shaped by past life activities.
In the man-nature orientation, a belief in
external forces controlling life events that
leads to an external locus of control and
lower levels of ambition, especially in
middle to lower management.
In the time orientation, reflected at work
in a lack of urgency and a preference for
tried and true conventional procedures.
In the activity orientation, enculturated
to admire ascetic contemplators over
practical doers; Indians are motivated by
duty (dharma) to their life roles and
family welfare rather than to the intrinsic
value of occupational accomplishment; a
sense of socio-moral obligation rather to
organizational commitment.
In the relational orientation, consistent
with collectivism, hierarchy, and
paternalism so that at work there is a
likely acceptance of status in a quality,
factionalism,
supervisory-subordinate
reciprocity and dependence4,5.
Figure C.26 Cultural Classification of Indian Management
The examination of SINGH6 and SAHYAY et al7 is of particular relevance arriving
at the following conclusions:
1 Hofstede, G. " Culture's Consequences", 1980; Klukhohn, F and Strodtbeck, F. " Variations in
Value Orientations", 1961.
2 Trompenaars, F. "Riding the Wave of Culture", 1993.
3 Ronen, S. and Shenkar, O., Academy of Management Review, 1985.
4 Gopalan, S. and Riveira, J., International Journal of Organizational Analysis, 1997.
5 While the above models provide a basic understanding of Indian culture and its manifestations in
the work place, other empirical studies found that the HOFSTEDE dimension were either
unstable or had weak links: see Singh, J.P. "Organizational Studies", 1990 and Sparrow, P.R.
and Budhwar, P.S., Journal of World Business, 1997.
6 Singh, J.P., Organisation Studies, 1990.
7 Sahay, S. and Walsham, G., "Using GIS in Developing Countries: Social and Management
Issues", (1997).
214
As a group, Indian managers are low on all four dimensions. They tend to underplay
use of power (managers prefer and use a consultative style and subordinates are not
hesitant to disagree with supervisors), feel comfortable in dealing with uncertainties
at work and life, emphasize loyalty and belongingness, are caring and do not
consider managerial assertiveness to be important.
Indian managers' attitude varied selectively with age, education, occupation
(function) and economic sector. For example, general managers differed from the
functional department heads in their advocacy of centralized controls and protection
of privileges.
These egalitarian managerial values, that is, employee involvement and total quality
participation, entail a normative shift from the paternalistic, authoritarian managerial
style to the supportive, facilitative managerial style.
Foreign firms and family businesses, however, need to earn public trust and
credibility and, therefore, are more likely to accord ethical standards more priority
than economic efficiency and legal compliance in organizational decision making.
The process of selection in getting the top team is critical. To facilitate the objectives
of the partnership and the IJV, the managing director and the HR manager may need
to be sourced locally, and with criteria agreed upon by both parents. Both, however,
may need to be acquainted with the parents1. Asians wanted to focus on effective
recruitment and training of new managers and staff who exhibited exemplary
interpersonal skills and who were committed to enhancing corporate success.
C.4.2.2 Learning and Culture
The transfer of organizational knowledge necessarily involves an examination of
how factors in the cultural environment will influence the implementation of new
organizational practices and routines2. The manner in which individual managers
deal with the challenge of integrating members of culturally diverse backgrounds
into a coherent organization provides insight into the sources of competitive
advantage of international organization.
1 Schuler, R., Dowling, P.J. and DeCieri, H., European Management Journal, 1992.
2 Knowledge Management Magazine, August 2000
215
The measurement of cross-cultural effectiveness in regard to the KM process is
derived from the outcomes of the learning process. The optimal solution would be a
dichotomous mix of efficiency and effectiveness, a way that offers the longest
sustainable competitive advantage.
It would be apparently a major mistake for parent company managers, unaware of
the cultural differences, to adopt a strategy developed in the parent company culture
to elicit commitment from local employees. Managers of IJVs, then, need to be
trained to be able to select an appropriate mix of determinants of organizational
commitment depending on the cultural orientation of their employees.
216
Host Culture Integration
Steps 6 to 10
7
8
9
10
5
11
Individual
Team or
Family
3
12
2
Steps 11 to 13
Steps 1 to 5
Entry Process
4
Re-entry Process
6
13
1
15
14
Steps 14 and 15
Home Culture Integration
1.
2.
3.
4.
5.
6.
7.
Selection and preparation of
F.D. Staff
Recruitment of overseas
candidates
Selection of personnel for foreign
service
General cultural or area training
Specific culture and language training
Departure and travel
Onsite orientation and briefings
8.
9.
10.
11.
12.
13.
14.
15.
Culture shock/adjustment
Overseas monitoring and support
services
Acculturation-making host friends
Withdrawal, psychologically
anticipating going home
Exit-transition, travel home or visit
other countries
Reentry shock
Readjustment
Reassignment in parent organization
Source: Harris, P. and Moran, R.T Managing Culturel Differences, Gulf Publishing, Houston, 1987, p 219
Figure C.27 Managing Cultural Differences
Cultural Barriers and Enablers to Knowledge Transfer
The application of ethical ideas in the contemporary context needs a much deeper
level of understanding and should be given greater emphasis. This calls for a
broadening of management education and development to incorporate value-based
inputs and processes.
217
While diversity training and awareness are on the increase in U.S. firms, language
training and cultural sharing are not. The ability to completely understand each other
has not been addressed or adequately resolved. Obviously, this limits organizational
effectiveness, while at the same time being relatively easily reversible.
U.S. multinationals generally expect all employees to be fluent in English and
assume they understand all of the colloquialisms, similes and metaphors of
American English. Many Americans simply presume comprehension because they
come from a generally unified language and culture. When a foreign multinational
attempts to do business in the U.S., the problem is even greater, Americans tend to
be even less able to embrace cultural or language differences than workers in other
countries, where multiple language comprehension is the norm.
However, not only must the multinational firm enable ubiquitous information but it
must also make sure the information is contextualized in such a fashion that it has
the same meaning to a person regardless of their cultural or native language.
These are the areas to which special attention has to be paid in the context of a wellrounded cross-cultural training for IJV personnel. However, it is important to
remember that the specific context of the IJV and the assignment has to be taken into
consideration. Cross-cultural training is most effective in a customized form that fits
the needs and scope of the individual employee1.
A successful international IJV is a stable, healthy and profitable business operation,
which is probably most representative of the globalization process. It is based on
two-way communication, mutual respect and commitment. However, international
managers need assistance and guidance in developing and nurturing the necessary
skills and knowledge required to run a successful operation and to overcome their
company’s and their own shortcomings. Cross-cultural aptitude can not be taken for
granted as it requires effort and time and must be integrated into the IJV framework
on a permanent basis. Learning to behave cooperatively in a multicultural
environment often requires a change in attitude, specialized training and constant
rethinking of objectives and environment.
1 For an extended treatise on cross cultural management, see Training within the IJV in C.5.5.2
218
C.4.3 Potential questions for further research
In emerging markets such as India, IJV alliance between a very strong established
industry leader from developed countries (e.g., U.S.) has to adjust often with a
technology weak and business driven partner in a different cultural and business
environment. This aspect has been scarcely attended to in the literature. In IJVs with
diverse culture and business model issues such as knowledge due diligence, initial
agreements on transfer of knowledge, types of knowledge and impact of cross
cultural management on this transfer are very crucial to the success of an IJV
alliance and the literature is sparse in this respect. In the case studies the author has
attempted to query exactly these issues in the IJV case studies.
C.4.4 KM Practices within the IJV Framework: Case Studies
C.4.4.1 DSP Merrill Lynch
The processes necessary to ensure a 100% integration and co-ordination of both
businesses as well as support functions were put into place from the outset of the
IJV. The resources include on-line access to the international research database of
ML, and access to the experience of the international workforce and global
competencies of ML worldwide. The transition process from DSP's indigenous
practice to Merrill Lynch's international management style and practice was
designed to be smooth and foolproof. During the merger process and the
restructuring relationship managers served as liaison and single point of contact
between the IJV employees and the parent companies.
C.4.4.2 JM Morgan Stanley
There are two sets of people who have to come to terms with change in the IJV.
Subsequently the IJV management was aware of the fact that knowledge channels
within the IJV framework had to be to be adapted accordingly. The first group of
people is those in support functions in Hong Kong (MS Asia Pacific headquarters).
The APHQ views the IJV employees as no longer MS employees but IJV
employees. The decision to enter into a JV was taken by the Head Office in New
York. For this reason the APHQ did not feel an exact link to the venture from the
beginning stage, as they would have normally done, Indian operations being under
the APHQ's operative directives. The JV employees have different designations and
due to their legal status do not figure in head counts and in consolidated balance
219
sheets. Top management feels that it is important to make clear to all actors in the
IJV network that the IJV is very much a part of MS worldwide and to make sure that
all information and communication channels remain wide open. This viewpoint and
aim is communicated throughout MS and the IJV.
In all MS subsidiaries worldwide the dual reporting channels are very open (i.e.,
functional and local, reporting to AP HQ in Hong Kong). Due to the fact that JMMS
is an IJV, these reporting channels are not as open as they used to be and the link is
perceived to be more restricted and less permeable. This is one of the major
challenges for the JMMS top management.
The main groups of people who have to undergo a change in mindset are the former
MS employees in India. There was quite a bit of initial skepticism, if not resistance,
insecurity about the IJV. JMMS employees were unwilling to give up their MS
position. It was important for these employees to identify with the JV as well as
internally within the MS global network and externally to clients in India. However,
this is a process that could be rushed and adaptation programs implemented in the
starting phase. One of the programs initiated were weekly brown bag sessions,
where all employees in the various divisions were encouraged to voice their
integration sentiments.
In the last 17 months the COO has been in the process of JV preparation and trying
to persuade those resisting the change. Now that the JV is in place, there is little
resistance left. JM financials was dissolved as a company and became integrated as a
part of the JV. 65 investment bankers came to join the 4 investment bankers from
MS in 1998. The plan to equalize both the company structures is a relatively long
term one.
MS brought in the international expertise and the necessary global infrastructure and
technology pertaining to the international capital market, private equity placement
and distribution and financial advisory. JM made the deal flow possible due to their
widespread relations to government, other clients and institutions. Here the local
knowledge consists to a major part of „knowing who“. In India’s financial
environment the government is one of the biggest purveyors of deals and JM
financials was in a position to see its venture partner through the regulatory hurdles
that they would not themselves have been able to overcome. MS entered the venture
relatively later, much after DSP Merrill Lynch, whom they consider to be their
major competitor in India.
220
The strategic issue of sharing and transferring knowledge between the partners was
never specifically addressed in the negotiation stage, as other issues such as legal
compliance and financial credibility were given a higher priority, and it was
assumed that the MS culture would be adopted automatically within the IJV.
According to MS and IJV top management this view was in part due to MS’ lack of
experience in global IJVs.
During the alliance negotiation stage there were many protective agreements on
software, patents, branding from both sides. MS has enhanced its reputation in
investment banking in India through JM Financials. MS, has at least in its partner’s
eyes, learnt a fair amount of cost-control from JMF, which is inherent in every
traditional business house and lacking to that extent in a foreign global player.
Compliance standards and internal policy was more or less the same in both partners
so that adjustment was easy there.
As one former JMF employee put it, “Americans are more open and sometimes
expect results too quickly whereas Indians have vast knowledge but lack a certain
amount of two-way communication skills”.
JMMS values talent and offers opportunities to grow for the individual while
meeting company and parent objectives. The working environment is free and
energetic.
The IJV employees have full access to all MS global training programs such as the
MS Analyst training. The few new people who have come as well as existing ex-JM
bankers were and are encouraged to get to know the culture and processes in MS in
order to help them integrate within it. However, concrete measures to support the
IJV employees in this endeavor1 were few.
C.4.4.3 Max New York Life
Within the MI organization it is common for the IJVs to be relatively autonomous
from the parent companies and each other. There is monthly financial reporting.
The executive committee meeting is strictly for internal targeting and review, with
the MI shareholders present. There is a dual reporting structure with the NYL,
1 Interview, JMMS, Mumbai, India, 1999.
221
financial and operational reporting goes to the CEO of MNYL as well as the NYL
AP Head in Singapore and Japan.
NYL has a strong brand name in its other markets, but in India, where the insurance
market is in its infancy. However, NYL aims to pass on the same service mentality
and quality assurance to its employees in MNYL. NYL sees India as a prime growth
market in Asia, especially in the coming years.
The IJV receives the operative guidelines and policies from the APHQ of New York
Life in Singapore and Japan. AP’s main input was to build a functional business
plan for the IJV and ensuring that it would not be a stand-alone and integrated within
the NYL network, and that all channels for knowledge transfer were open.
C.4.4.4 Birla AT&T
The CEO is appointed by AT&T to manage the alliance. The first CEO to be
appointed by AT&T was an expatriate from the AT&T Headquarters who stayed for
three years, an extremely dynamic person who really got the IJV up and running.
The CFO was appointed by Birla. The IJV operates in two areas i.e., the basic
telecommunications and cellular licensing.
AT&T provides the technical expertise, the management team/model/vision
statement and the engineering team to build up the network RF and civil
construction engineers. There is a vice-president in Seattle who is responsible for
Indian operations. The JV Financial structure is debt equity which is supported by
AT&T worldwide. Birla supplies the local market knowledge i.e., knowledge of the
general Indian customer per se not sectorial knowledge. Birla also supplied the
necessary government connections, where they definitely have the edge over the
foreign companies. Birla activities are pro-active with the government and they
provide advisory services to the JV.
This has led to a cultural split within the IJV with the different departments being
run differently. The split is thought of as being “formal/informal”. Officially the
organizational structure throughout the JV is the same but the “Birla side’ is more
hierarchically structured with a higher cost-control whereas the AT&T run
departments are more performance driven and open to the unknown. This is of high
value in departments such as customer care where models previously unknown to
the Indian market and consumer have to be implemented.
222
Through the years the separation has become somewhat diluted but is still palpable
with the traditional departments being more risk averse in light of company
activities. At the beginning of the IJV the conflict was more real as the cost
controlling, risk-averse, preserving assets of the Birlas did not match the
entrepreneurial spirit of AT&T in India. This was seen as a speed breaker for the
development of the JV. The pro-active CEO was essentially the glue that held the JV
together. The CEO has the final say and makes decisions that are the best for the IJV
as a whole.
AT&T relied heavily on its brand name as a source of global brand equity. A tarnish
in reputation could affect AT&T on a global scale. The AT&T brand equity affects
all departments, primarily Sales and Marketing, and most importantly customer care.
All aspects of customer care have to adhere to global AT&T standards and
guidelines and the GM of customer care operations has to confer directly with the
brand manager.
Service is being marketed under the AT&T brand name, marking the first time the
AT&T brand has been used for an Asian joint venture. Service quality is being held
to the same high standards as AT&T's operations around the world.
C.4.4.5 Sprint RPG
The senior IJV management reports to the board. The CEO has allegiance to both
partners but for administrative purposes RPG is the majority partner. The Board of
Directors has the final say in all strategic decisions of the IJV. Parent IJV meetings
are dominated by financial issues. The board of directors meets on a quarterly basis
to review operation.
A Global One manager said1: "In a joint venture the most important thing is trust
between the joint venture partners. This is more important than intellectual property
rights laws, which depend on implementation and enforcement. If Global One had a
100% wholly owned subsidiary it would transfer more technology. To transfer
advanced, valuable technology, you want management control."
Detailed performance data is regularly distributed to all units. The unit heads meet
several times a year to review each unit’s performance and to develop and
implement formal plans for the transfer of best practices on a global scale. Unit
1 Interview quote, Global One, U.S., 2000.
223
managers periodically visit each other, in order to go beyond performance data and
understand firsthand the factors that make particular practices superior or inferior. A
start-up group is responsible for designing and managing any new project. Thus the
embedded and underlying process knowledge is carried over, and start up expertise
can become one of the organization’s core competencies.
•
•
•
•
DSP Merrill
Lynch
JM Morgan
Stanley
Max New
York Life
Birla AT&T
Birla Group’s market knowledge was
IJV partner.
No knowledge due diligence was
conducted by NYL, as critical mass
and distribution channels were
considered key attributes of MI, the
assets.
Morgan Stanley conducted a due
diligence of JM, including intangible
knowledge. Access to the IJV
partner’s knowledge was viewed as a
key success factor.
knowledge due diligence of various
potential partners with regard to
market, regulatory, and partnering
Merrill Lynch conducted a
Was knowledge due diligence performed
before partner selection?
IJV
•
Agreement that NYL would take over
all training programs (life insurance-
•
Agreement for product training of local
specific) for local employees.
Technology transfer agreement for IT
and MIS systems from NYL.
•
resource base. No specifics determined.
Preliminary agreement to afford the
IJV restricted access to MS global
Agreement to adapt the IJV as far as
possible to ML global guidelines.
•
•
IJV has full access to ML extensive
global resource base.
•
incorporate professionalism in DSP,
through transfer of process knowledge
from ML to the IJV.
•
•
•
•
DSP
Product knowledge
Process knowledge
•
•
client knowledge
regulatory knowledge
•
•
market knowledge
AT&T
•
knowledge
Product/ Industry
Max India
•
New York Life
market knowledge
•
Morgan Stanley
Global research database
ML
Regulatory knowledge
•
•
Market knowledge
Merrill Lynch
•
•
within the IJV framework?
the IJV framework in the negotiation phase?
Agreement to initiate steps to
What types of knowledge were
considered most important for transfer
What preliminary agreements, if any, were
made for the transfer of knowledge within
224
•
•
No specified cross-cultural training /
management initiatives led to
•
Cross-cultural initiatives and
communication in the formation stage of
the IJV.
Failure to address cross-cultural issues
led to friction loss and lack of
symptomatic treatment of cross-cultural
issues specific to the IJV.
Cross-cultural training initiative
implemented throughout the IJV
framework.
levels of management with follow up
feedback encouraged adaptation of
partner management styles in the IJV,
especially in regard to professionalism.
International personnel movement at all
knowledge of the Indian environment,
very successful international assignments
Expatriates were trained and had
•
•
•
the IJV framework?
What is the impact of cross cultural
management on the knowledge transfer within
O & M performed a thorough
•
Ogilvy &
Mather
for the IJV.
Agreement for access to O&M intranet
Agreement for initial system setup by
Sprint.
•
•
Agreement on Transfer of Product
Technology from Sprint.
office.
Access to AT&T resource database
through AT&T knowledge liaison
AT&T Brand Manager to the IJV)
Agreement for protection of AT&T
Brand knowledge (Assignment of
•
•
•
employees by AT&T (at U.S. facilities)
•
•
•
•
•
consumer knowledge
market knowledge
market/consumer knowledge
Product knowledge
market knowledge
Process knowledge
knowledge
Product/ industry
Global resource data (global
•
brand knowledge)
Client knowledge
•
SG Benson
•
O&M
•
RPG
•
Sprint
•
•
Birla Group
•
•
•
•
•
Figure C.28 Knowledge Management – Alliance Management in IJVs
examination of all assets of SG
Benson, particularly client and
market knowledge.
No knowledge due diligence was
performed by either Sprint or RPG.
•
knowledge.
telecommunications firms wishing to
enter the Indian market, including
factors such as brand and product
Birla Group conducted due diligence
of various global
Sprint RPG
•
than the credibility of Birla Group.
considered a key factor. No specific
knowledge due diligence was
conducted on behalf of AT&T other
225
on global projects and market offerings.
This leads to synergies and valuable
insights on global marketing strategies.
Cross-cultural initiatives include working
resulted in knowledge over spill in other
areas of the parents’ business strategies
Insights gained from cross-cultural issues
areas of the parents’ business strategies
(e.g. US. Marketing in AT&T, and
quality control measures in Birla Group)
Insights gained from cross-cultural issues
resulted in knowledge overspill in other
center and quality control processes)
understanding (also through best practice
database) led to local, successful
adaptation of global processes (e.g. call
226
C.5 International Human Resource Management: The Global
Knowledge Worker within the IJV Framework
„A few years ago, human resources weren’t important to the business. What’s
different now is the degree in support and commitment from the executive team „.
The new economy with its relentless competition and for talent and the focus on
intellectual resources has driven home the message […] that people are important.
But in large multinational companies, often the HR Director is still trying to grapple
with more efficient HR administration services, whereas the focus should be on how
to maximize human potential. 1
As invisible assets are embodied in people, policies regarding human resources (HR)
are critical to organizational learning. The objective of the HR activities is to
complement line management in providing a supporting climate and appropriate
systems to guide the process of learning2.
This study wants to propose an agenda in which knowledge creation and learning
underpin the International Human Resource Management (IHRM) debate. In this
regard, the firm's stock of expertise is perceived in terms of the collection of skills,
talent and abilities (resources) and the human resource practices and policies through
which the resources are deployed and utilized (capabilities)3.
C.5.1 Human Resource Management in IJVs
The objectives of the IJV should be reflected in the corporation’s IHRM systems,
and the individuals’ personal performance targets. However, the unilateral setting of
business goals and executives’ performance targets in the foreign parent firm
without input from the local partner can lead, not only to unmet objectives, but also
to potential conflict and to deterioration of the relationship4.
The IHRM function should also contribute to the evaluation of the potential venture
partner's systems and practices, and determine future training needs. The
1 Wall Street Journal, 2000.
2 Pucik, V., Human Resource Management, 1988
3 Kamoche, K., International Journal of Human Resource Management, 1996.
4 DiStefano, J.J. and Lane, H.W. "International Management Behavior", 1988.
227
development of local human resources could contribute to the IJV’s competitive
advantage and protect the parent’s investment.
C.5.2
Knowledge Management Issues in IJVs
Pucik categorized the key IHRM activities as follows:
Staffing Practices
College Recruiting
Ability tests
Personal interviews
Internal Referrals or recommendations
External referrals or recommendations
Previous work
Educational background
Evaluation Practices
Written performance evaluation
MBO system
Succession Planning
Training practices
On the Job
Internal training by staff
Internal training by consultants
External training
Written Job Descriptions
Compensation Practices
Job evaluations
Seniority as pay criterion
Performance as pay criterion
Profit sharing
Figure C.29 HR Practices
In the 1990s, the concept of IHRM gained recognition as an important and a distinct
field of social inquiry1. IHRM objectives include the quest for control. This is
especially true when the financial performance of a venture is in doubt, and where
the business risks require close supervision of the operations. This involves the
placement of foreign parent nationals (expatriates) in key positions. Associated with
1 For a critique of the contemporary trends in IHRM research see: Forster, N., International Journal
of Human Resource Management, 1992; Kamoche, K., International Journal of Human
Resource Management, 1996a; Kochan, T.A. et al., "Research Frontiers in Industrial Relations
and Human Resources", 1992; Schuler, R. et al., International Journal of Human Resource
Management, 1993
228
the notion of control is the common view that knowledge is transferred from the
headquarters to the IJVs and not the other way around.
Much of the IHRM literature is currently concerned with expatriation and
repatriation and in particular the problems that managers face in adjusting to foreign
cultures and also subsequently adjusting to the "parent country"1. Other themes
include the factors affecting the performance of international managers and the need
for cultural sensitivity and language training2.
The examination of human resource issues and activities associated with IJVs
requires a depth of analysis not necessary for other types of alliances3. The
asymmetric appropriation of intangible resources - such as the acquisition of product
or market know-how for use outside of the partnership framework or even to support
a competitive strategy targeted at the partner - cannot be easily protected. The
asymmetry results from the internal dynamics of the strategic alliance. Benefits are
appropriated asymmetrically due to differences in the organizational learning
capacity of the partners. The shifts in relative power in a competitive partnership are
related to the speed at which the partners can learn from each other4.
Effective management of various HR related issues could influence IJV success.
Major HRM issues are:
•
•
•
•
•
•
•
Freedom of decision making by the IJV management
Appropriate selection of the IJV personnel
Use of experienced expatriates
Training of expatriate managers about local culture
Training of local managers about foreign cultures
Joint training of nationals and expatriates
Provision of special compensation of expatriates
1 see Black, J., Management International Review, 1990; Black, J. and Gregersen, H., Human
Relations, 1991; Black, J. and Stephens,G., Journal of Management, 1989; Black, J and
Grergersen, H., Harvard Business Review, 1999; Forster, N., International Journal of Human
Resource Management, 1994
2 Forster, N., International Journal of Human Resource Management, 1992
3 Child, J. and Faulkner, D., "Strategies of Cooperation", 1998; Cyr, D.J., " The Human Resource
Challenge of International Joint Ventures", 1995, Schuler R.S., International Journal Human
Resource Management, 2001.
4 Pucik, V., Human Resource Management, 1988
229
• Using locals in key IJV positions
• Inter-partner learning
• Building a separate IJV culture
The following figure depicts the four stages of the IJV process. The relevant
activities pertaining to human resource management and managing the knowledge
worker must be determined and examined.
HR Implications in the Four Stages of the IJV Process: IJV Stages
Stage 1 – Formation
• Human resource planning
• Identifying reasons
• Planning for utilization
• Selecting dedicated manager
• Finding potential partners
• Selecting likely partners
• Resolving critical issues
• Negotiating the arrangement
Stage 2 – Development
•
•
•
•
•
Locating the IJV
Establishing the right structure
Getting the right senior managers
Job design and job analysis
Recruitment, selection and orientation
The more important learning is, the greater
the role for HRM:
Knowledge needs to be managed
Systematic selection is essential
Cast a wide net in partner search
Be thorough for compatibility
Ensure extensive communications
More skilled negotiators are more effective.
Integrative strategies for learning
Concerns of multiple sets of stakeholders
need to be considered for long term viability
and acceptance
The structure will impact the learning and
knowledge management processes. These
are impacted by the quality of IJV managers
Recruiting, selecting and managing senior
staff are critical issues in the IJV
Stage 3 – Implementation
•
•
•
•
•
Establishing the vision, mission, values,
strategy and structure
Developing HR policies and practices
Staffing and managing the employees
Training, socialization and assimilation
Remuneration (compensation)
These will provide meaning and direction to
the IJV and employees
These will impact what is learned and shared
Need to design policies and practices with
local – global considerations
The people will make the place
Stage 4 – Advancement and Beyond
•
•
•
•
•
Learning from the partner
Transferring the new knowledge to the
parents
Transferring the new knowledge to other
locations
Employee welfare
Communications
Partners need to have the capacity to learn
from each other
HR systems need to be established to
support knowledge flow to the parent and
learning by the parent
Sharing through the parent is critical
Figure C.30 HR Implications in the Four Stages of the IJV Process
230
At the organization level, HR activities need to reflect and support:
•
•
•
•
Structure: a network-orientation
Values: self-control; initiative; co-operation
Knowledge: sharing; transferring
Teams and cross-unit interactions
The motivation that appears to be gaining substantial momentum involves learning
and knowledge sharing and transfer1. Within the IJV context and within KM there
are multitudes of organizational issues that are at the same time human resource
issues. LEI and SLOCUM2 state that there are three key aspects of HR management
that are important for efficient IJV operation: training and developing managers in
negotiation and conflict-resolution skills; acculturation of managers to work with a
foreign partner; and the harmonization of management styles.
KAMOCHE3 takes the view that before IHRM can even begin to examine the
individual's capacity to adjust to new or previously familiar circumstances, it is
necessary to clarify the specific purposes of international assignments.
The significance of this concept is outlined in particular with regard to how firms
can best create and utilize an international stock of expertise. This perspective
allows assessing the organization dynamics of resource heterogeneity that permit the
diffusion of learning. It is argued here that, through the integration of IHRM into the
KM strategy, the interaction of the firm's stock of knowledge and human resource
practices can enhance organizational effectiveness in a diversified international
context.
The issues associated with managing people need to reflect consideration of such
factors as local culture, labor market conditions, religion, laws, local politics and
local competitive pressures4. Locally developed human resource activities,
1 see Hedlund, G and Nonaka, I. In: "Implementing Strategic Process", 1993; Grant, R.M. and
Spender, J.C., Strategic Management Journal, 1996.
2 Lei, D. and Slocum, J.W. Organizational Dynamics, 1991.
3 Kamoche, K., International Journal of Human Resource Management, 1997.
4 Porter, M.E., "Competitive Advantage of Nations", 1990.
231
particularly under the guidance of a local HR professional, are more apt to
incorporate these local conditions and thus be more effective1.
The ability to manage human resources in a multi-cultural context has significant
impact on IJV performance2. The importance of complying with local HR practices
vis a vis the urge from the foreign parent company to maintain a desired level of
parent-country practices is likely to create difficulties in managing HR within an IJV
environment. LORANGE argues that IJV must have its own strong, full-fledged HR
function with clear methods of working closely with each partner3. Appropriate
staffing of the IJV using the local nationals, expatriates and third country
expatriates; developing and maintaining a separate HR policy mix adopting from
both the parents and host environments and using management development to
establish a shared vision and mindset towards a joint HR culture are important for a
successful IJV operation4. Intensive on-the-job training may reduce the
psychological distance and help build up a team spirit in such cross-cultural setting.
This may also be done through reciprocal arrangements between the foreign
companies and their overseas operations to exchange managers and specialists5.
Knowledge and IHRM
The concept of learning is located at the heart of IHRM for two reasons6. First, in
recognition of the potential strategic value of knowledge. Second, the strategic value
of resources is sustainable to the extent that the knowledge generated from the
utilization of these resources in the firm's productive activities subsequently
enhances the firm's capacity to carry out these activities. The implications for IHRM
are that this scope for organizational learning exists if the knowledge acquired by
individuals in international assignments can be diffused across the organization. The
notion of "experiential learning" therefore appears relevant to IHRM due to the role
1 Indeed , in the IJV, examined in the study, all the IJVs had local HR heads, often from the Indian
parent, who saw HR as a mechanism for control within the IJV.
2 Nam, S.H., International Journal of Human Resource Management, 1995
3 Lorange, P., International Journal of Human Resource Management, 1986
4 Nam, S.H., International Journal of Human Resource Management, 1995
5 Zeira, Y, and Pazy, A., Training and Development Journal, 1985
6 Kamoche, K., International Journal of Human Resource Management, 1997.
232
of "experience" in knowledge creation in international activities, where individuals
develop mechanisms for adaptability and task accomplishment in new cultural
settings.
• Role behavior perspective: Instead of using specific behaviors and job
performances as the fundamental components, this perspective shifts the focus
from individuals to social systems characterized by multiple roles, multiple role
senders, and multiple role elevators1. HR is the organization's primary means for
sending role information through the organization, supporting desired behaviors
and evaluating role performance. It is effective, therefore, when it communicates
internally consistent expectations and evaluates performances in ways that are
congruent with the systems behavioral requirements.
• Institutional Theory: A role theory perspective assumes individuals respond to
normative pressures as they seek approval for their performance in socially
defined roles. Similarly, institutional theory views organizations as social entities
that seek approval for their performance in socially constructed environments2.
• Human Capital Theory: Human capital refers to the productive capabilities of
people. Skills, experience, and knowledge have economic value to organizations.
Thus, people constitute the organization's human capital. Like other assets,
human capital has value in the marketplace, but unlike other assets, the potential
value of human capital can be fully realized only with the cooperation of the
person.
• Make/Buy proposition: In human capital theory, contextual factors such as
market conditions, unions, business strategies, and culture are important because
they have a direct impact on human capital. This way, alternative approaches in
HR can be used in order to increase the value of the organization's human capital
and the value of the anticipated returns, such as productivity gains.
The theme of learning in IHRM has been mentioned briefly in a number of studies,
thus pointing to the need for a more robust exposition of this concept. FORSTER
calls for further research in "learning processes in organizations and in an
international context"3. WELCH and WELCH suggest that such a firm "needs to
develop systems which enable it to transfer that knowledge around the organization
as well as create new knowledge and skills"4. These themes are developed further
along three inter-related dimensions:
• Re-examining the paradigmatic status of IHRM
1 Katz, D. and Kahn, R.L., "The Social Psychology of Organizations", 1978.
2 DiMaggio, P.J. and Powell, W., American Sociology Review, 1983.
3 Forster, N., International Journal of Human Resource Management, 1992.
4 Welch, D. and Welch, L., International Journal of Human Resource Management, 1994
233
• Identifying the strategic and operational issues pertinent to knowledge creation
and the transfer of learning and
• Identifying the problem of retaining knowledge within the organization.
Thus, the more the locally developed human resource activities support and
reinforce learning and sharing of knowledge, the more learning and sharing will take
place, thereby increasing the chances of success for the IJV1.
The importance of the human element in KM is key; accessing embedded
knowledge and skills in the highly complex IJV environment is a difficult task, and
must be approached with sensitivity. This is especially true in the knowledge-based
service sector, where a large part of the firm’s assets is the intellectual capital of its
employees, a lot of it tacit. According to GERINGER and FRAYNE, the failure of
IJVs is at least in part due to the managerial complexity involved in dealing with
two often contrasting corporate and national cultures. The management costs
attributed to this increased complexity, the lack of productivity due to friction at the
workplace, and the costs involved in getting the employee motivation needed for a
successful venture are often substantial2.
According to the human capital perspective, this tacit knowledge can be more
effectively retained and transferred through HRM that fosters loyalty and
commitment to the organization3, and underlines the importance of long-term
relationship. Such activities include extensive socialization and career development
programs; performance appraisal criteria that include processes as well as output;
and compensation that rewards longer term process behavior and team-based
activities4.
As PARKHE and PUCIK describe, learning, knowledge flow, sharing and transfer
are crucial indicators of the success of the IJV itself5,6. Establishing guidelines and
processes that will support learning and knowledge sharing and creation will be in
1 Child, J. and Faulkner, D. "Strategies of Cooperation", 1998.
2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
3 Lei, D, Slocum, J.W., and Pitts, R.A., Journal of World Business, 1997
4 op.cit..
5 Parkhe, A., Journal of International Business Studies, 1991
6 Pucik, V., Human Resource Management, 1988
234
the interest of both the IJV and the parent. This will be played out with the
development of the HR policies and practices for the IJV.
Importance of HRM in IJVs - Issues at Individual / Group Level
•
•
•
•
•
•
Learning, sharing, and transferring of knowledge to enable the other
employees and team to learn and grow
Competencies (knowledge, skills, abilities, personality and habits) to
perform the organizational role
Behaviors, actions and attitudes that are consistent with needs of the
business, customers and colleagues
Motivation and commitment to be productive, stay with the firm and attract
others to the firm
Lack of business success in the IJV due to human resource issues such
as lack of competent and motivated staff, staff not matched with the
requirements of the competitive strategy, or staff not socialized and
committed to the IJV itself or staff not able to manage dual loyalties
Expatriates, local staffing, adapting guidelines
Source: Schuler, R.J. (2001): The International Journal of Human Resource Management (in press)
http://www.rci.rutgers.edu/-schuler/Hrissues.htm
Figure C.31 Importance of HRM in IJVs: Individual / Group Level
KAMOCHE1 makes the case for a thorough reevaluation of the paradigmatic status
of IHRM. There is currently little evidence of a coherent epistemological foundation
for IHRM. Socio-psychological issues or focus on staffing and the relative mix of
parents' influence are prevalent. Corporate control through international assignments
is a further enduring concern. Applying ARGYRIS's model of double-loop learning
to IHRM, the current tendency to pursue the variety of objectives characterized
above is consistent with single-loop learning.
A double-loop approach would encourage firms to access critically what particular
underlying values and circumstances in IHRM need to be re-examined or altered
before prescriptive measures proposed in regard to second-order decisions. A
235
learning perspective in IHRM is underpinned by the creation of a stock of expertise,
which is available across the firm, for example through a process of "crosspollination"2.
By not having a coherent strategic vision about the value of internationally
generated expertise, the organization neglects to provide adequate supportive
mechanisms, preparatory training, and an opportunity for repatriates to utilize and
pass on their expertise on return. The operational and social mechanisms constitute a
sound basis for IHRM capabilities. Sustainable learning will not take place unless
there is a clearly defined paradigmatic approach to the generation and utilization of
knowledge.
Therefore, there is a need to develop specific mechanisms for knowledge transfer
and a more robust conception of learning. These are the "thought constructs" that
determine how people view and interpret the reality around them. Based on his
study, WHIPP3 identifies the role of knowledge in creating "differential advantages"
through HRM. He finds that "Learning becomes the central means of generating,
maintaining and regenerating that knowledge. An HRM approach can be a vital
means of developing that learning capacity."4
Knowledge transfer can take a number of forms.
• The creation of global teams and networks of experts; this involves the actual
mobility of people which may in some cases be constrained by geographical,
financial and other factors. These reasons explain why this approach is often
limited to managers and specialists.
• Maintaining effective communication systems and databases that people at
different sites can draw from; this is an alternative to mobility and is accessible
to a wider range of personnel.
• Having a systematic evaluation of individuals' experience upon completion of an
international assignment, and ensuring that where valuable knowledge has been
acquired, this knowledge is built into the organizational routines and taught to
others.
1 Kamoche, K., International Journal of Human Resource Management, 1997.
2 Bartlett, C.A. and Ghoshal, S., Harvard Business Review, 1992.
3 Whipp, R., International Journal of Human Resource Management, 1991.
4 op.cit.
236
Mechanisms of knowledge transfer such as teams and communication help to
establish the link between the individual and the organization. Where the
organization climate allows it, individuals' experience will ultimately become
embedded in the organizational stock of knowledge, which can then be applied to
new IHRM activities and problems1. It is evident from the above that the mobility
of people, effective communication systems and a willingness to challenge
traditional wisdom are the cornerstones of the mechanisms for the diffusion of
knowledge.
C.5.3
Implementing Global Human Resources Guidelines in the IJVs
The three major roles of the IJV HR department are 1) to assign and motivate people
via job skills, compatibility of styles, and communication compatibility, 2) to
manage human resources strategically and 3) to ensure that learning is being created,
shared and transferred so that the IJV is seen as a vehicle to produce not only
financial rewards but also managerial capabilities and expertise that can be used
later in other settings2.
In the majority of the IJVs interviewed the resulting personnel policies at the IJV
read very much like the policies of the American partner. The major differences or
adaptation to the Indian surroundings were in certain sensitive aspects such as
remuneration and designation, and adjustment to local tax laws.
Developing the HR policies and Practices
Who actually develops HR policies and practices can range from one or both of the
parents to the IJV exclusively. The more that the development is left with the IJV,
the greater likelihood that the practices will be effective for local adaptation, but not
as effective for global integration and learning transfer3. Successful
HR managers, however, aim to develop locally responsive HR policies and
1 see Inkpen, A, and Crossan, M., Journal of Management Studies, 1995: in their "learning
schema", the authors deemed that "a concept of individual learning should be embedded in a
concept of group learning, which in turn should be embedded in a concept of organization
learning" (p.598)
2 Lorange, P., International Journal of Human Resource Management, 1986
3 Child, J. and Faulkner, D., "Strategies of Cooperation", 1998
237
practices, while taking into consideration the HR guidelines and values of the parent
firms.
There are many HR issues that unfold during the formation and set up of the IJV
such as1:
•
•
•
•
•
The assignment of managers
Managers' foci during IJV operation
Top management evaluation
Managing loyalty issues
Career and benefit planning
Each partner may have different expectations from the IJV. A partner giving the IJV
low priority in its global strategy may assign relatively weak human resources to the
IJV. The quality of the top management is one of the most important factors in the
IJV's success2, and so assigning weak managers may endanger the IJV. This balance
should also reflect the input and views of the IJV's top management team. According
to PUCIK the IJV's top management should have the final say in the staffing of any
positions within the IJV itself3. As trust needs are high, especially in the early
phases, and the parents have the needed competencies, the parents may be able to
dictate initial and temporary staffing needs4.
The use of a large proportion of local managers rather than expatriates is
recommended to ensure the foreign parent acquires the necessary knowledge of the
local economy, politics and culture. This also increases the need for training
executives in the foreign parent companies headquarters in cross-cultural issues5.
Majority ownership and expatriate top management often reflect a lack of trust in
local nationals and also may be a lack of understanding of the local culture. It is the
role of IHRM to make up for this gap in skills. The more successful cross-national
JVs are those engaging in mixed management teams and cross-cultural training6.
1 Zeira, Y. and Shenkar, O., Academy of Management Review, 1987
2 Hamel, G and Doz, Y.L., "Alliance Advantage", 1998.
3 Pucik, V., Human Resource Management, 1988.
4 e.g., Parent company designees, such as a brand manager, chief engineer, technical expert.
5 Lane, H.W. and Beamish, P., Management International Review, 1990.
6 Radway, R.J., The Currency Forecasters Digest, 1986.
238
The difference in the role of HRM departments in IJVs in enabling and encouraging
an ethical work climate may reflect the different degree of influence that HRM has
on the IJV strategic policies and operational level tactics1. In addition, the difference
can be attributed to three factors in the IJV, more employee heterogeneity, greater
exposure to the risks of diverse, moral standards through borderless competition,
and more resources to devote to internal creation or external contracting of services
to develop an explicit ethical code. As workforce diversity and mobility increase and
external pressures for total quality performance escalate to IJV levels, parent firms
will need to match other firms in proactively fostering an ethical climate through
their HRM involvement.
Hence IJVs in India can provide pacesetting leadership in the implementation of
organizational ethic development systems to improve workplace justice and
productivity, to retain talented Indian workers, attract domestic and foreign
investment and build reputational capital to sustain global competitiveness
advantages2.
There may or may not be a transfer of culturally influenced HRM practices from the
parent firm's home country to its IJVs. As CAPELLI and McELRATH3 discuss, the
tendency of MNCs to transfer parent firm HRM practices to IJVs may vary by firm,
by the country of origin of the parent firm(s) and by the country in which the IJV is
located. In addition, the transfer of HRM practices from parent firms may vary over
time, especially as the parent firms global involvement changes4.
For example, SPARROW and BUDHWAR5 found that Indian HRM practices were
low on quality circles, empowerment and other elements that require individual and
team involvement and development. Other researchers, however, found that
managerial and non-managerial employees prefer or encourage participative
1 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.
2 Amba-Rao, S.C., International Journal of Human Resource Management, 1994.
3 Capelli, P. and McElrath, R., "Transfer of HRM Practices through Multinationals", 1992.
4 The Indian government's policy of regulating HR practices, along with the preference for using
host country nationals (HCN) by the parent companies, has contributed to the evolution of a
unique set of HR practices within foreign- Indian IJVs4. The Indian regulatory environment is
a major concern with a relatively large number of laws regulating HRM practices. See Lawler,
J.J. et. al., International Journal of Human Resource Management, 1995.
5 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.
239
leadership and involvement in decision making1. Even where hierarchical
relationships exist, employees expect and respond to consultative leadership with
low controls, and to task-oriented nurturing leadership, with better performance and
satisfaction2. Furthermore, HRM practices involve ethical issues, for example,
justice and equity in the assessment, development and rewarding of human
resources. Yet, research on ethical issues in relation to HRM practices in India is
lacking3. VENKATA RATNAM4 concludes that foreign firms are capital intensive
and have fewer jobs, with highly competitive pay and better working conditions than
indigenous firms do. Further, some managers in India regard US management
practices as to aggressively market-oriented, inflexible, impersonal and lacking
social and humanistic concerns.
In a six-country survey of US subsidiaries including India5, it was found that
technological, economic, legal and political conditions explain the differences in
managerial actions. The managerial systems and practices were divided into three
areas and a transfer model was offered. 1) Technological core activities influenced
by contextual variables, economic conditions and managerial practices; 2)
organizational social system influenced by socio-cultural factors; 3) institutional or
external relationships influenced by political, legal, and economic conditions.
KIGGUNDU, JORGENSEN, and HAFSI6 found that American practices related to
the organization's core activity work well in developing countries, but when the
environment is involved, adjustments may be needed to fit theory to practice.
Referring primarily to HOFSTEDE's 1980 dimensions7 of cultural differences
among countries, some authors showed contradictions among Western HR practices
1 Kanungo, R.N. and Misra, S., International Journal of Psychology, 1988.
2 Kakar, S., Administrative Quarterly, 1971 ; Sinha, J.B.P. "Work Culture in the Indian Context",
1990 ; Virmani, B. and Guptan, S. "Indian Management", 1991.
3 Jain, H.C., Lawler, J.J. and Morishima, M., International Journal of Human Resource
Management, 1998 ; Rosen, S. and Juris, H. "Handbook of Human Resource Management",
1995
4 Venkata Ratnam, C.S., International Journal of Human Resource Management, 1998.
5 Negandhi, A.R. and Prasad, B. "Comparative Management", 1971.
6 Kiggundu, N.M. et al., Administrative Science Quarterly,1983.
7 Hofstede, G. " Culture’s Consequences: International Differences in Work Related Values ",
1980.
240
and developing countries' culture. At the same time, they also discussed indigenous
adaptation1.
The "learning experience" of western management training included exposure and
willingness to experiment with new administrative concepts and organizational
change. As one executive indicated, at this point managerial orientation was
influenced by status, departmental and personal goals competing with organizational
and national mission. Employee performance was encouraged but delegation and
communication were selectively used towards these personal ends. For example,
departmental staff meetings were infrequently held and the grapevine became a
common source of information2.
These managerial values reflect an organization's orientation towards its employees
and their environment and are of significance in adapting to a rapidly transforming
economy in the Indian cultural milieu3.
In general, Indian managers are characterized as favoring centralized decision
making with tight controls with personalized leadership prevailing over institutional
arrangements on power sharing4,5. The large family firms, while multiple levels are
not an issue in view of their size, may reinforce the social hierarchy, culture and
paternalism, and, based on the level of distrust of outsiders, information sharing and
decision making may be limited. Personal connections become more valued than
task competence. Hence, even when they hire professional managers, decision
making remains with senior family members discouraging empowered,
entrepreneurial activity by the professional managers6.
Regarding HRM's role in integrating HRM with the corporate level and in
delegating responsibility to line managers, BUDHWAR and SPARROW7 found that
their respondents in India were low on both dimensions.
1 Jaeger, A.M. and Kanungo, R.N. "Management in Developing Countries", 1990.
2 Interview, JM Financials, India, 1999.
3 Amba-Rao, S.C., Journal of Business Ethics, 1993.
4 Virmani, B. and Guptan, S. "Indian Management", 1991.
5 Kakar, S., Administrative Science Quarterly, 1971
6 Mendonca, M. and Kanungo, R.N., In: "Management in Developing Countries", 1990
7 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.
241
C.5.4
Managing the Knowledge Worker
As COHEN and LEVINTHAL1 stated, the cognitive structures of individuals
provide the basis for organizational learning. Certainly learning occurs at the
individual, group and organizational levels. This implies that behaviors and styles of
managers in organizations have a significant impact on the ability and willingness of
a firm to learn2. LEI and SLOCUM3 suggest that learning-oriented managers need
to demonstrate cultural awareness and "humility" which respects the values and
customs of others: "cultural-functional narrowness and/or ethnocentricity results in
an educated incapacity that reduces the ability of organizations and managers to
learn"4.
The central challenge will be to make knowledge workers more productive.
Knowledge workers are rapidly becoming the largest single group of the work force
of every developed country.
The task of making the knowledge worker more productive should be approached
from the quality of the work rather than the quantity; it also means that we will have
to learn to define quality. The job definition and performance measurement criteria
require extensive worker input. A job description is not static.
Once the task has been defined the knowledge workers themselves can tackle the
next requirements. The requirements are.
• Knowledge workers bear responsibility for their own contribution. It is their
decision that they should be held accountable for in terms of quality with respect
to time and cost.
• Knowledge workers have to have autonomy and that entails responsibility.
• Continuous innovation has to be built into knowledge workers job.
• Continuous learning and teaching has to be built into the job.
To be productive, knowledge workers must be considered a key asset. Knowledge
workers, however, own the means of production and the "knowledge between their
ears" is a portable asset. Knowledge worker and organization are in a symbiotic
1 Cohen, W.M. and Levinthal, D.A., Administrative Science Quarterly, 1990.
2 Geringer, J.M. and Frayne, C.A., Management International Review, 1990
3 Lei, D. and Slocum, J.W., California Management Review, 1992
4 op.cit.., p. 11
242
relationship. Knowledge workers must be given incentives and allowed input to
increase their productivity in performance capacity for the organization.
Productivity of the knowledge worker will almost always require that the work itself
be restructured and be made part of a system. Higher productivity requires a change
in attitude, on the part of the whole organization. It therefore has to be “piloted” by
top management as any change process would. The first step is to find a receptive
group of knowledge workers. The next step is to sell it to them, and gradually
integrate in their work schemes, and patterns, until full acceptance is achieved. The
first attempts will certainly make clear the numerous pitfalls and fallacies of the
initiative. Only after first successes in the trial group, the initiative can be extended
organization wide. At this point, resistance will be located, (e.g., middle
management) or what changes in task, organization, measurement or attitude are
needed for full effectiveness. The pilot stage is vital for damage control, and later
success of the revised initiative.
According to DAVENPORT et al.1, the knowledge worker's primary activity is the
acquisition, creation, packaging or application of knowledge. Knowledge work
processes include such activities as research and product development, advertising,
education, and professional services like law, accounting, consulting and strategic
planning2.
A governing or organizing body trains and accredits practitioners, defines
performance standards and monitors complaints with standards. Managing
professionals is a different task from managing administrative or operational staff,
requiring a manager to cede day-to-day task control to the professional while
maintaining control and direction over strategic issues.
Knowledge workers are likely to resist standard routines, in fact, the level of
discretion and autonomy often separates knowledge workers from administrative
workers.
IT often makes new process designs possible in operational and administrative areas.
As work becomes more knowledge-intensive, rapid manipulation of data across
1 Davenport, T.H. et al., Sloan Management Review, 1996.
2 This is consistent with Mintzberg's analysis of managerial work, see: Mintzberg, H. "Mintzberg
on Management", 1989
243
distances has less impact; “richer”, more face-to-face communications are more
important. Technology can support knowledge work processes, but it must be
implemented with sensitivity to the nature of the work and its practitioners.
• Some processes consist of finding knowledge which existed – understanding
knowledge requirements, searching for it among multiple sources, and passing it
along to the requester or user. e.g., competitive intelligence processes.
• Other processes involve creating new knowledge such as research activities,
creative process in advertising process, writing books or articles, or developing a
movie.
• Knowledge work processes can package or assemble knowledge created
externally to the process. Knowledge packaging involves editing, design and
proofing processes.
• Certain processes primarily apply or use existing knowledge. The creation of
new bodies of knowledge might be actively discouraged. The auditor has to
interpret and apply existing procedures to a company’s transactions.
• Some firms have a primary focus on the reuse of knowledge.
C.5.5
C.5.5.1
Human Resources Knowledge Activities in the IJVs
Recruiting and Staffing
Associated with both control and international experience is the practice of
socializing managers in order to elicit their commitment to corporate culture and
values. The subtlety of socialization as a control mechanism is particularly realizable
where managers and staff from the IJV are posted to or trained at the corporate
headquarters, as opposed to the more common approach of sending headquarter
personnel to the IJV. Where such postings and training programs are linked to the
individual's perceived potential and uniqueness, a high degree of loyalty is likely to
result where such individuals are held up as the "lucky ones" or the "chosen few".
This perhaps explains the preoccupation of IHRM with high performers and highpotential personnel and why the geocentric staffing policy will continue to apply to a
small proportion of managerial and professional personnel1. The narrow focus on a
small cadre of high-fliers prevents the organization from tapping into and cultivating
a comprehensive stock of expertise. The effect of this narrows the scope for learning
1 Dowling, P. et al., "International Dimensions of Human Resource Management", 1994.
244
due to the underlying assumption that this small cadre provides the only source of
knowledge for organizational renewal and growth.
To maximize the people potential in the ventures, IJV staffing, according to CYR1,
ideally involves:
• Exchange of staff from the parents who are strong contributors with appropriate
skill sets
• Allocation of sufficient numbers of staff to the IJV to maximize the benefits of
continuous improvement through high-employee involvement
• Hiring managers to the JV with special skills beyond those of traditional
managers (e.g., possessing political expertise as well as knowledge of
management techniques)
• Staffing at "the top" (e.g., The IJV board) with managers who have exemplary
personal skills, the ability to communicate effectively, and flexible and
• The development of HR policy that protects the interests of the IJV (ex. retain
key JV personnel) but at the same time allows flexibility in order that staff don't
feel "trapped" in the venture
The selection criteria should include:
• The ability to perform the job
• Acceptance of the mission, values, strategy, structure, policies and practices of
the IJV
• Motivation and ability to learn and share tacit and explicit knowledge1
Recruitment and selection practices adapted to local conditions have a greater
chance of attracting a large pool of well-qualified job applicants. A critical criterion
in the recruitment and selection process in the IJV is an applicant's capacity for
learning and "knowledge-friendliness".
In the study, local nationals staffed most of the key positions. For the parent
companies, additional reasons for using local nationals included avoiding extra costs
to relocate expatriates and the reluctance of many foreign managers to live in India.
Availability of experienced local nationals at a lower cost further increases the
likelihood of local staffing.
C.5.5.1.1
IJV TOP MANAGEMENT
Recruitment and staffing of IJV employees, particularly those in top-management
positions, represent a crucial strategic control mechanism for an IJV parent. Even if
1 Cyr, D.J. "The Human Resource Challenge of International Joint Ventures", 1995, p. 120
245
it is only a 50/50 or a minority partner, a parent may be able to effectively influence
the management and performance of an IJV by influencing staffing of the IJV's key
positions. Unless the venture is staffed with personnel appropriately qualified for the
IJV's specific circumstances, parent objectives are unlikely to be achieved.
Therefore, by influencing the techniques and process used to recruit and staff the
ventures key positions, a parent may be able to influence IJV performance.
The potential for influencing venture performance through recruitment and staffing
is not limited to the IJV general manager position. The number and quality of human
resources, which are devoted to the venture, may influence the nature and extent of
organizational learning, which occurs within the IJV environment. Key areas for
exercising such influence may therefore occur throughout the value chain of the IJV,
including financial, legal and administrative staff and sales personnel. Since critical
technology often resides in non-patentable know-how or know-who, careful staffing
of these positions may enable the IJV to learn more rapidly from its parents and
transfer the basic concepts necessary for establishing and maintaining its
competitive advantage. Influencing these staffing decisions may be particularly
important when the skills critical to IJV performance are asymmetrically distributed
among the parent firms. Therefore, by ensuring that the people selected for the key
positions have the requisite technical and interpersonal (cross-cultural) skills,
receptivity to new ideas and ability to disseminate what they have learned
throughout the organization, a parent may be able to promote successful IJV
performance and attainment of its goals.
When recruiting individuals for positions within the IJV, the parent firm might
employ a realistic recruitment approach, which includes a realistic job description,
as well as personnel techniques such as psychological tests, and simulations, which
assess the fit of the individual skills with the demands of the IJV operation.
Many parent firms have adopted the maxim that responsibility for IJV recruiting and
staffing should be assigned to the local partner, in particular when difficulties
accessing the local labor markets are anticipated.
1 Child, J. and Faulkner, D. "Strategies of Cooperation", 1998
246
The IJV will have established its own set of HR practices, policies and procedures.
Thus, the HR head needs to possess many of the same skills of the HR head in the
parent firms. The HR head in the IJV needs to have an understanding of the IJV and
parent firms. Competencies in negotiation, communications and tolerance are critical
in this additional role. The HR leader also needs to manage the process of gaining
independence from the parents. As part of a high-quality top management team, the
HR head will see the desire for greater control of the IJV by the local management
team.
Particularly for the venture's general manager, it will generally be necessary for the
individuals to evidence stronger skills in networking, diplomacy and cultural
sensitivity than might be the case for a wholly owned subsidiary. These individuals
must be capable of understanding and functioning effectively within, the different
national and corporate cultures, which constitute the IJV's operating environment.
Bringing the right attitude and personality to work in the multi-cultural setting of the
IJV can be considered as an inherent skill that the employee should bring along to
the position. Dealing with an unpredictable and largely unknown environment, the
expatriate (as well the local employee) has to have certain traits such as flexibility,
self-confidence, self-efficacy, openness, motivation, orientation to knowledge,
cultural empathy, openness to information and optimism1. Such traits can only be
developed over a longer period of time, and some of them even require a certain
predisposition.
Employees working in an IJV face many challenges such as dual parenting demands,
complexity and multiplicity of goals, multiple cultural and language differences, as
well as geographic distances. The ability to staff a venture with individuals who will
be sufficiently flexible in thought and action is a fundamental prerequisite for
successful IJV performance2.
All firms look for analytic talent to do the technical work, human qualities of the
relationship work and entrepreneurial instincts to do organization building work.
They seek „multi-skilled“ individuals capable of managing both content and
1 Mamman, A., International Journal of Human Resource Management ,1995.
2 Cobbe, G., Strategic Alliance Executive Forum, 1989.
247
process1. The qualities for relationship work is a combination of interpersonal skills
and personal qualities of integrity and respect are essential in developing what is
referred to as „team consciousness“.
Retain Top Performers
Top managers see a sense of stewardship in their role. Participation in decision
making on governance issues was also critical to maintaining partners‘ commitment.
Reward systems, which partners saw as equitable and supportive were also key to
the high levels of engagement and retention of top performers.
Finally, the dedication to their work is one of the most important factors. For
partners, shared values, sense of enjoyment, stewardship, equitable rewards systems,
and inclusive decision processes together created significant barriers to exit.
Firms aim to develop the individual’s technical expertise, team consciousness,
institution wide focus, and a deep sense of engagement with the firm and its partners
through mentoring. This is a voice in governance and an equitable reward system
and shared values.
These managers are the links between the two parents and an important
communication channel within the IJV itself. In this capacity, these managers are
likely to interact with their counterparts in the parent companies. The more
knowledge and experience these individuals have, particularly pertaining to their IJV
knowledge, the more likely they can cope with potential sources of conflict. But the
organization will also be more dependent upon these individuals, so there will be a
need to develop the incentives to increase the likelihood that these individuals will
remain with the company.
Ownership distribution may matter less than how operating control and participation
in decision-making actually are allocated2. For a parent with minority ownership,
for example, the right to appoint key personnel can be used as a control
1 Leonard-Barton, D. "Wellsprings of Knowledge - Building and Sustaining the sources of
Innovation ", 1995.
2 Harrigan, K.R. "Managing for Joint Venture Success", 1986.
248
mechanism1. Control can be achieved by appointing managers loyal to the parent
company and its organizational ethos2.
The members / positions of the IJV management include the board of directors, the
managing director (general manager), HR leader and the chief operating officer
C.5.5.1.2
EXPATRIATE MANAGEMENT
Expatriate management is a key issue in IJV management, especially when the
assignment is in a high-complexity environment such as a developing country.
Expatriates can be essential to the process of transferring embedded, tacit knowledge
to the IJV from the foreign parent company. Expatriates, while in a good position to
implement the parent firm’s policies and values in a diplomatic manner, can also be
a major source of friction if they act in an inappropriate manner.
BLACK and GREGERSEN3 found that between 10 and 20% of US managers sent
abroad returned early because of job dissatisfaction or difficulties in adjusting to a
foreign country. More problematic was the fact that one fourth of those who finished
their assignment left the company with their acquired skills and IJV knowledge.
While firms realize that negotiating and marketing strategies do vary from culture to
culture, most do not, however believe that the variance is sufficient to warrant the
expense of programs designed to select and train candidates for international
assignments. Often, people at the home office find it difficult to imagine that
returning expatriates need help readjusting after a few years away.
According to the BLACK AND GREGERSEN survey, few HR managers have
worked abroad themselves, most have little understanding of a global assignment’s
unique personal and professional challenges. Successful companies make the
following three practices an integral art of their IHR practices:
• When making international assignments, they focus on knowledge creation and
global leadership development. People are given foreign assignments for two
reasons: to generate and transfer knowledge, and to develop their global
leadership skills.
1 Schann, J.L. "Parent Control and Joint Venture Success", 1983.
2 Killing, J.P. "Strategies for Joint Venture Success", 1983.
3 Black, J.S. and Gregersen, H.B., Harvard Business Review, 1999.
249
• They assign overseas posts to people whose technical skills match their crosscultural abilities
• They end expatriate assignments with a deliberate repatriation process.
For example, BOYACIGILLER1 has noted that the expatriate is often expected to
teach the locals how things are done at the headquarters. Similarly INKPEN and
CROSSAN2 have observed JV partners' reluctance to accept their new organization
as a "legitimate teacher" especially where the "child" is outperforming the "parent".
International assignments also seek to provide managers with experience, which is
considered vital for a career in top management. HRM research within the "national"
context also suggests that management development facilitates organizational
perpetuation that has important implications for the role of learning in achieving
organizational continuity in the international context3.
The value of the know-how and experience gained from utilizing human resources
in international management is realizable when directed towards improving the
firm's effectiveness in specific activities. While this seems obvious, current
expatriation-repatriation trends raise doubts about the extent to which this actually
takes place.
C.4.5.1.3
EXPATRIATE FAILURE: UNREALIZED SCOPE FOR LEARNING
If an international assignment represents an opportunity to learn, it is clear that
"expatriate failure" must represent the waste of such an opportunity. Estimates of
expatriate failure have been placed between 10 and 12%, and even up to 40%4. Not
only is learning experience wasted, but the individual can also acquire cynical and
potentially damaging views about international assignments in general, thus creating
attitudinal barriers to learning. This highlights the need to build on the
developmental aspects, including training and career management and to isolate and
resolve the negative aspects.
While the exercise of expatriation offers the opportunity to acquire knowledge from
international assignments, repatriation offers the opportunity to transfer this
1 Boyacigiller, N., Journal of International Business Studies, 1990
2 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995.
3 Preston, D., Human Resource Management Journal, 1993.
4 Mendenhall, M. and Oddou, G. Journal of International Business Studies, 1985.
250
knowledge and utilize it in the organization. These are concerns about "reverse
culture shock" which some observers place at about 60% of expatriates1. On another
level, this problem is reflected in the failure to integrate the management of
international mobility into the IJV planning process2. Research on repatriation must
go beyond adaptability to the physical and social environment and the stress
associated with it. A suggested approach is to examine the implications of
knowledge transfer back to the parent firm and how this is affected by the
individual's social well being. Socio-psychological problems constitute a barrier to
learning when they impede the individual's performance. When these problems are
caused by the firm's failure to provide support to returning personnel, the firm in
itself creates barriers to learning. The ultimate price to pay for this is dysfunctional
labor attrition and loss of knowledge.
The motivation of executives assigned to an IJV can be enhanced by the creation of
a clear linkage between the assignment and an assignee's future career. Parent
organizations should offer career planning to counter the ambiguity and risks
associated with IJV assignment, and to limit the potential for unsatisfying
repatriation experiences3.
Apart from career-path disturbances, the assignment to an IJV post usually requires
relocation to a foreign country with all the disruption to family and social life that
such a posting entails. Benefits packages must be designed to maintain the economic
and social lifestyle of the manager, so that the individual does not lose through the
IJV assignment4.
Parent firms might attempt to maintain expatriates in the IJV for a longer term, in
order to help transfer the tacit knowledge back to the parent. But in order to do this
the individual will have to be trusted by the parents and the IJV. So here the parents
and the IJV have to recognize and reward the individual for developing a dual
loyalty. For these individuals, HR activities from both parents and the IJV will be
1 Black, T.R., Management International Review, 1990.
2 Forster, N., International Journal of Human Resource Management, 1992.
3 Black, J.S. and Gregersen, H.B., Harvard Business Review, 1999; Caliguiri, P.M. and Lazarova,
M., In: "Developing Global Business Leaders", 2000.
4 Dowling, P.J., Welch, D.E. and Schuler, R.S., "International Human Resource Management",
1999.
251
long-term oriented. Both parents and the IJV will strive to put longer-term, dual
oriented loyalties and HR polices in place to motivate and retain these individuals.
Career planning and benefits provide managers with an understanding of and
assurance in relationships with the parents and the IJV itself. This is provided
through pre- assignment posting activities for the expatriate and family, specific
terms and conditions of the assignment itself, education and housing benefits for the
expatriate and family and finally, repatriation processes1.
Done effectively, all of these processes can help ensure that the expatriate will
perform as anticipated and that premature recall can be avoided2. The effect will be
to help ensure the likelihood of the IJV success.
• The experience dimension: Expatriates who have had prior experience with
foreign assignments are more likely to find easier to adjust to a foreign setting
than those who have not are3. Similarly, it can be argued that the longer an
employee stays in a multi-cultural workplace the more likely he/she will acquire
the knowledge relevant for reducing uncertainty during intercultural interaction4.
• The organizational factor: Given that pre-departure training has found to
improve expatriate intercultural effectiveness5,6 it would seem reasonable to
argue that organizational support for workforce diversity could influence intercultural effectiveness. The organization’s policies, systems and structures will
enhance cross-cultural interaction. Pre-departure training programs and the
integration of a ”multicultural mindset” in a holistic approach to IHRM within
the organization are two examples of the organizational factor behind crosscultural effectiveness.
The growing care of talented expatriates of Indian origin who have been educated
and exposed to western social and work cultures can provide useful personal role
models for Indian management by nurturing the leadership styles of the parent firm.
Many technically trained and educated graduates from India have been spotlighted
1 Caliguiri, P.M. and Lazarova, M., In: "Developing Global Business Leaders", 2000.
2 Black, J.S. and Gregersen, H.B. Harvard Business Review, 1999.
3 Black, T.R., Management International Review, 1990.
4 Torbion, I., " Living Abroad: Personal Adjustment and Personnel Policy in the Overseas Setting ",
1982.
5 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990.
6 see Chap. 3.2.
252
as world class technical leaders capable of entrepreneurial leadership1. As more of
these managers can be induced to return periodically or permanently to India, they
can serve as change agents to promote new standards and practices.
A majority of respondents from the IJV and two parent companies agreed that
employing experienced expatriate is useful at the beginning of IJV operations. For
technology based IJVs use of short term expatriates as technical experts is essential
at the beginning of technical operations (this is also the case when the industry is
new to India, such as telecom, insurance (private), and investment banking e.g.). The
quality of the expatriates must be high to ensure IJV success.
C.5.5.2
Training
Employee training and development includes any attempt to improve current or
future employee performance by increasing (through learning) an employee's ability
to perform, usually by changing the employee's attitudes or increasing the
individual’s skill level and knowledge. When implemented correctly, employee
training and development can be a useful control mechanism by removing
performance deficiencies, thereby allowing the organization to be more effective.
Due to the need for IJV managers to network with many different managers in each
parent company, as well as within the IJV itself, providing these managers with
training in interpersonal skills could also enhance IJV performance2. By fostering
improved communications, such training can help increase awareness of other
stakeholders' objectives and reduce the incidence of uncertainty, surprise and
potential conflict. Similarly, since many IJV issues are resolved through persuasion
and negotiation, a parent firm may be able to influence the venture by training IJV
managers or key parent company employees in negotiation or conflict resolution
skills. Moreover, IJV's offer the opportunity for a firm to improve its operations by
observing how another organization operates, such as in managing business
development programs and management of overseas subsidiaries.
Develop Individual Competencies over Time
1 Kripalani, M. et al., Business Week, 1998
2 Harris, P. and Morran, R., " Managing Cultural Differences" , 1991.
253
This requires a willingness to invest in initiatives to educate and refine employees'
skills.
Three particular aspects of the professional development processes at the ISFs stood
out1:
• An apprenticeship approach that relies heavily on senior managers as models
with a willingness to invest time to work closely with younger staff.
• A belief that learning does not stop with promotion.
• Continuous feedback.
Expatriates in the IJV framework are more likely in the future to be functioning as
part of multi-cultural teams particularly as the use of cooperative venture increases2.
Expatriates are most likely to interact directly with upper level managers in the
venture, and are also most dependent on their support. The many principles of
instruction and learning that typically comprise cross-cultural training programs are
western-developed3, and the effective transfer of these principles is not always that
easy. The appropriateness and generalizability of the training principles should be
carefully examined before applied to host country worker training projects.
Several theories also support the training of local IJV workforce:
Exchange theory: According to this perspective, any power of influence that is
exercised in a management situation is granted by those who are managed in return
for something they value4. Local staff dealing with expatriates in the IJV represents
a willful party in the social exchange involving power and influence. The failure to
consider this would lead to incomplete venture management.
Participative management: Proponents of this perspective have long recognized the
important contribution which subordinates can make to work innovation, efficiency
and overall productivity5.
1 In the IJVs in the study this model was prevalent, based on global guidelines.
2 Adler, N.J. " International Dimensions of Organizational Behavior ", 1991.
3 Vance, C., Wohlihan, J. and Paderon, E., Research on Personnel and Human Resources
Management, 1993.
4 Blau, P.M., " Exchange and Power in Social Life ", 1964.
5 Vance, C., Wohlihan, J. and Paderon, E., Research on Personnel and Human Resources
Management, 1993.
254
Communications theory: In the effective management situation, communication is
not one-way but two-way; both parties should actively receive and send information.
The accurate reception and interpretation of information has a significant impact on
the success of the IJV1. Just as a manager’s effectiveness can be enhanced through
cross-cultural training and awareness, so could subordinate performance be
enhanced through similar training.
Organizational development: Increased levels of trust, respect, open
communication, understanding, and common commitment among individuals and
groups are often cited goals for organizational development efforts. Effective
organizational development can avoid misunderstanding, redundancy and the costs
that come with them2. Local training incorporated in the organizational setting of
the IJV for increased cross-cultural awareness would help contribute to this.
The Attitudes and Personality dimension
Bringing the right attitude and personality to work in the multi-cultural setting of the
IJV can be considered as an inherent “skill” that the employee should bring along to
the position. Dealing with an unpredictable and largely unknown environment, the
expatriate (as well the local employee) has to have certain traits such as flexibility,
self-confidence, self-efficacy, openness, motivation, orientation to knowledge,
cultural empathy, openness to information and optimism3. Without this cultural
sensitivity, the employee is prone to misinterpret other’s attitudes and behaviors,
resulting in interpersonal and inter-organizational conflict.
At the same time training can also create common understanding among the workers
of a global understanding, but the acculturation of training must address
commonality while being sensitive to differences. Cultural differences can distort
what would otherwise be the expectations of training effectiveness.
The interaction between people from different cultural background can be intense.
Successful implementation requires both an understanding of the business and the
1 op.cit..
2 Huse, E. and Cummings, T.G., " Organization Development and Change", 1985.
3 Mamman, A., The International Journal of Human Resource Management, 1995.
255
partners’ cultures1. The IHRM perspective has concentrated on the selection of
executives and their adjustment to a foreign setting independently of the business
context, and the international business literature has concentrated on strategy and
structure issues independently of the implementation/behavioral processes
involved2.
Various reasons have been cited by business organizations for the low use of crosscultural training, the most prevalent being that such training is not thought to be
effective3, so that top management sees no need for it. Such a culturally insensitive
perspective seems to be a reason for many faulty international human resource
practices and the high expatriate failure rates4.
Language and cultural training can improve the extent and quality of communication
within the IJV as well as between the venture and its parents. Training programs can
also increase opportunities for corrective action by identifying and reducing errors in
performance5. By fostering improved communications, such training can reduce the
incidence of uncertainty, surprise and potent conflict6. This in turn facilitates
transfer of knowledge between the venture partners and within the IIV itself,
encouraging institutionalized learning.
A majority of the interviewees agreed that the training of foreign managers about
Indian culture and conducting joint training of host country nationals and parent
country nationals are important preconditions for IJV learning. All the IJV managers
had a similar background - they were either educating in the West or had prior
experience with Western business culture. In addition, the quest for inter-partner
learning was found to be more important during the implementation stage than was
anticipated during the motivation stage.
1 Lane, H.W. and Beamish, P., Management International Review, 1990.
2 op.cit.
3 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990.
4 Adler, N.J. " International Dimensions of Organizational Behavior", 1991.
5 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
6 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.
256
C.5.5.3
Personnel Movement
One of the most effective ways in which joint contribution by senders and receivers
to the technology transfer process occurs is in the use of personnel transfer1. In fact,
in the view of at least one interviewee, “This is the most important thing in
technology transfer: personnel transfer2”. In this way, the overall organization’s
technical competence can flow to where it was most needed.
Utilization of joint task forces from each partner and temporary assignments of
employees from one parent to another assist in formal and informal transfer of
knowledge. Firms that have had experience with knowledge and information
management will be more likely to do so and more effective in future relationships.
Such firms facilitate the transfer of learning and knowledge that are associated with
small events as well as large ones.
C.5.5.4
Communities of Practice
A great deal of knowledge is both produced and held collectively3. The critical
challenge, from this perspective, is to make this knowledge cohere. A core
competency requires the more elusive know-how - the particular ability to put knowwhat into practice4. Know-how is sui generis, and thus relatively easy to protect.
Conversely, however, it can be hard to spread, coordinate, benchmark, or change.
Know-how embraces the ability to put know-what into practice. Thus, know-how is
critical in making knowledge actionable and operational.
A group across which such know-how and sense making are shared - the group,
which needs to work together for its dispositional know-how to be out into practice is called a "community of practice". Through experience, a community of practice
develops a shared understanding of what it does, of how to do it, and how it relates
to other communities and their practices - in all, a "world view". This changing
understanding comprises the communities' collective knowledge base.
1 Inkpen, A.C., Academy of Management Executive, 1998.
2 Interview Quote, AT&T, USA, 2000.
3 Lave, J. and Wenger, E., " Situated Learning: Legitimate peri.part", 1991.
4 Ryle, G. " The Concept of Mind ", 1958.
257
This picture of knowledge embedded in practice and communities does not dismiss
the idea of personal, private knowledge. What people have by virtue of membership
in a community of practice, however, is not so much personal, modular knowledge
as shared partial knowledge1.
Most formal organizations are not single communities of practice, but rather hybrid
groups of overlapping and interdependent communities. Inter-communal
relationships allow the organization to develop collective coherent synergistic
organizational knowledge out of the potentially separate independent contributions
of the individual communities.
“Much of the power of the community of practice metaphor lies in its ability to move
beyond the traditional dichotomies. Perhaps most prominently a focus on a
community of practice refuses to see individual interests at odds with those of the
organization. Yet in doing so, community of practice challenges the organization to
find the shared purpose that individual development with the institutional direction
in a far more reciprocal way than the old dictum of „what’s good for the firm…2”.
Informal exchange has value and deserves to be nurtured. Hence the growing
interest in communities of practice - far flung ad hoc networks of people who have
common interests. The members of these communities, often operating across
organizational and hierarchical boundaries, share knowledge, solve problems and
exchange insights in ways that departmental structures don't promote. Sustaining
communities of practice takes plenty of persistence3.
1 Polyani, M. ” The Tacit Dimension", 1966.
2 Brown, J.S., Duguid, P., California Management Review, 1998.
3 Eisenhart, M., Knowledge Management Magazine, October 2000
258
Implications for Leveraging Knowledge through Communities of Practice
1.
2.
3
4.
5.
6.
7.
8.
To leverage knowledge, develop communities.
Focus on knowledge important to both the business and the people.
Create forums for thinking as well systems for sharing information
Let the community decide what to share and how to share it.
Create a community support structure.
Use the community's terms for organizing knowledge.
Integrate sharing knowledge into the natural flow of work.
Treat culture change as a community issue.
Source: McDermott, R., California Management Review, 41(4), 1999.
Figure C.32 Implications for Leveraging Knowledge through Communities of
Practice
Effective communities of practice increase "social capital": the economic value of
the relationships within an organization. Communities of practice can serve as an
ongoing archive and consulting resource to help firms respond to new opportunities
and tackle challenges.
Clear communication should prevail within the group, as well as a sense of shared
purpose. Defining the relationship between the community and the corporate
structure is a delicate task. It is important for the group to have a sense of
accountability, even though it may not deliver tangibles, and beneficial for it to have
an executive sponsor.
The success of any community of practice depends on how well management
provides "convenience and commitment" in the form of facilitation, technological
tools, scheduling meetings for minimal conflict and the like.
Tools and Techniques
While technology plays a vital role in facilitating community interactions,
particularly in the aftermath of globalization, using it inappropriately can be counterproductive. To make it easy for employees to find the information they need,
organizing the archive efficiently is important.
259
As companies grow, and people on to new responsibilities, their memberships in
communities allow participants to retain their allegiance to a group and bring to it
the insights they acquire in their new positions.
The business organization as a community of practice is one held together by a
shared concern for both the outcomes it achieves for customers and its members
personal development. Agreement on the „how“ of process and the „why“ of purpose
is the foundation of shared meaning.
Search and Retrieval
Certainly, most managers will acknowledge that getting knowledge to move around
organizations can de difficult. Given the opportunity, information appears to follow
readily. Intranets are indeed valuable, but social knowledge suggests that there is
more to consider both with regards to search and retrieval. The tasks undertaken by
communities of practice develop particular, local, and highly specialized knowledge
within the community. Communities develop their own distinct criteria for what
counts as evidence and provides "warrants" - the endorsements for knowledge that
encourage people to rely on it and hence make it actionable. Within communities,
producing, warranting, and propagating knowledge are almost indivisible.
Organizational Blindness
Hierarchical divisions of labor often distinguish thinkers from doers, mental from
manual labor, strategy (the knowledge at the top) from tactics (the knowledge at the
bottom). Above all, a mental/manual division predisposes organizations to ignore a
central asset, the value of the know-how created throughout all its parts. Successful
organizational synthesis of knowledge requires discovering knowledge as it emerges
in practice. That can't be done if when and where to look is predetermined ex ante1.
Communities of practice help to generate knowledge and distill collective knowhow. Consequently, trying to move the knowledge without the practice involves
moving know-what without the know-how.
Due to its social origins, knowledge moves differently within communities than it
does between them. Within communities, knowledge is continuously embedded in
1 Barley, S., Administrative Science Quarterly, 1966; Chesbrough, H . and Teece, D.J., Harvard
Business Review, 1996.
260
practice and thus circulates easily. Members of the community implicitly share a
sense of what practice is and what the standards for judgment are, and thus supports
the spread of knowledge.
Between communities, however, where by definition practice is no longer shared,
the know-how, know-what, and warrants embedded in practice must spread out for
knowledge to circulate. Different communities of practice have different standards,
different ideas of what is significant, different priorities, and different evaluating
criteria.
C.5.5.5
Incentives and Compensation
C.5.5.5.1
INCENTIVES
The transfer of knowledge within the organization, while needing to recognize and
overcome the barriers to such knowledge transfer can be facilitated by the appraisal
and reward systems. Here it must be distinguished between appraisal that focuses on
output-oriented result and those that focus on process-oriented behaviors. The
process-oriented appraisal systems are more supportive of managerial behavior that
is necessary for learning and knowledge transfer1. Performance appraisals can also
be categorized into those that focus on performance and those that focus on longerterm oriented organizational qualities such as trust, collaboration and interorganizational relationships2, as well as knowledge sharing and creating activities.
According to LEI, SLOCUM and PITTS, reward systems that focus on the longerterm organizational qualities is more conducive to creating a knowledge supportive
environment.
Managers should be aware of the barriers, real or potential, that might impede the
realization of learning even when knowledge and experience have been acquired. At
the individual level, these might be considered in terms of attitudinal, social and job
performance variables. Attitudinal and social barriers include the negative attitudes
and belief individuals espouse about international assignments and their lack of
commitment to the IHRM agenda. DE CIERI et al.3 found that personal factors
1 Lei, D., Slocum, J.W., and Pitts, R.A., Journal of World Business, 1997.
2 op.cit..
3 De Cieri, H., Dowling, P.J and Taylor, K.F., International Journal of Human Resource
Management, 1991.
261
associated with successful expatriation-repatriation include self-esteem, social
support and satisfaction with life and with family relationships. If these factors are
not sufficiently met, they constitute a potential barrier to learning.
Organizational barriers to learning are directly related to the absence of the
mechanism identified. Culture is normally perceived in terms of its integrative ethos
and its capacity to create and embody shared values. However, culture itself can be a
barrier to change and hence to learning.
The benefits of knowledge being created in an IJV may be visible across the firm.
The learning may be compromised through a failure to institute networking, because
units are loathe to "lose" key performers to other units, even in the form of job
rotation or because a "not invented here" syndrome precludes the adoption of new
technologies.
International assignments can be designed in such a way as to enhance the creation
and utilization of knowledge. This highlights the need for organizations to adopt an
IHRM perspective, which ensures generation and optimal allocation of technical,
social and personal skills in international assignments.
Additionally, organizations should provide an opportunity in which this collective
knowledge is nurtured and utilized in their diverse productive activities. Those who
design international assignments will need to go beyond the current concerns with
social, adaptability and operational issues, and pay more attention to the
development of "best practice" and the competencies that are transferable across the
organization.
DIRZIN1 recommends that companies conduct annual internal audits of employee
satisfaction and their perception of employer ethics. Management should act on the
knowledge they gather from these audits. More enlightened organizations use a
variety of incentives to show that they are serious about sharing knowledge. For
example, some have rewards and recognition programs for knowledge sharers.
These range from recognition in the company newsletter to substantial pay bonus2.
1 Dirzin, M., Vice President of business alliances.
2 Stevens, L., Knowledge Management Magazine, 2000.
262
"You have to show people what knowledge sharing can do for them - how it can help
in their jobs"1. PRUSAK says while organizations may achieve some improvement
through individual incentives and education, substantive change requires that the
formation of new types of social groups. "There is already a lot of sharing in
corporations, but it is within teams. If you want to increase sharing, put more people
in teams." It is best to encourage knowledge-sharing behaviors from the beginning,
which starts with the hiring process2.
• Develop Trust: Knowledge sharing can be encouraged by developing an
atmosphere among employees and between the company and the individual.
Supervisors consider how often employees have responded to questions posted
by other employees and how often they have posted ideas or thoughts on the
company Intranet. "We don't promote people unless they demonstrate that they
share knowledge". This is then reflected in the performance appraisal.
• Vary Motivation: For department heads and divisions, it is too important to
present benefits relevant to each division. On the individual level, organizations
should explicitly identify behaviors they want to encourage and others they want
to eliminate and then positive behaviors are rewarded with incentives.
Knowledge sharing should be a factor in employee appraisals, measuring
performance on a scale. Employees cannot earn a four or a five unless they have
participated in knowledge sharing activities, such as responding to posted
questions or publishing research.
• Show Public Recognition: Employees who have excelled at knowledge sharing
are acknowledged in some way. Another variety is to recognize employees who
use knowledge to contribute directly to the company's success. The programs
demonstrate the company's commitment to sharing knowledge3. A company can
encourage sharing among people of separate teams using various incentives, or it
can restructure the organization so people are members of many different teams,
which increases the pool of knowledge sharers. Intergroup knowledge sharing
can be encouraged through conferences, classes and mentoring programs. The
basis for forming a community is employee interest, not an organizational
mandate; people willingly share knowledge when they have common interests.
The creation of groups centered on interests is the incentive. Within such groups
knowledge sharing happens automatically and in unpredictable ways. Sometimes
a small group of KM enthusiasts inside a company can be the catalyst for
sharing.
1 Edwards, A.R., Junior CEO of Lighthouse Consultant Group in: s. above
2 Taylor, E., CEO of Collective Technologies, Austin, Texas in: s. above.
3 e.g., In AT&T the "Rising Star" program was implemented to support promising junior staff in
career development.
263
The need to address IJV parent performance appraisal (PA) practices and specific
managerial values arises for four reasons. First, high performance work systems
have been shown to be crucial to sustaining global competitiveness and they rely
upon objective, adequate PA processes1. However, in a recent comparative analysis
of global HRM practices, SPARROW and BUDHWAR2 highlight employee PA as
a relatively under-emphasized factor in Indian managerial practices. Second, the
productivity of work cultures in Indian organizations is jeopardized by employee PA
practices that appear to be biased, ad hoc and not integrated into a globally
competitive HRM system3. The lack of Indian PA practices formally integrated into
a quality performance-based HRM system allows Indian managers to over-control,
and under-control employees. This abuse of PA authority adversely impacts Indian
employees who have already been described as low on "efficiency emphasis". That
is, low on initiative for process improvement, low on risk taking propensity to
increase productivity and low on self-monitoring inclinations4. Employees regard
PA judgments as unfair and withhold productive efforts5.
Third, Indian managers have been criticized for not involving employees in the PA
process. The prevailing absence of this mutual influence in India, especially
managerial receptiveness to employee feedback has provoked skepticism and
resistance to the implementation of formal PA systems6.
Specific characteristics of uses of PA reported by most firms are: a) agreement
between the employee and the supervisor formed the basis for appraisal, b) an open
discussion to identify strengths and deficiencies, and opportunities for counseling
and c) a means of identification of training and developmental needs, assessment of
promotion potential and source of confidential ratings.
1 Marquardt, M.J. and Engel, D.W. "Global Human Resource Development", 1993.
2 Sparrow, P.R., and Budhwar, P.S., Journal of World Business, 32 (3), 1997.
3 Mendonca, M., and Kanungo, R.N. In: "Performance Management in Developing Countries",
1990; Shenkar, O. "Global Perspectives of Human Resource Management", 1995; Virmani, B.
and Guptan, S. "Indian Management", 1991.
4 Sparrow, P.R., and Budhwar, P.S. Journal of World Business, 1997.
5 Mendonca, M., and Kanungo, R.N. In: "Performance Management in Developing Countries",
1990; Sinha, J.P., "Work Culture in the Indian Context", 1990.
6 e.g., PA guidelines of Lucent Technologies were implemented in Tata Lucent. Interview Tata
Lucent, Bangalore, India, 1999.
264
C.4.5.5.2
COMPENSATION
The three major organizational needs that compensation addresses are the attraction
of potential employees to the organization, the motivation of employees to perform
and the retention of good employees.
In designing an IJV's compensation and reward system, it is essential that the system
is balanced in terms of internal equality and external competitiveness in order to
attract and retain qualified and committed personnel1. As part of the effective
compensation and reward system, and to provide the basis for effective performance
appraisals, it is essential that the systems objectives and procedures are able to be
clearly and consistently communicated to, and understood by, the IJV personnel. For
the IJV to be successful, the performance appraisal and reward systems should
reflect the fundamental strategy objectives of both partners, as well as the needs of
the venture itself. However, while sensitivity to the practices of the host country or a
local partner is important, it should not result in an abdication of responsibility.
Indeed, as noted by PUCIK2, such an approach is likely to be detrimental both to the
foreign and the long-term viability of the IJV itself.
It may be both unnecessary and undesirable to use the same reward system in the
IJV as is employed by the parent firms. In determining whether and how parent and
IJV reward systems should differ, parents can establish universal salary
management, job evaluation norms, benchmarks, compare individual country and
parent firm practices against these norms, and then modify the practices within the
framework to overall corporate objectives3.
Job evaluation, performance-based pay and profit sharing4 are all consistent with
more structured and rationalized employment systems. Seniority is taken as a pay
criterion to be associated with less structured and rationalized employment systems.
1 Geringer, J.M. and Frayne, C.A., Management International Review, 1990.
2 Pucik, V., "Technology Transfer in International Business", 1991
3 Geringer, J.M. and Frayne, C.A., Management International Review, 1990.
4 Interview, Lucent Finolex, Pune, India, 1999.
265
C.5.6 Potential questions for further research
KM in IHRM has been addressed in various literature as detailed in the earlier part
of this section. The literature could be well extended if certain hitherto not addressed
aspects of HRM practices in KM are surveyed, particularly in the light of wide gaps
in HRM practices in parent firms from developed countries and from emerging
countries. This is particularly true for partners from Asian subcontinent where
cultural issues in HRM play a key role and has a sustained impact on how
knowledge workers are managed. Answers to certain underrepresented areas in the
literature on KM in HRM, such as HR measures to support KM, influence of
parent’s HR policies on IJV, training measures supporting KM and evaluation of
KM workers have been sought through the case studies presented in this section.
C.5.7
C.5.7.1
Knowledge Management within the IJV Framework: Case Studies
DSP Merrill Lynch
Both the Chairman and the Managing Director are host country nationals. The
chairman is a 4th generation member of the D.S. PRABHOODAS family. ML
initially appointed the CEO, CFO, Head of Equity and the Head of Research.
Expatriates filled all these positions but only the Head of Research remains an
expatriate as he has the knowledge and access to the global ML knowledge network.
The market research employees in ML make up its largest Community of Practice,
with a high formal and informal connectivity. This is meant to enhance and support
the knowledge flow between the AP HQ, the parent firms and the IJV. Expatriates
are more experienced with the knowledge flow channels within the global network.
All the top management positions were initially held by Americans who were well
accepted by the local Indian management as they were „mature enough to see that
things had to be adapted to the Indian circumstances“1, mostly because of the
regulatory environment and the close knit Indian business community.
DSPML has implemented a HR Performance Appraisal System in conformity with
ML worldwide standards. The organizational hierarchies of the old system are being
redefined by the ML guidelines for becoming as lean as those of ML worldwide.
1 Interview, DSPML, Mumbai, India, 1999.
266
People at DSPML are considered a source of competitive advantage in today's and
tomorrow's knowledge driven world. DSPML demands the highest quality in skills
and knowledge from its employees. Local managers from India are also sent to ML
New York for a 3-6 month period in order to learn and transfer their knowledge back
to the IJV. Such foreign transfers are not institutionalized.
The IJV has adopted ML’s institutionalized HR guidelines for managing knowledge
workers. Constant interaction with the international workforce in the IJV network
through formal and informal communication channels is aimed to derive maximum
benefit from each other's experience and is encouraged and embedded within the HR
KM processes in DSPML. The IJV aims to help employees to share knowledge and
learn from each other, and introduce the technology that makes it easier to do a
global scale. There is rigorous and comprehensive on-the-job training, partially in
international offices. The DSPML compensation system is based on a merit system
and performance-oriented rewards are at the core of it.
C.5.7.2
JM Morgan Stanley
The reporting structure at MS is very flat, unbureaucratic on both sides with MS
channels being more institutionalized and JM having more hierarchical layers. There
is a white phone policy in MS, with people being able to request for support through
central liaison and co-ordination. Knowledge connections within the IJV network
are access to all databases, video conferencing, training programs and the MS
Intranet. MS (India) is now working on getting full connectivity. JM did not have
global reach and access before. The full technology is in place but there are
shortcomings in infrastructure i.e., the availability of bandwidth access. In theory,
JMMS employees have full access to the MS Intranet, but there are still certain
restrictions to global access and internal information.
C.5.7.3
Max New York Life
The CEOs for all of MI's IJVs are recruited independently, under the criterion "best
person for the job". The CEO is an IJV employee and MI does not have any
expatriate as an IJV CEO. The board represents the equity structure (24:76). Key
issues during the pre IJV and IJV formation process are:
Until 1999 a group wide HR function for Max India was not actively pursued, and in
1999 with the re-focussing of the group business strategy, a group HR head was put
in place and plans for group wide HR initiatives were made. The group HR strategy
267
is to be a unified force through all businesses, in alignment with the corporate
vision. There is a higher level of direction for future businesses for Max India.
HR is viewed as a key business and KM enabler within Max India. All the IJVs have
management responsibilities and management imperatives tend to come from Max
India and not from New York Life. There is a quarterly HR conference for all Max
India companies and IJVs. There are 1700 employees in the Max India group. At
this conference a common company philosophy is set for issues such as
compensation, services and performance appraisals.
November 2000 was the deadline set for the alignment of all HR guidelines. Until
then it was more characteristic of the IJV and the industry and the regional scientific
processes. The MI group also had a benchmarking study conducted with respect to
HR practices in India. As of now the IJV only reports to MI. Due to the minority
IJV there are no plans for a dual reporting structure. Other HR practices that are
meant to enhance the efficient use of knowledge resources within the group are
setting up of a MI group wide resource pool and development of centers of
excellence and the facilitation of cross border knowledge and skill transfer. There is
no job rotation between the different MI group companies. There are MI internal and
external training initiatives consisting of organizational development and various
behavioral programs. MI wishes to attain the status of “preferred employer" in India
through this restructuring initiative. Three HR areas are to be built up further are
relationship management, upskilling and more employee involvement in strategic
business processes. Max India believes that HR practices in India are more
advanced, but need to be more institutionalized and professionalized1. Furthermore,
the Indian business environment has yet to realize the full benefit of HR in relation
to its cost. Max India is aware of the fact that the quality, availability and cost in
Indian human capital differ from region to region, and labor laws are still restrictive.
They feel that it brings to the partnership the local expertise and hopes to learn
valuable lessons in HR for other group companies from the IJV.
All insurance training programs are established and led by NYL training units and
there will be local training with NYL bringing in trainers from AP HQ as well as
1 Interview, Max India Ltd., New Delhi, India, 2000.
268
global HQ in order to train the agents. Senior management was and will partially be
trained in the US.
C.5.7.4
Birla AT&T
The president and CEO of Birla AT&T has led the start-up of operations and the
recruitment of more than 240 people staff that grew to a total of 350 employees by
the end of 1996. The new staff underwent extensive training in India and the U.S. in
preparation for the launch of the cellular service.
India has a high growth rate in the internet hosting services, wireless and online
services. Birla AT&T employs more than 350 professionals. More than 305 of them
have been sourced locally.
The management model is that of AT&T, but the IJV principles are its own which
were worked out in the first three months by the CEO et al. They have been adapted
to Indian standards. The management training programs offered are from AT&T i.e.,
service excellence and branding, and customer satisfaction. These are conducted
externally and their input is of technical nature, management training and people
development. In the sales and market department there was the largest adaptation to
Indian surroundings. Two people were sent from AT&T originally in the areas of
customer care and marketing to initially setup the team. They wanted to ensure that
benchmarks were set for the future i.e., response time and number of calls.
C.5.7.5
Sprint RPG
Group HR activities include benchmarking internally and externally, ESO, unified
training initiatives, as well as senior management headhunting. The Group CFO is
responsible for Group funding and multinational accounting. Corporate
communications is aimed at presenting a unified image of the RPG externally.
Barriers to knowledge transfer within the RPG include different goals between
partners due to convergence of services and technological advances over time. The
only expatriates Sprint RPG has are technical experts who stay for a couple of
months. This is according to RPG's HR policies: “Indian companies have to have
Indian faces1"
1 Interview quote, RPG group, Mumbai, India, 1999.
269
Sprint RPG is a venture into a new field for RPG, which sees its core competencies
in its contacts to the government, reputation in India. RPG has a status in India as a
“preferred employer”. RPG feels that it “knows the Indian customer”, and has
extensive market knowledge, which includes vast market research resources, and
customer profiling.
RPG policy towards HR is to get the person with the appropriate skill sets. The CEO
and other top executives are chosen through headhunters. RPG is generally looking
for “younger” people, who have experience in the knowledge-based economy. This
is not a common approach for family run businesses in India, where tradition,
conservatism and loyalties are often valued more. There are bi-annual HR group
meetings, where the top 200 HR managers get together. There is a regulated
personnel movement program within the RPG Group companies.
In RPG Sprint the HR policies follow basic RPG guidelines. The management
committee makes any joint decision regarding HR, and both partners have equal
votes. As far as possible, important issues are dealt with at the level of the
management committee. For the senior management, RPG group, in general, and
Sprint RPG have a variable compensation plan linked to performance. Senior
management receives an end of year reward for performance for up to three months
compensation.
RPG's group training initiatives are available to all group companies and the same
training investments are made for both subsidiaries and JVs. RPG sees itself as a
central unbiased arbitration point for training and knowledge resources.
Personnel movement within the RPG group is very common especially for upper
middle management and technical experts, a foreign assignment and career
enhancement.
270
C.5.7.6
Ogilvy & Mather (India)
Graduates for recruitment go through media communications, written test and
personal interviews. Personnel transfer or rotation is encouraged with the possibility
of a sabbatical abroad in London, AP or New York. There are also international and
intercultural project teams that work on one project but when they return there is no
formal process to re-incorporate their experiences.
O&M worldwide has re-focussed itself from an advertising agency to a
communications company. Codifiable knowledge is contained in a worldwide
database to which all O&M management employees have access. Knowledge from
the few employees who go abroad does not go back into the company „ we can’t
force them to produce fantastic results just because they have been abroad“1. The
initiative to share their know-how has to come from the employees themselves. In
other AP countries the database is used more because „they have it longer“.
Promotion of database use through a „knowledge head“, who is a knowledge
centered individual who encourages others to share and access knowledge.
1 Interview, O&M (India), Mumbia, India, 2000
IJV employees have full access to all
of ML’s training facilities and
programs, locally as well as the U.S.
Possibility for personnel movement
(permanent) is given within a fast
track career program
Expatriate top management
supervised the initial set up of the
IJV.
Expatriate Management of Indian
origin at top management level
(CEO, COO)
Employees in the IJV were either
from JM Financials or MS India.
No data available
Expatriate Management for the
initial set up of the IJV
•
•
•
•
•
•
•
Max New
York Life
Birla AT&T
•
•
AT&T HR Policy implemented
No data available
MS HR Guidelines are implemented
from the U.S. with exceptions such as
compensation structure and
designation.
Exception: local adaptation of
compensation structure.
•
•
ML HR policy and guidelines have
been implemented in the IJV (in
accordance w/ trend towards
professionalism)
•
Job rotation from the IJV to Merrill
Lynch HQ in New York; a viceversa internal internship opportunity
is in the planning (focus on
technology)
•
DSP Merrill
Lynch
JM Morgan
Stanley
What influence do the parent’s HR policies
for knowledge workers have on the HR
policy of the IJV?
What concrete HR measures are
implemented to support knowledge
friendly environment within the IJV
framework?
IJV
•
•
•
•
IT end-user training is foreseen.
No data available
IT end-user training is attended to
(e.g., Intranet)
Training needs of employees are
aimed at covering local knowledge
needs, i.e., product and technology
How are training measures adapted to
the IJV knowledge management
strategy?
271
Personal enhancement is supported, by
initiative lies with the IJV employee
•
•
•
Performance Appraisal through direct
and indirect supervisor, also on
No data available
Evaluation through direct supervisor
Evaluation of training needs on an annual
basis
•
•
Periodic 360° Evaluation
•
How is knowledge management workers
evaluated within the IJV framework?
AT&T Training facilities and
programs for IJV employees
Cross-cultural training/ management
initiatives (database), local and in the
U.S.
Technology
transfer
through
technology professional from Sprint
onsite at the IJV.
Global project teams
Personnel movement (follow your
client) on a permanent and internship
basis
job rotation (in Asia)
training at O&M Asia and U.S. HQ
•
•
•
•
•
•
•
Sprint RPG
Ogilvy &
Mather
AT&T training program
•
O&M training program
O&M Performance appraisal measures
and promotion policies implemented
•
•
HR mission Statement from O&M
O&M HR Policy implemented
•
•
IJV HR guidelines
AT&T Performance appraisal
measures implemented
•
•
HR mission Statement
•
IT end-user training in Inter and
Intranet
Inter IJV / subsidiary training on a
global basis based on local
expertise and centers of excellence
•
No data available
Local feedback from IJV training
was incorporated in the global
training measures (call center
processes)
Quality product training is given to
the local employees.
•
•
•
•
•
•
•
•
•
•
Performance appraisal with regard to
different criteria, including knowledge
sharing
Initiative is rewarded on a personal and
group basis
Knowledge champions are actively
sponsored throughout the IJV framework,
not only in the IJV
Knowledge incentives for use and upkeep
of knowledge data bases
Initiative from employee for training
encouraged
Annual training budget
knowledge sharing criteria
Figure C.33 Knowledge Management – Human Resource management in IJVs
Brand Manager for protection of
brand knowledge from AT&T, U.S.
•
272
273
C.6 Technology Management: Implementing Global Knowledge
Management Tools
C.6.1 Bridging Information Management, Technology Management and
Knowledge Management
Experts in intelligence have striven to create improved systems for information
collection, management, and analysis under various guises since the 1940s1. The
widespread availability and adoption of computers during the past three decades has
brought more highly evolved systems for constructing, acquiring, storing, and
representing knowledge.
With the advent of new technologies, such as data mining, Intranets, video
conferencing, web casting, leading on to Internet technologies and enterprise portals,
and several technology vendors are offering such solutions as panaceas for the
business challenges of the knowledge era. Trade press coverage of the "productivity
paradox" has further added to the speed of the IT treadmill by suggesting that
increasing investment in new information technologies should somehow result in
improved business performance2.
Companies are still struggling to understand how to put information to work so that
it improves business performance. Information technology (IT) and information
management (IM) are part of the organizational KM. They are aimed towards
creating the systems and processes to store or classify information rather than
improving the way people behave with information. When information management
is confused with or substituted for KM, senior executives still find it difficult to
justify technology investments with superior business performance, even after
having spent billions of dollars. Even so, this has often not encouraged more peoplecentered IM initiatives.
The information processing perspective as organizational theory is based on the
premise that organizations are created to facilitate the flow of information for
1 Crevier, D. " The Tumultuous History of the Search for Artificial Intelligence ", 1993.
2 Davenport/ Prusak, " Working Knowledge: How Organizations Manage What They Know " 2000.
274
effective individual and organizational decision-making1. The focus is on the
capacity and facilitation characteristics of organizational structure and processes that
support, encourage and reward transfer of information within the organizations,
across its boundaries to IJV partners and the IJV itself, and that enable the
organization to acquire knowledge to transform the data and information. KM
addresses how the organization can use this information in a creative way to better
deal with and learn from the environment and its own experiences2.
C.6.1.1
Information Management
The link between Information Orientation (IO) and business performance is more
powerful than a simple correlation. IO represents a measure of how effectively a
company manages and uses information, thus encouraging superior business
performance, external shock notwithstanding. However, companies with a high IO
may have an easier time recovering from these shocks.
Information technology practices (ITP): A company’s capability to effectively
manage IT applications and infrastructure to support operations, business processes,
innovation and managerial decision making.
Information Management practices (IMP): A company’s capability to effectively
manage information over the lifecycle of its use, including sensing, collecting
organizing, processing and maintaining information.
Information behavior and values (IBV): A company’s capability to instill and
promote behaviors and values in its people for effective use of information.
The Anderson IO model identifies four levels of IT support:
•
•
•
•
IT operational support
IT for business process management
IT for innovation support
IT for management support
1 Egelhoff, W.G., Journal of International Business Studies, 1991.
2 Makhija, M.V. and Ganesh, U., Organizational Science, 1997.
275
How Managers View Effective Information Use
Information Orientation (IO)
Information
Technology Practices
(ITP)
•
•
•
•
•
Capability
IT for Operational
Support
IT for Business
Process Support
IT for Innovation
Support
IT for Management
Support
Information
Management Practices
(IMP)
Information Behaviors
and Values
(IBV)
•
•
•
•
•
•
•
•
•
•
•
•
•
Capability
Sensing
Collecting
Organizing
Processing
Maintaining
Capability
Integrity
Formality
Control
Sharing
Transparency
Proactiveness
Source : Marchand, D.M., Kettinger, W.J. and Rollins, J.D. (2000): Sloan Management Review,
Summer 2000, 7.
Figure C.34 How Managers view Effective Information Use
For operations support, IT is focussed on making branch employees more productive
through the standardization and centralization of the back office, which give staff
more time to spend with customers1.
IT for innovation support applications allows customers, tracking of potential
customer, and identification of internal new business opportunities. Information
gathered through these applications is fed into existing management support systems
to speed, among other things, future strategy formulation.
The mental model created in the ANDERSON study determined the sets of
„information capabilities” consists in total of 15 specific competencies associated
with effective information use. These three information capabilities are seen as
components of one higher level idea termed as „information orientation“ (IO), which
measures a company’s capabilities to effectively manage and use information. The
results of the study indicate that IT practices, management of information and
276
information behaviors all must be strong and working together, in order to increase
business performance.
Guidelines towards a higher IO (gained from benchmarking and best practices):
Guideline 1: Focus Your Best IT resources on what makes your company
distinctive: In most companies, the time, attention, expertise and money of topquality IT people are in short supply. The high IO company leverages IT to create
new products and services and improve management decision making. In contrast,
low IO companies dissipate their IT investments on basic operational support and
infrastructure. IT investments must have a strategic aim, not only an operational
one.
Guideline 2: Effective IT operations support effective business processes, which
then provide information for decision making. For many companies with low IO,
poor information for management support of strategic and tactical decisions is a
direct result of ill-designed business processes. Companies with high IO focus on
getting support for key processes.
Guideline 3: Good IT practices can uncover new business opportunities and
lead to innovative management actions. A company with high IO benefits not
only from tying its IT practices loosely to the way it creates business value, but also
from new business opportunities and management initiatives. IT choices directly
influence business strategy (and vice versa). Superior IT practices also continues to
play a critical role in its global expansion and merger strategy.
Information Management Practices of High IO Companies
The IO model has five separate phases: sensing, collecting, organizing, processing
and maintaining. Companies with high IO (or who wants to achieve it) pay special
attention to training other employees to collect, organize, and process information
about customers, products and performance. Effective information management
must be instilled in the members of an organization. Good sensing and informationvaluation and information processing practices are critical elements of a high IO
company.
1 For example, GE is in the process of outsourcing all back office processing to its Indian
subsidiary. Interview, GE Capital, New Delhi, India, 2000.
277
Guideline 4: Companies with high IO actively manage all phases of the
information life cycle. Companies with high IO view information as having a life
cycle with discrete valuation points. These are reinforced through communication,
formalization of best practices and on-the-job training. New information is first
evaluated for its relevance, then collected (IT practices) for decision making. After
processing information must be updated or discarded. High IO companies
understand the importance of each of these practices and know that inadequate
attention to one practice can disrupt the cycle.
Guideline 5: Managers and employees must develop an explicit, focussed view
of the information necessary to run the business. Good information management
should constantly focus on the decision contexts of managers and employees. All
employees have their „information responsibilities“, which means information
accountability for everybody1.
Guideline 6: When people do not understand the business, they cannot sense
the right information to change the business. People can sense information
effectively only when they understand what drives a company’s business
performance and how they personally can help to improve performance. Sensing is
enhanced and information valuation assessments become more precise.
Information Behaviors and Values of high IO companies
The IO model identifies six information behaviors and values: integrity, formality,
control, transparency, sharing, and proactiveness. A firm with low IO will install
maybe some, but not all of the behaviors. In a working environment in which people
understand how individual and team performance is built up, people are more likely
to share and use information that benefit others. Effective information use ultimately
depends on their ability to create and motivate information user proactiveness.
IO Guideline 7: Do not compromise on information integrity: In organizations,
integrity develops trust among members by defying boundaries within which they
can legitimately use power and influence.
IO Guideline 8: Team-based performance information creates openness and
improves information sharing. Performance indicators, tied only to an overall
1 Marchand, D.A., Davenport, T.H. and Dickson, T., "Mastering Information Management", 2000.
278
business measure- such as EBIT – may not give enough information to provide
adequate information control.
IO Guideline 9: People who understand the business and are informed will be
proactive. The process of openly sharing performance-based information inside a
company creates powerful support for employees and managers to seek new ideas
and information inside a company.
Virtual teams need to build a relationship, often through face to face meetings,
before they effectively collaborate electronically1. If a group of people doesn’t have
contact, don’t already share knowledge, and don’t understand what insights and
information will be useful to the other party, IT is not likely to facilitate this
exchange. There is typically too much focus on Information Systems – identifying
what information to capture, constructing taxonomies for organizing information,
determining access, and so on, rather then focussing on making sure that effective
and efficient KM processes and tools are in place.
Although, HUBER2 explicitly specifies the role of IS in the learning organization as
primarily serving organizational memory, IS can serve the other three processes
(knowledge acquisition, information distribution, and information interpretation) as
well. At the planning level, scenario-planning tools can be used for generating the
possible future trends. Similarly, use of Groupware tools, Intranets, e-mail, and
bulletin boards can facilitate the processes of information distribution and
information interpretation. The archives of these communication mediums can
provide the elements of the organizational memory (OM), which needs to be
continuously updated and refreshed. The technical infrastructure of the OM
suggested by HUBER can lead to organizational rigidity when it becomes "hi-tech
hide bound"3 and is unable to continuously adapt its "theory of the business"4.
HUBER1 notes that "it might be reasonable to conclude that more learning has
occurred when more and more varied interpretations have been developed, because
such development changes the range of the organization's potential behaviors...".
1 Lynne Markus, M. and Benjamin, R.I., Sloan Management Review, Winter 1997.
2 Huber, G. P., Organization Science, 1991.
3 Kakola, T.K., Accounting, Management and Information Technologies ,1995.
4 Drucker, P.F., California management Review, 1999.
279
However, most extant information systems focus on the convergence of
interpretation and are not geared for multiple interpretations2.
ARGYRIS3 has argued that the "massive technology of Management Information
Systems (MIS), quality control systems, and audits of quality control systems is
designed for single loop learning." Essentially, he asserts that the problem of using
IT is in its reinforcement of the prevailing rigid structures4. He attributes the
overarching command-and-control structures for the "gaps of knowledge" that top
managers design to manage effectively: "Another set of attitudes usually developed
is that lower level managers and employees can be trusted only to the extent that
they can be monitored". He argues that the problems related to MIS implementation
are more related to organizational factors than to misappropriation of the underlying
technology. His analysis suggests that many of the recommendations to overcome
the barriers may be inadequate and, in some cases, counterproductive.
In developing an information management policy that can be incorporated within the
framework, alliance negotiators should openly discuss and agree upon the level of
confidentiality for different categories of information. This agreement should be
contractually fixed during alliance negotiations. Ongoing attention to information
management issues is required as an alliance grows more complex or and develops
over time. When defining information boundaries, however, key alliance personnel
must have the authority and autonomy to expedite communication and work flows
between the firms. An overly restrictive information policy will damage trust,
hamper learning, and impede the development of interpersonal relationships across
organizations.
A web of interpersonal connections supports information-flow circuit, enhanced
learning and the formation of strategies. Frequent interactions and the timely
exchange of information across organizations resolve conflict, build trust, speed
decision making, and uncover new opportunities for the partnership.
1 op.cit.
2 Argyris, C., Journal of Management Education, 1977.
3 Argyris, C., Journal of Management Education, 1977.
4 Orlikowski, W.J., Accounting, Management and Information Technology , 1991.
280
C.6.1.2
Technology Management
"In the last 20 years, US industry has invested more than $1 trillion in technology
but has realized little improvement in the efficiency or effectiveness of its knowledge
workers… This failure was due to organizations' ignorance of ways in which
knowledge workers communicate and operate through the social processes of
collaborating, sharing knowledge, and building on each others' ideas."1
Companies are still struggling to understand how to put information to work so that
it improves business performance. After huge investments in Information
Technology (IT) it is still difficult for senior executives to link the company’s
technology investments to its business performance. Companies must do more than
excel at investing in and deploying IT2. They must combine those capabilities with
excellence in collecting, organizing and maintaining information, and with getting
their people to embrace the right behaviors and values for working with information.
Technology is a key enabler for the implementation of KM. Indeed, it would be
impossible for many companies to have pursued their approaches to KM if existing
IT capabilities were not available3.
Successful companies learn from partners and quickly diffuse the acquired
knowledge through the firm, not by building large electronic repositories, but by
connecting the right people together4. Information technology has led many
organizations to believe in a New World of leveraged knowledge. Web-based
technologies have made it possible for professionals to draw on the latest thinking of
their peers no matter where these are located. As a result, many companies are
rethinking how work gets done and linking people through electronic media or
through a best practices database so they can leverage each other's knowledge.
These companies believe that by simply getting to document their insights and draw
on each other's work, they could create a web of global knowledge that would
enable their staff to work with greater effectiveness and efficiency. While IT has
inspired and facilitated this vision, it itself cannot bring the vision into being.
1 John Seely Brown, Director of Xerox Park Research Center
2 Marchand, D.A., Kettinger, W.J., and Rollins, J.D. Sloan Management Review, 2000.
3 APQC, Knowledge Management Report, 1998.
4 McDermott, R., California Management Review, 1999.
281
IT usually reinforces an organization's norms about documenting, sharing
information, and using the ideas of others. The relation between IT expenditures and
„success“ of KM measures is attributed to an economic transition from an era of
competitive advantage based on information acquisition to one based on knowledge
creation1. There is also a continuous redefinition of organizational goals, purposes,
and strategy. This new business environment demands a faster cycle of knowledge
creation and action based on this new knowledge.
IT supports the complex tasks of autonomous knowledge workers. As technology
infringes on the domain of symbolic abstract work the interaction between user and
tool becomes more complex, especially in the realm of professional services where
human capital is the key asset and their tools is their sustenance. A primary focus of
the knowledge industries has been to gain influence over knowledge workers, in
order to increase their productivity2.
The increasing sophistication of the IT infrastructure has heightened this tension.
More often, computer technologies are not passive but active tools that manage work
processes. Expert systems, which specifically aim at codifying knowledge and
creating a specific method to do a task, are especially "proactive" in this respect. In
an APQC report, the technologies determined as having the most impact on internal
knowledge sharing were Groupware, the Internet and Intranets, and databases and
pointer systems. "Its role is emerging as an integrator of communications
technology, rather than a sole keeper of information. The critical role of IT lies in its
ability to support communication, collaboration and those searching for
information, not static repositories of 'best practices'. Lessons learned include the
need to adopt early on a common user-friendly platform"3.
Most of the preliminary KM management initiatives consist of implementing
collaborative systems, such as Lotus Notes / Domino, and intellectual asset
management applications. But with KM being increasingly driven by the Internet, ebusiness and the company Intranet, content management applications have also been
on the rise for the past few years.
1 Malhotra, 1998., New world of business, http.
2 Sviokla, J.J., Sloan Management Review, 1996.
3 APQC Report, 1998.
282
Previous research has shown that environmental context can have a significant
influence on the likelihood that an organization will adopt new technology1.
Company strategy and other contextual factors shape technology use in the firm.
Organization structure, distribution structure, compensation systems, and product
and service mix, training, job roles, and potential career paths are among the
important variables.
Key issues in the implementation of new technology are:
•
•
•
•
The role of the technology sponsor
The role of the technology champion
The design of the implementation process
The rationale behind the radical change
WALTON, in a study of new IT in organizations, has noted the importance of how
management values the meaning of new technology2 for business strategy. In
addition to sponsorship, the initiative has to have adequate funding from the start.
The implementation methods can draw from previous change management
approaches.
A pilot implementation gives the necessary information to make that judgment. The
manager's role as implementer is to make the technology available for the individual
to judge.
The job of a manager is to think broadly about options and perhaps search for
possible approaches, which may be surprisingly different. Strategizing must be done
early in implementation for the complete design of the process.
The nature of the supporting organization also has an impact on implementation.
Many organizational theorists argue that radical change is best effected quickly and
painlessly. Managers who intuitively understand these economies of scale may see
their roles as technology champions to be less like scientists and more like change
agents for rapid achievement of economies in social knowledge.
There is probably no optimal way for an organization to implement a technology.
The natural propensity when implementing technology to support autonomous
professionals is to adopt caveat emptor strategy, because it implicitly relies on
1 Etillie, J.E., R&D Management,, Oct. 1983.
2 Walton, R. "Up and Running: Integrating IT and the Organization", 1989.
283
independent judgment for the technology's acceptance and subsequent use. But
radical software technologies also need concentrated action. Projects have life and
momentum. The managers of a project must assume a strategy of "diffuse or die". If
the project does not grow, it will probably end.
After studying existing and emerging technologies and their application to KM it
becomes evident that while their usefulness is growing, there is much room for
improvement. Issues such as tacit knowledge sharing, creativity, and innovation
represent fundamental challenges. The application of technology to those issues, and
frameworks to support their adoption within the enterprise, have the potential for
dramatically improving the business value chain.
IT architecture, the conceptual design of the technological infrastructure of the
business, can be anathema to senior executives. "Architecture" sounds too abstract;
it is embodied in standards whose currency and relevance arouse controversy and
emotion; it can be positioned as an obstacle to innovation and rapid systems
development.
CEOs can sponsor IT architecture in three ways:
In dialogue with technologists in Information Systems and elsewhere proposals and
their implications for the business can be evaluated. There is evidence that this
combination of technologies will facilitate. The technologists have to establish the
robustness and the risks inherent in the architecture and benchmark against rival
technologies.
They use the vision and authority to ensure architecture standards are respected
across the business; usually this is confined to making just a few of standards of
policies sacrosanct. Second, they establish seed-corn funds - available at key stages to implement important features ahead of proven benefits.
Today's business visions require sponsorship of external as well as internal IT
architectures, defining how the infrastructure will provide linkage to suppliers,
channels customers and allies.
The assessment of the KM tools should two-pronged. First, a look at the knowledge
sharing vision or processes those has been defined and identify which technologies
are necessary to enable these processes. Second, a review of the technologies that
are available in the market today that could be integrated into a knowledge-sharing
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environment and determine if the types of processes these technologies can enable
would provide value to the organization. In other words, they have to identify
technologies to support their requirements, and review the technologies if leveraging
them should prove advantageous.
C.6.2 Supporting Global Knowledge Flow through Effective Technology
Management
Technology based conceptualizations have been primarily based upon heuristics,
embedded into procedural manuals, mathematical models or programmed logic that capture the preferred solutions to the given repertoire of organizational
problems.
Such „off the shelf“ solutions for storing, best practices, for example may be used
later for crunching out pre-determined solutions based on pre-defined parameters.
Such systems, however, can be discordant with a complex business environment.
Standardized KM solutions define the basic assumptions about organizational
routines, which then get embedded in the firm’s strategy. The hardwiring of such
assumptions in the organizational knowledge databases may lead to a perpetual
insensitivity of the organization to the changing business environment. Whereas
institutionalized „best practices“ may provide solutions for routine problems, this
may not work for new situations with a high level of complexity.
Experts in training, technology, and financial planning led the effort. As rational as
this approach was - and as scientific as the pilot design attempted to be - both
companies failed to achieve adoption1. Other explanation for successful
implementation: Each organization's strong culture may have helped to reinforce the
implementation process. Culture is an important variable at the company level.
"Everybody has equal access to the technology tools now...phase two of KM focuses
on motivating the people to use all the tools2"
1 New York Life's CEO was the sponsor; the day-to-day champion was a knowledge friendly line
manager. AIG created an extremely targeted implementation approach that aimed for
significant adoption by building up support in each local office.
2 AT&T Wireless, 2000.
285
Creating an organization where KM goes beyond IT and the creation of knowledge
databases can be accomplished by integrating the principles and tools of KM into the
day-to-day pursuit of operational initiatives.
Rather than relying solely on databases to search for information, one approach is to
create the process tools and collaborative techniques that enable people to share
knowledge in real time.
IJV technology management in the knowledge perspective deals with the assessment
of the partner’s technology, the concrete process of technology transfer from the
parents to the IJV, and the management and global implementation of the
technological KM tools that complement the firm’s global knowledge strategy.
These tools can be aimed at managing internal knowledge within the IJV
framework, or bringing in external knowledge, i.e. customers, suppliers and other
actors.
Information technology has provided the tools to better perform the activity of
building knowledge capital. Two important areas in particular have contributed to
the birth of modern KM systems: communication (or network technologies) and
relational databases.1 The parent firms must decide which processes of knowledge
transfer and creation can be automated, and how the IJV can be incorporated into
this system. The parent firms must re-evaluate the position of the IJV within their
respective networks, and how much internal knowledge they want the IJV to have
access to.
Until now, the main focus has been to develop new applications of information
technology for the digital capture, storage, retrieval and distribution of the
organization’s explicit knowledge. New KM tools, technologies, and capabilities
continue to be developed. Increased sophistication will play a major role in
furthering the growth of KM.
1 Savary, M., California Management Review, 1999.
286
C.6.3
C.6.3.1
Knowledge Management Tools
Repositories
Knowledge repositories capture explicit, codified information wrapped in varying
levels of context. Such repositories include data warehouses. More sophisticated
repository approaches attempt to wrap more contexts around information as it is
captured. Whatever the level of sophistication, repositories essentially capture data,
information and knowledge in forms and through processes that enable access
throughout the company. Over time, these repositories contribute to the
maintenance-shared intelligence and organizational memories.
Data warehousing can be defined as a process that extracts data captured by multiple
business application and organizes it in a way that is meaningful to the business,
supporting the need to inform decision makers. Data-warehousing products include
tools and application software that support design, development, and
implementation of these solutions.
C.6.3.2
Process Redesign
Effective knowledge programs will put emphasis on capturing from every work
experience and from assignments1. Decision diaries, reflection times at meetings and
after action reviews (AAR) are potentially powerful tools. AAR is a technique first
developed in the US army to capture lessons from battlefield engagements, in the
form of structured sessions. Another useful technique is that of „knowledge
refining“. A series of memos, emails or meeting minutes are examined for their
relevant and reusable content, which is stored in an evolving and structured
knowledge base.
The primary learning objectives of these knowledge maps that employees will
discuss and understand are:
• The entire process of delivering a product or service to a customer. The steps that
precede the customer request such as sales & marketing, the actual customer
exchange, and the follow-through of the customer’s request by the rest of the
1 David Skryme: Knowledge Management: Making it work ; http://skyrme.com
287
•
•
•
•
•
organization (in particular those parts of the organization that do not have direct
interaction with the customer)
The critical hand-offs that need to occur in the value chain and the key variables
that ensure a proper hand-off
The role that each employee plays in the value chain (each employee should be
able to "find themselves" in the process that is visualized)
How decisions people make can have a positive or negative impact on the value
chain "upstream" and "downstream" from them
Any major changes to the process that have been introduced recently and the
rationale for them
Process metrics – data related to customer satisfaction with the value chain,
internal metrics tracking the key hand-offs, and their process metrics that
employees need to understand
The existence of performance barriers and initiatives that need to be implemented to
remove those barriers:
Implementing decision-support tools
Making available the wealth of knowledge that exists throughout the organization is
of real benefit to firms that wish to improve the ability of employees to make
decisions1. Expertise is elicited from leading practitioners, formed into rules and
guidelines, and then made available to others, usually via computers to ease the
upgrading of the knowledge base. Members can not only draw from but also
contribute to a dynamic evolving firm-wide experience base.
Intranet and Internet Technologies
The explosive growth of Internet and Intranet technologies has also proven a catalyst
to KM initiatives. They are especially successful at supporting a common platform
where members of the organizational network can find each other and gain access to
the knowledge they require. Furthermore, one common platform goes a long way
towards presenting a unified front internally an externally. IJVs that have access to
both the parents' Intranets, with firewalls if required, can have much more efficient
access to knowledge and knowledge sources, as well as feeling as part of the
integrated parent company network.
1 Marshall, C., Prusak, L. and Shpilberg, D., California Management Review, 1996.
288
Intranets use the infrastructure and standards of the internet but are cordoned off
from the public Internet through software programs known as „firewalls“:
Employees can venture out onto the net, but unauthorized users can’t gain access1.
The Intranet is an inexpensive yet powerful alternative to other forms of internal
communication, including conventional computer setups. One of an Intranet’s most
obvious virtues is its ability to greatly reduce the need for paper. All sorts of
documents – internal phone books, procedure manuals, training materials,
requisition forms – can be converted to electronic form on the Web and constantly
updated for future reference.
But Intranets do something far more important. They pull all the computers,
software, and databases in the corporate landscape into a single system that enables
employees to find information and knowledge. Scientist working in fields such as
genetics and biotechnology credit Intranets with allowing them to share information
with colleagues and quickly sift through data that might have taken days to find in
the past. Across the business world, employees from engineers to office workers are
creating their own home pages and sharing details of their projects with the rest of
the company.
Not only do corporations already have the networking infrastructure – and the
money to actually pay for software – but they also require the technology that finally
gets information out of the arcane world of databases into a format anyone can use.
It requires little if any training – and makes including electronic information simple
enough for everyone in a company. Another advantage of Intranets is the relatively
low cost of ownership. These simple information-sharing setups can already provide
a significant strategic advantage.
Intranets are often used to support knowledge access and exchange within
organizations. Using technologies such as TCP/IP protocols and linked hypertext
WebPages, Intranets operate within firm's boundaries, which are usually delineated
by firewalls and password access. Increasingly, however these boundaries are drawn
to include close allies, suppliers, and customers in order to allow them to participate
in the exchange of knowledge.
1 Business Week, 1996.
289
Portals
The fragmentation of Intranets has led to a need for an enterprise knowledge portala single point of access to enterprise resources. This can be an information portal
(one that offers access to all information sources), a collaborative portal (one that
enables users to establish their own virtual project communities with conferencing,
work flow, query tools and document management) or an expertise portal (one that
allows expertise to be contributed and networked throughout the enterprise). A
fourth possibility is an enterprise knowledge portal, which combines the attributes of
information, collaboration and expertise.
Many CIOs have discovered a problem with enterprise information portals: No
matter how usable or how personalized they are, users must still be persuaded to
visit the portal in order to find all the valuable information and knowledge on the
Intranet sites it leads to.
A portal requires highly intelligent searching and categorization functions, and this
technology, which previously was available only in proprietary KM systems, is now
a part of generic software packages. The key to this new generation of KM systems
is server-based software that read documents in the document server, or e-mail in the
server and can bring all the information together as one consistent knowledge base.
The portals will need to interface with existing systems and competing products that
come into the portal infrastructure, such as document management systems,
collaborative systems, data warehousing, business intelligence tools, search engines
and categorization tools. Companies engaged in Web-based KM need better
automatic categorization and better navigational tools.
Four critical elements for the enterprise knowledge portal:
• An enterprise table of contents
• Corporations now use metadata (historically considered the glue for lower-level
data, or data about data) to provide relationships between systems and people
• The need for the individual worker's personal portfolio
• The ability to analyze and structure data
C.6.3.3
Information Technology Applications
Overview of IT Applications
The first step in building a knowledge base is to capture large volumes of structured
and unstructured information that exist on paper, film, faxes, microfiche and photos,
290
and convert it into a digital format readily accepted by back-end applications, such
as the document management, and enterprise resource planning systems.
Remote scanning is another trend in document capture. Companies have
traditionally relied on centralized production groups with high-volume scanners.
Now they want to capture documents such as bills at the point where they enter the
organization, send them over the internet to central facilities, avoiding the delays
and resulting cost, of shipping them to the centralized production groups.
Workforce Management
Managing the workforce entails not only knowing about the time and resources that
employees consume, but also the content of their work. It involves integrating
structured data with less structured data - statements of work, contracts,
engagements and status reports - all with the ultimate purpose of helping employees
make judgments. Workforce management is also a means of understanding how
people do their work and using that information to create tools that help new
employees progress more rapidly.
Alternative Products & Services
Developing a simulation of the financial decisions within a company is also another
option. Primary goals, employee composition and the existing level of business or
financial knowledge will determine the appropriate tool. In some cases, it may be
more appropriate to set the context of the value chain with customer loyalty in mind.
For many companies the economics of customer loyalty will drive the value chain.
By blending the value chain with customer loyalty information, higher value
opportunities can be identified.
291
Implementing Groupware to support collaboration
Groupware has long been seen as a way to encourage the sharing of ideas in a much
freer flowing manner than repositories or codified decision support systems allow.
The aim is to create “anytime, anywhere” collaboration spaces. However, despite
high levels of interest, implementation efforts often fall victim to a “build it and they
will come” approach. All firms rely on the ability to not only represent ideas but also
discuss them. Having set parameters by which KM can be defined, a study of the
types of software that could be included under this definition can be conducted1.
Software can be classified into the five KM categories i.e., gathering, storage,
communication, dissemination, and synthesis.
Software can be grouped into five common categories that represent the current
software market: document management, information management, searching and
indexing, communications and collaboration, and expert systems. A sixth category,
systems for managing intellectual property, is added as an adjunct category1.
Software that supports the transfer of operational data to the warehouse and
warehouse management software is used extensively in support of KM initiatives. In
particular, KM imposes the need for extraction of information from unstructured
data and the ability to draw conclusions based on its relationship to more
unstructured data.
Groupware is part of the overall technological infrastructure, as it supports the
collaboration needed for knowledge sharing as well as e-mail and other forms of
inter-personal communication required for the efficient, time and locationindependent exchange of information. There has been a steady and rapid growth in
the adoption of data warehousing tools and techniques and continued advancements
in their sophistication. This expansion is the result of an increasing focus on systems
that support access and analysis of data rather than on systems designed primarily
for capturing transactions as seen in the early and mid-1990s.
1 Fayyad, U.M., " International Business Management ", 1996.
292
Document Management Systems
One of the first software opportunities for the use of software in managing
knowledge was the collection, storage, and distribution of the artifacts of knowledge
contained in an organization. Many of these systems emulated the paper and library
systems that preceded computers. Advanced features of document management
systems provide version control, authentication, and translation.
Information Management
Software for information management fills many needs within an organization.
Information on hardware and software assets and location, analysis of user needs,
automated alert systems, and data storage help to provide an infrastructure that is
needed for higher level of software systems. Some of the best-selling software has
been developed in this category including RS (SAP) and SCS (Baan).
Searching and Indexing
There has been much attention given in recent years to search and indexing
techniques with the exponential growth of information. The Internet has accelerated
techniques and, as disparate systems become connected to one another, searching
and indexing becomes a function more critical than storage. Information that cannot
be located easily and with reliability holds little value.
Expert Systems
Another area of software that has been growing rapidly is in the intelligent analysis
of information, online processing, and filtering. These expert systems attempt, in
part, to simulate human decision making and synthesis information. Often relying on
concepts from the field of artificial intelligence, expert systems help make vast
quantities of data and information useful.
Communications and Collaboration
Software tools that aid in communications and collaboration are included within KM
because of their role in facilitating the flow of tacit information.
1 Leonard-Barton, D., Wellsprings of Knowledge - Building and Sustaining the sources of
Innovation ,1995.
293
There are still much greater quantities of knowledge stored within the heads of
individuals and within business processes than has been and can be translated into
electronic forms. Communications and collaboration software generally help to
build relationships between people and reinforce organizational culture and design.
An area that was once dominated by e-mail systems software titles has evolved to
provide more robust communications features. Older products such as Notes
(IBM/Lotus), Exchange (Microsoft), are representative of this category.
Intellectual Assets
Software that helps to track and manage the intellectual assets of an organization
range from legal systems to maintenance of trademarks, patents and other
intellectual property. Since much of the organizational knowledge and value is
contained within those assets it is essential that these tools be included in an overall
investigation of KM software.
If one investigates all of the software that supports business decisions, contains
knowledge, or facilitates the making turning of raw information into knowledge it
becomes apparent that there are many types of software could be included, such as
enterprise resource planning (ERP) tools, computer aided manufacturing, etc. Many
software products have been designed from a functional, rather than integrated,
perspective due to the structuring of traditional organizations. As organizational
structures evolve to become more holistic, KM software tools will also change.
Other technology advances include knowledge exchange platforms, knowledge
workflow management software, and knowledge profiling technologies. These
applications will advance structured and unstructured data access capabilities,
enhance information retrieval, and improve subject matter expert identification.
C.6.4 Potential questions for further research
At a time when technology and the global acceleration of technology platforms play
a driving force in a need, interest and purpose to form IJVs, the role of KM in
Technology Management is an issue which cannot be overlooked. The
misconception that Technology Management is KM or at least the major aspect of
KM can be very easily solved and settled by the impact of key areas of KM already
outlined in the subsections addressed in this chapter. This in no way undermines the
role of TM in KM, which does play a key role in an integrated approach to KM. The
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TM issues become more striking when an IJV is formed by technology heavy and
strong parent from a developed nation and a technology weak but strong knowledge
worker environment of a parent from an emerging market. Key areas of KM in TM
such as juxtaposition of the IJV within the TM strategies of the parents, KM tools in
the IJV, directional flow of information between the IJV parents and IJV itself and
external factors affecting TM in the IJV are under-explored in the literature. In this
study an attempt has been made to cover these aspects of KM in TM in IJV case
studies. The results of this exploration would give a glimpse of the importance and
necessity to augment our knowledge in these areas of integrated KM in IJVs.
C.6.5
C.6.5.1
Knowledge Management within the IJV Framework: Case Studies
DSP Merrill Lynch
At the start of the IJV, the Technology Integration Committee was formed to
implement a unified IT system within the IJV and secure smooth information flows
between the parents. The committee was an operational partnership between DSP
and Merrill Lynch' Technology Department. Its objective was to ensure the smooth
and constant flow of information and knowledge within the IJV framework.
DSPML, in concordance with ML global strategy and DSP’s efforts towards
institutionalization, plans to make continuous investments in state-of-the-art IT and
KM tools. The IJV also has access to all new knowledge tools implemented in ML
International. This includes on and off site training and access to global ML
technology resources. Thus far, the knowledge management tools have been well
accepted by employees at DSP Merrill Lynch. Unlike some other firms, there hasn't
been a pronounced generation divide between the younger people at the firm - those
less than 30 grew up using technology - and the older people, some of who might be
apprehensive about using the new tools. According to the CEO of DSP Merrill
Lynch, "What knowledge management needs right now is to be grounded in the
pragmatism of doing business." Evidence that the program is working is, as of now
largely anecdotal, as with most knowledge management initiatives in the early
stages.
The focus in DSP Merrill Lynch is generally on improving processes or creating
new ways of working. In general, professionals can spend as much as three quarters
of their time looking for sources or information needed to do their jobs, so making
processes of learning faster will automatically increase productivity.
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Merrill Lynch' global expansion was marked by strategic acquisitions and
supporting the diverse cultures of its business units. In the mid-1990s delays caused
by the incompatibility of the different information systems around the globe
threatened to impact productivity and responsiveness to clients. In response to this,
Merrill Lynch launched an initiative to create an efficient seamless communications
infrastructure, the Knowledge Exchange®.
The Knowledge Exchange® initiative was specifically designed to improve
information sharing and streamline the flow of knowledge across the organization.
A primary strategic aim of the Knowledge initiative was to create a global support
structure for remote offices. The Knowledge Exchange® was rolled out worldwide
in a relatively short timeframe, as it was considered as a critical issue.
According to the Merrill Lynch Enterprise Service Delivery1, the Exchange allowed
employees worldwide to find information and sources in a significantly shorter
timeframe, be it internal or research for clients. In addition, help-desk support staff
uses the Exchange directories to identify people and instantly obtain system profile
information. Essential information can be found in a single unified source.
C.6.5.2
JM Morgan Stanley
Morgan Stanley Dean Witter has automated paper-mail routing and audiotape
retrievals using a sophisticated storage area network. The software called Automated
Work Distributor from DST Systems inc., is designed specifically for financial
applications, and entirely replaces routing of paper-based mail. A Windows NT
LAN runs the imaging workflow management system.
MS has implemented a database for its existing library of voicemail tapes that are
used to record all telephone conversations between employees and clients. Under the
old filing system, the staff could take up to six hours to manually find a particular
tape of a phone call; now, the index of tapes is being linked to the workflow
management software so that any tape is immediately available.
The company maintains a worldwide backup data center 15 miles from the
company's Jersey City, N.J., technology HQ. Data is copied to the backup facility in
real time, and in the event the main data center fails, the backup data center can
296
come online within 45 minutes. The data is stored using TimeFinder and EMC's
Data Manager software, which allows the company to take a snapshot of the
database--a copy of all the information frozen at a particular point in time--and then
use the mirror-image copy to make a backup at a remote location.
MSDW also has a Web-based commerce system, which will allow clients to log
onto a Web site and retrieve any of the data over a telephone voice-response system,
including daily positions and historical performance statements. This requires links
from a Web server to the DB2 server on the mainframe to process information
requests in real time. All technologies are introduced on a global scale after the pilot
phase, but as of yet the necessary infrastructure is not in place.
The key differences between the IJV parents are that MS has a very open and free
information flow in its global networks. In JM, key information and knowledge was
highly centralized, hierarchical and bureaucratic with only a few top managers
having access to it. The IJV provided a significant improvement in information flow
from JM Financials. The investment bankers, who were mostly previously with JM,
are getting used to having access to information as well as being empowered to
make decisions based on this information. On the other hand, information flow from
the AP HQ is not as unrestricted as it used to be, as they view the IJV from a
different perspective as they would a wholly owned subsidiary.
There is a back office bi-weekly meeting where all managers are free to raise issues
that they term relevant. For the first time JM managers realize they were expected to
open up and communicate irrespective of the hierarchical pressures. Since the start
of the IJV, 90 people have left the company, but the people who remained are
getting to know each other through MS open management style, which encourages
knowledge flow and sharing. The initiative for more openness came from
J. Kampani, one of whose primary goals was to adopt management practices and
gain expertise from MS management in order to institutionalize and professionalize
his hitherto patriarchal firm. Inter-firm transfers and rotation internships are an
integrated part of knowledge sharing, with even the son of the CEO, working for MS
in the global Headquarters in New York.
1 Interview, Merrill Lynch Enterprise, New York, 2000.
297
C.6.5.3
Max New York Life
The purpose of preliminary KM initiatives within the IJV network was to get to
know the partner. Within the IJV and the parents there is a circulation of a
newsletter and MI and NYL have access to both parents' intranet. It must be noted
that Max Group Intranet was, at this point, at a very early developmental stage, and
basically still in the design phase.
C.6.5.4
Birla AT&T
Birla AT&T does not yet have access to AT&T global intranet. The IJV has
restricted access to the AT&T Intranet as it is a non-consolidated JV, which has
already constructed its own website. All communications are still on paper, gaining
connectivity to the parent's KM tools is still a work in progress.
One IJV manager cites the lack of transparency as major symptom of the two sides
of Birla AT&T and he calls it a „non-collaborative“ environment. As HRM practices
are aligned to the Birla Management style a 360º evaluation cannot as yet be
implemented or that other HR KM tools and channels have to be significantly
adapted to the local environment. He feels that the Indian bureaucracy mentality is
still at work here with a high resistance to change in certain parts of the
organization.
Knowledge Flow within the IJV
The quality of service is extremely important at Birla AT&T, and when potential
candidates were chosen for sales and marketing in customer departments the levels
were consistently kept up.
AT&T's KM effort began as a result of the company's concerns about its aging
workforce, its large number of work centers with many people in them, whose jobs
had become very specialized, and the fact that the organization was "very productsilo based" according to AT&T1, the officer in charge of internet implementation
strategy at AT&T.
1. http://www.cio.com/archive/enterprise/091599_ic_content.htm
298
The AT&T brand and its reputation are extremely important to AT&T Global and so
it assigns a brand manager who is a branding specialist to each of its global
operations. The brand manager at Birla AT&T is an AT&T employee, a NRI
expatriate, directly assigned from HQ. The brand manager’s role is to prevent the
misuse of the AT&T brand name and to ensure that branding and marketing
knowledge are passed on correctly to the IJV. The brand manager feels that only the
CEO should make key strategic decisions, as they are the only one capable of
making the decisions without creating further divisions in the department.
The brand manager also implements and passes on global strategic directors
regarding advertising, training programs, ethical codes and customer interaction.
The brand manager is a member of the board on the AT&T side and has a separate
contract and a veto right for all IJV activities. He prefers to function on persuasion
and acknowledges the need to understand local market knowledge. There is no
conflict of interest as he considers a „win/win“ situation being in the best interests of
the IJV. The reporting structure of AT&T is performance and target driven on a
monthly and quarterly rolling basis.
The Birla AT&T Customer care is also in charge of billing operations for customers.
The accounting guidelines are according to AT&T global guidelines. Special
adaptations have been made to billing systems in India with regards to delivery
systems, credit culture in India and different bill formats and adjusted to a format
that the Indian customer is used to.
The parameters of quality and service are quantity, response time and complaints.
The call center concept is a new one in India and most of the work is done through
the training of call-center employees1. There is no technological fall back and the
whole customer care process can only be monitored through quantitative measures.
The problems that arise in intensive customer care in India are the night shift, and
the lack of service culture in India. All call-center employees are students and
graduates and there is an extremely high annual staff turnover of 40%. The reason
1 The Indian customer is very demanding and rude sometimes and do not feel themselves at the
level of the call-center employees plus are not accustomed to asking help though telephone.
The Indian website was constructed here specifically for the Indian market. There are no
performance incentives for call-center employees. AT&T admits that the quality of call-center
employees is definitely higher in India. For this reason AT&T is considering moving several
back office processes to the IJV.
299
why, contrary to the other countries, students are employed at the call-center
operations is the fact that they have to have a good command of English and the
local language and have to be at least semi-computer literate.
The basic training functions on the buddy system, where people are hired in small
groups. All information and technical support is on the Webpage/Intranet and high
value is placed on KM tools such as e-learning. Service quality is the highest at the
beginning of employment but the initial euphoria lets off afterwards with routine
activity.
Problems and Best Practices
AT&T uses a total quality approach to guide the management of all parts of its
business and because they believe that quality happens through people, they work to
create an environment that encourages everyone to give their best.
AT&T in India is a strategic market for AT&T because of the country's size and
future growth potential. India currently ranks in AT&T's top 20 bilateral streams by the year 2005, it will be among the company's top 10.
"We could see that as we went on, not only did we need to lower our unit expense,
but also we had to find better ways to train our people and deliver service to our
customers.1" AT&T decided that KM was the strategy for capturing and
disseminating information about how people did their jobs and, in the process, for
accelerating employee training and improving customer service.
The first target was the call center for customer service. "We started to analyze what
employees were really doing. We chose high-performers, captured the way they did
their jobs, and created templates of those processes." As a result of this effort, by the
end of 1995, AT&T launched a web-based KM program to make information and
services available to 4'000 employees. Today, through the intranets inside AT&T,
every employee has access to the websites and KM tools. The savings in manpower,
training and time has amounted to hundreds of millions of dollars, according to
Scites AT&T is also saving by being able to use an intranet and the same tools to
assimilate, educate and serve the new employees2.
1 http://www.cio.com/archive/enterprise/091599_ic_content.htm
2 op.cit
300
At AT&T, most specific groups such as R&D, customer care and consumer
products, have their own websites in the manner of communities of practice. Each
website has a feedback capability and a mechanism for responding to suggestions or
queries. There are chat rooms for exchanging ideas and posing problems, interconferencing for global virtual meetings over the internet, and collaborative websites
for projects, containing virtual file cabinets about the project and the information
about team members.
IKE, the Information and Knowledge Exchange, which is AT&T’s Global
Services' sales support intranet, bridges the gap between the headquarters staff and
global sales associates. With new competitors, technology changes, and market
share erosion, AT&T's leadership team realized the need for a new business
direction. This need for a direction was becoming more obvious with technology
changes and the globalization of the world's telecommunications markets. AT&T
also needed to ensure that a uniform message was being delivered to all associates
effectively in the rapidly changing business environment and that key knowledge in
all areas was studied effectively throughout the corporation.
If AT&T were to remain a global market leader, it needed to arm its sales force with
all the information they need quickly and efficiently, especially as the trend shifted
towards new products, such as wireless services, convergent technologies and new
global markets.
Knowledge Management and Organizational Learning quickly became the
buzzwords throughout AT&T. Executive support and intervention led to the creation
of IKE; the Information and Knowledge Exchange sales support intranet. Today,
IKE handles 14000 regular users throughout the company. It provides the sales
team and staff with up-to-date information regarding product, customer, and
industry news. IKE is one of the five largest sales support intranet sites in the
world.
The AT&T traditional training methods were insufficient. Sales-person feedback
questionnaires indicated the need for specialty courses surrounding each new
product and service line. Global sales associates are geographically dispersed
throughout the world and additionally, many of the AT&T product and service
subject matter experts were centrally located at the firm's HQ in New Jersey. AT&T
301
realized that it needs to capture the expertise that existed and leverage it for shared
learning.
IKE was initially rolled out in 1997. The effort of identifying all the required data
sources to be added to IKE was led by the Global services marketing team. The
Global Services Marketing was exploring new territory. They learned about
technology enhancements and knew the sales teams were beginning to use the
internet and intranet back in 1997.
The first phase of the KM initiative was the Knowledge Community Symposia, to
lay the foundations of 'communities' surrounding the sales expertise. In order to lay
the foundation of a culture of knowledge sharing, AT&T aimed to invoke a feeling
of the 'knowledge community', and drive the sales transformation. After this first
step, sales associates now knew the leadership team, as well as the communication
channel into headquarters.
Today, a Client Relationship Manager heads up each knowledge community. Each
knowledge community has an area of expertise and is linked to other knowledge
communities of similar sales titles. IKE implemented Q&A Boards for each
knowledge community that was monitored regularly. The CRM's duty was to make
sure that all questions were answered within a 24-hour timeframe. The Knowledge
Community leaders know that their job is to support the members of their
knowledge community.
In 1997 and 1998, the 'sense' of communities grew stronger, and the need for
marketing to be the driving force behind the KM and OL initiative subsided. The
actions designed to help AT&T attains the goals in their business plan were the
following: a framework was developed to facilitate a functioning community, so that
all community members could completely understand the sales processes. Linkages
could thus be established to reinforce the communication channels.
Content management is to this day one of the most critical aspects. The primary
criterion for IKE was that the information had to be accurate. If information were
inaccurate or outdated, the user would be discouraged from returning to the site. A
fast download time is essential. The IKE team formed templates and style
guidelines for web sites to ensure that the marketing team followed the guidelines,
so that the sales teams enjoyed faster access to sites. The site had to be intuitive and
302
easy to navigate. The design scheme for IKS had a similar template for each
community. Finally, implementing IKE had to be a cost-effective measure.
Executive engagement was critical to the success of IKE and the transition to
knowledge management. The knowledge community (KC) facilitator role was
another critical element, as the 'glue' that holds the community together. Obtaining
feedback for improvement is also a must.
Managing content and ensuring accuracy of content is the single, most important
factor in IKE. With newer technology available today, and with many businesses
shifting to portal technology to manage communication, meta-tagging content, the
assigning of properties to a document, is another important factor. This in
concordance with the shift in IT strategy to portal technology.
The marketing team expected process improvements by moving to IKE and
knowledge communities. Surveyed sales executives have reported a 30% increase in
productivity1. Sales associates claim that proposal development time has been cut by
50% as a result of having template proposals that can be then customized.
IKE has created demand and expectation to receive information much faster and
with context. Global Sales Associates share valuable information, including learning
and best practices, virtually around the country. On monthly Community calls, KC
facilitators will showcase these best practices. Incentives for knowledge sharing
include sales recognition programs, such as the "Rising Stars" and other programs.
C.6.5.5
Sprint RPG
KM used to be a delegated function within the RPG group but now it is a group
initiative headed by the CIO of the RPG group. Sprint RPG makes use of the readily
availability of IT and business management skills available in India. In addition to
this they have gained technical and industrial experience from Sprint (Global One).
According to Sprint RPG Managers2: "Sprint could have exported the hardware,
licensed the software, and made a service or maintenance agreement. But which
Indian company could have successfully launched an e-mail business in 1994? You
1 AT&T KM survey, article with Microsoft.
2 http://www.cbi.gsia.cmu.edu/newweb/workingpapers/brewer
303
have to know how to manage the business. Could an Indian company have paid the
start up costs and sustained early losses? It takes deep pockets […] back in 1994 we
saw liberalization of Indian government policies ahead, a big market in the future.
Several lines of products and services we could add year by year, and a chance to
become a turnkey telecom provider for business customers in India. To so this we
have to operate in India and make an investment. The "whole business" concept was
our rationale. For a small investment of 5 Million US$ we find a partner, make a
business plan, and open an office. We lose a few million dollars for a few years, but
we have our flag on the map"
Sprint transferred technology to its Indian joint venture in the form of software for
running the e-mail service. Initially, Sprint did not transfer the source code that is
required to understand how the software works. Later some of the source code was
transferred to enable local engineers to adapt the software to the needs of Indian
customers. The software, however, was not state of the art as in the HQ.
Sprint is closing the use of the software in the U.S. and therefore will stop
maintenance support of it. This change raises questions about how the software can
be supported and maintained in India in the future.
Knowledge Flow within the IJV Network
Sprint RPG managers reinforced this point1: "The risk of loss of proprietary
technology when employees leave is less than imagined because it is unlikely that
one employee can possess enough overall knowledge to become a competitive threat
outside the company. Sprint RPG possesses organizational knowledge - the
combination of high-end tandem hardware, proprietary software, and the know-how
to set up the system and run the business - that is difficult to replicate".
A Global One manager said: "Ten years ago, Sprint would not have transferred this
source code, when the software was new. There is a technology time lag from the
West to India". However, a Sprint RPG manager had a different view: "Since we
aren't allowed by the government of India to be an internet service provider, we
have no use for Sprint's latest technology. That's why it is not transferred."
1 op.cit
304
For manufacturing group companies the transfer of technology agreements are
specified in contractual agreement and embedded in the manufacturing processes.
For their service group companies and IJVs, such as Sprint RPG, transfer of
knowledge comes in the form of the skill sets of employees, benchmarking,
operational and organizational levers and industry experience.
The knowledge integration program of RPG has the following characteristics:
• 5-6 formal sessions per year where specific KM agenda is set. At these forums
best practices are shared and external benchmarks set.
• 35 CEOs and management committee members participate in the knowledge
integration forums. Within each group company internal knowledge integration
coordinators are responsible for raising awareness on key issues and keeping
abreast of the knowledge initiatives in the other group companies.
• In addition to these external experts, consultants and IT experts are brought in to
implement knowledge integration initiatives and training.
The IJV has access to the RPG Intranet, which among other things showcases best
practices within the RPG group. RPG Intranet is being built up at the moment to
accommodate all employees in RPG enterprises. The knowledge integration
coordinators are viewed as knowledge champions whose mission is to build up trust
and acceptance of core knowledge initiatives.
C.6.5.6
Ogilvy & Mather
From O&M worldwide O&M India receives global expertise and technology e.g.,
various interactive technologies. O&M (US) is the largest media buyer in the USA.
Knowledge Flow within the IJV Network
Most of the input comes from the Asia Pacific Region. There is a codified database
Sunflowers to which O&M India has access to the best practice database on the
company Intranet, which consists of case studies. Every year there is an AP regional
meeting where the 200 senior employees in the whole of Asia attend. Here best
practices are discussed in work sessions and dissemination of knowledge takes
place. The US managers attend development projects and seminars. There is a
definitive thrust at O&M to codify knowledge due to high staff turnover and
increasing communication needs.
Within O&M the thought processes can be speeded up through intuitiveness i.e.,
tacit knowledge of longer term O&M employees and experts. But in the case of
305
newer employee’s the thrust to externalize this tacit knowledge through codified
databases has not yet reached the desired implementation in India i.e., the employees
are not using it enough. Knowledge sharing in O&M India is still linked to the
individual, the new knowledge management strategy is looking for individuals who
can become „ circles of influence“ and building them through mentorship and
coaching1.
Each office is assigned a database head who is a knowledge based individual,
identified as „knowledge friendly“ and looking for material, references etc., on his
own and at the directive of the department head who has been integrating the
database / Intranet and its influence on creativity into the organizational culture
within O&M. Local employees suffer from the „not invented here“ syndrome and
referring to an analogous case studies and best practice must be incorporated into
their minds.
O&M worldwide has an Intranet to which all global affiliates and IJV have full
access. The codification of knowledge for shorter jobs in order to quicken the
process of client advertising is practiced. The new ideas presented in the
organizational meetings are also available throughout the network. „Knowledge
from elsewhere can stretch one's own creativity“.
The importance of a personal network that cannot be codified and personal
connections „ knowing who“ is rated very high in O&M India, in adaptation to the
local business environment and needs. The pace of implementation of the KM tools
is much slower in India due to lack of infrastructure, even though many of the tools
were created there.
O&M Indian managers confer with O&M US and AP managers on a need basis but
there is a lot of knowledge sharing and expertise transfer in the O&M worldwide
network. The idea of OC as a specific consulting division was born in India at a
„ special world wide consulting summit“. O&M worldwide are considering whether
this consulting unit can be incorporated on a worldwide basis. Knowledge sharing
takes place in these collective meetings and extensively through personal
1 e.g., Mattel was introduced in India (hotwheels). Past case studies of market entry worldwide were
readily available in the sunflower database but creative group made first proposal without
referring to the best practices and knowledge resources of O&M and had to return to the
drawing board.
306
networking such as „ friends“ that can be referred to. As far as client access is
concerned Indian clients prefer personal treatment to formal solutions.
The IJV has restricted access to the
MS technology environment
(Intranet) through MS AP HQ in
Hong Kong.
JM Financials formerly had no
technology strategy.
The IJV has partial access to the
NYL Intranet and full access to all
product-specific computer-based
training.
The IJV has full access to the MAX
India Intranet and best practice
databases, as well as electronic
forums and whiteboards.
The IJV has access the AT&T
technology environment through the
U.S. knowledge liaison office
(mostly restrictions for in-depth
product specifics)
•
•
•
•
•
Birla AT&T
Max New
York Life
Electronic forum
Whiteboards
•
•
Computer Based Training modules
(AT&T)
Best Practice database
•
•
Computer Based Training modules
(NYL)
•
AT&T Intranet (as applicable)
Max Intranet with link
•
•
NYL Intranet with IJV home site
•
ML Internet (restricted)
Computer Based Training modules
•
DSP formerly had no technology
strategy
•
•
Best Practice Database
•
Global Research database (restricted)
ML Intranet with IJV home site
•
•
Global Research Database
•
The IJV is fully integrated within the
Technology environment of ML
worldwide at the most current level.
(Simultaneous worldwide
implementation)
•
DSP Merrill
Lynch
JM Morgan
Stanley
What KM technology tools are in place in
the IJV framework?
How the IJV is integrated within the
technology strategies of the parents?
IJV
Product and firm-specific
information can accessed through
the Knowledge liaison office
Marketing information flows from
•
Reporting structure to NYL U.S>
parent
•
•
Max India best practice
conferences
Board meetings
Reporting structure MS AP HQ
Product and market information is
relegated through the Asia Pacific
HQ. This is due to the unique IJV
status of JMMS.
Regional conferences
Board meetings
Reporting structure MS AP HQ
•
•
•
•
•
•
•
How is the information flow between
the IJV and the parent company setup?
307
Lacking bandwidth to ensure full
connectivity
Restricted access through knowledge
liaison office
•
•
But lacking bandwidth to ensure full
connectivity.
Implementation of newest technology in
the IJV
•
•
Technology environment in the process
of being set up.
Information flows are hampered by
difference in status of subsidiary and IJV
•
•
Access to technology environment is
restricted due to the IJV status.
•
•
What dominant external factors affect
technology management within the IJV
framework?
Ogilvy &
Mather
Sprint RPG
Limited access to Sprint Intranet
RPG is still in the building phase of
its technology environment
Full access to the O&M worldwide
technology environment
O&M India has also played a active
role in the introduction of new
worldwide knowledge tools and
functions (pioneer)
SG Benson had no technology
strategy previously
Full access to O&M net came only
after percentage of ownership of
O&M was raised.
•
•
•
•
•
•
Electronic forum
Quality control database
•
•
Case study database
Electronic project forum
Client database
•
•
Best Practice database
•
•
O&M Intranet
•
Sprint Intranet (restricted)
Global Case study database
•
•
Best Practice database
•
•
Information is readily accessible to
all on the global O&M technology
environment
Technology flows through local,
regional and global meetings and
interaction.
RPG best practice conferences
•
•
Technology information though on
site installation by Sprint engineers
Dual reporting structure
(AP HQ AT&T/RPG)
Board meetings
•
•
•
AT&T directly to the IJV AT&T
Brand manager.
•
•
Figure C.35 Knowledge Management – Technology Management in IJVs
The IJV has full access to the Birla
Group Intranet
•
308
309
C.7 Comparison of the Case Studies with respect to Key Research
Questions
Information gathered and outlined in the previous sections on the individual IJVs
constituted the basis for the cross comparison of the cases with respect to the key
research questions. The following table outlines a brief perception of how the cases
compared or differed in providing answers to the key research questions posed.
The case studies were analyzed for the evidence of the presence or absence of an
integrated knowledge management approach in the IJV. The salient points were then
compared with regard to the research questions posed at the beginning of the study.
Indo-U.S. IJV
Integrated KM Strategy
DSP Merrill Lynch
Yes
JM Morgan Stanley
No
Max New York Life
Partially Yes (early stages)
Birla AT&T
Yes
Sprint RPG
No
Ogilvy & Mather
Yes
Figure C 36. Integrated KM Strategies in Case Studies Indo-U.S. IJVs
DSP Merrill
Lynch
IJV
Technology integration
committee – integration of
DSP knowledge with ML
knowledge infrastructure
US parent’s institutionalized HR
guidelines, adapted to local
circumstances
Processes for complete integration
put into place at the
beginning
Weak Technology KM of DSP
Creating new ways of working
Business before knowledge
transfer and creation
DSP’s Indian Culture and
knowledge of Indian financial
environment
Management structure
High level of knowledge transfer
KM is adapted within the strategic
planning of DSPML
Awareness of competitive
surrounding and full integration
into ML global knowledge
network
Continuous innovation
Improving processes
HR – Indian circumstances
Inaccessible Indian financial market
Focus on people
3 year strategic plan with US
parent
Does an integrated KM strategy
within the IJV facilitate effective KM
and how can it be developed and
implemented
within
the
IJV
framework?
What are the main barriers to
effective KM and inherent
weaknesses
within
these
processes?
What are the dominant internal and
external factors in the IJV
environment?
What are the strategic
organizational processes
constitute
KM
within
framework of the IJV?
and
that
the
PRQ3
PRQ2b
PRQ2a
PRQ1
310
Max
New
York Life
JM Morgan
Stanley
Lack of alliance experience in MS
Need for a strong “local”
service in insurance related
business
NYLs foray into a promising
emerging market
Introduction of IDRA bill –
facilitation of market entry
•
•
•
Max’s vision to excel in
people oriented, knowledge
based service business
NYL’s strength in business
models
ands
industry
expertise
•
•
KM strength of MS
Business expertise of MS and local
know-how
of
the
JM
Financials
Corporate culture in IJV
Limited access to MS global
knowledge network
No clear definition of strategic
planning
Executive
committee
for
operational and strategic
decisions
Difficulty of integration of
the IJV into corporate
network
Too early to know the
outcomes
Very
new
business
segment, hitherto under –
exposed in India
•
•
•
IJV
Transformation of
culture is difficult
•
Compliance
and
financial
credibility given more
importance
Issue of KM never addressed
during the formation of IJV
Focus on business before KM
Differences in US parent and
IJV
access
to
communication flow
311
IJV guidelines follow above
process
Too early to perceive
integrated approach to KM
•
•
an
KM refers to understanding and
enhancing information flow and
decision
making
in
the
organization within the NYL
global network
No evidence of an integrated
approach to KM
•
•
Sprint RPG
Birla AT&T
Opening of a brand new
service sector (telecom)
Technical expertise of AT&T
Local consumer and market
knowledge of Birla
The strength of the IJV
partners
Entry into a fast growing
service sector (telecom)
Technical expertise of Sprint
Global One
Local field and
knowledge of RPG
•
•
•
•
•
•
•
market
The strength of the IJV
partners
•
of
brand
name
Protection of brand names of
parents
Focus
on
technology
•
•
of
Focus on new technology
•
transfer
A very fast growing telecom
sector in India
Absolute focus on quality - IJV
Protection
AT&T
Potential of telecom services in
India
•
•
•
•
Lack of bandwidth i.e.,
technological infrastructure
Strongly
“local”
management principles
•
•
Different goals between the
partners
Problems in transfer of best
practices
•
•
No 360º evaluation in IJV
•
Focus on trust between
partners
Lack
of
transparency
between partners
•
•
Birla is not yet at par with
AT&T KM
•
Ever changing mood of the
industry (several mergers
and demergers)
Management models from
AT&T but IJV principles
are local
•
•
cultural split in the IJV
•
312
•
•
Strength of local KM models
from RPG
The technology transfer from US
parent to the IJV is based on
“manage your own business”
model
Some evidence of integrated KM
strategy
Improving due to IKE concept of
AT&T
•
•
Evidence of integrated KM
strategy exists in theory but not
in practice
•
Ogilvy
Mather
&
Foothold of a global brand
management partner into an
emerging market
Strength of the US parent
•
•
Brand
management
protection of name O&M
Focus on “local” business
•
•
and
Business models based on
parent but managed locally
Absolute strength of KM
processes of the US parent
•
IJV is more “local” oriented
•
•
•
•
Introduction
champions
integrated knowledge management strategy
of
knowledge
Access and active participation
in O&M global KM network
Figure C.37 Comparison of case studies for the evidence of the presence or absence of
Opportunistic
•
Transfer
of
technology
•
outdated
Local HR guidelines
•
313
314
C.8
Salient Points from Other Interviews (vide Annex)
In addition to the above structured case studies the key outcome of all the interviews
conducted with the companies listed in Annex E.5 are described below:
• Although the need for effective and integrated KM has been widely recognized,
both by parent companies and the IJV itself, at the present time integration of all
aspects of the KMS is not common place.
• Many of the firms in the study are, however, making first steps in this direction.
This is implied by the definite shift of the source of KM away from operative
functions, such as IT, towards an understanding of strategic needs for KM.
• KM initiatives, while often focussed on technological tools, tend to be more
people oriented in IJVs than in other forms of organizations. Reasons stated
include the higher level of tacit knowledge in IJVs and the more complex
demands of interface management.
• The importance of cross-cultural management (CCM) is evident, in theory, to
most firms in the study. However, few firms actually have put this into practice.
Furthermore the implications of effective CCM on knowledge transfer and
learning within the IJV network do not seem to be clearly defined.
• The complexity of implementing global KM tools becomes clear within the
framework of the IJV. Infrastructure gaps between the parent companies,
technical incompatibilities of the systems and differing technological mindsets of
the employees are important factors when assessing the impact of global KM
tools.
• The importance on informal channels for knowledge acquisition, transfer and
creation were underlined by a large portion of the researched companies. A
complex business environment, tacit knowledge and the lack of transparency of
knowledge structures within the IJV network have led to this dependence on
informal knowledge channels, such as a personal network.
• US parent firms tend not to view learning from their Indian partner as a primary
goal for entering into an IJV. The knowledge flow from the parent to the IJV,
which is usually fully integrated in the US parent's knowledge network, is often
315
considered to be one way, with firm-specific knowledge being transferred to the
IJV. Processes to filter back any knowledge created within the IJV were rarely
institutionalized.
• Indian parent firms, more often, tend to think of the IJV as a mode for acquiring
knowledge from the parent company. This knowledge did not mainly consist of
firm specific or product knowledge, but often was in regard to expertise,
management skills and strategic and operative processes as well as
professionalism.
• The Asia Pacific HQ of the U.S. firm was, in almost all cases, responsible for the
operative directives for the Indo-U.S. IJV, which fell under its jurisdiction. Often
the IJV was subject to dual reporting structures. The Asia Pacific HQ added to
the bureaucracy of the knowledge structures within the IJV framework. This
demonstrated the problem in separating the strategic and operative aspects of
KM, when a 'top down' approach to KM was not taken. The APHQ proved
supporting of knowledge structures as far as informal relationships and
geographic proximity was concerned, but did not intensify passed on knowledge
from the parent firm.
A cross comparison of the case studies suggests that no unified conclusions can be
drawn for an integrated approach to KM strategy in Indo-U.S IJVs. A summary of
the research findings is presented in the following chapter.
316
D Conclusion
This section presents the conclusion of the study, which outlines the contributions of
this dissertation to existing research from a theoretical and empirical perspective. A
cost/benefit analysis of an integrated Knowledge Management Strategy will be
presented, combined with a critical reflection of the barriers to effective knowledge
management. In a final step, the potential for further research in the relatively
unexplored field of knowledge management in IJVs will be determined.
D.1 Key Findings
In the conceptual framework the primary research questions were defined. These
were the analysis of the direct and indirect knowledge flows between the critical
actors were identified, the environmental analysis of the IJV framework and the
subsequent determination of the dominant internal and external factors affecting the
KM processes. In the final stage, the measures and steps towards an integrated KM
strategy within the IJV framework and its influence on effective knowledge
management were outlined.
In a structured manner inter-organizational relationships between the different actors
and examination of the flow of knowledge between the parent companies and the
IJV was analyzed where the IJV framework and environment of the Indo-U.S. IJV
framework was defined.
Based on the conceptual framework outlined in Section A, the core knowledge
management processes within the IJV framework were defined as:
• Strategic Planning (SM): Developing a global knowledge strategy
• Alliance Management (AM): Inter-organizational knowledge transfer
• International Human Resource Management (IHRM): Managing knowledge
workers in the IJV
• Technology Management (TM): Implementing global knowledge management
tools within the IJV framework
As a first step, the author examined the knowledge management activities and
approach within the IJV framework. Based on this preliminary analysis, the core
knowledge management processes were crystallized. The existing theoretical
literature on knowledge management (KM) in International Joint Ventures (IJVs) is
presented in detail. The aim here is to provide a foundation against which the
empirical findings that are presented in section C could be examined. An assessment
317
of the theoretical considerations for the core knowledge management process and
the status of knowledge management in the knowledge-based Indo-US JVs
completed the research.
In line with the focus of the thesis the IJVs in the case studies with Indo-US JV
firms focussing on professional service sectors (IT, advertising, telecommunication,
insurance, banking and financial services), following standard methodology, formed
the basis of the analysis of the KM processes within the Indo-US JVs. Whilst this
provided valuable and rich information on various aspects of knowledge
management in information-based Indo-US IJV's and gave ground for theory
building it was appropriate to focus on selected case studies to give a realistic
picture of core KM processes in Indo-US JVs.
At the end of each subsection, each of which focussed on a specific core knowledge
management process, the relevant empirical findings were presented. Finally, the
case studies were analyzed for the evidence of the presence or absence of an
integrated knowledge management approach in the IJV. The salient points were then
compared with regard to the research questions posed at the beginning of the study.
In three cases there was a clear evidence of an integrated KM strategy, in one case a
partial approach was detected and two cases there was absolutely no evidence of an
integrated KM strategy. This was examined in detail as a cross comparison of the
Indo-U.S. IJVs on an evidence for an integrated KM strategy was assessed based on
answers to the primary research questions posed at the beginning of this study.
The case studies in Part C illustrated how information-based IJVs and their parent
firms deal with KM and knowledge channels within the IJV framework. The IJV
case studies represent joint ventures with a diverse mix of factors. These included
industry leadership and sector knowledge, business models, technology
infrastructure and approach, and the differences between the HR practices of the US
parent and the Indian partner. These include the strength of the latter in terms of
profound “local” market and customer knowledge, and HR practices that are tailored
to local environment and culture and effective networking in the local business
environment. Despite all these factors there is a clear necessity and intent on the side
of both the parent companies, driven by mutual interest in a successful venture.
While the study showed that knowledge-based IJVs in a complex business
environment realized the need to manage effectively the knowledge within and
between the organizations for maximum benefit, and that most IJVs had knowledge
318
activities in place, few organizations took an integrated approach to KM. The lack of
an integrated approach starting with the strategic planning of the IJV, the day-to-day
management of the knowledge within the alliance, HR policies and TM led to a
haphazard collection of KM initiatives, inconclusive knowledge structures,
incompatible tools, and failed implementation. When management support was not
there, attempts were bound to falter.
This is evident from a cross comparison of the case studies with respect to KM
practices. Though the findings from the research questions raised at the outset
suggest that there is no universal approach to KM within the case studies.
The chasm between KM in theory and practice led to the development of a
conceptual framework for an integrated KM strategy. Within this framework all
aspects of KM can be addressed for full complementarity and with a structured
approach, problems can be anticipated and barriers overcome.
Even if this is a qualitative study, and quantifiable measures for integrated
knowledge management are only discussed en passant, the study does aim to stress
that taking an integrated approach to KM in the IJV will lead to a higher knowledge
transfer and creation within the IJV framework. This in turn will lead to cost savings
by minimizing friction, knowledge wastage, conflicts, misunderstanding and lack of
trust between the partners thereby influencing the overall performance and perceived
success of the IJV.
In addition to the key findings from the case studies there were important findings
from the number of interviews conducted with other companies, as well as with
experts, both from academic and the practical field, as outlined in the annex. These
experts included professors and consultants as well as managers from transnational
operating within the Indian business environment. Typical of the nature of the Indian
subcontinent KM initiatives were more people oriented stressing the major role of
cross-cultural management. The importance of informal channels for knowledge
acquisition, transfer and creation were underlined by many companies. Infrastructure
gaps between the Indian and U.S. partners and the technical incompatibility of the
systems, as well as the mindset of the people are key factors in deciding on major
aspects for a suitable integrated knowledge management. A major aspect that
emerged out of the research was that U.S. parents do not tend to view learning from
their Indian partner as a primary goal for entering the IJV, while the Indian parents
tend to think the IJV as a mode of acquiring knowledge from the parent company.
319
D.2 Contributions to KM literature
The literature on KM in IJV's is sporadic at best and spread over the various aspects
mentioned. The in-depth literature survey on the knowledge management in IJVs
and the core knowledge management process in IJV in this thesis provides an
extensive and resourceful review on the subject.
The literature on strategic processes in IJVs has been collated with research on KM
in organizations to provide a current and complete overview of KM in IJVs. The
state of research on organizational learning within and between organizations is
described at length as the conceptual primer of knowledge management within
organizations. Organizational learning is understood as a primary goal to be
achieved with en effective knowledge management.
Research on strategic process and operative alliance management has been
examined from a knowledge perspective, and the literature on human resource
practices in IJVs has been examined in depth from theoretical and empirical
perspectives in combination with more recent research on knowledge workers and
learning within organizations. Finally the technological aspect of knowledge
management within IJVs was presented.
D.2.1 Implications for further Research
The first and second order findings of this study provide preliminary insights into
the knowledge structures in the IJV and the core knowledge management processes.
Furthermore, the linkages between the processes and organizational interfaces are
described. However, these aspects have to be elaborated individually and from a
holistic perspective.
The mutual dependency of the KM processes should be placed on the research
agenda. Here, the following research questions should be addressed.
• What is the impact of KM processes and the linkages between them?
• How can an integrated KM intensify the effectiveness of individual knowledge
initiatives?
The underlying barriers and enablers for the core KM processes have to be examined
in further detail. Related questions are:
• How can barriers and enablers be anticipated from the start of an IJV?
• How can these be realistically dealt with?
320
• What are other approaches to analyze the key KM processes and the factors that
affect them?
Finally, a major challenge will lie on the measurement, not of knowledge assets per
se, but of the successful knowledge flow within the IJV network in order to increase
the controllability of the process.
Further research needs to be done on the crucial task of KM in IJVs, including the
dependencies between IJV network and its environment-(s). The direct and indirect
integration of cross-cultural issues into research on KM can pose a challenge for
future research in this area. A structured analysis of knowledge and learning related
values, as well as the more mundane reflection of the business environment and
factors affecting it would certainly precede such a question.
D.2.2 Implications for IJV Management
The necessity for a well-defined approach to knowledge management was evident in
all of the case studies examined. That this was often not implemented within the
organizations gave rise to the attempt to create a concept for integrated knowledge
management within the IJV framework.
The findings of this study can, to a certain degree, be generally relevant for
management theory within the situation of an IJV. However, the complexity and
interaction of the KM processes outlined in this study indicate that any sort of "how
to" guide for KM in IJVs, as a panaceas for every situation is not likely to be of
much help.
The key factor for management of all actors of the IJV is the understanding of the
interconnections of all KM processes and structures and the realization of the need
for an integrated approach to KM. The context specificity of KM could lead to the
conclusion that each firm in an IJV has to concur with its partners and find its own
way for attaining optimal effectiveness of the KM processes within the IJV
framework.
Evident in the research is the fact that managers need to focus more attention on the
organization(s) of KMS as a whole, and from there go on to analyze the individual
KM processes. Launching initiatives is the last step in this chain of events.
321
It is critical to examine and address barriers to effective KM openly and in a
structured manner, if necessary with external assistance, after determining the core
KM processes within.
The advent of the “information economy” at the beginning of the last decade,
followed by immense growth of the “information-based” sectors, those industries
that value knowledge and intellectual capital as their primary assets and source of
wealth, substantiated the IJVs in these sectors. A focus on an integrated KM strategy
also has consequences on the managerial tools developed and implemented in these
organizations.
The first generation of knowledge management initiatives focussed on implementing
technology tools aimed at capturing the knowledge within the firm and increasing
the efficiency and speed at which knowledge is retrieved by those who seek it. The
second generation already realized the need for managerial tools to create a
knowledge friendly environment, and to instill a knowledge mindset in its
employees. The term knowledge worker arose, and along with it the need to create
an optimal working environment for them.
A plethora of people-centered initiatives were launched to enhance knowledge
transfer and creation within the organization, and to encourage knowledge workers
to do so. Organizations also found that providing people with the incentives to share
knowledge and enabling them to work in an environment that encourages knowledge
creation was a key driver for business performance. This approach also increased the
effectiveness in the use of the knowledge management tools of the first generation,
by increasing levels of education and acceptance at all levels of the organization.
The next generation of information-based IJVs and their parent firms must realize
the need for an integrated approach to knowledge management at all levels of the
IJV framework in order to guarantee the best conditions for a successful and
prosperous partnership.
322
E Annex
E.1 List of Abbreviations
AAR
After Action Reviews
AM
Alliance Management
APHQ
Asia Pacific Head Quarters
BS
Business Strategy
BU
Business Unit
CCM
Cross Cultural Management
CCT
Cross Cultural Training
CEO
Corporate Executive Officer
CIO
Corporate Information Officer
CKO
Corporate Knowledge Officer
COO
Corporate Operating Officer
CP
Communities of Practice
DSPML
DSP Merrill Lynch
HCW
Host Country Workforce
HQ
Head Quarters
HR
Human Resource
HRM
Human Resource Management
IBV
Information Behavior and Values
IHRM
International Human Resource Management
IJV
International Joint Venture
IMP
Information Management Practice
IO
Information Orientation
IP
Intellectual Property
IS
Information Systems
ISF
Information-based Service Firm
IT
Information Technology
323
ITP
Information Technology Practice
JMMS
JM Morgan Stanley
JV
Joint Venture
KM
Knowledge Management
KMS
Knowledge Management Systems
KO
Knowledge Officer
KMP
Knowledge Management Process
NYL
New York Life
MI
Max India
MNYL
Max New York Life
MIS
Management Information Systems
MNC
Multinational Corporation
ML
Merrill Lynch
MS
Morgan Stanley
OM
Organizational Memory
O&M
Ogilvy and Mather
OS
Organizational Structure
PA
Performance Appraisal
PR
Public Relation
PRQ
Primary Research Question
PS
Professional Service
PSF
Professional Service Firm
PSJV
Professional Service Joint Venture
R&D
Research and Development
SBU
Strategic Business Unit
SM
Strategic Management
SP
Strategic Planning
TBP
Transfer of Best Practices
324
TM
Technology Management
TQM
Total Quality Management
325
E.2 Annex on Govt. of India Policies and Rules1
Government Policy on Foreign Direct Investment
The role of foreign direct investment (FDI) was recognized in India in its Industrial
Policy Resolutions of 1948 and 1956 but not in key industries, which were reserved
for exclusive growth in the public sector till recently. The Foreign Exchange
Regulation Act (FERA), 1973, put, barring certain exceptions, a ceiling of 40
percent on foreign equity participation in India. Multinational corporations, which
did not want to dilute their stake, were asked to leave the country. FERA was a
major deterrent to FDI in India till the New Industrial Policy) NIP) or 1991 (see Box
1 for major elements of government policy on FDI and MNCs. As seen from Box 1,
the guidelines for foreign investment rules still vary depending on the area/sectors of
investment shown in column 1.
Specific high technology and priority industries are now given automatic approval to
conclude foreign technology agreements within certain guidelines. Permission is no
longer necessary for the hiring of foreign technicians and the testing of locally
developed technologies outside India. The newly created Foreign Investment
Promotion Board (FIPB) negotiates with a number of large international firms to
promote substantial investment, improved access to advanced technology and world
markets. As discussed late, bulk of the investment in the 1991 liberalization era
came through the FIPB route (Table 1). Eighty-two percent (US$ 4,608 million out
of US$ 5,601 million) of direct investment or 22 % (US$ 4,608 million out of US$
20,7042 million) of foreign investment flows during 1991-97 came through the
FIPB. Over 50% of the portfolio are by FIIs.
Till 1991 FDI accounted for a marginal share in total foreign capital in India.
Though the FDI approvals increased substantially during 1991-96 to a total of US$
29,608 million, the actual inflows at US# 5,690 million accounted for only one-fifth
of the approved amount (Table 2). There is huge gap between FDI approvals and
actual flow of FDI during 1991-96. While public policy consistency was an issue in
view of political instability, the major worrisome factor is the poor infrastructure.
1 Venkata Ratnam, C.S. (1998): The International Journal of Human Resource Management, 9 (4
August), 567-589 and Tables appended to represent latest available figures.
326
Box 1: Extent of permissible foreign equity by NRIs/OCBs/PIOs/FIIs
Areas of investment
1.
2.
3.
NRIs/OCBs/PIOs
FIs/FIIs
35 priority industries
announced in July 1991
b) 9 high priority industries
in metallurgical and
infrastructure
sector
announced in Dec. 1996
c) 13 priority industries
announced in Dec. 1996
d) Export/trading/star
trading house
100%
equity,
repatriable,
automatic approval by RBI
74%
equity,
repatriable,
automatic approval by RBI
51% equity, repatriable, automatic
approval by RBI
74% equity, repatriable, automatic
approval by RBI
51% equity, repatriable, automatic
approval by RBI
Investment up to 100%
51% equity, repatriable, automatic
approval by RBI
51% equity, repatriable, automatic
approval by SIA/DZ (EPZ)
100% EOUs and units in
FTZ and EPZ, software
and hardware technology
parks
Sick industries
100% equity, automatic approval
by SIA/DC (EPZ)
100% equity, automatic approval
by SIA/DC (EPZ)
100% private placement prior
approval by RBI
50% automatic approval by
SIA/FIPB
up to 49% with approval in basic,
cellular mobile and paging, VSAT
and other wireless services and up
to 51% with approval in other
value added services (not to be
offset against the FDI in the
investment company with Indian
ownership)
51% equity automatic approval
up to 100% with approval
up to 100% equity, repatriable,
prior approval by SIA
50% automatic approval by
SIA/FIPB
up to 49% with approval in basic,
cellular mobile and paging, VSAT
and other wireless services and up
to 51% with approval in other
value added services (not to be
offset against the FDI in the
investment company with Indian
ownership)
51% equity automatic approval
100% equity automatic approval
up to 51% equity, case by case
approval by SIA
up to 24% repatriable, prior
approval
by
SIA,
export
obligations
100% equity on repatriation basis,
automatic approval
up to 24% repatriable, prior
approval
by
SIA,
export
obligations
No foreign investment is allowed
except for company property
up to 100% with approval
P to 40% with approval
up to 40% with approval
Up to 20% with approval
a)
4.
Mining
5.
Telecommunication
6.
7.
8.
9.
Entertainment electronics
Power
Medical clinics, hospitals,
shipping, oil exploration,
deep sea fishing, ind. with
license
Industries reserved for
SSI
10.
Housing, real estate,
business
centers,
infrastructure facilities
11.
Domestic
operations
12.
Banking services
air
taxi
327
13.
Non Banking Financial
Companies
up to 51% with no conditions, up
to 100% with conditions
up to 51% with no conditions, up
to 100% with conditions
14.
a ) Disinvested share of
PSEs
b) Units in UTI
c) Public sector mutual
funds
d) Private sector mutual
funds
Portfolio
investment
(investment in shares &
debentures)
NRIs/OCBs are permitted to
invest on these shares/units/funds
on a repatriable basis through both
primary and secondary markets
Only FIIs are permitted to invest
in these shares/units/funds on a
repatriable basis through both
primary and secondary markets.
FIIs are also allowed to invest on
dated govt securities under certain
conditions
Only FIIs are permitted to invest
subject to individual ceiling of
10% and collective ceiling of 24%
in both listed and unlisted
companies. 100% investment in
debt securities of companies are
registered FII debt funds are also
allowed
15.
Individual ceiling 1%, collective
ceiling 5%, relaxable to 24% by
General Body Resolution only in
listed company stock share.
Permitted to invest in unlisted
companies
Source: Economic Survey, 1996-7, Ministry of Finance, GOI, p. 112.
NRIs = non resident indians PIOs = persons of indian origin; EOU = export oriented unit; OCBs =
overseas corporate bodies; Fis - foreign investors; EPZ = export processing zone; FIIS = foreign
institutional investors; SIA = sect for industrial approvals; FIZ = free trade zone; VSAT = very
small aperture terminal; DC(EPZ) = development commissioner, export processing zone
328
Table 1. Foreign investment flows by category1
million)
(US$
April-Nov
A.
B.
Direct Investment
a. RBI automatic
route
b. SIA/FIPB
route
c. NRIs (40%&
100%)
d. Acquisition of
Shares $3
Portfolio
Investment
a.
FIIs4
b. Euro-equities5
c.
Offshore
funds
and
others
Total (A+B)
1992-3
1993-4
1994--5
1995-6
1996-7
1997-8
1998-9
AprDec2
1998-9
AprDec2
1999-002
315
42
586
89
1314
171
2144
169
2821
135
3557
202
2462
179
1610
109
1330
120
222
280
701
1249
1922
2754
1821
1252
867
51
217
442
715
639
241
62
48
48
-
-
-
11
125
360
400
201
295
244
1
240
3
3567
1665
1520
382
3824
1503
2082
239
2748
2009
683
56
3312
1926
1366
20
1828
979
645
204
-61
-390
270
59
-722
-791
15
54
1341
831
401
109
559
4153
5138
4892
6133
5385
2401
888
2671
Source: Reserve Bank of India, Economic Survey, 1999-2000, Prepared by Economic Division of
Ministry of Finance, Govt. of India.
Notes
1. Figures shown in this table are based on actual inflows.
2. Provisional.
3. Relates to acquisition of shares by Indian companies by non-residents under Section 29 of
FERA
4. Represents fresh inflow/outflow of funds by FIIs.
5. Represents GDR amounts raised abroad by Indian Corporates
Over 50 % of the FDI approvals in the post-1991 period are in high-priority sectors
where government even conceded guaranteed return on investment, allowed the
option of 100% equity, joint ventures with state governments/public or private sector
firms, etc.
The share of FDI inflows in India in the total FDI inflows to all developing countries
has improved from 0.34 % in the 1991 to 1.76 % in 1995 (Table 3). This can be
329
attributed to the foreign-investor-friendly policies of the NIP of the Government of
India.
Gopinath1 classified the period from 1948 to date into four phases in terms of the
foreign investment policy regime in India as following:
1. from independence to the emergence of internal economic crisis in the late 1960s
(1948-66), which was marked by a cautious approach to foreign capital;
2. from 1967 till the second oil shock in 1979, characterized by a highly regulated
regime;
3. from 1979 to 1990 with progressive attenuation of regulations, and ;
4. The reform period from 1991 onwards, signifying a liberal foreign investment
environment.
Table 2. Direct foreign investment: actual inflows vs. approvals
Approvals
Rs. Crore
US$ million
Actual Inflows
Rs. Crore
US$ million
Actual as % of
approvals
1991
1992
1993
1994
1995
1996
1997
1998
Total
(1991-98)
739
325
5256
1781
11189
3559
13590
4332
37489
11245
39453
11142
57149
15752
28783
6975
193648
55111
351
155
477
675
233
13.1
1786
574
16.1
3009
958
22.1
6720
2100
19
8431
2383
21.4
12085
3330
21.1
9116
2230
32
42173
11963
21.7
Source: Reserve Bank of India, Economic Survey, 1999-2000, prepared by Economic Division of
Ministry of Finance, Govt. of India
The approval and actual figures include NRI Direct Investment approved by RBI but exclude flows
under acquisition of shares of Indian Companies by non-residents.
1 Gopinath, T. (1997): Foreign Investment in India: Policy Issues, Trends and Prospects. Reserve
Bank of India Occasional Papers, 8(2&3), 435-470.
330
Table3. FDI inflows, by host region (US$ million)
Country
1992
1993
1994
1995
1996
1997
1998E
China
India
Indonesia
Korea, Republic of
Malaysia
Philippines
Thailand
All developing countries
(including China)
Share of India in all
Developing countries (%)
11156
233
1777
727
5183
228
2114
51108
27515
550
2004
588
5006
1238
1805
78813
33787
973
2109
809
4342
1591
1364
101196
35849
2114
4346
1776
4178
1478
2068
106223
40800
2426
6194
2325
5078
1517
2336
135343
44236
3351
4673
2844
5106
1222
3733
172533
45460
2258
-356
5143
3727
1713
6969
165936
0.7
1.0
2.0
1.8
1.9
1.4
0.4
Source: Taken from World Investment Report 1999, United Nations, in Economic Survey, 19962000 by the Economic Division of Ministry of Finance, Govt. of India.
Figures for India in this table may differ from those in other tables because of the differences in
coverage and source of information.
E = Estimate
331
E.3 Interview Formats
E.3.1 Parent Company Employees
General questions about the IJV
•
•
•
•
•
•
•
History
Ownership
Organization Structure ; Which organization structure does it resemble
Strategic Business Planning
Personnel structure – Are there any expatriates?
Role of the parent in the IJV
Interaction of JV employees with the parent company
Knowledge Management
•
•
•
•
•
•
•
Define the KM strategy in the parent firm
Define the technology strategy in the parent firm
How was KM implemented in the IJV
What was the importance placed on KM in the IJV?
What are the knowledge channels to the IJV?
How is the reporting structure to the IJV defined?
Does the parent company support knowledge transfer incentives?
Knowledge Management in the parent firm
• Does the firm know about the KM strategy of the partner firm?
• Was this a factor in the IJV negotiations?
E.3.2 CEOs of the Indo-U.S. IJVs
Knowledge Management in the IJV
• Is there a liaison office?
• How do you learn (and teach) in this company?
• Have you learned enough from the parent companies?
• Have they learned from you?
• Whom does the JV top management consist of?
• Are there any expatriates / consultants here?
• Define initiated KM processes. How is knowledge stored and passed on?
• Who has access to knowledge within the firm?
332
KMP Processes
• Is there Technology sharing?
• Is there a JV parent interaction?
• Is there personnel movement?
• Is there a strategic integration?
• Are there any strategic linkages between the JV and the parent?
• How often do you meet / confer with the parent?
• Describe the interaction / reporting channels with the parent firm (AP HQ)
• How much of the knowledge is stored with the people and how much is left in
the company?
• Value of knowledge
E.3.3 HR Heads of the Indo-U.S. IJVs
Basic Questions
• How many employees are in the IJV?
• How many employees are employed in the parent company (A) and Parent
Company (B)?
Reporting Channels
• How is the reporting structure built up between the IJV and the parent
companies?
• How often do the IJV Hr head and the Parent company head meet?
• Which parent’s HR policies does the IJV follow?
• Which policies were applied to the IJV?
• How were these policies adapted to the local environment?
• Who does the HR Head report to in the parent companies?
HR Policies
• How are the HR policies adapted to the local situations
• What training programs of the parent company can the IJV employees avail of?
• What training programs must they avail of?
• How is the compensation structure set up?
• Is there the possibility of job rotation between the IJV and the parent companies?
Expatriate Management
•
•
•
•
How many expatriates are currently employed/ were employed in the IJV?
U.S. parent firm: What programs for expatriate acculturation are available?
What cross-cultural diversity programs are available within the firm?
What experience has the parent company had with expatriates so far?
333
Compensation
• How are compensation guidelines adapted to the local circumstances?
• Which parent company (U.S. / India) are the compensation guidelines accorded
to?
Performance Appraisal
• How is the performance appraisal system set up in the IJV/ parent company?
• How often do performance appraisals take place?
E.3.4 CIOs / CTOs of Indo-U.S. IJV
Technology Strategy:
• Which IT guidelines does the IJV follow?
• Who does the CIO of the IJV report to?
• How is the technology flow from the parents to the IJV
• Who delivers the technical infrastructure for the IJV?
• How was the technical infrastructure set up?
• What infrastructure/ technical problems arose during the setup phase?
• Does the IJV have access to the parent companies' intranets?
• What firewalls are in place?
• Are any B2E portals in place/ and if so how and when were they set up?
Parent-IJV Relationship:
• How was the technical infrastructure implemented in Asia?
• In which order (countrywise?)
• What adaptations have been made to the parent company knowledge
management strategy?
• In how far do these adaptations differ from subsidiary to IJV?
Information Management:
• How are the information flows between the parent companies and the IJV set up?
• How is the information flow between the IJV and U.S. company AP
Headquarters?
Knowledge Management Strategy
•
•
•
•
How was the new Technology accepted in the beginning?
Where was the most resistance to be found?
How was this resistance countered?
Where were the technology champions to be found?
334
•
•
•
•
How were these supported and encouraged?
How was new technology communicated to the employees?
Was this strategy any different than in other IJVs/ subsidiaries?
What was the biggest hurdle to implementing knowledge management tools in
the Indo-U.S. IJV?
• What lessons can be learned from this experience for future IJVs?
335
E.4 Interview Partners from diverse Indian IJVs
The following is a list, sorted alphabetically, of Companies Interviewed. The
selection of the companies followed the criteria outlined in section A. On an average
2-3 executives from each company were interviewed in line with the conceptual
framework of the study (Section A) and questionnaire based on the previous section,
for 1-2 hrs during the period September 1999 - October 2000.
Company
AIG
AMSOFT Information
Services
Avnet Max
AT & T
Bharti BT Satellite
Communication Services
Birla AT & T
BT
Business Consulting Group
Comsat Max
DeLoitte Touche Tohmatsu
DSP Merrill Lynch
Investment Banking
Equifax Venture Infotech
Equifax
Ernst & Young Knowledge
Management Services
Fisher Rosemount
GE Capital
GE Capitals
Georg Fischer DISA
Global One
Hindusthan Thompson
Associates
IBM India
Business Sector
Location
Insurance
New York
IT
Bangalore
IT
New Delhi
Telecommunications
Pune, New Jersey and Seattle
Telecommunications
Bangalore
Telecommunications
Pune
Telecommunications
Mumbai
Management
Consultants
Telecommunications
Mumbai
New Delhi
Mumbai
Mumbai
Business Services /
Finance
Mumbai
IT Services
Mumbai
Financial Services
Atlanta
Management
Consultants
Mumbai
Mumbai
Mumbai
Business Services /
Finance
Financial Services
Gurgaon, Haryana
Hartford, CT, USA
Bangalore
Bangalore
Telecommunications
Madison, N.Y.
Advertising
Mumbai and Bangalore
IT
Bangalore
336
India Lease Development
JM Financials
KPMG Corporate Finance
KPMG Corporate Finance
Lucent
Lucent Technologies Finolex
Mahindra British Telecom
Max Atotec
Max India
Merril Lynch
MGF Group
Modi Xerox
Modicorp
Modicorp Learning Institute
J.P. Morgan Stanley
Securities
Morgan Stanley
Ogilvy Consulting
Ogilvy & Mather
Advertising
Ogilvy & Mather worldwide
Pricewaterhouse Coopers
Prudential ICICI Asset
Management
Rediffusion Dyer Brand
Communications
RPG Enterprises (Head
Quarters)
Sprint RPG India
Business Services /
Finance
Mumbai
New Delhi
Management
Consultants
Management
Consultants
Telecom service
platforms
Telecom service
platforms
Telecommunications
Bangalore and New Delhi
Technology
New Delhi
Group
Broad spectrum of
Services
Financial Services
New Delhi
New York and Singapore
Delhi
New Delhi
Technology
New Delhi
Group
Broad Spectrum of
Services
New Delhi
Business Services /
Asset Management
Mumbai
Financial Services
New York and Hong Kong
Management
Consultants
Management
Consultants,
Advertising
Advertising
Mumbai
Mumbai
New Delhi
Mumbai and New Jersey
Pune
Pune
New Delhi
New York
Management
Consultants
Asset Management
Bangalore and Mumbai
Business Services
Mumbai
Broad spectrum of
business
Mumbai
Telecommunications
New Delhi
Mumbai
337
TATA AIG Risk
Management Services
TATA BP Solar
TATA Group
TATA Honeywell
TATA Liebert
TATA Lucent Technologies
TATA Lucent Technologies
TATA Itochu Nelito
Systems
The Associates
J. Walter Thompson
WIPRO GE Medical
Systems
Young and Rubicam
Insurance
Mumbai
Technology
Bangalore
Broad spectrum of
business
IT / Technology
Mumbai
Technology
Thane
Telecom Service
platforms
Telecom Service
platforms
Technology
Bangalore
Mumbai
New Delhi
Thane
Management
Consultants
Advertising
New Delhi
IT / Technology
Bangalore
Advertising
New York
Bangalore
338
E.5
Case Study Companies
1.
DSP Merrill Lynch
Tulsiani Chambers, WestWing, 11th Floor
212 Backbay Reclamation, Mumbai 400 021
India.
Tel : +91 22 285 3793
Fax: +91 22 204 8518
2.
JM Morgan Stanley Securities Ltd
Forbes Building, Charanjit Rai Marg
Mumbai 400 001, India
Tel: +91 22 204 6600
Fax: +91 22 204 6607
3.
Max New York Life Insurance Company Ltd.,
Max House, 1 Dr. Jha Marg
Okhla, New Delhi 100 020, India
Tel: +91 11 693 3619
Fax +91 11 693 2754
4.
Birla AT & T Communications Ltd.,
Sharda Complex, 11/1 Erandwane
Off Karve Road, Pune 411 004, India
Tel: +91 212 332 001
Fax: +91 212 337 710
5.
Sprint RPG India Ltd.,
Gulmohar House, 161/B-4 Gautam Nagar
Yusuf Sarai, New Delhi 110 049, India
339
Tel: +91 11 669 669 ; Fax: +91 22 6858308
6.
Ogilvy Consulting
Trade Center, Senapati Bapat Marg, Lower Parel
Mumbai 400 013, India
Tel: +91 22 491 3877 ; Fax: +91 22 491 3989
340
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CURRICULUM VITAE
Curriculum Vitae
Anita Subramanian
Date of Birth: 06 May 1975 in Amsterdam, The Netherlands
Education
1998 – 2002
Doctoral studies and completion of doctoral thesis, University
of St. Gallen, Switzerland.
1999-2000
Field research in India.
2000
Visiting scholar at Temple University, Philadelphia, USA.
1993 – 1998
Studies
in
Business
Administration
/
Economics
(Lic.Oec.HSG), University of St. Gallen, Switzerland.
1992
Studies at Vesalius College, Vrije Universiteit, Brussels,
Belgium.
1992
Swiss Matura at Gymnasium Baumlihof, Riehen, Basel-Stadt,
Switzerland.
Professional Experience
Since 2002
JKP Program, UBS AG, Zurich, Switzerland
2001
Experienced Analyst, Accenture AG, Zurich, Switzerland
1998 – 1999
Assistant to Prof. Li-Choy Chong at the University of St.
Gallen, Research Institute for International Management, FIM,
Asia Research Centre
1993 - 1995
Summer Associate (Praktikum) with Ciba AG, Basel,
Switzerland
Gedruckt bei Salinas Press AG, Walisellen
www.salinaspress.com
Auflage 10 Ex., Februar 2003