Knowledge transfer barriers

Sharing knowledge becomes even more vital when a company opens a foreign subsidiary, since its successfulness, among other factors, will be determined by how and what knowledge is transferred to them. Knowledge such as, business relationships, product design or other intimate details of how the organization operates can be a key to success. Likewise, having a lack of that knowledge can entail a weakened company with increased costs. (Osak, 2013). Additionally, many companies invest both capital and time in trying to prevent the loss of knowledge when for example employees retire or otherwise choose to leave the firm. Ensuring that the employees share their experiences and knowledge with each other is therefore of crucial importance (Cancialosi, 2014).

Nowadays, it is increasingly common to find corporations that internationalize via subsidiaries (Fortune, 2015). There are examples of companies that have succeeded in the internationalization process, however, it is still unclear why some companies succeed better than others (Dyer & Hatch, 2006). One of the aspects that researchers have identified is that subsidiaries perform badly due to the failure in receiving the right information or obtaining it in the incorrect manner (Szulanski, 1996). Others have also pointed out that it is very common that the level of knowledge varies within the entities of the company, which can be an issue when trying to grow (Argote & Ingram, 2000).

Within the research field of knowledge transfer, it is clear that knowledge is a key factor for the firm’s operations and that it provides a great source of competitive advantage. However, knowledge is in itself complex and little research has been found on how this sophistication is solved. It seems like it is challenging for many firms to know how to manage knowledge and specifically to understand what are the main obstacles and impediments that make it so.

When analyzing the knowledge transfer process many aspects can interfere and research outline different factors affecting this process. Nevertheless, it is difficult to know which the altering factors are in the process or to what extent they are determinants of the success of the knowledge transfer.

Characteristics of the Knowledge causing Transfer Difficulties

Previous research indicates that the characteristics of the knowledge itself affect the level of difficulty to transfer knowledge (Szulanski, 1996). Noorderhaven and Harzing (2006) emphasize on the idea that firms should be able to differentiate codified from non-codifiable knowledge, or also known as explicit and tacit. Knowledge that is tacit ‘cannot be captured’ (Tsoukas, 2003) and is based on experiences (Polanyi, 1966). Due to this lack of tangibility, it is more difficult to transfer tacit knowledge (Noorderhaven & Harzing, 2005). However, tacit knowledge can be a great source of competitiveness since it is difficult to imitate and to obtain for competitors (Martins & António, 2010).

Tacit knowledge is considered to be context oriented, in the sense that it is only reasonable in certain situations and topics (Brown & Duguid, 1991). Kogut and Zander (1995) develop this idea by adding that it is part of the processes of a firm and consists of the know-how actions rather than the knowledge itself. Lippman and Rumplet's (1982) mention an interesting point, that since the tacit knowledge is the understanding of how to do something, it consequently includes capabilities required to accomplish it. In this way, replicating these skills or competences to a subsidiary can be very difficult.

According to Noorderhaven and Harzing (2005) most of the knowledge is transferred in social interactions, implying that it cannot be easily preserved. It also requires a further process of interpreting and integration that makes it more difficult to transfer (Schultz, 2003). They assure that face-to-face interaction is considered the best way to transfer tacit knowledge. However, Nelson and Winter (1982) argue that if it is a large MNC with many new subsidiaries or if they are established far away from the HQ, having face-to-face interaction might be time-consuming and expensive. Therefore, nowadays many MNC use technology to transfer this knowledge, though, the effectiveness of doing so decreases. Especially, since physical presence provides an immediate feedback and deeper understanding compared to virtually (Kiesler & Cummings, 2002). Many authors (Martins & António, 2010) also found that trust between the HQ and the subsidy is a key element for the transfer of knowledge, which can rather be achieved by face-to-face interactions than by emails or calling.

Riusala and Suutari (2004) discuss that another way to transfer tacit knowledge is through expatriates. It facilitates the process of learning and builds up trust. Martins and António (2010) continue by explaining that it is a more conservative communication process of receiver and sender, which allows more flexibility since questions can be asked and knowledge can be adapted to the subsidiary. However, many issues also arise by using expatriates and which can make the knowledge transfer complicated as well (Choi & Johanson, 2012). Expatriates are the delivers of this knowledge and therefore need to be knowledgeable about the culture and environment. Moreover, they should be able to create relationships with the locals and employees so that it is not understood as the knowledge is being forced upon them (Martins & Antonio, 2006). Hence, it is even more important with the initial selection process of the expatriate (Choi & Johanson, 2012).

Another aspect that is underlined by different studies is that the organizational structure and climate of the MNC can be an additional barrier to knowledge transfer. Chena and Huang (2007), states that an innovative organizational climate is by nature facilitating an increased social interaction among the members. This is because employees are encouraged to interact with each other, due to their willingness to exchange creative ideas (Edmondson, 1999). Consequently, an uncreative climate in the organization could therefore decrease the amount of knowledge transferred. Moreover, the degree of cooperative organizational climate can affect the interaction of individuals both positively and negatively (Jaw & Liu, 2003). Janz and Prasarnphanich (2003) argue that the knowledge transfer is positively influenced by a cooperative climate, since it increases the willingness of interaction in the organization. Therefore, the lack of a cooperative climate can be perceived as a negative impact on the communication which is correlated as a barrier. An organizational structure that positively influences innovation and cooperation is therefore facilitating knowledge transfer, whereas an organizational structure that do not, is creating a barrier for the knowledge transfer.

Organizational structure is commonly classified into three elements; formalization, centralization and integration (Andrews & Kacmar, 2001). Andrews and Kacmar (2001) explain that the level of formalization is determined by the number of formal policies, procedures, and rules that exist in the organization. In contrast to a high degree of formalization, a low degree of formalization is associated with jobs that are unstructured, which implicates that the employees have the possibility to deal with their tasks in a more unrestrained manner (Sivadas & Dwyer, 2000). Consequently, members of an organization with low degree of formalization are forced to frequently have social interactions to discuss and decide alternatives to execute their tasks (Bidault & Cummings, 1994). A higher degree of formalization within the MNC could therefore act as a barrier for the knowledge to be transferred, since it does not promote social interaction.

Centralization, which is the second element of the previously mentioned classification, is in an organization negatively associated with knowledge transfer since it is perceived to diminish the willingness of social interaction (Ferris & Kacmar, 1992; Andrews & Kacmar, 2001; Tsai, 2002). A high degree of centralization is referred to as a structure in which the authority of decision-making is concentrated in the top of the hierarchy, which imply that the members have less control and experiences powerlessness. This lack of control and power automatically contributes to less social integration, since it reduces the need and motivation of communication (Sivadas & Dwyer, 2000). However, when organizations are decentralized, individuals are more involved in the decision-making and have more subjects to influence, which encourage and require the members to communicate (Andrews & Kacmar, 2001).

The third element in the classification of organizational structure, integration, concerns the extent to which the subdivisions in an organization consolidate (Sciulli, 1998). When there are higher levels of integration, the members have a closer relationship since they have to work together and more information is shared (Janz and Prasarnphanich, 2003). While high levels of integration improve the transfer of knowledge, lower levels of integrated mechanism in the organization rather demote knowledge transfer. Subsequently, low degree of integration is identified as an obstacle since it simultaneously indicates that the mechanism of transfer is inferior.

One important field of study within knowledge transfer research is the social or cultural perspective of knowledge transfer. This perspective emphasizes that the ability to transfer knowledge is dependent on people rather than technology (Brown & Duguid, 1991). Taking this into consideration, the cultural realities and differences between different units trying to transfer knowledge is of great importance. Major research has been conducted on understanding the consequences of cultural differences (Leyland, 2006). One important influence is Schein (1985), and his literature regarding organizational culture and the importance of cultural compatibility between organizations.

Zaidman and Brock (2009) take on a research approach that focuses on the norms and rules that impact knowledge transfer between business units in different countries. The authors were able to observe a HQ- subsidiary relation where the knowledge transfer was hindered by the subjectiveness and understanding of parameters such as power distance, gender roles and levels of directness in communication. For example, the study points out the importance of horizontal knowledge transfer between team members and friends in the different units. However, subsidiary observations showed a problematic reality, where there were examples of women excluded from this type of spontaneous knowledge sharing, due to the influence of the country norms and gender roles. This can be illustrated by the quote ‘the girls feel insecure to mix with the boys‘ (Brock & Zaidman, 2009, p 322). The women not having access to these informal networks of knowledge sharing, points out the impact of cultural differences on knowledge transfer. This creates a problem for MNCs that aim to transfer knowledge throughout the network of subsidiaries.

The study also acknowledges hierarchy as a barrier to transfer knowledge. One issue is that managers have a tendency to control knowledge and keep it for themselves (Brock & Zaidman, 2009), where the reason for this is that they see the information as a source of power (Balsmeier & Nagar, 2002). Another issue is the avoidance from the employees to approach higher ranked managers with questions due to the risk of being exposed to a negative answer, which is related to when a country has this type of culture (Brock & Zaidman, 2009).

Several studies have been aiming to develop frameworks to examine cultural differences among countries (Leyland, 2006). A cultural compatibility index has also been presented by Calori, Lubatkin, Veiga, and Very (2000). Leyland (2006), is using Hofstede’s (1980) framework of cultural dimensions; power distance, individualism/collectivism, uncertainty avoidance, and masculinity/femininity. This study finds that success in knowledge transfer within multinational corporations with heterogeneous cultures is facilitated by cultural alignment. Dissimilarities in culture could for example be differences between individualistic and collectivistic cultures. An individualistic culture promotes knowledge transfer efforts by expecting benefits for the own subsidiary, whereas the collectivistic culture views the knowledge as the property for the whole MNC, to be used for the benefit of any subsidiary. Due to this mismatch, Leyland (2006) expects that ‘knowledge transfer efforts will be more successful when they involve subsidiaries in societies with similar collectivist cultures‘ (Leyland, 2006, p 263). When the cultures are not aligned, however, there is an increased need of directive and support from the head office, to overcome these barriers.

The cultural barrier is also underlined by the studies of Holtbrugge and Berg (2004) who found a positive relation between knowledge transfer and cultural similarity. On the other hand, a very recent study (Fong Boh, Nguyen & Xu, 2013), finds that cultural alignment is of less importance when transferring knowledge between headquarters and subsidiary. Instead they claim trust and openness to diversity as being critical factors. However, this view is unusual, thus it would be an interesting topic for future research.

As previously mentioned, there are several factors that can impede knowledge transfer between a firm and its subsidiaries. According to Epson (2001), one of the factors which plays a major role is the individual, and in particular how susceptible the individual is to accepting and understanding certain types of information. This phenomenon is noted as professional resistance and can be related to not only monetary factors but also to more personal feelings such as fear of losing status or becoming unemployed. (Empson, 2001)

The phenomenon is based on the fact that the process of knowledge transfer is inter-personal and that an organization cannot force individuals to share their knowledge and experience. One aspect that can affect knowledge transfer between professionals is the type of knowledge that is attempted to be transferred. One could argue that codified knowledge could be shared with or without an employee’s consent, as it can be shared via textbooks or training programs, whilst tacit knowledge requires the employees themselves to share it, as it is compiled with their experiences and relationships (Empson, 2001). A professional might feel unwilling to share their tacit knowledge with others as they believe that their knowledge is his or her primary source of value within the firm. As such, sharing this knowledge is believed to decrease the individual’s power within the firm, leaving them worse off than before. An attempt to prompt an individual to codify or share their knowledge would, with likelihood, be met with resistance. This is because the employee will feel as if the firm is trying to take control of the immaterial right of one’s experiences (Empson, 2001).

The second major factor that affects the efficiency of knowledge transfer on an individual level, is the employee’s absorptive capacity and their ability to understand and accept knowledge (Martins & António, 2010). An organization which wishes to improve the absorptive capacity of its subsidiaries, can do so by adapting the knowledge and putting a local context, thus making it more accessible to employees. This process, given its nature, often leads to the subsidiary’s business model being an improvement rather than just a modification of the original. As such, the subsidiary business model is not only more understandable and accessible for the subsidiary employees, but also more accepted by the local stakeholders. Elaborating on this point, one could argue that a parent company’s chance of successful knowledge transfer to a subsidiary depends not only how well the business model is modified or implemented, but also depends on what the original business model is (Martins & António, 2010).

Another factor which determines the effectiveness of knowledge transfer is employee interest. Martins (2010), argues that an employee’s lack of competence or lack of experience can lead to a loss of interest, which in turn can create a resistance to knowledge. This becomes especially apparent when the two parties do not share a common interest or if the receiver has not requested the given knowledge, regardless if that knowledge is technical or tacit. If an organization tries to send knowledge anyway, there is a greater chance of the receiver misunderstanding it. (Martins & António, 2010).

Discussion and Conclusion

Extensive research has been made on knowledge transfer throughout the years. Research has been examining the role of knowledge in organizations, often with an emphasis on the importance of knowledge and capabilities as a resource of competitive advantage. Due to the increasing globalization and creation of MNCs, the challenge of transferring the knowledge throughout the organization has been an interesting topic for researchers. Especially when it comes to identifying the factors behind a successful knowledge transfer. Furthermore, many articles discuss, not only, knowledge transfer success factors, but also certain knowledge transfer barriers. These are; internal stickiness, absorptive capacity, cultural similarity, personal motivation and structure.

Our review focuses upon four key concepts, thus our findings are structured into four categories. First, different types of knowledge can be transferred and tacit knowledge stands out as difficult in this context, due to its lack of tangibility and possibility to codify and then transfer the knowledge. Solving this by major efforts to create face-to-face interaction can be expensive and time consuming within an MNC consisting of a vast amount of units around the world. Second, research reveals that structure affects knowledge transfer by its ability or disability to enable social interaction. Centralization, formalization and non-integration inherent a risk to act as barriers for knowledge transfer due to its failure to create an environment of dependence and social interaction.

Third, the cultural aspect has been widely studied, where a higher cultural distance, measured by for example Hofstede’s (1980) framework, increases the risk of failures in knowledge transfer. An important learning is the importance of understanding the different realities and environments that units within the MNC is affected by, so both the receiver and sender of knowledge are aware of the perceptions that can occur. Finally, the knowledge transfer is dependent on the individual’s ability to understand and accept knowledge. Absorptive capacity and motivational factors are necessary for successful transfer of the knowledge.

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