Knowledge of the firm and the evolutionary theory of the multinational corporation

Authors: Kogut B.¹; Zander U.²

Source: Journal of International Business Studies, Volume 34, Number 6, November 2003 , pp. 516-529(14)

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Abstract:

Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporationJournal of International Business Studies (2003), 34, 516–529. doi:10.1057/palgrave.jibs.8400058

Document Type: Research article

DOI: http://dx.doi.org/10.1057/palgrave.jibs.8400058

Affiliations: 1: 1Wharton School, University of Pennsylvania, USA 2: 2Institute of International Business (IIB), Stockholm School of Economics, Sweden

Publication date: 2003-11-01