The Role of Headquarters
Edited by Ulf Andersson and Ulf Holm
Chapter 11: Managing the Transfer of Externally Embedded Subsidiary Knowledge: The Role of Headquarters’ Control Mechanisms
Christine Holmström INTRODUCTION Within the international business literature it is assumed that the MNC can enhance its stock of knowledge through its foreign subsidiaries. Research has shown that the ability of foreign subsidiaries to assimilate new knowledge from their local environment constitutes a crucial competitive advantage (Kotabe et al., 2007) and an expanding stream of research attests to the importance of external relationships for the subsidiary’s ability to assimilate new knowledge from its local environment, turning it into new innovations (von Hippel, 1988) and capabilities (Andersson et al., 2002; Frost, 2001; Holm and Pedersen, 2000; Håkansson, 1989; McEvily and Marcus, 2005; Schmidt and Schurig, 2003). It is argued that, to the extent that subsidiaries control important domestic knowledge, this knowledge will subsequently be transferred and exploited to the benefit of the whole corporation (Andersson et al., 2001, 2002; Foss and Pedersen, 2002). However, several authors have pointed out that it is difficult to accomplish knowledge transfer across MNC units. Indeed, much of the research on knowledge transfer has been concerned with examining how different barriers affect the transfer of knowledge across MNC units, including the intrinsic nature of knowledge (Winter, 1987; Zander and Kogut, 1995) and barriers of cognitive or motivational character (Gupta and Govindarajan, 2000; Szulanski, 1996). In recent research it has been proposed that these barriers are especially manifest in situations where the subsidiary is deeply embedded in external relationships with demanding customers or suppliers (Andersson et al., 2002; Forsgren et al., 2000; Håkanson and...
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