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Knowledge flows and the modelling of the multinational enterprise

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Abstract

This research develops a location–allocation, mixed integer linear model that simultaneously evaluates a substantial number of multinational enterprise (MNE) location and control configurations to yield an optimal network, considering R&D, production and marketing facilities, produced in-house and/or outsourced. The model places special emphasis on the role of intra-firm, inter-firm and extra-firm knowledge flows in addressing cost minimisation considerations of MNEs. A simulation analysis is undertaken to evaluate potential solutions from such a framework and to analyse their consistency with theoretical expectations.

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Notes

  1. A special issue of JIBS was recently devoted to the role of intra-firm and inter-firm knowledge flows (Volume 35, No. 5, 2004).

  2. Models within the fields of supply chain management, transportation and mathematical programming have been published in leading operations research journals (Management Science, Operations Research, Interfaces, Journal of the Operational Research Society and others) in an attempt to study the MNE phenomenon.

  3. This is achieved easily by setting outsourcing costs to very high values.

  4. Based on data obtained from OECD (2001), ILO (2005) and UNIDO (2005a, 2005b).

  5. Based on data obtained from Davies and Lynos (1996), Frankel (1997), OECD (2001) and European Commission (1997).

  6. Production must be located in two countries because total world demand exceeds the capacity of a single plant.

  7. We used the familiar formula of Kogut and Singh (1988: 422) to calculate cultural distance, based on the four cultural distance dimensions of Hofstede (1980). The computed cultural distance values were then normalised to the magnitude of geographic distance used in the previous runs.

  8. For reasons of simplicity, we ignore outsourcing of R&D. Incorporation of R&D outsourcing into the model should not cause a problem, but it requires a different definition of the R&D cost function.

  9. Implying that the knowledge flow cost from A to B differs from the knowledge flow cost from B to A.

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Acknowledgements

We thank the participants of the Second JIBS/AIB/CIBER frontiers conference and two anonymous JIBS reviewers for their comments, and Arie Lewin for his guidance. We further wish to thank the Recanati fund and the Asper Centre at the Hebrew University for their financial support, and Shai Harel for execellent research assistance.

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  1. Jerusalem School of Business Administration, The Hebrew University, Israel

    Nicole Adler & Niron Hashai

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  1. Nicole Adler
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  2. Niron Hashai
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Correspondence to Niron Hashai.

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Accepted by Arie Y Lewin, Editor-in-Chief, 10 November 2006. This paper has been with the authors for one revision.

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Adler, N., Hashai, N. Knowledge flows and the modelling of the multinational enterprise. J Int Bus Stud 38, 639–657 (2007). https://doi.org/10.1057/palgrave.jibs.8400284

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400284

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