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A Knowledge-based Theory of the Multinational Economic Organization
Abstract
The study of the MNC has been deeply influenced by transaction-cost economics over the last four decades (Buckley and Casson, 1976; Dunning, 2000; Hennart, 1982; Rugman, 1981). Coase's (1937) analysis of the boundaries of the firm became the foundation of one of the most important and enduring areas of international business research: the study of internalization and the theory of the multinational corporation. However, recent research has argued that a capability-based approach to the MNC provides a more complete analysis than traditional internalization theory (Cantwell, 2014; Teece, 2014).In this paper, we argue that efforts to subsume the analysis of internalization within the study of capabilities exhibit a fundamental flaw. They neglect a critical distinction Williamson (1999) made between economic organization and the firm. Drawing on concepts from the knowledge-based view of the firm, we develop a more comprehensive approach to multinational economic organization that deals with questions of both scope and form of organization.
... First, this study contributes theoretically to the current research by applying the knowledge-based view theory to assess the performance of gig employers. It is evident in the literature that proliferation of new information sources and technology placed pressure on companies to rapidly update their skills by exploiting external expertise (Holland & Brewster, 2020;Low & Ho, 2016). Companies have begun to rely more heavily on external networks for new information, and multinational corporations have begun to use their global reach to gain access to a broader range of knowledge sources (Alcácer, Cantwell, & Piscitello, 2016). ...
... Companies have begun to rely more heavily on external networks for new information, and multinational corporations have begun to use their global reach to gain access to a broader range of knowledge sources (Alcácer, Cantwell, & Piscitello, 2016). This focus on external knowledge presented researchers with a significant theoretical challenge of how public knowledge could help a company to develop firm-specific competitive advantages and the knowledge-based view theory answered this question by combining strategic capability, knowledge acquisition and application capabilities (Alcácer et al., 2016;Galunic & Rodan, 1998;Low & Ho, 2016). Second, this study contributes practically by detailing how employers are gradually increasing their dependence on white-collar gig workers by designing and improving performance metrics, which facilitate the engagement of gig employees. ...
... In the 1980s, a firm's resource-based strategy demonstrated the vital role of organisation-specific strategic assets in achieving a competitive advantage (Wernerfelt, 1995;Winter, 1998). In the 1990s, however, the proliferation of new information sources and technology placed pressure on companies to update their skills rapidly by exploiting external expertise (Low & Ho, 2016). Companies began to rely more heavily on external networks for new information, and multinational corporations began to take advantage of their global reach to access a wider variety of knowledge sources (Buckley & Casson, 1985). ...
The main purpose of this paper is to explore the performance of white-collared gig workers using three theoretical perspectives: knowledge-based view theory, employee engagement theory, self-determination theory. The study investigates the relationship between intellectual capital, collective cognitive engagement, intrinsic motivation, and knowledge management as antecedents to the performance of gig workers. Furthermore, it investigates whether a moderation effect of intrinsic motivation using game elements can improve the performance of gig workers. This study uses primary data collected over 8 weeks from January 2020 to Feb 2020. This study collects self-administered cross-sectional primary data from an online platform that currently engages white-collar gig workers or has engaged them in two previous years (2018 and 2019) in either one or more platforms. This study also develops a conceptual model to measure the performance of white-collared gig workers using an extension of the three theoretical perspectives.
... Meanwhile, it is also difficult to be cracked, imitated, and chased by other competitors. Therefore, the knowledge base is not only a decisive resource for firms but also an important component of their sustainable competitive advantage (Yu and Yan, 2021;Low and Ho, 2016). A firm with a stronger knowledge base can predict the future more accurately. ...
... (1) This study promotes the integration and development of some theories such as knowledge base, exploratory innovation, exploitative innovation, and data mining. Knowledge base are regarded as an important source of firms' sustainable competitive advantage (Yu and Yan, 2021;Low and Ho, 2016). Based on the knowledge-based view and data mining and other related theories, this study constructs the theoretical model of the relationship between the knowledge base and dual-innovation performance of firms and analyzes the influence of knowledge-base features on the dual-innovation performance of firms in different clusters. ...
Dual innovation, which includes exploratory innovation and exploitative innovation, is crucial for firms to obtain a sustainable competitive advantage. The knowledge base of firms greatly influences or even determines the scope, direction, and path of their dual-innovation activities, which drive their innovation process and produce different innovation performances. This study uses data source patents obtained by 285 focal firms in the Chinese new-energy vehicle industry in the period 2015–2020. Five knowledge-base features are selected by analyzing the correlation and multicollinearity, and four different firm clusters are found by using the k-means clustering algorithm. Based on the classification and regression tree (CART) algorithm, we mine the potential decision rules governing the dual-innovation performance of firms. The results show that the exploratory innovation performance of firms in different clusters is mainly affected by two different knowledge-base features. Knowledge-base scale is a key factor affecting the exploitative innovation performance of firms. Firms in different clusters can improve their dual-innovation performance by rationally tuning the combination of knowledge-base features.
... Although insight from the works in literature can be drawn upon, nevertheless, whether institutional accounting practices underlies KM effect on organization performance is under-researched. Particularly in Malaysia, empirical research examining institutional accounting information system as mechanisms through which the decomposed KM capabilities influences institutional performance is scarce (Zaied, 2012;Eréndira et al., 2017;Low & Ho, 2016;Zoogah et al., 2015). As KM investigation in organizations is not currently tailored towards institutional accounting practices (Cepeda & Vera, 2007;Ayodele et al., 2019), it is difficult to comprehend the practice involvement in organization KM strategies and investigating the role played by the practice in KM matters becomes worthwhile. ...
... The reason is that expertise provides the most excellent ability to sustainable differentiation that culminates in superior performances in organizations (Zaied, 2012;Nieves & Haller, 2014;Ramachandran et al., 2013). Interestingly, past studies define organizations as bodies that produce, integrate, and allocate knowledge based on the knowledge-based theory (KBT) of the firm (Grant, 1996;Sveiby, 2001;Low & Ho, 2016;Nonaka et al., 2018). A knowledge-based strategy is an approach that studies KM with particular importance placed on the intangible knowledge resource, specific knowledge capability or embedded expertise in institutions processes and infrastructures (Sveiby, 2001;Nieves & Haller 2014;Martín-de Castro, 2015). ...
The study highlights the part of institutional accounting practices in the relationship between specified KM capabilities and institutional performance. A theoretical model was tested based on the insight from literature and knowledge-based theory (KBT). The data collected from a survey of 322 staff in knowledge-based organizations (KBOs) were analyzed to test the extended model using partial least squares structural equation modeling approach. The result depicts that greater levels of specific KM infrastructure and process capability would positively influence institutional accounting management practices and, consequently organizational performance. Unlike KM process capability, KM infrastructure capability has a positive and significant impact on organizational performance. The study provides a new understanding to management and practice on the vital role played by institutional management accounting practice in KM success in Malaysia. The research offers fresh insight into further studies in diverse settings. The research is insightful as it deviates from the over-researched context in KM literature to extricate the role of accounting in the business KM strategy.
... KBV sees knowledge as a central resource for value creation which is stimulated by the interaction between people and the exchange of ideas, feedback and so forth (Sveiby, 2001). The discussion of Low & Ho (2016) shows that value creation relies on such internal capabilities to create knowledge but simultaneously also on the ability to manage external relationships with regard to knowledge transfer. Some scholars argue that based on the resource-based view of the firm (RBV) (Barney, 1991;Wernerfelt, 1984Wernerfelt, , 1995, KBV has been developed (Grant, 1996(Grant, , 1997Kogut & Zander, 1992). ...
... Especially, with regard to the implementation of RPA software bots, one can even critically pose the question whether and how long specific competencies in this context are required internally in a company and whether a set of different competencies is required for the operational side of RPA. The ability to make us of external sources of knowledge and relationships with regard to digital transformation might hence be important issue for the vast majority of firms (Low & Ho, 2016). Questions related to this and important for further research might be: ...
Purpose
Digital transformation of organizations has major implications for required skills and competencies of the workforce, both as a prerequisite for implementation, and, as a consequence of the transformation. The purpose of this study is to analyze required skills and competencies for digital transformation using the context of robotic process automation (RPA) as an example.
Design/methodology/approach
This study is based on an explorative, thematic coding analysis of 119 job advertisements related to RPA. The data was collected from major online job platforms, qualitatively coded and subsequently analyzed quantitatively.
Findings
The research highlights the general importance of specific skills and competencies for digital transformation and shows a gap between available skills and required skills. Moreover, it is concluded that reskilling the existing workforce might be difficult. Many emerging positions can be found in the consulting sector, which raises questions about the permanent vs temporary nature of the requirements, as well as the difficulty of acquiring the required knowledge.
Originality/value
This paper contributes to knowledge by providing new empirical findings and a novel perspective to the ongoing discussion of digital skills, employment effects and reskilling demands of the existing workforce owing to recent technological developments and automation in the overall context of digital transformation.
... We anchor our research in the knowledge-based view of the firm (Low and Ho, 2016;Lu et al., 2014;Habbershon and Williams, 1999;Nahapiet and Ghoshal, 1998;Grant, 1996) and examine the contingent role played by family firms' SEW considerations and the heterogeneity within. We test our prediction using a proprietary, longitudinal panel data set of 213 EMNEs from India, of which 175 are family oriented. ...
... Large and diverse countries such as India house heterogeneous populations not just across various regions, but even within cities and regions, and therefore, firms have to offer multiple products to satisfy these diverse customer segments. When firms operate in multiple product markets, they create structures to integrate and improve the efficiency of information and knowledge flows within the organization, and these organization-specific integrative capabilities are important for the development of productive capabilities (Low and Ho, 2016). Since EMNEs are 'latecomers' as compared to MNEs from developed countries, the knowledge gained through extensive domestic operations in complex and dynamic emerging economies is likely to overcome some of the disadvantages of inexperience in international operations, leading to greater OFDI undertaken by them. ...
Despite increasing research on multinationals from emerging economies (EMNEs), our understanding of the antecedents of their international expansion is still limited. In this study, we seek to examine whether knowledge gained from operating in their complex and diverse domestic markets deter or aid the outward foreign direct investments of EMNEs. As family firms are dominant in emerging economies, we further explore how heterogeneity within family firms moderate this relationship. We conduct our investigations using a proprietary longitudinal dataset comprising 213 EMNEs from India featuring in the S&P Bombay Stock Exchange (BSE) 500 index covering a six-year period from 2007-08 to 2012-13, of which 175 were family EMNEs and find supporting evidence for our theoretical predictions.
... This rationale led to the development of the Knowledge-Based View (KBV) of the firm (Grant, 1997), which postulates that a heterogeneous knowledge base and capabilities are the main determinants of a firm's performance in a knowledge-based economy (Eisenhardt & Santos, 2002). According to knowledge-based theory, a firm's success depends upon its capabilities of knowledge production and relationship management for external knowledge transfer (Low & Ho, 2016). Pereira and Bamel (2021) have illustrated the temporal evolution of research themes associated with the Resource-Based View (RBV) and Knowledge-Based View (KBV). ...
Research into the Resource-Based View (RBV) and Knowledge-Based View (KBV) of firms has evolved over the last 30 years from being focused on the control of physical resources, through knowledge-based digital resources, to innovation. This paper considers a service perspective of RBV-KBV to help explain differences in the competitive advantage attributable to digital and physical resources. Such an understanding helps explain the evolution of RBV-KBV research over the last 30 years and strengthens the links between the established research themes of RBV, KBV, and innovation. Competitive advantage can be created and retained through digital resources but sustainable competitive advantage for digital service firms relies on those physical resources that provide the dynamic capabilities to innovate, and so continually develop the digital resources.
... Companies internalise activities that they perform with more excellent capability than the market (Teece, 2014). A recent line of research integrates the three theories, arguing that capabilities and transaction costs are dynamically interconnected and influenced by past experiences, where governance choices affect organisational capabilities and vice versa (Low & Ho, 2016). ...
... Office hypothesis or office hypothesis of corporate administration was proposed by Alchian and Demsetz (1972) and Jensen and Meckling (1976). They argue that firms exemplify progression of legally binding connections between people (Low & Ho, 2016). Yet, traditional financial aspects consider the firm as a solitary item element to boost benefit (Carías Vega & Keenan, 2016). ...
Since public sector reform initiatives, public accountability and transparency have advanced democracy and good governance on managing state finances. State financial management mechanism involves regional policies and fiscal decentralization trend in the devolution of responsibility for empowerment from central to local units of governments, but the governance face challenges to effectively manage and control the use of public funds that best meet citizen’s needs. This study determines the effect of public accountability and transparency on the management of state finances in Indonesia, as well as the extent to which public accountability and transparency affect the management of state finances. Based on a descriptive quantitative case-oriented research approach, 60 survey interviews are collected and analyzed with multiple linear regression analysis techniques. This study concludes that Public Accountability partially has a significant effect on the Financial Management Mechanism. On the other hand, partially public transparency has no significant effect on the State Financial Management Mechanism. Cumulatively, some aspects of Public Accountability and Transparency have a significant effect on the State Financial Management Mechanism. If unaccountability in decentralised administrative model prevails, problem of ineffective policy output may persist to impair sustainable finance and public values for good governance in times of covid-19 crisis related society.
... Since then, there has been a considerable expansion in the knowledge management literature, including parallel interests in its interrelated concepts; knowledge generation, representation, accessibility, and transfer (Lahti and Beyerlein, 2000). There have also been a proliferation of research into various dimensions of knowledge, including knowledge types (Forés and Camisón, 2016), knowledge creation process (Nonaka and Toyama, 2015), knowledge-based theory (Nonaka, Von Krogh and Voelpel, 2006;Low and Ho, 2016;Nikolaou, 2019); knowledge transfer (Manfredi Latilla, 2018), knowledge sharing (Obembe, 2010;Ahmad and Karim, 2019), organizational epistemology (Tsoukas, 2005), knowledge acquisition (Yli-Renko, Autio and Sapienza, 2001), knowledge taxonomies (Saeed and Sattar Chaudhry, 2002), and enabling contexts (Choo and Alvarenga Neto, 2010;Fletcher, 2014). Due to the significant progresses in the field, knowledge creation is often positioned in the literature as a core dynamic asset of organizations, which allows internal social actors to interact and exchange relevant knowledge. ...
In the last few decades the relevance of knowledge management to organizations has become increasingly apparent. However, there are varying levels of emphasis on researching different aspects of this multidimensional construct. One such dimension is knowledge sharing, which is extensively researched from an impact perspective but with limited research on understand dynamic interactions of actors. In this research, we aim to explore factors influencing knowledge sharing among top and middle managers during the strategy communication process. We further draw on the concept of ‘ba’ as an alternative interpretive tool for understanding managerial interaction dynamics. Adopting a qualitative approach, 32 semi-structured interviews were conducted across a single case Kuwaiti public sector ministry and collated data presented as a thematic narrative to capture managerial perspectives. The findings indicate that organizations benefit more from aligning heterogenous groups within common collective spaces, and that social spaces or contexts are critically important for sharing knowledge pertinent to successful execution of strategies. Furthermore, the propensity to share knowledge was found to be dependent on the tribal affiliations of individual actors, and knowledge sharing dispositions was impacted by prejudices and social stereotypes. The research proposes practical considerations for organization management to foster knowledge exchange among the workforce.
... Proponents of this theory argue that knowledge-based resources, since they are difficult to imitate and obtain, are crucial in creating a company's competitive advantage. The organization is in fact conceived as a set of knowledge where the value is generated by the ability to disseminate this knowledge (Low and Ho, 2016). Knowledge spreads and is generated in a community of subjects in an organized context: organizational culture, procedures, documents, IT systems, human resources, are various aspects that fall within the KBV. ...
... In the international business context, it is the role of organisations to ascertain that knowledge once created, is transferred effectively within the intra MNC network and ensures effective management of this intra organization exchange (Kogut & Zander, 1992;Buckley & Casson, 1985;Grant, 1996). However, knowledge transfer within the intra MNC network can be challenging due to its stickiness and tacit nature (Jensen & Szulanski, 2004) as well as knowledge sharing barriers (Low & Ho, 2016) that exist between the subsidiaries and the parent. ...
Although a general association between the role of international assignees and knowledge transfer has been noted in the international human resource literature, very little is known on how subsidiary knowledge flow strategies influence the purpose of expatriate assignments. Building specifically on Gupta and Govindarajan's typology of subsidiary knowledge flow strategies and Hocking's expatriate assignment purpose, we examine the link between subsidiary knowledge flow and the purpose of expatriate assignments using a mixed method approach. Combining survey data and qualitative interviews from 156 subsidiaries in the service and manufacturing sector in Malaysia and Singapore, we find that subsidiaries with divergent strategic roles have different knowledge flow strategies, thus leading to different purposes of expatriate assignments.
... The foreign trade of different countries implies a part of foreign economic activity and includes imports and exports. Problems associated with the development of foreign trade activity in national economies have been addressed by various theoretical approaches [12,13]. The mercantilists believed that the government should support a positive balance of trade through tariffs, quotas and other trade policy instruments. ...
An analysis of foreign trade activity in the Russian Arctic framed by a discussion of the climatic, social, demographic, natural, etc. characteristics of the region is presented. From this point of view, the following limitations apply: the complexity of the Arctic area; the need to find technological solutions that take into account the climatic characteristics; an absence of the usual conditions for sustainable development; the limitation of ecological systems in the creation and use of technologies needed for the development of foreign trade activity. Theoretical approaches to the problem of foreign trade activity of territories are discussed alongside a proposed methodology for the analysis of foreign trade activity and an assessment of the foreign trade activity index of the Russian Arctic regions. The analysis is based on official data of Federal State Statistics Service of Russian Federation from 2000 to 2015. The results of the research showed that priorities for Russian Arctic foreign trade should be prioritised according to three groups, consisting of 1) regions with a high level of foreign trade activity; 2) regions with a low level of foreign trade activity; 3) regions with the least developed foreign trade activity. Each group requires a specific foreign trade development strategy corresponding to its characteristics.
... General theoretical frame and theoretical perspectives on particular facets of inter-unit communication in multinational corporations As we have postulated that the ultimate task of communication between heads of manufacturing units is mutual learning, we selected the theory of organizational learning as the general theoretical frame for studies on communications between heads of MNCs' manufacturing units (Argyris and Schön, 1978;Herriott et al., 1985;Davenport and Prusak, 2000;Argote and Miron-Spektor, 2011;Argote, 2011;Low and Ho, 2016). Regarding the specific mode of organizational learning (communication between heads of sister subsidiaries), we should identify the motives of communications, the content of communications, the context of communications, the organizational settings for communications and the process of communications. ...
Purpose
The paper identifies the factors that shape the intensity and perceived effectiveness of communications between heads of manufacturing units of multinational corporations (MNCs).
Design/methodology/approach
The paper is based on a survey of heads of MNCs’ manufacturing subsidiaries in Russia.
Findings
We found that the intensity of most inter-unit communication channels depends on the speed and magnitude of the changes experienced by manufacturing subsidiaries in products and production technologies. The assessment of the efficiency of a communication channel with high media richness strongly correlates to the intensity of its use.
Practical implications
Subsidiary managers are quickly mastering most easy-to-use channels (i.e., e-mail exchange, talking on the phone, reading corporate magazines) by themselves, but are minimizing their participation in time-consuming activities (i.e., corporate-wide and special conferences, arranging informal meetings with foreign peers) unless they have to manage rapid changes in products and production technologies. Thus, to intensify the voluntary use of inter-unit channels with high media richness, headquarters should instill in subsidiary managers the value of cooperation between manufacturing units. Moreover, the effectiveness of inter-unit channels with high media richness should be properly demonstrated to subsidiary managers to assuage their initial reluctance.
Originality/value
This paper presents communications between manufacturing units of multinational corporations not as the transfer of abstract knowledge but as routine processes of exchange of detailed information on valuable improvements of the existing practices and solutions to technical and organizational problems common in facility development and mastering new products.
... The knowledge-based theory of economic organization [Low and Ho, 2015] provides a fresh approach to understanding aspects of the scope of the MNC and offers the prospect of shedding additional light on headquarter-subsidiary relations, especially on relations with foreign R&D units and manufacturing units, but unlike the previously described approaches, it does assume an underlying rationality in the behavior of the MNC as a whole, the making of seamless judgments on where specific knowledge is located and the capacity to evaluate the opportunity costs of internal efforts dedicated to the development of specific knowledge versus the acquiring or contracting of knowledge holders from elsewhere. ...
... The knowledge-based theory of economic organization (Low and Ho, 2015) provides a fresh approach to understanding aspects of the scope of the MNC and offers the prospect of shedding additional light on headquarter-subsidiary relations, especially on relations with foreign R&D units and manufacturing units, but unlike the previously described approaches, it does assume an underlying rationality in the behavior of the MNC as a whole, the making of seamless judgments on where specific knowledge is located and the capacity to evaluate the opportunity costs of internal efforts dedicated to the development of specific knowledge versus the acquiring or contracting of knowledge holders from elsewhere. ...
Purpose
The purpose of this study is to advance the understanding of digitalization–sustainability relationships in the digital age. Specifically, this study aims to test the link between Chinese digital firms’ adoption of digital technologies and green innovation. This study highlights the peculiarities of digital firms related to green innovation and how the adoption of digital technologies contributes to the sustainable development agenda.
Design/methodology/approach
This study empirically examines the impact of digital technologies on green innovation outcomes in publicly listed digital firms in China from 2010 to 2020. Using panel data from the China Stock Market and Accounting Research Database (CSMAR) and the Chinese Research Data Services Platform, the authors estimate regression models and find support for the hypotheses.
Findings
The authors find that the digitalization level of firms has a positive impact on corporate green innovation. In addition, this relationship is positively moderated by the level of internationalization in the firms. Moreover, the results of this study past the robustness and endogeneity checks.
Originality/value
This study provides novel insights into the green innovation of digital firms by analyzing the knowledge management capabilities of digital firms as well as the impact of the level of internationalization on knowledge acquisition and management (i.e. boundary conditions). Specifically, the findings of this study provide a new context to encourage study on green innovation. Moreover, this study enriches the literature on corporate digitalization and the factors influencing corporate green innovation.
AI-infused knowledge (AIK) systems have the potential to transform the way firms operate, providing dynamics for optimising processes, enhancing decision-making, and fostering innovation. This shift can play a vital role in service-oriented contexts, like accounting firms. In this study, we aim to explore how AIK can drive green intellectual capital (GIC) aspects, spurring accounting firms’ performance related to environmental and sustainable practices. Drawn from the resource-based view (RBV) and knowledge-based view (KBV), sustainability culture (SUC) is integrated into the model as a moderator variable to provide an in-depth understanding of this matter. The study adopted a quantitative approach, data was collected through an online survey distributed to accounting professionals. The analysis shows interesting outcomes: AIK positively and significantly affected the internal dimensions of GIC, green human capital (GHC) and green structural capital (GSC) within accounting firms, while green rational capital (GRC) had no effect. In turn, these two internal dimensions, GHC and GSC, had a significant impact on accounting performance across various aspects, including efficiency, accuracy, compliance with environmental standards, innovation in reporting, and timeliness. Intriguingly, SUC was found to significantly moderate the association between GIC dimensions and accounting firm performance. The results of this research offer actionable insights for stakeholders and decision-makers, including accounting firms, clients, and the community at large. Accounting firms are highly recommended to adopt AI-infused platforms to foster GIC dynamics, specifically GHC and GSC. AI-infused knowledge tools have the potential to improve efficiency, accuracy, innovation in reporting, compliance with sustainability standards and timeliness, thus leading to better overall performance. Although service-oriented contexts, like accounting, have the potential to substantially benefit from GIC practices, research in such a significant discipline has been remarkably scarce.
Purpose
As a highly knowledge-intensive activity, digitalization is changing the construction industry landscape and is encouraging construction firms to explore the transformation. This study establishes a new theoretical model aimed at examining the impact of three types of intellectual capital (IC) on digitalization through the lens of knowledge-based view and explores how IC and digitalization influence sustainability performance from the triple bottom line principles.
Design/methodology/approach
A questionnaire survey was conducted to collect data from Chinese construction firms using convenience sampling. A total of 181 valid responses were obtained. Then, a partial least squares structural equation modelling (PLS-SEM) technique was executed through Smart PLS 3.0 software. The measurement model was assessed to ensure reliability and validity, and the structural model was analysed to test the proposed hypotheses.
Findings
The empirical results confirm the positive impact of IC on digitalization and digitalization on sustainability performance. Moreover, digitalization plays a significant mediating role in the relationship between IC and sustainability performance.
Originality/value
The results provide empirical evidence supporting the different roles of IC and digitalization in improving sustainability. The findings contribute to enhancing the understanding of digitalization practices from the perspective of IC and provide theoretical and managerial implications for sustainability issues in the context of the construction industry.
Purpose
The study examines the role of ethical leadership in the innovative performance of employees. Further, the purpose of the study is to investigate the mediating effect of human capital and social capital on the relationship between ethical leadership and the innovative performance of employees.
Design/methodology/approach
The study collected primary data from 386 managerial-level employees of information technology (IT) companies in the northern region of India. Structural equation modelling (SEM) was used to analyse the data and derive the direct and indirect effects.
Findings
The findings indicate a significant positive impact of ethical leadership on the innovative performance of employees. Further, it was found that ethical leadership has both direct and indirect effects on the innovative performance of employees, where the indirect effect was mediated through intellectual capital (IC). The research confirms that IC and ethical leadership are crucial resources for fostering a knowledge-driven culture and innovative performance amongst employees.
Originality/value
The research has made a novel attempt to explore the interplay between ethical leadership, IC and innovative performance in the Indian context. Further, the study provides actionable strategies for business leaders to optimise business processes and encourage innovative practices amongst employees in the company.
This study aims to examine the moderating effect of knowledge integration capability on the relationship between business ties, political ties, and entrepreneurial creativity on competitive advantage. We present the first model that links the ability to integrate knowledge, network ties, and entrepreneurial creativity with the background of MSMEs in Indonesia. This study’s data collection method is a questionnaire survey given to Indonesian MSME entrepreneurs. Meanwhile, 358 questionnaires have been qualified for further processing as part of the random sampling approach used in this study’s sample collection. Additionally, the survey data were acquired through the use of SmartPLS, and the study’s findings indicate that business ties, political ties, and entrepreneurial creativity all favorably impact competitive advantage. Knowledge integration capability reinforces the influence of business ties and entrepreneurial creativity on competitive advantage. But knowledge integration capability is unable to counteract the impact of political ties on competitive advantage. The results complement the literature related to the use of knowledge resources in achieving competitive advantage. Considering the important role of knowledge integration capability in the escalation of competitive advantage in corporations, MSME entrepreneurs are strongly advised to consider the available resource of knowledge. To preserve the competitive advantage, knowledge should be continuously expanded.
Purpose
This paper aims to derive a model that explores how the interplay between knowledge integration capability and innovation impacts strategic orientation, leading to the attainment of sustainable competitive advantage. The study considers the constituents of strategic orientation, namely, customer orientation, competitor orientation and technology orientation, as the basis for achieving sustainable competitive advantage. The study suggests that the firm’s capacity for integrating external and internal knowledge shapes how strategic orientation influences sustainable competitive advantage through service innovation.
Design/methodology/approach
This empirical research relies on qualitative and quantitative data gathered from telecom professionals to assess how knowledge integration and service innovation influence sustained competitive advantage. Structured equation modeling is used to examine the model and its interrelationships.
Findings
The research establishes significant relationships between strategic orientations, knowledge integration capability, service innovation and sustainable competitive advantage. Knowledge integration capability and service innovation are found to mediate the relationship between strategic orientations and the achievement of sustainable competitive advantage.
Practical implications
The study highlights the significant contribution of a firm’s knowledge integration capability in driving service innovation, especially in technology-intensive service industries facing hypercompetition. It also advocates prioritizing technology orientation and integrating knowledge from internal and external sources for competitive advantage.
Originality/value
To the best of the authors’ knowledge, this study is the first to model the effect of knowledge integration capability and service innovation on strategic orientation-led sustainable competitive advantage.
This article examines the impact of the staffing of foreign subsidiaries of multinational enterprises (MNEs) on the innovation performance of the parent company and the moderating effect of the institutional distance between the host country and the home country. This paper conducts an empirical analysis on the data of 59 mature Chinese MNEs and their 872 overseas subsidiaries over the past 11 years and obtains some interesting results. The results show that the proportion of host country nationals (HCNs) in overseas subsidiaries has a significant positive impact on the innovation performance of the parent company and that it is not a simple linear relationship but rather an inverted U‐shaped relationship. As HCNs increase, the ability to acquire knowledge is increasing, while the ability to integrate knowledge is decreasing. Thus, multiplicative combinations of latent mechanisms result in an inverted U‐shaped relationship. However, the institutional distance between countries negatively moderates the effect of subsidiary HCN proportions on parent company innovation performance. The findings have important practical implications for the multinational innovation strategies of Chinese MNEs and governments.
Purpose
This paper aims to illustrate how integrating competitive intelligence (CI) into a US health-care firm can aid in information sharing and building knowledge for the organization.
Design/methodology/approach
This study is exploratory using a systematic literature review to develop a conceptual model applied to the US health-care industry.
Findings
This research presents key propositions of CI’s role in the CI process along with the C-suite’s role in supporting a process and culture to ultimately, gain competitive advantage through the knowledge-based view.
Practical implications
With the growing volume of data, a unified system and culture within a firm is paramount. The US health-care system is a privatized industry that has become more competitive stifling information sharing. The need for prompt and accurate decision-making has become an imperative. Crises, like the current COVID-19 pandemic, only exacerbate the issue. This model offers a blue print for executives to build a CI function and encourage information sharing.
Originality/value
Previous research has focused on the CI process and its value. Yet, little research is found on how to integrate CI into a firm and its role through the CI process. This study builds a conceptual model addressing integration and the flow of information to knowledge along with key firm dynamics to nurture the function. Although the model is applied specifically to US health care, it offers application to most any industry.
This study defines Shanzhai mobile phone (ShanzhaiGi) as an indigenous innovation product supported by a group of value chain suppliers that provide good-enough products by charging reasonable prices in a rapid time frame to fulfill the needs of target customers. Through examining the business model of Shanzhai mobile phone firms, we find that the value created by them is to provide products that benefit the countryside people so that everyone can get connected. Moreover, ShanzhaiGi offers more features than premium international brands to fulfill the market demand of the masses. Shanzhai mobile phone firms capture values, sales revenues, and market shares through cost control by utilizing Shanzhai's value chain suppliers and innovative channel management. While contrasting the business model of Tianyu (as the 'King of Shanzhai') with other market leaders (Nokia and Samsung), we find that the market leaders have a relatively more developed business model than Tianyu. Therefore, Tianyu should further enhance its segment, value chain relationship, and competitive strategy.
This paper develops a dynamic capabilities-based theory of the multinational enterprise (MNE). It first reviews scholarship on the MNE, with a focus on what has come to be known as “internalization” theory. One prong of this theory develops contractual/transaction cost-informed governance perspectives; and another develops technology transfer and capabilities perspectives. In this paper, it is suggested that the latter has been somewhat neglected. However, if fully integrated as part of a more complete approach, it can buttress transaction cost/governance issues and expand the range of phenomena that can be explained. In this more integrated framework, dynamic capabilities coupled with good strategy are seen as necessary to sustain superior enterprise performance, especially in fast-moving global environments. Entrepreneurial management and transformational leadership are incorporated into a capabilities theory of the MNE. The framework is then used to explain how strategy and dynamic capabilities together determine firm-level sustained competitive advantage in global environments. It is suggested that this framework complements contract-based perspectives on the MNE and can help integrate international management and international business perspectives.
Knowledge is too problematic a concept to make the task of building a dynamic knowledge-based theory of the firm easy. We must also distinguish the theory from the resource-based and evolutionary views. The paper begins with a multitype epistemology which admits both the pre- and subconscious modes of human knowing and, reframing the concept of the cognizing individual, the collective knowledge of social groups. While both Nelson and Winter, and Nonaka and Takeuchi, successfully sketch theories of the dynamic interactions of these types of organizational knowledge, neither indicates how they are to be contained. Callon and Latour suggest knowledge itself is dynamic and contained within actor networks, so moving us from knowledge as a resource toward knowledge as a process. To simplify this approach, we revisit sociotechnical systems theory, adopt three heuristics from the social constructionist literature, and make a distinction between the systemic and component attributes of the actor network. The result is a very different mode of theorizing, less an objective statement about the nature of firms ‘out there’ than a tool to help managers discover their place in the firm as a dynamic knowledge-based activity system.
Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.
This article outlines a rationale for the existence of firms and derives its implications for corporate strategy. It argues that one important source of sustainable rents is the ability of firms to reduce the costs they experience in organizing both internal and external transaction below those of their rivals.
Some scholars have argued that globalization will reduce the importance of local contexts. We argue instead that despite the increased frequency and intensity of interactions across local contexts, they continue to retain their distinctive differences. MNEs face growing challenges in managing the complexity of these interactions, because they must manage multiple embeddedness across heterogeneous contexts at two levels. First, at the MNE level, they must organize their networks to exploit effectively both the differences and similarities of their multiple host locations. Second, at the subsidiary level, they must balance internal embeddedness within the MNE network, with their external embeddedness in the host milieu. Balancing the subsidiary's strategic role within the MNE with its local identity and its domestic linkages can sometimes represent a trade-off. Multiple embeddedness thus creates both business opportunities and operational challenges, which are explored in this special issue.
In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures.
Transaction cost economics (TCE), and more specifically the version of TCE that hers been developed by Oliver Williamson (1975, 1985, 1993b), has become an increasingly important anchor for the analysis of a wide range of strategic and organizational issues of considerable importance to firms. As argued by some of its key proponents. the theory aims not only to explain but also to influence practice (Masten, 1993). In this article. we argue that prescriptions drawn from this theory are likely to be not only wrong but also dangerous for corporate managers because of the assumptions and logic on which it is grounded. Organizations are not mere substitutes for structuring efficient transactions when markets fail: they possess unique advantages for governing certain kinds of economic activities through a logic that is very different from that of a market. TCE is ''bad for practice'' because it fails to recognize this difference. We identify some of the sources of the ''organizational advantage'' and argue for the need to build a very different theory. more attuned to the realities of what Simon (1991) has called our ''organizational economy.''
This paper reviews the progress of the research agenda initiated by The Future of the Multinational Enterprise (1976). Focusing initially on the problem of explaining the existence of the multinational enterprise, the agenda soon broadened to encompass the analysis of alternative modes of foreign market entry, the role of international joint ventures, the impact of innovation on corporate growth, and the role of culture in international business. The core philosophy – based on the Coasian nature of the firm and on rational action modelling – has remained constant, while the widening range of applications has encouraged synthesis with theories developed in other fields of research. Success in answering any one question invariably generates new questions, which must in turn be answered through a further extension of the theory, and this dynamic continues to drive the development of the theory today. Internalisation theory has retained its validity and its vitality over the past 30 years, and is currently being extended into new fields of international business research.
The potential of post-contractural apportunistic behavior for improving market efficiency through intrafirm rather than interfirm transactions is examined under the assumption that vertical costs will increase less than contracting costs as specialized assets and appropriable quasi rents increase. Vertical integration protects against the risk of contract cancellation and can create market power which is not generally referred to as monopoly. Contracts used as a alternative provide economically enforceable protection against opportunistic behavior. Solutions to opportunistic behavior problems can include joint ownership of common assets and condominium ownership of services. Economies of scale are major factors in some businesses, such as insurance. The complexities of ownership relations makes it difficult to assign higher costs to either the contract or vertical-integration approach. This suggests that economic analysis should be used to identify which is most advantageous for specific kinds of activities.
The intention of this paper is to review the literature linking ownership and location strategies to economic geography and theories of globalisation and to explore new areas of research. This paper examines globalisation in terms of conflicts between markets and economic management, and suggests that the differential pace of globalisation across markets presents a number of challenges to policy makers in local, national and regional governments, and in international institutions. In examining the changing location and ownership strategies of MNEs, it shows that the increasingly sophisticated decision making of managers in MNEs is slicing the activities of firms more finely and in finding optimum locations for each closely defined activity, they are deepening the international division of labour. Ownership strategies, too, are becoming increasingly complex, leading to a control matrix that runs from wholly owned units via FDI through market relationships such as subcontracting, including joint ventures as options on subsequent decisions in a dynamic pattern. The input of lessons from economic geography is thus becoming more important in understanding the key developments in international business. The consequences of the globalisation of production and consumption represent political challenges, and reaction against these changes has led to a questioning of the effects of global capitalism as well as to its moral basis. These four issues are closely intertwined and present a formidable research agenda to which the international business research community is uniquely fitted to respond.
The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization – to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization. It is common to see the firm characterized by the power to settle issues by fiat, by authority, or by disciplinary action superior to that available in the conventional market. This is delusion. The firm does not own all its inputs. It has no power of fiat, no authority, no disciplinary action any different in the slightest degree from ordinary market contracting between any two people. I can “punish” you only by withholding future business or by seeking redress in the courts for any failure to honor our exchange agreement. That is exactly all that any employer can do. He can fire or sue, just as I can fire my grocer by stopping purchases from him or sue him for delivering faulty products.
The imputation problem is how to account for the sources of the value of the firm. I propose that part of the value of the firm derives from its participation in a network that emerges from the operation of generative rules that instruct the decision to cooperate. Whereas the value of firm‐level capabilities is coincidental with the firm as the unit of accrual, ownership claims to the value of coordination in a network pit firms potentially in opposition with one another. We analyze the work on network structure to suggest two types of mechanisms by which rents are distributed. This approach is applied to an analysis of the Toyota Production System to show how a network emerged, the rents were divided to support network capabilities, and capabilities were transferred to the United States. Copyright © 2000 John Wiley & Sons, Ltd.
The imputation problem is how to account for the sources of the value of the firm. I propose that part of the value of the firm derives from its participation in a network that emerges from the operation of generative rules that instruct the decision to cooperate. Whereas the value of firm-level capabilities is coincidental with the firm as the unit of accrual, ownership claims to the value of coordination in a network pit firms potentially in opposition with one another. We analyze the work on network structure to suggest two types of mechanisms by which rents are distributed. This approach is applied to an analysis of the Toyota Production System to show how a network emerged, the rents were divided to support network capabilities, and capabilities were transferred to the United States. Copyright © 2000 John Wiley & Sons, Ltd.
Business strategy is a complex subject and is usefully examined from several perspectives. This paper applies the lenses of governance and competence to the study of strategy. Both the governance and the competence perspectives have had the benefit of distinguished antecedents. They have also had to deal with tautological reputations. I begin with the governance perspective, with emphasis on the six key moves through which it has been operationalized. I then examine the competence perspective in these same six respects. Governance challenges the competence perspective to apply itself more assiduously to operationalization, including the need to choose and give definition to one or more units of analysis (of which the 'routine' is a promising candidate). The research challenges posed by competence to which governance can and should respond include dynamic transaction costs, learning, and the need to push beyond generic governance to address strategy issues faced by particular firms (with their distinctive strengths and disabilities). A lively research future for these two perspectives, individually and in combination, is projected.
It is argued that Kogut and Zander (1992) and Conner (1991) erred in the specific way in which they claimed that a distinct theory of the multi-person firm can be constructed on the basis of a theory of organizational knowledge or from resource-based insights. It is not possible to tell very much of a story about why there should be firms in lieu of notions such as ''opportunism'' or ''moral hazard.'' However, properly interpreted, knowledge-based theories may help shed light on issues relating to the boundaries and internal organization of the firm.
This paper continues the critique of knowledge-based theories of the firm that was undertaken in Foss (1996a), specifically criticizing the reasoning in Kogut and Zander (1996) and Conner and Prahalad (1996). I argue that Kogut and Zander (1996) attempt to explain firm organization in terms of a preference for such organization--a distinctly non-economic mode of explanation--and that Conner and Prahalad fail to sufficiently characterize the nature of the firm, because they identify firm organization with the employment contract and neglect asset-ownership.
The imputation problem is how to account for the sources of the value of the firm. I propose that part of the value of the firm derives from its participation in a network that emerges from the operation of generative rules that instruct the decision to cooperate. Whereas the value of firm-level capabilities is coincidental with the firm as the unit of accrual, ownership claims to the value of coordination in a network pit firms potentially in opposition with one another. We analyze the work on network structure to suggest two types of mechanisms by which rents are distributed. This approach is applied to an analysis of the Toyota Production System to show how a network emerged, the rents were divided to support network capabilities, and capabilities were transferred to the United States. Copyright © 2000 John Wiley & Sons, Ltd. The thesis of this article is that a structure of a network is an emergent outcome generated by rules that guide the cooperative decisions of firms in specific competitive markets. The observed differences in the patterns of cooperation across industries are not happenstance. They reflect rather the implicit operation of these cooperative rules and the competing visions that come to shape a network. The emergence of the structural pattern of cooperation is not the result of an abstract and static choice between market or firm, or market versus hybrid cooperative forms of governance. Structure is emergent in the initial conditions of a specific industry. The structure of an industry is interesting, because it represents capabilities of coordination among firms, as well as claims on the property rights to profits to cooperation. The conventional emphasis on the opposition of market, contract
Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge reside also in a network of interacting firms?
This line of questioning presents the challenge to state an alternative view to the “theory of the firm,” a theory that has moved from Coase's early treatment of what firms do to a concern with ownership, incentives, and self-interest. We return to Coase's original insight in understanding the cost and benefits of a firm but based on a view that individuals are characterized by an “unsocial sociality.” Does the perception of opportunism generate the need to integrate market transactions into the firm, or do boundaries of the firm lead to the attribution of opportunism?
This basic dichotomy between self-interest and the longing to belong is the behavioral underpinning to the superiority of firms over markets in resolving a fundamental dilemma: productivity grows with the division of labor but specialization increases the costs of communication and coordination. The knowledge of the firm has an economic value over market transactions when identity leads to social knowledge that supports coordination and communication. Through identification, procedural rules are learned, and coordination and communication are facilitated across individuals and groups of diverse specialized competence.
A firm is distinct from a market because coordination, communication, and learning are situated not only physically in locality, but also mentally in an identity. Since identity implies a moral order as well as rules of exclusion, there are limitations and costs to relying upon a firm for exchange as opposed to the market. These costs are not necessarily those traditionally assigned to the category of decreasing returns to hierarchy. For example, an identity implies that some practices, and businesses, may be notionally inconsistent with each other. Norms of procedural justice that are identified with a firm imply that not all technically feasible complements are permissible within the logic of a shared identity. There is consequently a cost to an identity that offsets the benefits. Because the assemblage of elements that compose an organization are subject to requirements of consistency, identities rule out potentially interesting avenues of innovation and creativity.
We illustrate these ideas by returning to the original prisoners’ dilemma game and by an analysis of the coherence of a firm as a search for complements that are consistent with norms of procedural justice. We argue that the underlying dynamic of a prisoners' dilemma game reveals the problems of coordination, communication, and conflicts in norms of justice when players are deprived of social knowledge and shared identity. Similarly, the determination of a firm's coherence arises out of the demand for a moral and notional consistency in the “categorization” of its activities, as opposed to a technological necessity. These ideas are illustrated through an empirical examination of logical complements in high performance work systems.
Demonstrates that technical change is attributable to experience. The cumulative production of capital goods is used as the index of experience. New capital goods are assumed to completely embody technical change. The assumption is made that the model will be operating in an environment of full employment although reference is made throughout to the case of capital shortage. The implications of this model on wage earners are discussed, and profits and investments are examined. The rate of return is determined by the expected rate of increase in wages, current labor costs per unit output, and the physical lifetime of the investment. Learning is an act of investment that benefits future investors. Further analysis shows that the socially optimal ratio of gross investment to output is higher than the competitive level. (SRD)
Building on the resource-based view of the firm, this paper explores the notion of ‘resource recombinations’ within the firm. We suggest such recombinations can occur when competencies within the firm (which are interpreted as organized clusters of firm resources) either combine to synthesize novel competencies (synthesis-based recombinations) or experience a reconfiguration or relinking with other competencies (reconfiguration-based recombinations). Central to this paper is an examination of the antecedents necessary for such innovation to occur, and in particular the nature of knowledge in the firm. We argue that several characteristics of knowledge (tacitness, context specificity, dispersion) and its social organization (the way competencies come to be formed and institutionalized) will have important consequences on the likelihoods of resource recombinations. Our paper develops a model of resource recombination likelihoods and propositions. © 1998 John Wiley & Sons, Ltd.
The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
Much of the current thinking about competitive strategy focuses on ways that firms can create imperfectly competitive product markets in order to obtain greater than normal economic performance. However, the economic performance of firms does not depend simply on whether or not its strategies create such markets, but also on the cost of implementing those strategies. Clearly, if the cost of strategy implementation is greater than returns obtained from creating an imperfectly competitive product market, then firms will not obtain above normal economic performance from their strategizing efforts. To help analyze the cost of implementing strategies, we introduce the concept of a strategic factor market, i.e., a market where the resources necessary to implement a strategy are acquired. If strategic factor markets are perfect, then the cost of acquiring strategic resources will approximately equal the economic value of those resources once they are used to implement product market strategies. Even if such strategies create imperfectly competitive product markets, they will not generate above normal economic performance for a firm, for their full value would have been anticipated when the resources necessary for implementation were acquired. However, strategic factor markets will be imperfectly competitive when different firms have different expectations about the future value of a strategic resource. In these settings, firms may obtain above normal economic performance from acquiring strategic resources and implementing strategies. We show that other apparent strategic factor market imperfections, including when a firm already controls all the resources needed to implement a strategy, when a firm controls unique resources, when only a small number of firms attempt to implement a strategy, and when some firms have access to lower cost capital than others, and so on, are all special cases of differences in expectations held by firms about the future value of a strategic resource. Firms can attempt to develop better expectations about the future value of strategic resources by analyzing their competitive environments or by analyzing skills and capabilities they already control. Environmental analysis cannot be expected to improve the expectations of some firms better than others, and thus cannot be a source of more accurate expectations about the future value of a strategic resource. However, analyzing a firm's skills and capabilities can be a source of more accurate expectations. Thus, from the point of view of firms seeking greater than normal economic performance, our analysis suggests that strategic choices should flow mainly from the analysis of its unique skills and capabilities, rather than from the analysis of its competitive environment.
Knowledge management has become one of the most widely promoted management ideas of all time. It is perhaps more than a passing fad, suggesting a real convergence of theoretical and practical ideas about the firm. Ideas developed to explain strategic success are being used to design strategies which improve the firm's ability to capture more of the potential value from the knowledge which they and their members have or can acquire. This article provides an outline of the theory of knowledge in business and describes and analyses two matched but contrasting examples of knowledge management activities that illustrate the impact of theory on practice.
This paper updates some of the author's thinking on the eclectic paradigm of international production, and relates it to a number of mainstream, but context-specific economic and business theories. It suggests that by dynamizing the paradigm, and widening it to embrace asset-augmenting foreign direct investment and MNE, activity it may still claim to be the dominant paradigm explaining the extent and pattern of the foreign value added activities of firms in a globalizing, knowledge intensive and alliance based market economy.
The division of labour encourages the development of differentiated knowledge, and therefore of distinctive capabilities, which are `knowledge how' rather than `knowledge that' – a distinction akin to that between technology and science. The consequent problems of co-ordination may be handled by access or control, which suggests a choice between markets or firms; but market relationships must be managed, and no person can know enough to control a complex firm. `Managing capabilities' is itself a capability, and must be limited by differences between knowledge bases, which may be acute even when capabilities are closely complementary.
Strategies for unstructured competitive environments: using scarce resources to create new markets
- Robins