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Managing tacit and explicit knowledge transfer in IJVs: the role of relational embeddedness and the impact on performance

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Abstract

Drawing on organizational learning and economic sociology, we address how relational embeddedness between the foreign parent and international joint venture (IJV) managers influences the type of knowledge (i.e., tacit and explicit) transferred to the IJV, and how the importance of relational embeddedness varies between young and mature IJVs. We also examine the influence of tacit and explicit knowledge on IJV performance. Our results show the importance that tie strength, trust, and shared values and systems play in the transfer of tacit knowledge, especially for mature IJVs. Our findings are consistent with Uzzi's tenets: tacit learning is accumulative, assists in explaining explicit knowledge, and is enhanced by social embeddedness. We also find that the influence of transferred tacit knowledge on IJV performance stems principally from its indirect effect on the learning of explicit knowledge.

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Notes

  1. Lane et al. (2001) treat trust as a component of absorptive capacity. To better separate the social and cognitive aspects of knowledge, we associate trust with relational embeddedness.

  2. The χ2 is sample size dependent and favors complex models. GFI and NFI are sample size dependent and tend to decrease sharply as the sample size goes below 200 (Bentler and Bonett, 1980; Gerbing and Anderson, 1992; Hu and Bentler, 1999). Hu and Bentler (1995) note: ‘GFI behaves inconsistently across estimation methods at sample sizes of 250 or smaller (pp. 91–92)’ and ‘NFI is not a good indicator for evaluating model fit when N is small (p. 89)’. CFI and RMSEA provide a better idea of the fit when sample sizes are small. Thus we have looked at these indices to identify the best-fitting model. Hu and Bentler (1999) suggest that CFI>0.95 is deemed a good fit. Similarly, Browne and Cudeck (1993) suggest that RMSEA <0.05 can be considered a close fit.

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Acknowledgements

An earlier version of this paper received the best paper award at the Academy of International Business Conference, held in July 2004, at Stockholm, Sweden. This material is based upon work supported by the National Science Foundation under Grant No. 0080152. Any opinions, findings, conclusions, or recommendations expressed in this paper are those of the authors and do not necessarily reflect the views of the National Science Foundation. This paper has been improved by thoughtful comments from the Guest Editors, Nicolai Juul Foss and Torben Pedersen, and the very helpful anonymous reviewers. We have benefited from comments from the audience at seminars given at Indiana University and Peking University.

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Correspondence to Charles Dhanaraj.

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Accepted by Nicolai Juul Foss and Torben Pedersen, Departmental Editors, 2004. This paper has been with the author for two revisions.

Appendix: A sample questionnaire statements used for construct measures

Appendix: A sample questionnaire statements used for construct measures

Parent–IJV tie strength

To what extent have you received support from your foreign parent in each of the following areas? (5-point scale from ‘Little support’ to ‘Strong Support’)

  • Managerial resources

  • Emotional support

  • Time

Trust

To what extent would you rate the following statements as true of your relationship with your foreign parent (5-point scale from ‘Little’ to ‘To Great Extent’)

  • As we have been doing business for so long, we can understand each other well and quickly.

  • In our contacts with the foreign parent, we have never had the feeling of being misled.

  • In this relation, both sides are expected not to make demands that can seriously damage the interests of the other.

  • In this relation, the strongest side is expected not to pursue its interest at all costs.

  • In this relation, informal agreements have the same significance as formal contracts.

  • As we have been doing business so long, both sides know the weaknesses of the other and do not take advantage of them.

Shared systems

In the following section, we would like you to indicate the extent to which you agree with the following statements as they describe your joint venture. Please circle the number. (5-point scale from strongly disagree to strongly agree)

  • The JV's systems have been tailored to using the systems brought from the foreign parent.

  • The foreign parent monitors the extent to which the JV follows established procedures.

  • The foreign parent developed specific procedures for the JV to follow.

  • The foreign parent has made efforts to instill its business philosophy in the JV managers.

Tacit knowledge

To what extent have you learned from your domestic parent? (5-point scale from ‘Little’ to ‘To great extent’)

  • New marketing expertise

  • Knowledge about foreign cultures and tastes

  • Managerial techniques

Explicit knowledge

To what extent is the knowledge that you have gained from your foreign parent? (5-point scale from ‘Little’ to ‘To great extent’)

  • Written knowledge about the technology

  • Procedural manuals or technical manuals

  • Written knowledge about management techniques.

Performance measures

(5-point scale from poor to excellent)

  • Key managers in the Hungarian parent would rate the JV's performance as…

  • Key managers in the foreign parent would rate the JV's performance as…

  • You would rate the JV's performance as…

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Dhanaraj, C., Lyles, M., Steensma, H. et al. Managing tacit and explicit knowledge transfer in IJVs: the role of relational embeddedness and the impact on performance. J Int Bus Stud 35, 428–442 (2004). https://doi.org/10.1057/palgrave.jibs.8400098

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