Knowledge transfer effectiveness in subsidiary initiative selling - : Unlocking the door to subsidiary initiative for managers operating in small developed markets

Abstract:

Purpose

The purpose of this paper is to describe, explore and explain the influence of entrepreneurial knowledge transfer effectiveness in the subsidiary initiative selling process. Specifically the flow of tacit knowledge relating to specific entrepreneurial opportunities transferred from subsidiaries as part of an attempt to achieve approval, support or resources for subsidiary initiatives is under focus. The paper seeks to develop hypothesis regarding possible relationships between tacit knowledge transfer effectiveness and subsidiary initiative, and further the relationship regarding the utilization of tacit knowledge transfer mechanisms for this purpose.

Method

The study consists of qualitative research in the form of a multiple case study. Eight cases are presented, four are Swedish subsidiaries of international organizations and the other four are Swedish headquarters of international MNC´s. The study uses an ‘abductive’ approach, moving frequently between literature, theory and empirical findings in order to prepare hypotheses that can be used for quantitative testing. The study develops its final hypotheses by comparing hypotheses that can be derived from literature, and then confirming, rejecting or modifying them based on the empirical evidence collected.

Findings

The study finds that tacit knowledge transfer effectiveness is a significant determinant of subsidiary initiative. Despite this fact the study finds that subsidiary managers appear to underrate and in some cases disregard the importance of tacit knowledge transfer effectiveness in the initiative selling process. The fact that tacit knowledge transfer effectiveness is not actively addressed means that a significant opportunity for improvement probably exists in this area.

The study findings stand in contrast to the viewpoint held by the majority of the existing literature that although the transfer of tacit knowledge and the associated integrative and interactive communication mechanisms will have a positive direct effect on subsidiary initiative, they will as a secondary effect increase headquarters monitoring and interference. This interference is thought to decrease subsidiaries autonomy, entrepreneurial-ness and ultimately the level of subsidiary initiative. The study finds that the secondary effect is in fact in the opposite direction, being positively related to subsidiary initiative.

The study also finds that when examining subsidiaries located in small developed markets the most important entrepreneurial knowledge flow to consider may be between the subsidiary and its regional management structure, as opposed to the head office.

Originality/Value

The study combines existing literature with a multiple case study to create hypothesise specifically relating to tacit knowledge transfer effectiveness and its role as a determinant of subsidiary initiative. The study further focuses on the influence of tacit knowledge transfer mechanisms in relation to subsidiary initiative.

The study provides a classification of subsidiary initiatives which is most useful given the subject of this study and further creates a distinction between the discrete short term effects of a specific instance of knowledge transfer and the continuous process of knowledge transfer over time. The paper also brings forward the importance of the distinction between the conceptualization of the discrete specific process of initiative selling, and the cumulative effect of initiative selling over time, which along with other types of knowledge transfer and subsidiary promotion tactics I refer to as ‘subsidiary selling’.

Implications for research

The hypotheses developed in this paper are suitable to be tested in a large scale quantitative study.

The fact that managers do not seem to be actively trying to transfer tacit knowledge more effectively means that where active tacit entrepreneurial knowledge transfer strategy is found it is likely to have significant effect on subsidiary initiative level.

The challenge to the conventional assumptions that the presence and utilization level of tacit knowledge transfer mechanisms are likely to have a positive side effect on subsidiary initiative, as opposed to the negative side effect as predicted by contingency theory, is very significant.

The distinction between the short- and medium term effects, as put forward in this study, informs scholars that an academic study needs to both take into account the time frame over which the effects of knowledge transfer are studied as well as the negative feedback loop of the knowledge transfer. The study also puts forward specific categories of subsidiary initiative, and suggests that these categories should be individually studied in future quantitative research.

Implications for managers/practitioners

Subsidiary Management should be aware that they could dramatically improve their entrepreneurial project approval rate by improving their tacit knowledge transfer effectiveness.

The finding  regarding that increases in tacit knowledge effectiveness, lead to lower costs of future knowledge transfer, further leading to increased likelihood of headquarters attention and comfort, means that they have the opportunity to create a virtuous circle of increased knowledge transfer resulting in lower costs of knowledge transfer resulting in more willingness to engage in knowledge transfer.

The finding that the secondary effects of knowledge transfer of entrepreneurial opportunities have a further positive effect on subsidiary initiative means that there is very little downside to increasing the use of integrating and interactive communication mechanisms, and with significant upside this indicates managers should immediately attempt to increase the presence and utilization of these mechanisms.

The study indicates that it may be a prudent strategy for managers of subsidiaries in multinational corporations operating in small developed market’s to increase their tacit knowledge transfer effectiveness regarding entrepreneurial opportunities during the initiative selling process, as this rare skill may help them win the battle for internal resources such as attention and finance.