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Managerial ties and knowledge transfer in business ecosystems: Evidence from Korean subsidiaries in China

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Abstract

This study adds to the literature on business ecosystems and knowledge management by examining managerial ties as contingency factors. We suggest that managerial ties can be symbiotic (resources) or parasitic (constraints) to a foreign firm. We support our contention with evidence from Korean subsidiaries in China. We find that domestic political ties strengthen the effect of headquarters' knowledge transfer on performance. On the other hand, business ties are a double-edged sword, strengthening the performance impact of local knowledge acquisition while weakening that of headquarters' knowledge transfer.

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Notes

  1. We thank an anonymous reviewer for his or her suggestion on conducting the last two tests for endogeneity.

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Author information

Authors and Affiliations

  1. Department of Business Administration, College of Economics and Management, Yanbian University, 977 Gongyuan Road, Yanji, 133002, China

    Jingxun Li & Lian Zhang

  2. Department of Marketing, College of Business, Florida State University, 821 Academic Way, Tallahassee, FL, 32306-1110, USA

    Ruby P. Lee

Authors
  1. Jingxun Li
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  2. Ruby P. Lee
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  3. Lian Zhang
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Corresponding author

Correspondence to Ruby P. Lee.

Appendix: CFA results and measures

Appendix: CFA results and measures

Measures

Standardized

Factor Loadings

AVE

Construct Reliability

Headquarters’ knowledge transfer (anchored on a seven-point bipolar scale from 1 = a little extent to 7 = a large extent)

 

0.61

0.88

Please indicate the extent to the following areas of organizational knowledge has been transferred to your subsidiary from the headquarters:

 

1. The development of basic and applied technologies

0.95

2. New product design and development

0.88

3. Manufacturing activities

0.79

4. Sales, marketing and distribution

0.63

5. General management

0.58

Local knowledge acquisition (anchored on a seven-point bipolar scale from 1 = a little extent to 7 = a large extent)

 

0.61

0.86

Please indicate the extent to which your company has formally and deliberately acquired the following areas of knowledge from the host country

 

1. Adapting management to the local Chinese market

0.64

2. Chinese culture and traditions

0.77

3. Laws, regulations and policies in China

0.86

4. Financial and monetary systems in China

0.83

Business ties (anchored on a seven-point Likert scale from 1 = strongly disagree to 7 = strongly agree)

 

0.61

0.82

1. Top executives of our company maintain good personal relationships with local business partners

0.79

2. Top executives of our company meet local business partners in relaxed environment (e.g., dining out)

0.78

3. Top executives of our company contact local business partners after office hours

0.77

Political ties (anchored on a seven-point Likert scale from 1 = strongly disagree to 7 = strongly agree)

 

0.77

0.93

1. Top executives of our company invested a lot of resources into building relationships with government officials

0.84

2. Top executives of our company contact local government officials after office hours

0.98

3. Top executives of our company meet local government officials in relaxed environment (e.g., dining out)

0.91

4. Top executives of our company maintain good personal relationships with local government officials

0.76

Subsidiary local market performance (anchored on a seven-point bipolar scale from 1 = much lower to 7 = much higher)

 

0.73

0.89

Please indicate the level of your firm performance compared to your major competitors in the last three years in terms of the following in your local market

 

1. Sales growth

0.71

2. Market share

0.90

3. Returns on assets

0.93

  1. Model fit indexes: Chi square = 167.99 (df = 138), GFI = 0.89, CFI = 0.98, NFI = 0.90, IFI = 0.98, RMSEA = 0.04
  2. All items are significant at p < .001

Separate CFAs and their model fits

 

GFI

CFI

NFI

IFI

RMSEA

Headquarters’ knowledge transfer

0.96

0.98

0.97

0.97

0.16

Local knowledge acquisition

0.97

0.98

0.97

0.98

0.15

Business ties

1

1

1

1

0

Political ties

0.97

0.98

0.99

0.99

0.13

Subsidiary local market performance

1

1

1

1

0

  1. The table above shows the individual CFA summary for our five constructs or latent variables. Since Business Ties and subsidiary local market performance each contains only three items, the program is not able to compute their individual measurement models (Zainudin 2012). Although the individual model fitness of headquarters’ knowledge transfer, local knowledge acquisition, and political ties are acceptable in general, their RMSEA values are greater than 0.80. Pooled CFA is recommended in our case given that it runs all the latent variables simultaneously, avoiding the concern associated with model identification

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Li, J., Lee, R.P. & Zhang, L. Managerial ties and knowledge transfer in business ecosystems: Evidence from Korean subsidiaries in China. Asian Bus Manage 17, 183–207 (2018). https://doi.org/10.1057/s41291-018-0033-y

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