Knowledge Implications of Relationships between Established Multinational Companies and Latecomer Firms: An Interdisciplinary Framework

In this paper, we adopt a knowledge perspective to analyse the role of inter-organisational relationships between multinational and local firms in catching-up processes. Relationships between an established foreign incumbent and a latecomer firm in an emerging economy are characterised by a high level of asymmetry in the initial stock of resources and knowledge of each partner. However, in the most prominent management literature, this fundamental asymmetry has seldom been fully addressed, and alliances or other inter-organisational arrangements are usually implicitly or explicitly considered as being between equally developed firms from developed countries. In this article we aim at contributing to fill this gap by proposing a framework of analysis, based on a literature review. Our paper is structured around three main questions: How knowledge is created, transferred and absorbed? What are the main characteristics of latecomer firms and catching-up processes? What is the role of inter-organisational relationships and networks in knowledge creation and transfer, in particular in the case of relationships between multinational incumbents and latecomer firms? The methodology consists of a literature review. Due to the large scope of theoretical streams covered, a certain level of partiality in the choice of theoretical streams and sources may be found. In each theoretical stream, attention has been paid to identify the most recognised, quoted sources. In particular, quotations by recognised scholars and in literature reviews in each stream are used to identify the most relevant sources. Innovation economics, knowledge management, technology management, development economics are used to identify and define the basic concepts and processes. In order to analyse the role of inter-organisational relationships, three streams of research are taken into account: the Industrial Network Approach, the Strategic Alliance literature and the Global Production Network perspective. The preliminary findings of this perilous exercise are that the complementarities between the different research streams have proven useful in defining an encompassing framework of analysis of the role of inter-organisational relationships between multinational and local firms in catching-up processes. In particular, the different streams of research that we have examined highlight four (eventually overlapping) modalities of inter-firm relationships: (i) access a partner’s stock of knowledge in order to exploit complementarities, (ii) transfer knowledge to a partner in order to improve the partner’s contribution, (iii) absorb its partner’s knowledge base for opportunistic (competitive) reasons, (iv) create new knowledge by interacting. The creation of new knowledge by interacting appears to be a higher order outcome of inter-firm relationships, in particular if significant innovation (new to the world) is generated. It can be assumed that the generation of innovation by interacting requires a certain level of symmetry in the level of the stock of knowledge possessed by the two parties, as is often the case in developed countries. For latecomer firms in emerging economies, initially in a situation of strong asymmetry of knowledge stock relative to foreign multinationals, the access to this higher order outcome of relationships is only possible after having constituted a significant (and valuable) stock of knowledge. The managerial implications of paradoxes arising from such situations are discussed. The potential contributions to the literature are the definition of an encompassing framework and an identification and discussion of the role of inter-organisational relationships between multinational and local firms in catching-up processes.