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processes
Knowledge in
global
multinationals
lntroduction
whichhassitesthroughoutthe
organization
A largemultidivisional is global
worldandwhosebusiness
in character.
7 This information was taken from the following websites on 16 June 2003 (rvwr,v.EY.com,
wn'wBoeing.com,rvwwlBM.com).
I Z A T I O N ACLO N T E X T S
ORGAN
8 Siteaccessed
16June2003.
SI V U L T I N A T I O N A L S
K N O W L E D GPER O C E S S EI N
This means of structuring a multinational corporation assumesthat the home baseof the
corporation, the country out of which a multinational originates,provides a platform and
a foundation from which global advantagecan be achieved (Macharzina et al' 2001').In
such organizations global expansion occurslargely through taking advantageof the home
bases,capabilities,which are developedfrom, basedin, and exploit national and regional
systemsof innovation. Porter (1990), for example, suggeststhat such a logic is highly
prevalent. Laurent (1983, 1986) also supports such a perspective,and arguesthat all multi-
nationals to some extent bear the stamp of the country from which they originate.
Basedon this model the corporate centre, which will be basedin the home country is
typically largeand where not only the vast majority of strategicdecisionsaremade,but where
researchand developmenttype knowledge-creatingactivitiesarealsolocated(seeFigure13.1).
Within such organizations knowledge flows unidirectionally, ftom the corporate centre out
to the organizations businessunits, which arelargely responsiblefor applying this knowledge
to their local market context. Finally, another characteristic of this model is that there are few
independent interconnections between different businessunits. The importance of such a
structural logic is also reinforced by those wdters who suggestthat the extent to which multi-
nationals aretruly intemational hasbeen exaggerated,and that the majority of multination-
als are still home or region centred(Hirst and Thompson 1999;Rugman2000).
knowledge
Unidirectional f lows:
Centre>> Periphery
A U T O N O M OB
UUSS I N E S S A U T O N O M OB
UUSS I N E S S
. Knowledge application . Knowledge application
NOinter-unit
knowledge-sharing
A U T O N O M OB
UUSS I N E S S
. Knowledge application
F i g . 1 3 . 1 . A c e n t r a l i z e dh, i e r a r c h i c asl t r u c t u r ef o r m u l t i n a t i o n a l s
Hansen et al. (1999),as discussedin Chapter9, suggestedthere were two broad knowledge
managementstrategiesthat companiescould pursue:a codificationor a personalization
strategy.
Dell,the computermanufacturingand retailingcompany,was one companythey describedwhich
strategy.Such a strategyis lT-based,and involvesthe codification
followed a codification-based
of knowledgeinto searchablerepositories(seeTable9.1).With such an approach,the knowledge
in the repositorycan easilybe reusedby anyone.Dell combinesthis type of knowledgemanage-
ment strategy,with a centralized,hierarchicalstructure.Dell utilizesa knowledgerepositoryto
sell computersdirect to their customers,who define the specificationof their machines(either
on the web or via a telephonecall with a customer sales assistant)through selectingcompo-
nents from the knowledge repository.Dell, which has over 34,000 employees worldwide,
spread across thirtv four different countries, utilizes a centralizedcorporate structure.Thus
national/regional
offices,whose main responsibilities are for sellingcomputers,or providingafter-
salessupportand servicingto customers,do not havemuch of a role in strategicdecision-making,
and are more concernedwith administrationand knowledge applicationthan with knowledge
creation(suchas designingor managingthe lT-basedknowledgerepository).
BUSINESS BUSINESS
. Knowledge
creation o Knowledqe
creation
. Knowledge-sharing . Knowledde-sharing
CORPORATE CENTRE
Responsibilities:
o Facilitate
knowledge-
sharing
. Someknowledge
lnterbusiness
interaction
and
Interbusiness
interaction
and knowledge-sharing
knowledge-sharing
BUSINESS
. Knowledge
creation
r Knowledge-sharing
A contingencyperspectiveon structure
TRANSPARENT ISOLATED
Knowledge
observability
INTEGRATED OPAQUE
Low
Low High
System-embeddedness
of knowledge
no exception in this respect,as the relationship between organizational size and the
dyramics of knowledge processeshas in general terms been neglected (exceptions
include Fenton and Pettigrew2OOOb; van Wijk and van den Bosch2000; Becker2OOl;and
Forsgren1997).
As has been discussedextensively elsewherein the book, the typically fragmented,
specialized,and dispersednature of the knowledgebasein most organizationsmeansthat
one of the key tasksfor management is to coordinate and integrate organizational knowl-
edge. In general,as organizational size increases,the more complicated the processof
knowledge coordination becomes,as the organizationalknowledgebasebecomesmore
and more fragmentedand dispersed.Drawing on Brown and Duguid's (1991) metaphor
'community of communities', the more organizational (sub)
of an organization as a
communities that exist, the more likely it is that processof coordinating and facilitating
their interactions will increasein complexity.
VanWilk and van den Bosch(2000)studiedthe evolutionin the structuring of Rabobank, the
Dutch-base bd a n k i nagn df i n a n c i as le r v i c e . y t h e l a t e1 9 9 0 s
c o m p a nby e t w e e n1 9 B Ba n d1 9 9 7 B
it employed 44,000workerswith operations in over100countries. Duringthe time studied,due
to a varietyof externaland internaldrivers,it evolvedits internalorganizational structureaway
from a hierarchical one towardsa network-based structure.Partof the catalystunderlying this
evolution was thatthe mergersandacquisitions undertaken by Rabobank increased the sizeof
the organization suchthat businessunitswere increasingly at arm'slengthfrom the corporate
centre,andalsoincreasingly didn'tknowwhererelevant knowledge was located.
Theutilization of a networkstructure, it wasfelt,wouldhelpaddress theseproblems. However,
the largesize of the organization was found to make difficult the development of a single organ-
izational network.Therelationship betweenorganization/network sizeandthedynamics know- of
e n a s m a l l esrc a l ei,no n eb u s i n e susn i tS P E C T R U w
l e d g ep r o c e s s ewsa sa l s ov i s i b l o Mh, i c hh a d
beenin the vanguard of developing andimplementing the network-based structure. Duringthe
time that this divisionwas studied(approximately six years),it grew from havingonly thirty
employees to having350.The expanding sizeof the SPECTRUM divisionsignificantly affected
patterns of horizontal communication betweenstaffworkingin its differentproductareas,which
is oneof the characteristic elementsof a networkstructure. In general, the increasing sizeof the
organization inhibitedhorizontal communlcation. Thus,when the division had been relatively
small,suchcommunication was widespread, but as the divisiongrew it becameincreasingly
uncommon, with eachproductgroupbecoming moreandmorecompartmentalized.
pos-
of interactionsthat are
Howevet,incleasingolganizationalsizedoesnotsimplymaketheprocessofcoordination
it can funiamentally alter the type and character of
more complex, character
dir.";;;;" chapten 3-6, the tacit and context-dependent
sible. As has been knowledgerequiresextensive
-.un, ,t at effectivelysharing
most organizationatt<now*teig" peopleto be willing to
in1 context where enough trust existsfor
socialinteractions to occur in chapter 6' this is
particularly
in such . nr"."rr. As was extensivelydisLssed
participate
thecasewhenknowledgehastobesharedbetweenpeoplewhoarenotmembersoftheSame
community,astheymayhavedifferentvaluesystemsandlimitedcommonknowledge. necessaryfor such knowledge
the type or 'otiui
Developing u"o "rutions well as Gargiulo and
"""u"tlg Thus Hansen(Iggg), as
processes to be effectFJrriiir"-.""*ming.
Benassi(2000),alguethatsustainingstlongsocialrelationships'requirescontinuous
pelson can
relationships that any
interactionsbetweenpeopleandasustainedrec-ipro.ut.^.t'uns;.ottlowledgeandinfor-
Thus there is a limit to the numb", oi,,,.h researched by
mation. company
tlme' For example' in Kappa' the global R&D
sustain at any one effective
done by staff to sustain
ttl' 'n" ulnot"" or iJ*lliig
orlikowski f'"" ct'upit' organizational size
to tt problem of burn-out' Thus as
social relations cont;t"J "
incleases,sodoesthepotentialproblemsanddifficultiesofsustainingrelationshipswith
allthepeoplewhomayhaverelevanttnowreogeandexperience(seeFigurel3.4fora
of this process)'
graphical representation
network
5mall,cohesive
(a)
Strongtie
Weaktie
O Person
holes
(b) Largenetworkwith structural
'o
of different size
relations within networks
Fig. 13.4. Typical social
@ O R G A N I Z A T I O N ACLO N T E X T S
Dueto the amountof work involvedin sustaining them, is therea limitto the numberof strongties
that peoplecan have?lf so, what is the approximate
sizeof this limit-5 , 10,20,50,more?
cohesive networks with all relevant people, and the more people's social networks will
becomefilled with structuralholes (seeFigure13.4).
Thus the larger an organization, the more people's social networks will have structural
holes, and the smaller an organization, the more easyit will be for people to develop, pos-
SeSs,and sustain cohesivenetworks. As a consequence,the knowledge dynamics within
large and small companies are likely to be quite different. As suggestedby Table 13.1 and
Figure 13.4, this does not mean that large multinationals are less effective at sharing,
searching for, or integrating knowledge than in small companies, simply that their
knowledge dynamics will be different.
In conclusion, this section has shown how organizational/network size can signific-
antly affect the dynamics of knowledge processes.In general, as organizational size
increases,not only doesthe complexity of managing knowledgeprocesses increase,but
the characterof the network of socialrelationsbetweenpeople,which crucially underpin
knowledgeprocesses, will also change.
Knowledgesharing acrosssocioculturalboundaries
and businesssystems
Sociocultural values and beliefs refer to the systemsof values,knowledge, and beliefs that
individual people possess.Such values are shapedby an enormous diversity of social and
cultural factors including social class,the countries in which people are born and live,
educational expedence, family and parental influences, religion, experiencesof work,
professionalcodes of behaviour and ethics, etc. Some, most notably Hofstede (1980,
2001), arguethat distinctively national cultural characteristicscan be identified in differ-
ent countries. But, while this perspectivehas been highly influential, it has simultaneously
been subjectto significantcriticism (McSweeney2002; Soderbergand Holden 2002).
Having said that, numerous examples can be given of differencesin sociocultural
values that exist, and their impact on organizational processes.In the knowledge
K N O W L E D GPER O C E S S EI N
SN / U L T I N A T I O N A L S
management literature the greatest,if not sole focus, is on differencesbetween Japan and
Europe and the USA.Nonaka and Takeuchi (1995) suggestthat there are quite distinctive
differencesbetween Japan and the Western world (Europeand the Americas)with regard
to the way knowledge is conceptualized and used in organizations. While this could be
criticized as crude cultural stereotyping, there is some evidence that there are distinctive
differencesbetween Asian and European values and attitudes. For example, Pauleen and
Yoong (2001) found there to be a greater degree of respect for authority and a higher
degree of formality in businessrelations in Japaneseand Chinese cultures than in
European and Australian cultures. Such differences were also shown to make misinter-
pretation and distortion possiblein communication processes.
One explanation for the existenceof the differencesin sociocultural values that people
across the globe possessis that they are shaped by the system of cultural values that
people areborn, educated,socialized,and work within. The most well-known advocateof
such a perspectiveis Hofstede,whose influence is visible in the work of some of those who
write about multinational companies, thus, Machalzina et al. (2001) talk about how
knowledgeis deeply culturally bound, while Van Maanen and Laurent (1993, 275) talk
about how values and behaviour are shapedby'underlying codesof meaning'.
Such differences have been shown to have a profound influence on knowledge
processes. Firstly,such differences,as was discussedin Chapter 6, make the sharing and
integration of knowledge between people with different systemsof sociocultural values
extremely complex and difficult. The lack of common knowledge, shared system of
values, or overlapping senseof identity that can exist in such situations is the primary
explanations for these difficulties. Secondly,the sociocultural values that people possess
importantly shapethe way knowledge is produced, meaning is made, and, using the lan-
guage of the practice-basedperspectiveon knowledge, how processesof perspective
making and taking occur. Thus people actively use their sociocultural values to produce
meaning and create knowledge, and two people may construct quite different meanings
from the sameevents,basedon their different value systems'
The example immediately below provides an illustration of such a process.Further, an
acknowledgement of the role played by sociocultural values in shaping the way people
createmeaning and produce knowledge challengesthe idea embeddedin the transmitter-
receivermodel of knowledge-sharingutilized by the objectivist perspectiveon knowledge
(seeChapter 2). Thus, knowledge cannot simply be diffused and transferred, unaltered,
between people with different cultural values.
of market
The degreeandcharacter ln the USA,labourmarketshavemuchweaker
regulation protectingworkers'rightsthanin other
legislation
countries
The extentof governmentownership In France,comparedto otherWesternEuropean
in industry countriessuchas the UK,the governmentstillhas
levelsof ownershipin a numberof business
significant
sectors
The roleof tradeunionsin business In Germanytradeunionshavea significantrolein
decision-making andtheirrelations throughbeinggiven
businessdecision-making
with businessmanagement significant powerenshrinedin law
bargaining
The roleof banksandfinancial In Japanbankshavea powerfulroleat the headof
in industry
institutions groups,and havecloselinkswith large
largeindustrial
businessorganizations
Thetype of financial
systemandthe In the UKthe financialsystemplacespressureon
economicperformance demandsthey businessesto focus on relativelyshort-term
placeon organizations economicgoalssuchas sha.eprice
The term 'businesssystemr,as utilized by these writers, refers to the structure of social,
political, and economic institutions that constitute and shape the environment within
which businessorganizations operate. Key institutions in these structures include gov-
ernments and financial institutions. Researchshows that these institutional structures
vary significantly between different countries and regions, with Whitley (1999) develop-
ing a ty?ology of six distinctive types of businesssystemsmade up from sigrrificantly dif-
ferent institutional structures.Some of the key aspectsof the institutional structure that
characterize business systems are outlined in Table 13.2, and include the nature and
degreeof legal regulation, as well as the character of the financial system.
Conclusion
The fragmented and dispersed character of the knowledge base within multinationals
means that there are potentially significant beneflts from effectively managing it. Thus
the potential synergy that could be created from bringing together elements of this dis-
persed knowledge is enormous. This helps to explain why multinationals corporations
have been some of the most enthusiastic adoptersof knowledge management initiatives.
However, paradoxically, these same characteristicsof the knowledge basemake its man-
agementan extremely complex and difficult task.This is due to both the sizeof the knowl-
edgebasein these organizations, which means the knowledge baseis highly fragmented,
combined with the fact that this knowledge is dispersedamong communities which can
have different sociocultural values and which operatewithin distinctive businesssystems.
One way in which multinationals can managetheir knowledge baseis through the way
business is structured, with the chapter showing how hierarchical and network-based
structures produce very different knowledge-sharing d;,namics. However, Birkinshaw
et al.'s (2002) contingency perspectivesuggeststhat the dominant logic that suggeststhat
network structures are inherently better for knowledge-sharing compared to hierarchical
stluctures,in all situations,was challenged.
K N O W L E D GPER O C E S S EI N
SI \ 4 U L T I N A T I O N A L S
Hofstede(1988,2001)arguesthatdistinctnational
culturescanbe identified.
Towhatextent
doesyourown personal experienceconfirmor challenge
this?Further,
do suchcultural
differences hinderprocesses
significantly of knowledge-sharing?
FordandChan(2003), in oneof the few studiesto examinethe effectof cultural differences
on organizational knowledge processes, foundthatlanguage competences significantly
affectedsuchprocesses. In general, informalknowledge flowsweremostlikelywithin
cultural groups,while{ormalbusiness-related communication was morelikelybetween
c u l t u r aglr o u p sW
. h a td o s u c hf i n d i n gssa ya b o u t h e i m p o r t a n coef p r o v i d i nl g
anguage
training as a way of dealing with the difficulties of cross-cultural knowledge processes?
exampleof Dell{seep. 200)showedthatit hada centralized
Theillustrative hierarchical
structure,
andutilized
a codification-based
knowledge management strategy.Towhatextent
aresuchknowledge management strategies
compatiblewith hierarchical
structures?
Further,
wouldsucha knowledge management strategybe compatiblewith a network-based
structu
re?
'Managing
M. Becker(2001). DispersedKnowledge: Organizational
Problems,Managerial
Strategiesand their Effectiveness',Journalof ManagementStudies,3\ll:1037-51 .
Examineshow organizationalsize affects the characterof organizationalknowledge bases, as well
as the most appropriatestrategies for managingknowledge.
J. Birkinshaw, (2002).'Knowledge
R. Nobel,andJ. Ridderstale as a Contingency
Variable:
Do the
of KnowledgePredictOrganizational
Characteristics Structure?'Organization
Science,1313274-89
Providesan analysiswhich suggests that organizationalstructure needs to be sensitive to the
characterof an organization'sknowledge base.
@ ORGAN
I Z A T I O N ACLO N T E X T S