A Framework of Knowledge Transfer in Cross-Border Joint Ventures: An Empirical Test of the Korean Context (1)

Abstract * Cross-border joint ventures are studied based on a framework of knowledge transfer. We tested two nested regression analyses to examine a different interaction between the relation- and knowledge-specific variables with the two types of knowledge transfer. * Knowledge is operationalised in terms of new product development and manufacturing processing skills/technique, and the former is considered more tacit than the latter. Key Results * Between the two types of knowledge transfer, a positive social interaction between partners was accentuated in a transfer of more tacit knowledge. * Attributes of knowledge and absorptive capacity were confirmed again for an effective transfer of knowledge within the context of international joint ventures. Cooperative alliances are formed to enjoy economies of scale, to reduce or share risks (Hennart 1988, Buckley/Casson 1998), to gain global competitiveness (Porter/Fuller 1986, Harrigan 1988), and to learn and internalize new skills and/or knowledge (Hamel 1991, Inkpen 2000, Kogut 1988, Lyles 1988, Makhija/Ganesh 1997, Mowery/Oxley/Silverman 1996). Especially when MNEs enter foreign markets, they arrange collaborative relationships with local companies as one of the viable solutions for overcoming foreignness. Stopford and Wells (1972) have provided a seminal study of cross-border joint ventures between U.S. MNEs and local firms. These ventures are designed to access new markets, to gain local legitimacy, contacts, resources and market knowledge, and to contain and share risks (Beamish 1988, Gomes-Casseres 1990, Hennart 1991a, Stopford/Wells 1972). While taking advantage of these benefits by forming international joint ventures (IJVs), MNEs have naturally evolved into integrated networks of global operations. In order to orchestrate their globally integrated networks, MNEs may need to work with local partners in emerging economies. One of the critical management or operational assignments could be the effective transfer of knowledge to local partners in certain types of IJVs. However, knowledge is sticky, thus difficult to transfer (Szulanski 1996). Therefore, the mechanism of knowledge transfer within the IJV context from MNEs to local firms, which has been unduly neglected, deserves close attention. The goal of this paper is to examine the determinants of cross-border knowledge transfer from MNEs to local firms, a phenomenon which has not been extensively researched. The only contexts which have previously been researched are the Hungarian (Lyles/Salk 1996) and Chinese (Shenkar/Li 1999, Tsang 2002). An early study by Child and Markoczy (1993) compared host country managers' behavioral similarities in Chinese and Hungarian IJVs, while Tsang's recent study (2002) examined knowledge acquisition by MNEs in foreign ventures in China. Accordingly, our inquiry into the Korean venue is expected to enhance our understanding of cross-border learning. In addition, a dynamic perspective on knowledge transfer in IJVs is analyzed by considering the interface between the determinants and two types of knowledge. Inkpen and Dinur (1998) argued that different types of knowledge require different management. Building on their argument, this paper presents and examines different types of knowledge. Instead of treating knowledge as an abstract subject, we operationalised knowledge as new product development and manufacturing process skills/technique. The former is expected to have more tacit and specific knowledge attributes than the latter. Between the two types of knowledge, we expect a different interaction with the determinants of knowledge transfer. By dichotomizing knowledge, we will be able to show that a relation-specific variable will play an important role for the transfer of knowledge which has more tacit and specific attributes (e.g., knowledge related to new product development). Subsequently, a framework of knowledge transfer within an IJV context will be constructed. …