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Towards an Integrated Knowledge Management Strategy in Indo-U.S. International Joint Ventures D I S S E R T A T I O N der Universität St. Gallen, Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG) zur Erlangung der Würde einer Doktorin der Wirtschaftswissenschaften Vorgelegt von Anita Subramanian von Riehen (Basel-Stadt) Genehmigt auf Antrag der Herren Prof. Dr. Li Choy Chong und Prof. Dr. Martin Hilb Dissertation Nr. 2736 Salinas Press, Walisellen, 2003

Transcript of Towards an Integrated Knowledge Management Strategy in ...FILE/dis2736.pdf · Towards an Integrated...

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Towards an Integrated Knowledge Management Strategy in Indo-U.S. International Joint Ventures

D I S S E R T A T I O N der Universität St. Gallen,

Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG)

zur Erlangung der Würde einer Doktorin der Wirtschaftswissenschaften

Vorgelegt von

Anita Subramanian

von

Riehen (Basel-Stadt)

Genehmigt auf Antrag der Herren

Prof. Dr. Li Choy Chong und

Prof. Dr. Martin Hilb

Dissertation Nr. 2736

Salinas Press, Walisellen, 2003

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Die Universität St. Gallen, Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG), gestattet hiermit die Drucklegung der vorliegenden Dissertation, ohne damit zu den darin ausgesprochenen Anschauungen Stellung zu nehmen. St. Gallen, den 10. Dezember 2002

Der Rektor: Prof. Dr. Peter Gomez

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Acknowledgements Many individuals from different places and countries have been helpful to me during the past few years in accomplishing this doctoral thesis and I would like to take the opportunity to express my sincere thanks and gratitude. Prof. Li Choy Chong, my mentor and dissertation supervisor has always been a huge support to me during the research process and I greatly cherish the time I was able to work for him in the Asia Research Centre. During this period, I had the privilege of being able to participate in the lead for the course "Management in Asia", which enabled me to further my knowledge in this area. Many valuable ideas were sown for my doctoral thesis during this time. My sincere thanks are due to Prof. Martin Hilb, my co-referant, who was always willing to lend a patient ear during various stages of this dissertation and keep me on track for my doctoral work. My research work was amply supported by the Temple University, Philadelphia, where I had the privilege to be a visiting scholar with Prof. Preet S. Aulakh for almost one year. A special thanks goes to the multitude of interviewees who had the graciousness to support in my endeavor during the empirical research data collection in India and later in the USA. The sincere help from various Indo-U.S. Joint venture companies and their parent organizations is very much appreciated. This is especially true for the substantial quality time they spent with me for the interviews, accommodating my queries amidst their tight schedule. Many of the interviewees were directly affected by the events of September 11, 2001 and my heart goes out to them. Last but not least, I would like to thank my parents from my heart for their love, dedication and support through joyous and trying times. I owe them everything. Bottmingen, Dezember 2002 Anita Subramanian

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Table of Contents

A THE RESEARCH FOCUS: CONTEXT DEFINITION.......................................1

A.1 Introduction ....................................................................................................................................... 1

A.2 Research Focus .................................................................................................................................. 3

A.3 Conceptual Framework .................................................................................................................... 4

A.4 Methodology ...................................................................................................................................... 9

B KNOWLEDGE MANAGEMENT IN INTERNATIONAL JOINT VENTURES: THEORETICAL CONSIDERATIONS....................................................................12

B.1 Defining the International Joint Venture (IJV) Framework....................................................... 12 B.1.1 IJV Theory ................................................................................................................................... 13

B.1.1.1 Why Firms enter IJVs ........................................................................................................ 15 B.1.1.1.1 Traditional Theories of the FIRM................................................................................. 17 B.1.1.1.2 The Knowledge Based Theory of the Firm................................................................... 18

B.1.1.2 The Formation and Structure of the IJV ............................................................................ 22 B.1.1.3 IJV Management................................................................................................................ 25 B.1.1.4 Longevity and the Transitory Nature of IJVs .................................................................... 27 B.1.1.5 Organizational and National IJV Culture........................................................................... 28

B.1.2 Information-based Service JVs .................................................................................................... 30 B.1.2.1 Global Professional Services ............................................................................................. 30 B.1.2.2 Information-based Service - IJVs ...................................................................................... 33

B.2 Knowledge Management Theory ................................................................................................... 36 B.2.1 Defining Organizational Knowledge............................................................................................ 36 B.2.2 Organizational Learning............................................................................................................... 42 B.2.3 Overview of the Knowledge Management Processes .................................................................. 52

B.2.3.1 Knowledge Evaluation....................................................................................................... 55 B.2.3.2 Knowledge Transfer Processes .......................................................................................... 57 B.2.3.3 Knowledge Creation .......................................................................................................... 60 B.2.3.4 Knowledge Retention ........................................................................................................ 65

B.2.3.4.1 Organizational Memory................................................................................................ 68 B.2.3.4.2 Tools for Knowledge Retention.................................................................................... 69

B.2.4 Knowledge Management Strategy ............................................................................................... 71 B.2.4.1 Barriers .............................................................................................................................. 72 B.2.4.2 Enablers ............................................................................................................................. 73

B.2.5 The Knowledge Management Environment................................................................................. 76 B.2.6 The Knowledge Management Architecture.................................................................................. 78

B.3 Knowledge Management within the IJV Framework.................................................................. 84 B.3.1 State of Research on Knowledge Management in IJVs ............................................................... 85 B.3.2 Knowledge Management Strategy in IJVs................................................................................... 99 B.3.3 KM Processes in IJVs ................................................................................................................ 103 B.3.4 Developing the Framework........................................................................................................ 109

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C CORE KNOWLEDGE MANAGEMENT PROCESS IN INTERNATIONAL JOINT VENTURES..............................................................................................113

C.1 Introduction ................................................................................................................................... 113

C.2 Key Information on Case Study Partners ................................................................................... 118 C.2.1 DSP Merrill Lynch (DSPML) .................................................................................................... 118

C.2.1.1 Indian Parent - DSP Financial Consultants (DSP) ........................................................... 118 C.2.1.2 U.S. Parent – Merrill Lynch (ML) ................................................................................... 119 C.2.1.3 The IJV – DSP Merrill Lynch (DSPML)......................................................................... 120

C.2.2 JM Morgan Stanley (JMMS)...................................................................................................... 123 C.2.2.1 Indian Parent – J.M. Financials (JMF)............................................................................. 124 C.2.2.2 U.S. Parent – Morgan Stanley Dean Witter (MS)............................................................ 124 C.2.2.3 The IJV – JM Morgan Stanley (JMMS) .......................................................................... 125

C.2.3 Max New York Life (MNYL).................................................................................................... 127 C.2.3.1 Indian Parent – Max India Ltd (MI)................................................................................. 128 C.2.3.2 U.S. Parent – New York Life International Inc. (NYL).................................................. 131 C.2.3.4 The IJV – Max New York Life (MNYL) ........................................................................ 131

C.2.4 Birla AT&T Communications Ltd. ............................................................................................ 133 C.2.4.1 Indian Parent – Aditya Birla Group ................................................................................. 134 C.2.4.2 U.S. Parent AT&T Wireless Services.............................................................................. 135 C.2.4.3 The IJV – Birla AT&T..................................................................................................... 136

C.2.5 Sprint RPG ................................................................................................................................. 138 C.2.5.1 Indian Parent : RPG Enterprises ...................................................................................... 138 C.2.5.2 U.S. Parent - Sprint International / Global One ............................................................... 140 C.2.5.3 The IJV: Sprint RPG India Ltd ........................................................................................ 141

C.2.6 Ogilvy and Mather (O&M) ........................................................................................................ 141 C.2.6.1 Indian Parent – S. G. Benson ........................................................................................... 142 C.2.6.2 U.S. Parent – Ogilvy & Mather ....................................................................................... 142 C.2.6.4 The IJV – Ogilvy Consulting India Ltd. .......................................................................... 143

C.2.7 Analysis of the literature context and data ................................................................................. 144 C.2.8 Indian Economic Environment................................................................................................... 144

C.3 Strategic Planning: Implementing a Global Knowledge Management Strategy in the IJV ... 146 C.3.1 Global Knowledge Management Strategy ................................................................................. 146

C.3.1.1 The Knowledge Audit...................................................................................................... 152 C.3.1.2 Top Down KM Strategy .................................................................................................. 154 C.3.1.3 Creating the Environment for Global Knowledge Management within the IJV.............. 156 C.3.1.4 Implementing The KM Strategy ...................................................................................... 157

C.3.2 Types of KM Strategy................................................................................................................ 161 C.3.3 Organizational Knowledge Roles............................................................................................... 164

C.3.3.1 Knowledge Structure in the IJV Network........................................................................ 164 C.3.3.2 The Role of the Chief Knowledge Officer....................................................................... 166 C.3.3.3 Other Knowledge Roles in the IJV .................................................................................. 170

C.3.4 Incorporating KM Processes in Strategy.................................................................................... 171 C.3.5 Measuring the Success of KM Efforts ....................................................................................... 173 C.3.6 Transfer of Best Practices Across the IJV Network................................................................... 174 C.3.7 Potential questions for further research...................................................................................... 177 C.3.8 KM Practices in IJV Case Studies: Strategic Planning .............................................................. 178

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C.3.8.1 DSP Merryl Lynch........................................................................................................... 178 C.3.8.2 JM Morgan Stanley.......................................................................................................... 178 C.3.8.3 Max New York Life......................................................................................................... 179 C.3.8.4 Birla AT&T ..................................................................................................................... 180 C.3.8.5 Sprint RPG....................................................................................................................... 180 C.3.8.6 Ogilvy & Mather.............................................................................................................. 181

C.4 Alliance Management: Inter-organizational Knowledge Sharing ............................................ 183 C.4.1 Knowledge Management during Different Phases of Alliance Management ............................ 183

C.4.1.1 IJV Negotiation Phase ..................................................................................................... 187 C.4.1.2 IJV Formation Phase........................................................................................................ 194 C.4.1.3 IJV Management Phase ................................................................................................... 199

C.4.2 Cross-cultural Management and Learning ................................................................................. 204 C.4.2.1 Cultural Context in the IJV.............................................................................................. 206 C.4.2.2 Learning and Culture ....................................................................................................... 214

C.4.3 Potential questions for further research...................................................................................... 218 C.4.4 KM Practices within the IJV Framework: Case Studies ............................................................ 218

C.4.4.1 DSP Merryll Lynch.......................................................................................................... 218 C.4.4.2 JM Morgan Stanley.......................................................................................................... 218 C.4.4.3 Max New York Life......................................................................................................... 220 C.4.4.4 Birla AT&T ..................................................................................................................... 221 C.4.4.5 Sprint RPG....................................................................................................................... 222

C.5 International Human Resource Management: The Global Knowledge Worker within the IJV Framework .................................................................................................................................................... 226

C.5.1 Human Resource Management in IJVs ...................................................................................... 226 C.5.2 Knowledge Management Issues in IJVs .................................................................................... 227 C.5.3 Implementing Global Human Resources Guidelines in the IJVs ............................................... 236 C.5.4 Managing the Knowledge Worker ............................................................................................. 241 C.5.5 Human Resources Knowledge Activities in the IJVs................................................................. 243

C.5.5.1 Recruiting and Staffing.................................................................................................... 243 C.5.5.1.1 IJV Top Management ................................................................................................. 244 C.5.5.1.2 Expatriate Management .............................................................................................. 248 C.4.5.1.3 Expatriate failure: unrealized scope for learning ........................................................ 249

C.5.5.2 Training............................................................................................................................ 252 C.5.5.3 Personnel Movement ....................................................................................................... 256 C.5.5.4 Communities of Practice.................................................................................................. 256 C.5.5.5 Incentives and Compensation .......................................................................................... 260

C.5.5.5.1 Incentives.................................................................................................................... 260 C.4.5.5.2 Compensation ............................................................................................................. 264

C.5.6 Potential questions for further research...................................................................................... 265 C.5.7 Knowledge Management within the IJV Framework: Case Studies .......................................... 265

C.5.7.1 DSP Merryll Lynch.......................................................................................................... 265 C.5.7.2 JM Morgan Stanley.......................................................................................................... 266 C.5.7.3 Max New York Life......................................................................................................... 266 C.5.7.4 Birla AT&T ..................................................................................................................... 268 C.5.7.5 Sprint RPG....................................................................................................................... 268 C.5.7.6 Ogilvy & Mather (India).................................................................................................. 270

C.6 Technology Management: Implementing Global Knowledge Management Tools.................. 273

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C.6.1 Bridging Information Management, Technology Management and Knowledge Management . 273 C.6.1.1 Information Management................................................................................................. 274 C.6.1.2 Technology Management................................................................................................. 280

C.6.2 Supporting Global Knowledge Flow through Effective Technology Management ................... 284 C.6.3 Knowledge Management Tools ................................................................................................. 286

C.6.3.1 Repositories ..................................................................................................................... 286 C.6.3.2 Process Redesign ............................................................................................................. 286 C.6.3.3 Information Technology Applications ............................................................................. 289

C.6.4 Potential questions for further research...................................................................................... 293 C.6.5 Knowledge Management within the IJV Framework: Case Studies .......................................... 294

C.6.5.1 DSP Merryll Lynch.......................................................................................................... 294 C.6.5.2 JM Morgan Stanley.......................................................................................................... 295 C.6.5.3 Max New York Life......................................................................................................... 297 C.6.5.4 Birla AT&T ..................................................................................................................... 297 C.6.5.5 Sprint RPG....................................................................................................................... 302 C.6.5.6 Ogilvy & Mather.............................................................................................................. 304

C.7 Comparison of the Case Studies with respect to Key Research Questions............................... 309

C.8 Salient Points from Other Interviews (vide Annex ) .................................................................. 314

D CONCLUSION.............................................................................................316

D.1 Key Findings .................................................................................................................................. 316

D.2 Contributions to KM literature.................................................................................................... 319 D.2.1 Implications for further Research............................................................................................... 319 D.2.2 Implications for IJV Management.............................................................................................. 320

E ANNEX ........................................................................................................322

E.1 List of Abbreviations..................................................................................................................... 322

E.2 Annex on Govt. of India Policies and Rules ................................................................................ 325

E.3 Interview Formats ......................................................................................................................... 331 E.3.1 Parent Company Employees ...................................................................................................... 331 E.3.2 CEOs of the Indo-U.S. IJVs ....................................................................................................... 331 E.3.3 HR Heads of the Indo-U.S. IJVs ................................................................................................ 332 E.3.4 CIOs / CTOs of Indo-U.S. IJV................................................................................................... 333

E.4 Interview Partners from diverse Indian IJVs............................................................................. 335

E.5 Case Study Companies.................................................................................................................. 338

F BIBLIOGRAPHY..........................................................................................340

F.1 Bibliography Cited ............................................................................................................................. 340

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F.2 Additional Literature ......................................................................................................................... 374

F.3 HTTP LINKS...................................................................................................................................... 405

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Table of Figures Figure A.1 Literature Overview of Research Context ........................................................................................ 2 Figure A.2 Conceptual Framework I.................................................................................................................. 6 Figure A.3 Conceptual Framework II................................................................................................................. 7 Figure A.4 Towards an Integrated Knowledge Management Strategy............................................................... 8 Figure B.1 The IJV Framework ....................................................................................................................... 13 Figure B.2 The Reasons for Forming an IJV.................................................................................................... 16 Figure B.3 Process of Alliance Evolution......................................................................................................... 23 Figure B.4 Basic Assumptions made about IJVs ............................................................................................. 26 Figure B.5 The Globalization framework for Service Businesses................................................................... 30 Figure B.6 Industry Globalization Drivers for Service Firms ......................................................................... 32 Figure B.7 Knowledge Generative Cycle ......................................................................................................... 36 Figure B.8 Knowledge value chain................................................................................................................... 38 Figure B.9 Typologies of Organizational Learning........................................................................................ 48 Figure B.10 Knowledge Management Theories................................................................................................ 51 Figure B.11 Knowledge Management Processes within the Firm.................................................................... 53 Figure B.12 Outcomes of Explicating Knowledge........................................................................................... 56 Figure B.13 The Spiral of Knowledge ............................................................................................................. 62 Figure B.14 How Information-based Firms Manage Knowledge.................................................................... 67 Figure B.15 Common Pathologies and Challenges in Knowledge Accumulation and Knowledge Sharing in IJVs ................................................................................................................................................................... 80 Figure B.16 Knowledge Management Architecture.......................................................................................... 81 Figure B.17 Importance of Knowledge Acquisition Goals .............................................................................. 87 Figure B 18. Key Issues in the Knowledge Management Processes............................................................... 112 Figure C. 1 DSP Merrill Lynch Key Data ...................................................................................................... 119 Figure C.2 JM Financial Morgan Stanley Key Data...................................................................................... 126 Figure C.3 Business Structure of JMMS......................................................................................................... 127 Figure C.4 Max New York Life Key Data....................................................................................................... 128 Figure C.5 Birla AT&T Key Data................................................................................................................... 135 Figure C.6 Sprint RPG Key Data ................................................................................................................... 139 Figure C.7 Ogilvy & Mather India Key Data................................................................................................. 143 Figure C.8 Value Creation ............................................................................................................................ 148 Figure C.9 Developing a Knowledge Strategy .............................................................................................. 149 Figure C.10 Intangible Assets........................................................................................................................ 153 Figure C.11 Global Management Perspectives ............................................................................................. 165 Figure C.12 Knowledge Reporting Structure in the IJV Network ................................................................. 166 Figure C.13 The Model CKO........................................................................................................................ 167 Figure C.14 The Model CKO....................................................................................................................... 169 Figure C.15 Knowledge Management - Strategic Planning in IJVs.............................................................. 182 Figure C.16 Process Framework of the Development of Cooperative Inter-organizational relationships ... 185 Figure C.17 Bargaining Power .................................................................................................................... 188 Figure C.18 Alliance Knowledge Acquisition Process ................................................................................ 191 Figure C.19 Knowledge Model to Guide International Joint Venture Evaluation ........................................ 193 Figure C.20 Knowledge Acquisition and Instability..................................................................................... 194 Figure C.21 Joint Venture Development and Multicultural Features ........................................................... 195 Figure C.22 Cycle of Fair Processes........................................................................................................... 198 Figure C.23 Factors Affecting Technology Transfer Across Nations............................................................ 199 Figure C.24 Impact of Cross Cultural Training ............................................................................................. 207 Figure C.25 Western / Asian Values.............................................................................................................. 209

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Figure C.26 Cultural Classification of Indian Management .......................................................................... 213 Figure C.27 Managing Cultural Differences................................................................................................ 216 Figure C.28 Knowledge Management – Alliance Management in IJVs ......................................................... 225 Figure C.29 HR Practices............................................................................................................................ 227 Figure C.30 HR Implications in the Four Stages of the IJV Process ............................................................. 229 Figure C.31 Importance of HRM in IJVs : Individual / Group Level ........................................................... 234 Figure C.32 Implications for Leveraging Knowledge through Communities of Practice ............................. 258 Figure C.33 Knowledge Management – Human Resource management in IJVs ........................................... 272 Figure C.34 How Managers view Effective Information Use......................................................................... 275 Figure C.35 Knowledge Management – Technology Management in IJVs.................................................... 308 Figure C 36. Integrated KM Strategies in Case Studies Indo-U.S. IJVs ........................................................ 309 Figure C.37 Comparison of case studies for the evidence of the presence or absence of .............................. 313 integrated knowledge management strategy................................................................................................... 313 Table 1. Foreign investment flows by category1 (US$ million)................................................................... 328 Table 2. Direct foreign investment: actual inflows vs. approvals................................................................... 329 Table3. FDI inflows, by host region (US$ million)......................................................................................... 330

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A The Research Focus: Context Definition

A.1 Introduction

Over the last decade International Joint Ventures (IJVs) have gained increasing importance in India, in the aftermath of economic liberalization, which has been an ongoing process since 1991. IJVs are common, especially, in the high-growth, high-knowledge service sector, such as financial services, telecommunications, and the Information Technology (IT) sector.

Due to increasing liberalization of the service sector in India, IJVs with local firms are viewed by U.S. firms and their Indian counterparts as a viable tool for access to the resources they require. On the one hand, firms recognize the potential value-added of such a venture, while at the same time faced with a high failure rate and the coordination costs involved.

An IJV is defined as collaboration between two (or more) partners from different countries, with an organizational and legal form separate from that of the parent companies. IJVs in developing countries have a substantially more complex environment, particularly if the foreign partner comes from a developed nation. Factors influencing this are the very different cultures of the parent companies, the differing objectives and goals of the partners, and the complex business environment of the developing country.

The failure rate in international joint ventures is exceedingly high (in some studies, up to 80%)1 due to their inherent instability2. The significant costs of control and coordination needed to operate a successful IJV are often not sustainable over time when faced with the realities of diminishing returns.

In today's knowledge-based economy, knowledge is viewed as the most strategic resource of organizations. Furthermore, learning and acquiring the skills and competencies of partners is a primary goal of IJVs, particularly in global service firms. One key reason for the termination of IJVs stems from lack of further „learning“ potential between the partners, when one partner feels that it has accessed

1 Bleeke, J. and Ernst, D., Harvard Business Review, 1991. 2 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.

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sufficient knowledge from the venture and can operate on its own. In fact, a successful learning environment is the exception rather than the rule1.

Knowledge management (KM) emerged, both in theory and in business practice, towards the end of the 1990s. Knowledge Management is defined as the process of adding or creating value by more actively leveraging the know-how, experience and judgment resident within and in many cases outside of an organization.

The research on strategic processes in IJVs, intra- and inter-organizational learning and KM within organizations forms the basis for the research on KM management in IJVs.

Figure A.1 Literature Overview of Research Context2

1 Inkpen, A. C., Academy of Management Executive,1998. 2 This literature listing is in no way exhaustive; the author wanted to showcase the most influential

studies done on the subjects at hand.

Research Literature Overview

Knowledge Managementin IJVs

Research on StrategicProcesses in IJVs

Research on KnowledgeManagement in Organizations

•Bartlett / Ghoshal, 1991•Beamish, 1985, 1988•Buckey / Casson, 1988•Contractor / Lorange, 1988•Geringer, 1991•Hamel / Prahalad / Doz, 1989•Harrigan, 1985•Killing, 1982, 82•Tallman / Shenkar, 1994•Goodman, 2002•Kale et al, 2000

•Badaracco, 1991•Hamel, 1991•Inkpen, 1995, 1998•Lyles, 1988•Lyles / Salk, 1997•Mowery / Oxley / Silverman, 1996•Parkhe, 1991•Pucik, 1991•Tiemessan, Inkpen et al., 1997•Bueckel et al, 1998•Berdrow / Lane, 2002

•Davenport / Prusak, 199 8•Fiol / Lyles, 1985•Gupta / Govindarajan, 1991, 1994•Hedlund, 1994•Huber, 1991•Kogut / Zander, 1991, 1992, 1995•Nonaka, 1991, 1994•Nonaka / Takeuchi, 1995•Polyani, 1966•Pfeffer et al, 2000•Liebowitz, 1999•Senge et al, 1999•Von Krogh et al, 2000•Dawson, 2000•Tiwana, 2000

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A.2 Research Focus

In light of the scenario above, the focus of the study is to determine the key strategic processes of knowledge management within the framework of the IJV, and identify inherent process weaknesses and barriers to effective knowledge management. Furthermore it will be determined whether Indo-U.S. joint ventures were responding to the need for an integrated knowledge management strategy. The aim is to understand the specific processes that make up an integrated approach to knowledge management within the IJV.

The objective of the research is to contribute to the existing research on KM in knowledge-based IJVs. A business environment with increasingly difficult competitive conditions is a fertile ground for a study of knowledge transfer and creation. By focussing on IJVs between a developing and developed country, the author aims to study the dominant external and internal factors of the specific IJV framework, which constitute a highly complex business environment. Beyond that, this dissertation aims to offer a holistic model for an integrated knowledge management strategy for firms entering knowledge-based IJVs.

The study contains an in-depth analysis of the key processes in KM and the inherent weakness and barriers to effective integrated KM within Indo-U.S. IJVs. The current responsive measures of the various actors in the IJV framework are analyzed. Finally, an integrated knowledge management strategy will be suggested for the IJV framework, and its implementation discussed.

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The primary research questions (PRQs) that will be addressed in this dissertation are:

• What are the key strategic and organizational processes that constitute knowledge management within the framework of the IJV? (PRQ1)

• What are A) the dominant internal and external factors in the IJV environment, and B) the main barriers to effective knowledge management and inherent weaknesses within these processes? (PRQ 2a/2b)

• Does an integrated knowledge management strategy within the IJV facilitate effective knowledge management and how can it be developed and implemented within the IJV framework? (PRQ3)

Developing the framework for an integrated knowledge management strategy and its managerial implications was expected to shed more light on the topic and was the building block of the research.

A.3 Conceptual Framework

The literature on inter-organizational relationships has tended to focus on antecedent conditions, structural issues, and on relationships between antecedent conditions and outcomes with structure as a mediating variable, or on comparative studies of governance forms1. In this study, the IJV framework of the Indo-U.S. venture has been defined as the IJV itself, the Indian and U.S. parent firms, as well as the Asia-Pacific Headquarters (APHQ) of the U.S. partner, from which the IJV generally receives a large part of its operation directives.

Understanding processes is central to the understanding of inter-organizational relationships. Today, most IJV partners view knowledge as a key resource within the alliance. The need for effective knowledge management has been realized and most IJV partners are implementing measures to support intra- and inter-

1 Ring, P.S. Patterns of Process in Cooperative Interorganizational Relationship. In: "Cooperative

Strategies: North American Perspectives", 1997.

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organizational knowledge flow, creation and retention. However, an integrated strategy, which is incorporated within the parent firms and the IJV that links all knowledge processes is lacking. This tends to lead to a sub-optimal learning outcome within the IJV framework.

The channels through which knowledge flows and how it is created and retained within the IJV framework were examined, and the organizational processes involved were analyzed. This highlighted the key characteristics of KM processes in the broadest sense, as well as allowing for the inherent barriers and key enablers to effective KM to be determined.

In the first phase, the IJV framework and the direct and indirect knowledge flows between the critical actors were identified (PRQ1). In the second phase, the environmental analysis of the IJV framework and subsequent determination of the dominant internal and external factors affecting the KM processes were identified (PRQ2a). In the third and last phase, the measures and steps towards an integrated KM strategy within the IJV framework and its influence on effective knowledge management were identified (PRQ 3).

The first part of the conceptual framework deals with the inter-organizational relationships between the different actors and examines the flow of knowledge between the parent companies and the IJV. Here, the IJV framework and environment of the Indo-U.S. IJV framework was defined.

In the second part of the conceptual framework the KM processes was described and analyzed. Their characteristics and inherent weaknesses and barriers were identified. This study aims to give a comprehensive overview of the specific organizational processes that have a direct impact on knowledge transfer, creation, and management within the IJV framework. These processes and their sub-processes were determined and classified by their potential contribution towards effective knowledge management. This constituted the primary research questions 1 and 2(b).

The second part describes the direct and indirect knowledge flows, as well as the explicit and tacit knowledge management processes within the IJV framework.

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Figure A.2 Conceptual Framework I1

In this phase the weaknesses and barriers of the current knowledge management processes were analyzed. The responsive measures of the IJVs were examined, and the core knowledge management processes within the IJV framework were identified and described.

In the third phase, the conceptual framework reflects the process analysis of the core knowledge processes i.e., process description, process analysis, and process restructuring.

1 Source: Author

Conceptual Framework I

Indian Parent

U.S. ParentAsia-Pacific HQIndo-U.S. IJV

U.S. Parent

Direct and indirect knowledge flow within the Framework

Dominant internal and externalfactors of knowledge transfer

and creationPRQ2PRQ1

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Figure A.3 Conceptual Framework II1

Knowledge management was defined along the lines of:

• Strategic Planning (SM): Developing a global knowledge strategy

• Alliance Management (AM): Inter-organizational knowledge transfer

• International Human Resource Management (IHRM): Managing knowledge workers in the IJV framework

• Technology Management (TM): Implementing global knowledge management tools within the IJV framework.

1 Source: Author

Conceptual Framework II

Indian Parent•Strategic Planning• Alliance Management• IHRM• Technology Management

U.S. ParentAsia-Pacific HQ•Strategic Planning• Alliance Management• IHRM• Technology Management

Indo-U.S. IJV•Strategic Planning• Alliance Management• IHRM• Technology Management

Direct and indirect knowledge flow within the Framework PRQ2b

U.S. Parent•Strategic Planning• Alliance Management• IHRM• Technology Management

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Figure A.4 Towards an Integrated Knowledge Management Strategy1

The framework for the study on knowledge management in Indo-U.S. JVs was conceived as a multi-stage process describing:

• The direct and indirect knowledge flows within the IJV framework

• Determination of the core strategic KM processes within the IJV framework

• The dominant internal and external factors, barriers and enablers that affect the flow, creation and retention of knowledge within the IJV framework

• Attempts to develop a model for integrated KM within the IJV framework.

In conclusion, a suggested blueprint for an Integrated Knowledge Management Strategy for the IJV Framework was developed. Managerial implications for implementation of these measures were then finally discussed. The goal of this work

1 Source: Author

Conceptual Framework III: The Knowledge Management Processes

Key Strategic Processes in the IJV Framework

Strategic Planning Alliance Management IHRM Technology Management

Process Description: The Knowledge Perspective

Strategic Planning Alliance Management IHRM Technology Management

Process Analysis: The Knowledge Management ProcessesStrategic Planning Alliance Management IHRM Technology Management

Developing a global Inter-organizational Managing Implementing globalknowledge Strategy Knowledge Transfer Knowledge Knowledge Management

in the IJV Framework Workers in Tools in the IJV FrameworkI JVs

Strategic Planning Alliance Management IHRM Technology Management

KNOWL EDGE MANAGEMENT PROCESSES IN THE IJV FRAMEWORK

Towards an Integrated Knowledge Management Strategy in the IJV Framework

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was to contribute to the understanding of knowledge management in IJVs and provide potential and plausible solutions for implementation.

A.4 Methodology

The choice of methodology is key to the success of an empirical study. The methodological design chosen must enable the researcher to procure optimal data in order to address the primary and secondary research questions. The methodology selected should be aimed at avoiding “gross misfits” in the exploration of the research questions at hand1.

The use of qualitative empirical research for the study of knowledge management strategy in international joint ventures needs to be assessed before it is chosen as a tool for the study. A brief overview of general qualitative research is presented below. Qualitative vs. Quantitative Empirical Social Research

“Empirical social research rests on the peculiar practice of representing the social reality of others through the analysis of one’s own experience in the world of the others“2. This holds true as much for quantitative, as for qualitative research.

For a long time, qualitative social research methodology was considered inferior to the other forms of social research. Research based on qualitative data collection, such as case studies, was judged less valuable than its quantitative counterparts, due to perceived imprecision (as in quantification) and lack of objectivity3. Despite these prejudices, qualitative research methods have become commonplace, especially in fields such as psychology, sociology, and management strategy.4

The difference between qualitative and quantitative social research does not only lie in the instruments and method of data collection and analysis, so a mere description of these cannot build the basis for the choice of and critical reflection on the empirical method and its consequences5. The discussion of methodology should

1 Yin, R.K. " Case Study Research: Design and Methods ", 1994. 2 Van Maanen, J. "Tales of the Field", 1988. 3 Yin, R.K. " Case Study Research: Design and Methods ", 1994. 4 Yin, R.K. " Case Study Research: Design and Methods ", 1994. 5 Morgan, G. "Beyond Method: Strategy for Social Research", 1983.

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therefore include an analysis of the theoretical foundations and assumptions behind it. While quantitative methods take a positivistic approach, qualitative methods are generally characterized as being interpretative.

Methods of qualitative empirical research, such as case study analysis, structured and unstructured interviews and document analysis or participant observation are nowadays often seen as a key method for a detailed research of the firm1, in part due to the undeniable impact of past qualitative studies. As far as objectivity is concerned, the environment is a social construct, and an objective perception free from one’s own perceptions and values is difficult to realize2.

According to MILES and HUBERMANN „ the one major feature of qualitative research is that they focus on naturally occurring, an ordinary event in natural settings, on what ´real life´ is like. That confidence is [supported] by local groundedness, that fact that the data is collected in close proximity to a specific situation."3

With regard to the research on cross-border knowledge transfer and management, and the management of IJVs, the researcher can exercise no behavioral control over the actors, so the experimental strategy cannot be used, as in a realistic simulation of a highly complex situation. Due to the contemporaneous nature of the researched subjects and their transitory nature, a historical analysis is not applicable as a research method4. That leaves the survey, the structured and unstructured interviews, and the case study.

There will be a discussion of concrete methodological design pertaining to the study of knowledge transfer and management. Finally, a description of the choice of study objects (IJVs and the respective parent firms), the process of data collection, the instruments, and data analysis.

Due to the explorative nature of the research questions, interviews and following case studies seem to be the most advantageous methodology, particularly in view of

1 Foddy, W. "Constructing Questions for Interview and Questonnaire",1993. 2 Bonss, W. and Hartmann, H. Soziale Welt, 1985. 3 Miles, M.B. and Hubermann, A.M. "Qualitative Data Analysis” – a source book of new methods

1984. 4 Yin, R.K. " Case Study Research: Design and Methods ", 1994.

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the fact that research on knowledge management in cross-border joint ventures is still in the early stages.

Methodology pertinent to rationale, selection of IJVs, collection of data relevant to key focus of the research questions and analysis are detailed in section C.

The current thesis represents an exploratory attempt to find the gaps in literature and fill in with the focussed case studies on integrated knowledge management strategy in key areas of KM strategy within the Indo US IJV framework.

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B Knowledge Management in International Joint ventures: Theoretical Considerations

B.1 Defining the International Joint Venture (IJV) Framework

In the following section the existing theoretical literature on knowledge management (KM) in International Joint Ventures (IJVs) is presented in detail. The aim here is to provide a foundation against which the empirical findings that are presented in section C can be examined.

With the accelerated business globalization in the last decade, the need to coordinate organizational resources across national boundaries has increased manifold. Management know-how, technology and capital flow from developed countries to developing countries. IJVs have always been a popular way to do business in the competitive global marketplace. Especially in Asia, the number of IJVs has risen sharply, but so has the magnitude and scope of the investments in such ventures1.

For this study on knowledge flows between and knowledge creation within organizations, the key actors have to be determined. INKPEN et al. defined the critical actors in the KM process within IJVs as the IJV itself and the two parent companies2. Within the context of the Indo-U.S. IJV, however, there are additional factors. The Indian IJV of the U.S. parent firm falls under the operational directives of the U.S. firm’s Asia-Pacific headquarters. Due to this dual reporting structure on a strategic and operational level on the side of the U.S. parent firm, the AP headquarters should play an integral role when examining processes of inter-organizational KM in this context. The framework developed here for the study is shown below:

1 Nam, S.H., International Journal of Human Resource Management, 1995. 2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North

American Perspectives”, 1997.

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Figure B.1 The IJV Framework

B.1.1 IJV Theory

Analyzing IJVs from an exchange perspective focuses attention on the interaction

and relationship dimensions of the inter-organizational relationship1, which are necessary preconditions for a successful partnership. Theoretically, within the context of an IJV, resources flow from the parent firms to the JV, where they are

1 Inkpen, A.C. and Beamish, P.W. Academy of Management Review, 1997.

Joint Ventures are equity alliances that involve the transfer and creation of equity ownership. International Joint Ventures are, by definition, when the parent companies are located in different countries. The IJV is collaboration between two (or more) partners from different countries, with an organizational and legal form separate from that of the parent companies.

The IJV Framework

Indian Parent

U.S. ParentAsia-Pacific HQIndo-U.S. IJV

U.S. Parent

= direct and indirect intra-organizational knowledge flow

Source: Author

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transformed into resources of greater value, which are then partitioned and flow

back to the parent firms1.

Strategic alliances, which are defined as a sharing of resources, create unique learning opportunities for partner firms. Knowledge is one of the firm’s most important resources. A strong capability for organizational learning has been identified as perhaps the only long-term source of and sustainable strategic advantage for firms2.

A strategic alliance starts with a set of initial conditions that defines the tasks, boundaries, interface structure, and expectations of the partners3. The partners cycle through a sequence of learning, re-evaluation and readjustment stages. The alliance partners then learn by interacting in joint activities, evaluate the alliance for efficiency, and evaluate each other for equity and adaptability, and use these assessments to revise the initial conditions.

In RING and VAN DE VEN4, IJV partners go through a sequence of negotiations, commitments, and execution stages. If preliminary commitments are executed in an efficient and equitable manner, the partners expand their mutual commitments to the alliance. If not, they initiate corrective actions or reduce their commitment to the alliance. Successful JVs progressively improve on upon the initial conditions of the venture and make increasing commitments to the alliance. Unsuccessful alliances are either constrained by initial conditions or fail in either the learning or re-evaluation stages.

Differences in goals, values and company routines are sources of potential conflict, which may make management of the venture difficult. IJVs cause additional problems because individuals living in different countries also have different goals, values and customs.

1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North

American Perspectives”, 1997; Beamish, P.W. In: “International Entrepreneurship: Globalization and Emerging Businesses”, 1999; Louis, H. and Beamish, P.W. In “ Handbook of Cross-cultural Management”, 2001.

2 Lei, D., Hitt, M.A. and Bettis, R. Journal of Management, 1996. 3 Doz, Y., Strategic Management Journal, 1996. 4 Ring, P.S. and Van de Ven, A.H., Academy of Management review, 1994.

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Effective communication is vital for the successful management of IJVs because partners enter a JV with a very limited knowledge of each other’s goals, capabilities, and behaviors, and also because the initial agreement must be renegotiated due to unforeseen changes in the IJV environment1. Difficulties in communication put an additional strain on partner adjustment and can result in the unsuccessful demise of the IJV.

The competitive advantage of an IJV stems from assets and capabilities that are superior to those possessed by the relevant competition or alternative, or that are combined and deployed in such a way as to confer a superior competitive position. Advantages of the IJV are also relative to the arena or context - what provides an advantage in one environment may not in another because of different competitive surroundings and conditions2.

In summary, the advantages of an IJV are superior assets and capabilities, knowledge of business environment, infrastructure, entrepreneurship, rates and diffusion of innovation, influence with foreign leaders and links between the industrial and financial sectors.

B.1.1.1 Why Firms enter IJVs

The primary motive in most cases for the creation of an IJV is to close the gap between strategic intent and resource availability. As voluntary inter-organizational relationships, firms enter IJVs to achieve a strategic objective not attainable by acting autonomously. The strategic objectives behind the creation of an IJV include the reduction of risk, economies of scale, access to technology or markets, and the search for legitimacy3.

Non-transferability of competitive advantage occurs when the advantage or a key component thereof is not mobile between the home country and the host country. There are two basic causes of immobility- geographical specificity and the tacit (non-codifiable) nature of much of knowledge, skills, and technology.

1 Doz, Y., Strategic Management Journal, 1996. 2 Hu, Y.S., California Management Review, 1995. 3 Contractor, F. and Lorange, P. “Cooperative Strategies in International Business”, 1988.

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The transfer of an advantage fails to be successful if the mobile advantage or asset loses its value in the target country. This can happen either because the advantage is no longer relevant in a different context, or because it can easily be neutralized by local competitors. Thus, superior management, skills and resources in the home country may not be the same in the context of the target country. Technological advantages can be neutralized by the weakness of intellectual property law and leniency in enforcing the law. Whether an advantage retains its value depends on the fit between conditions in the target country and the nature of the advantage.

Figure B.2 The Reasons for Forming an IJV

The transfer of an advantage is neither automatic nor easy, and may require adaptation, investment, and reconfiguring the ingredients of the advantage. Furthermore, there is an important parallel between the transfer of advantages and the diffusion of innovations - neither advantages nor new products and processes remain unchanged during the process of transfer of knowledge.

Key structural features of an industry may determine the relative weight that contractual arrangements and processes play in inter-organizational collaborations1. Large-scale reliance on inter-organizational linkages reflects a fundamental and pervasive concern with access to knowledge. First, inter-firm cooperation

1 Powell, W.W., Koput, K.W. and Smith-Doerr, L., Administrative Science Quarterly, 1996.

Reasons for Forming an IJV

• To gain knowledge, to learn and to transfer that knowledge back to the parent firm• Host government regulatory environment • To gain rapid market entry and access to a new customer base • Increased economies of scale • To gain local knowledge, local market image and distribution channel access • To spread risk • To improve competitive advantage in the face of increasing global competition • Cost-effective and efficient responses forced by globalization of markets. Adapted from: Schuler, R.S. (2001): The International Journal of Human Resource Management (in press) http://www.rci.rutgers.edu/-schuler/Hrissues.htm

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accelerates the rate of technological innovation. Second, reliance on collaboration has potentially transforming effects on all participants1.

Finally, collaboration may itself become a dimension of competition. As firms turn to outside parties for a variety of resources, they develop a network profile or portfolio of relationships to specific partners for certain activities. A firm’s portfolio of collaboration is both a critical asset and a signal to markets, as well as to other potential partners, of the quality of the firm's activities and products. If the members in an industry are constrained in their choice of partners to a small set of potential partners, competition is increased within a narrow sphere.

Regardless of whether collaboration is driven by strategic motives, such as filling in missing pieces of the value chain, or by learning considerations to gain access to new knowledge, or by embeddedness in a community of practice, connectivity to an inter-organizational network and competence at managing collaboration have become key drivers of a new logic of organizing. This view of organizations and networks as vehicles for producing, synthesizing and distributing ideas recognizes that the success of firms is increasingly linked to the depth of their ties to organizations in diverse fields.

B.1.1.1.1 TRADITIONAL THEORIES OF THE FIRM

Two principal foci of research on various forms of collaboration have been the transaction and the mutual exchange of rights, and the relationship and mechanisms through which information flows and mutual adjustments take place. It is critical whether common assets are pooled or different resources traded, which stage of development an organization is in, and the nature of ownership2.

The second line of inquiry adopts a process focus, analyzing whether features of the task require continuous communication and organizational learning, and the extent to which the collaboration is embedded in multiple, ongoing relationships3.

1Harrigan, K.R., Strategic Management Journal, 1988. 2 Joskow, P., American Economic Review, 1987. 3 Prahalad, C.K. and Hamel, G., Harvard Business Review, 1990 ; Hamel, G., Strategic

Management Journal, 1991.

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KOGUT1 defines three theoretical approaches for explaining international strategic alliances: transaction cost theory, strategic focus, organizational learning. The transaction cost approach suggests that firms act to minimize the sum of production and transaction costs, with hybrid forms such as strategic alliances emerging when the added cost of inter-firm coordination are lower than those involved in fully internalizing an activity2. From this perspective, the knowledge sought in an IJV arrangement includes patents, technical know-how, financial expertise, experienced managerial personnel, and access to marketing and distribution channels.

Transaction cost analysis focuses on organizational efficiency, specifically where market transactions involve higher complexity and significant uncertainty, such as technological innovation or entering new markets.

Strategic considerations such as competitive advantage, market expansion and extending product portfolios may be equally or more important as transaction costs. Adopting a more strategic perspective on collaboration focuses attention on long-term organizational effectiveness, rather than short-term efficiency.

The strategic focus approach suggests that firms establish international strategic alliances to maximize profits via their improved competitive position, thereby deterring market entry by their competitors and enhancing their potential for oligopolistic profit1.

B.1.1.1.2 THE KNOWLEDGE BASED THEORY OF THE FIRM

Knowledge has been recognized as a key resource and learning as a core competency for global organizations. There has been little research on learning in international collaborations that describes the channels and processes through which learning takes places, or how to ensure adequate KM in the IJV. Furthermore, to understand the KM process under the specific circumstances of the IJV, the terminology used must first be defined.

PRAHALAD and HAMEL defined the resource-based view of the firm, stating that firms should position themselves strategically based on their unique, valuable, and inimitable resources and capabilities rather than the products and services derived 1 Kogut, B., Strategic Management Journal, 1988. 2 Hennart, J., Strategic Management Journal, 2000.

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from those capabilities2. The strategic driver for the firm becomes leveraging those resources and capabilities across its many markets and products. The resource-based strategy is a long-term view, and more robust in an uncertain and dynamic environment. It equips the firm to succeed in highly complex environments.

One of the central notions of Resource Base Theory is that companies in the same industry compete with generally the same resources, but combine them in different and disparate ways (making them idiosyncratic combinations of resources) – because of their history, embedded processes and work practices, management decisions, stage in organizational lifecycles, social complexity and organizational culture, employees skills and know-how, pools of cumulative experience, and knowledge transfer and knowledge embedding over time3.

The original idea behind the knowledge-based view of the firm is that "the central competitive dimension of what firms know how to do is to create and transfer knowledge efficiently within an organizational context"4. From the knowledge perspective, in the resource based theory of alliance creation, it is the underlying assumption that the partners should consider the other partner’s knowledge as a valuable resource, and as a primary reason to enter into the alliance.

Strategic alliances are both a cause and effect of knowledge intensive competition5. Collaboration enables firms to learn from each other and thus accelerates the movement of knowledge. Established competitors must respond, and increasingly often they do so by expanding their alliance network, in order to lower costs and risks, to expand markets, and to learn or create new knowledge. The knowledge-based perspective directs firms to consider6: • How good a firm is at doing something • How good it is at learning specific capabilities • The value of these capabilities as platforms for new markets

1 Contractor, F. and Lorange, P. "Cooperative Strategies in International Business", 1988. 2 Prahalad, C.K. and Hamel, G., Harvard Business Review, 1990. 3 April, K.A., Journal of Knowledge Management,2002 ; April, K.A. and Caradock, J. “Corporate

Landscape in South Africa”, 2000. 4 Kogut, B. and Zander, U., Organizational Science, 1992 5 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991. 6 Op.cit.

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Traditional approaches of viewing the JV formation process ignore the use of organizational learning, memory and history as factors that have an impact on how and why a firm will enter an IJV1. A firm whose activities cross boundaries must acquire knowledge from its environment, or more precisely, from other organizations in its environment. This includes knowledge about new technologies, markets, and how to manage its own operations in adding value to the technology and in dealing with the markets2.

Knowledge is becoming increasingly recognized as one of the most important resource flow between the actors in the IJV formation, the two (or more) parents and the IJV itself. GHOSHAL notes that one key asset of the MNC “is the potential to learn from its many environments”3. Exploiting this potential to the fullest extent possible by implementing viable processes for the acquisition and creation of knowledge within the firm should be one of the top priorities of an IJV.

Competency development as a strategic goal of an organization requires a firm to have an explicit policy or intent to use collaboration as an opportunity to learn rather than to minimize cost or risk. Conceiving the firm as a bundle of competencies and associated routines, rather than technology or products, suggest that a central purpose of collaboration is the acquisition of new competencies and routines, rather than access to discrete technology or markets.

The knowledge-based theory generally makes two basic assumptions about organizational knowledge. First, organizational knowledge has a tacit component4 that is harder to transfer, and second individuals have bounded rationality5.

Therefore, an IJV represents an ideal vehicle for knowledge acquisition and learning6. VAN GLINOW and TEAGARDEN consider the IJV an extremely conducive structure for knowledge transfer, due to the high level of operative inter-

1 Lyles, M. A., International Business Review, 1994. 2 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991. 3 Ghoshal, S., Strategic Management Journal, 1987. 4 Polyani, V., "The Tacit Dimension", 1966; for further discussion on knowledge categorization see

Chap. B. 5 Simon, H., "Theories of Bounded Rationality", 1972 6 Harrigan, K., Strategic Management Journal, 1988.

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firm cooperation and commitment required1. STEENSMA and LYLES have tried to explain IJV survival through social exchange and knowledge based perspectives2. From this perspective, the knowledge sought in an IJV arrangement would include market access and, in the context of developing countries, access to privileged relationships with the government. In this context, the IJV as a longer-term, more strategic relationship is necessary to acquire embedded or tacit knowledge3. Strategic alliances for embedded knowledge involve the transfer of skills and capabilities, rather than discrete packages of know-how. This requires the partnering organizations to have direct, intimate and extensive exposure to each other's staff, equipment, systems and culture.

Human capital represents the knowledge, skills and health embodied in individuals (while) social capital refers to the norms and network facilitating cooperation either within or between groups4 . KOGUT and ZANDER argue that firms exist because people prefer the moral communities and shared identities that they supply. The symbolic role of identity enables speed and efficiency in the creation and transfer of knowledge5. A further perspective for the knowledge-based theory of the firm is the argument that organizations have advantages over markets because they can mobilize social capital embedded in human relations in order to create intellectual capital. Organizations provide institutional settings for human interactions, which also foster social capital.

The learning approach proposes that firms form IJVs primarily in order to gain access to vital knowledge they are lacking. From this perspective, firms are neither perceived as aggregates of complex organizational routines that cannot be efficiently transferred in the marketplace, nor can be specified in a contractual arrangement, but that require a replication of the organization itself6. This approach pinpoints the knowledge assets as the key resources to be exchanged in an IJV relationship.

1 Van Glinow, B. and Teagarden, M., Human Resource Management, 1987. 2 Steensma, H.H. and Lyles, M.A., Strategic Management Journal, 2000. 3 Tacit knowledge here refers to organizational knowledge that is not easily accessible and not

formalized; According to Polyani, V. "The Tacit Dimension", 1966. 4 OECD, 2001. 5 Kogut, B. and Zander, U., Journal of International Business Studies, 1995 6 Kogut, B., Strategic Management Journal, 1988.

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Learning in these circumstances is a complex, multilevel process. It involves learning from and with partners under conditions of uncertainty, learning about partners’ behavior and developing routines and norms that can mitigate the risks of opportunism, and learning how to distribute newly acquired knowledge across different projects and functions. In short, internal capability and external collaborations are complementary. Internal capability is indispensable in evaluating ideas or skills developed externally, while collaboration with external partners provides access to news and resources that cannot be generated internally.

Knowledge-based theories of the firm traditionally deal with how members of the organizational network, transfer, integrate, and create knowledge in its different forms.

B.1.1.2 The Formation and Structure of the IJV

In a typical IJV, a new separate legal entity is established, and the parents own its assets jointly. The ownership structure, i.e., the division of equity between the IJV parents and the resulting control issues, is often determined by external factors, such as government restrictions. It is also a strong indicator of the power balance within the IJV. The venture reports to two administrative hierarchies, which are usually represented by a joint board of directors. This dual reporting structure is one of the elementary knowledge channels and a critical source of potential conflict. Employees from the parents and the IJV work together across the social and organizational boundaries of the parent firms. The contractual arrangements between the parents, as extensive as they may be, cannot spell out every obligation for every contingency.

LORANGE AND ROOS have defined the formation process of the JV in three

stages1, internal push, analytical scope and stakeholder strength. The formation process involves an internal assessment of the firm’s needs, skills and competencies,

the development of the internal champions2, the determination of the organizations goals and its strategic directions, and the negotiations with the stakeholders. The influence of organizational learning on these processes is essentially what the firm

1 Lorange, P. and Roos, J., Management International Review, 1990. 2 Lyles, M.A., International Business Review, 1994.

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has learned from these processes in the past, and what consequences this will have on the future actions of the organization.

Figure B.3 Process of Alliance Evolution

The alliance negotiation phase is a crucial one in determining the learning outcomes and the constraints of the individual partners to access to the different types of knowledge inherent to the parent firms. This phase includes ownership and intellectual rights questions and the contractual technology transfer agreements. Acknowledging the importance of managing knowledge issues within the alliance is essential to the success of an IJV1. The process of partner search, including due diligence, alliance negotiation, and alliance formation must be examined as far as their impact on effective knowledge transfer between the actors in the IJV framework is concerned.

Internal issues like proprietary technology and ownership structure also play a big role in the outcome of the IJV. At the time the IJV is formed, each partner is dependent on the other for critical input2. The IJV partner has access to more options, including terminating the venture.

1 Hamel, G., Strategic Management Journal, 1991. 2 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.

Source: Doz, Y.L. (1996): Strategic Management Journal, 17, 55

Re-evaluation•Efficiency•Equity•Adaptability

Initial Conditions•Task definition•Partners routines•Interface structure•Expectations of

•performance•behavior•motives

Learning•Environment•Task•Process•Skills•Goals

Revised Conditions•Task definition•Partners routines•Interface structure•Expectations of

•performance•behavior•motives

Allows

Facilitate orhamper

Leads to Readjustment

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Effective knowledge evaluation in the alliance formation phase, such as accurate assessment of the partner’s knowledge databases, and the firm’s own access to this knowledge, and contractual negotiation form the cornerstone for an optimal learning outcome in the IJV. Over time, there will be a shift in bargaining power in favor of one or the other. Relationship between instability of the IJV and the foreign partner’s bargaining power has been described elsewhere1. International Transfer of Advantages

As stated above, one of the key reasons to enter an IJV is the transfer of competitive advantages between the partners.

The competitive advantage of a firm can be: • Unique or firm-specific advantages in the home country • Assets in the home country (resources, capabilities, relationships, and corporate

characteristics) • General attributes and general access shared by the industry and/or the nation

An international transfer of advantages is defined as the process whereby the firm draws, from its home base, on some or all of its unique advantages (relative to home competitors), its underlying assets and capabilities, or the general qualities enjoyed by the home nation and /or industry. The firm makes use of these resources in order to give its operations in a foreign country a competitive edge. Non-transferability can occur for two reasons: the advantage (or key component thereof) is not mobile internationally or the advantage itself loses values in the target community. Immobility may be due to geographical specificity or the tacit nature of knowledge, while the absence of value may be due to the lack of "fit" with the environment or to competitors' moves to neutralize the advantage

In theory, the transfer of advantages can take place in several directions - from the parent company (and the home nation) to the foreign venture, from the venture up to the parent, from one subsidiary to another.

The foreign firm can only gain advantage if it is able to transfer some of its advantages from outside the target country that are not available to indigenous

1 Inkpen, A. C. and Beamish, P.W., Academy of Management Review, 1997.

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players. This puts advantages and their transfer at the center of the analysis of the firm's international operations.

B.1.1.3 IJV Management

Despite their increased popularity and strategic importance, most IJVs fail to achieve their strategic objectives in the long run. Many western corporations seek cooperative ventures as a “quick fix” to global competitiveness without understanding the relationships being established and the behavioral and cultural

issues involved1. Many of the performance problems experienced by IJVs have

been linked to the unique managerial requirements of these ventures2. Due to the increased complexity of IJVs, they are more difficult to manage and often result in significant additional or unforeseen transaction costs incurred by problems in coordination and communication. Domination based on financial ownership and tight control is giving way to partnership based on mutual interests, trust and management on ongoing relationships. IJVs may force a shift in executive behavior towards improved skill in working collaboratively, communicating and gaining

consensus3.

IJV performance is determined to a large part by people and not by contracts. Management of the people dimension, IHRM is an integral tool for influencing interaction within the IJV. SCHULER has summarized the basic assumptions made about IJVs in research so far.

An effective IJV control system is one that promotes the attainment of the strategic objectives for the venture. These strategic objectives often differ significantly for the parent firms as well as the IJV as a separate entity. Due to the unique feature of shared ownership and decision-making, the control mechanisms deployed in IJVs must account for all major stakeholders, most importantly parent firms, venture management, employees and host government.

1 Lane, H. and Beamish, P., Management International Review, 1990. 2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 3 Palmer, I. and Hardy, C. " Thinking About Management: Implications of Organizational Debates

for Practice" , 2000.

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Figure B.4 Basic Assumptions made about IJVs

The factors affecting the performance of IJV's are manifold and have been the subject of much research. The following factors have been recognized in the literature as having the largest direct influence on the performance and success of the IJV. • Partner Choice: Knowledge is one of the main resources that partners

exchange, and the choice of IJV partner will determine how sustainable the exchange relationship will be1.

• Control Mechanisms: Differences in corporate control affect the knowledge flows in multinational corporations (MNC), being able to either hamper or enhance them2.

• Motivation: Learning and knowledge creation as a primary motivation for entering into an IJV termed as learning intent by HAMEL is an important determinant of the efforts that a firm makes in learning from a JV partner1.

1 Beamish, P.W. “Multinational Joint Ventures in Developing Countries”, 1988. 2 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991.

Basic Assumptions Made About IJVs

• Joint ventures are challenging to run successfully• Joint ventures create opportunities for learning• The partners in a joint venture may not always seize these opportunities to

learn• Ability, motivation and capacity for learning at the individual, group and

organizational levels are critical to the success of the venture• Different types of knowledge are transferred by different types of methods• A venture with two foreign parents experiences different learning dynamics

from a venture with only one foreign parent• Sources of learning include the parents and the IJV itself• Learning and transfer of knowledge are essential for success of the

venture• There are unique issues and stages in the evloution of the IJV• There will be changing desire for control by the partners during the life of

the IJV• Staffing is a critical issue for success• Top management of the IJV may be the most important factor for success• Organizational structure is also critical for success• IJVs evolve in ways that are hard to predict at the outset• Joint ventures are learning systems and serve as vehicles for learning

Source: Schuler, R.J. (2001): The International Journal of Human Resource Management (in press)http://www.rci.rutgers.edu/-schuler/Hrissues.htm

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• Expectations: Expectations change during the course of the IJV, depending on the development of the venture2.

• Cultural Context: Often the methods by which the culturally diverse partners learn and the way they manage their knowledge bases vary3.

• Experience: Finally, previous experience with IJVs, or partnering knowledge, has an impact on performance, for learning processes and outcomes change and develop as firms gain experience through learning by doing.

B.1.1.4 Longevity and the Transitory Nature of IJVs

A study of almost 900 JVs found that only 45% were mutually agreed to have been successful by all partners4.

An alliance is likely to have a number of different objectives, and outcomes may be planned or unplanned, explicit or implicit. Firms which view a JV as a series of discrete projects with specific aims and objectives are more likely to evaluate the success of the IJV in terms of cost, time and performance, rather than the overall relationship. Firms, which develop JVs to learn and acquire new skills, will need different measures of success5.

The primary motivation behind the creation of an IJV is value creation, consisting of resource flows between the two parents and the independent entity of the IJV, and the consequent harvesting of the revenues6. As soon as this value-added for either partner is overshadowed by the transactional costs of the collaboration, the IJV is in danger of being made redundant through the market. It is therefore important to view the formation and operation of a JV as a constant change process, whereby

1 Hamel, G., Strategic Management Journal, 1991. PARKHE argues that longevity is an indicator

for the success of IJV, and other studies such as HARRIGAN have employed termination of the alliance as a performance criterion. It is difficult to access the success of an IJV, and in particular termination of a partnership does not necessarily indicate failure if the objectives have been met. Alliances that have reached their strategic objective might be terminated and still be considered a success.

2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North American Perspectives”, 1997.

3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North American Perspectives”, 1997.

4 Harrigan, K. "Managing for Joint Venture Success", 1986. 5 Tidd, J. "From Knowledge Management to Strategic Competencies", 2000. 6 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997.

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attention has to be continually paid to the shifts in bargaining power and value creation, and the inherently transitory nature of IJVs. The transitory nature of IJVs has an influence on research on IJVs; indeed it must be incorporated within any study on IJVs.

INKPEN concludes that as long as the alliances serve the strategic objectives of the firm, they should be safeguarded and nurtured. However, when alliances fail to fulfill their promise or outlive their usefulness, they must be terminated. He identifies reasons why organizations may persist with failing alliances and suggests some mechanisms for countering these forces1. By following these ideas, firms can better exploit the strategic potential of alliances and make the decision to terminate when strategy is no longer being served.

B.1.1.5 Organizational and National IJV Culture

To analyze culture within the IJV, it is necessary to find a basic definition of culture.

Organizational Culture is the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptations and internal integration, and that have worked well enough to be considered valid, and, therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems2.

National Culture is the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture is a system of collectively held values and beliefs3.

Characteristics of Culture include ethnicity, country of origin, religion, gender, age, educational / professional attainment and language.

1 Inkpen, A.C and Ross, J., California Management Review, 2001 2 Schein, E.H., Organizational Dynamics, 1983. 3 Hofstede, G. "Cultures Consequences", 1980.

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Theories of Cross Cultural Management • Uncertainty reduction theory: Reducing uncertainty has been found to be

central to intercultural effectiveness1. Uncertainty reduction is a construct that relates to the capability of individuals to foresee and explain their own behavior and that of others during interaction2. This ability is essential at the beginning of the interaction, at various stages of the interaction and during several interactions3.

• Contact theory centers on the assumption that negative attitudes towards strangers are mainly caused by misunderstanding and/or misinformation as a result of isolation. For this reason, experts have advised organization to redesign jobs to facilitate cross-cultural interaction by encouraging common goals and inter-group interdependence4. While examining cross-cultural interaction, it is important not to forget the individual relationship between the people who interact. Status, a casual versus a formal relationship, and the goals of the venture need to be taken into consideration to analyze relationships accurately.

• Organizational socialization tactics: As a manager is confronted with new situations, his/her own cultural identity changes in the process. There are four types of “change tactics" that can be empirically validated5. The first organizational tactic constitutes changing neither oneself nor the situation (replication); second, changing oneself but not the situation (absorption); third, changing the situation but not oneself (determination); and finally changing both (explorations). Employees respond to organizational socialization tactics by either accepting only some of the norms and values (creative individualism) or by accepting them all (conformity). Differences in national culture have received a great deal of attention in studies of cross-border alliances, and the consensus is that national differences do exist and that these affect both the intent and the ability to learn.

Relationship between organizational culture and national culture in IJVs has been described by MESCHI and ROGER6

1 Gudykunst, W.B., Communication Quarterly , 1985. 2 Gudykunst, W.B., Culture and Intergroup Processes. In: "The Cross Cultural Challenge to Social

Psychology ", 1988. 3 Gudykunst et al., Western Journal of Speech Communication, 1987. 4 Pettigrew, T.F. and Martin, J., Journal of Social Issues, 1987. 5 Blochner, S. “The Social Psychology of Cross-cultural Training “, 1982. 6 Meschi, P.X. and Roger, A., Management International Review, 1994.

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B.1.2 Information-based Service JVs

B.1.2.1 Global Professional Services

Service based businesses differ from goods-based businesses in a set of distinctive characteristics. LOVELOCK and YIP set up the following framework for the globalization of service businesses.

Figure B.5 The Globalization framework for Service Businesses

Services can be divided into three categories: • People-processing services involve tangible actions to customers in person.

These include passenger transportation, healthcare, food service, and lodging services. The customer needs to enter the service factory in order to receive the service.

• Possession-processing services involve tangible actions to physical objects to improve their value to customers. Examples are freight transport, warehousing, equipment installation and maintenance, car repair, laundry and disposal.

Source: Lovelock,C.H. and Yip, G.S. (1996): California Management Review, 38(2), 67.

Globalization Framework for Service Businesses

Special Characteristics of Service Businesses

Performance not an object Harder for customers to evaluateCustomer involvement in production Lack of inventoriesPeople as part of service experience Importance of time factorQuality control problems Electronic channels of distribution

Industry Globalization Drivers

Common Customer needs Favourable logisticsGlobal Customers Information TechnologyGlobal Channels Government policies and regulationsGlobal economics of sale Transferable competitive advantage

Type of ServicePeople-Processing Possession-Processing Information-Based

IndustryGlobalization

Potential

Global StrategyGlobal market participationGlobal servicesGlobal value chainGlobal marketing

SupplementaryServices

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• Information-Based services are perhaps the most interesting category from the standpoint of global strategy development because they depend on collecting, manipulating, interpreting and transmitting data to create values. Examples here include accounting, banking, consulting, education, insurance, legal services, and news.

Information-based services include "exclusive occupational groups that apply somewhat abstract knowledge to particular cases"1. Information-based Service Firms (ISFs) are hired for their expertise and skills, enabling them to produce an outcome that clients either use or sell. Tasks in information-based services involve individual expertise and group interdependence among ISFs for joint problem solving2.

Service production and delivery systems can be divided into back office and front office. Information based services by contrast have the potential to be much lower contact in nature. The service offering of ISFs mostly include additional elements in the form of supplementary services, "the service of the service". These supplementary services not only add value and allow firms to differentiate themselves from their competitors but also offer opportunities for firms to develop effective globalization strategies.

There are eight categories of support services (information, consultation, order taking, hospitality, care taking, exceptions, billing, and payment) encircling the core product3. Many of these are based on informational processes that can be located in one part of the world and delivered electronically to another. In practice, the nature of the product, customer requirements, and competitive practices help managers to determine which supplementary service must be offered and which might usefully be added to enhance value. In developing a global strategy, management must decide which, if any, supplementary elements should be consistent across all markets and which might be tailored to meet local needs, expectations, and competitive dynamics. This is the essence of standardization and customization, but services offer much more flexibility in this respect.

1 Abbott, A. " The System of Professions: An Essay on the Division of Expert Labor, Chicago ",

1988. 2 Jones, C. et al., Organization Science, 1998. 3 Lovelock,C.H. and Yip, G.S., California Management Review, 1996.

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LOVELOCK and YIP classify the following “Industry Globalization Drivers”:

Figure B.6 Industry Globalization Drivers for Service Firms

• Global Customers - As large corporate customers become global, they often

seek to standardize and simplify the array of services they consume. Telecom providers, corporate banking, insurance, business logistics, and management consultants are examples of ISFs that follow their customers globally. Customers for information-based services may have a more diffused set of needs, but these certainly include comprehensiveness, accuracy, and accessibility.

• Global Channels - The availability of electronic channels of distribution for services provides nearly total global coverage for more and more service offerings. These electronic global channels support not just information-based services but augment people-processing and possession-processing services. Internet technology can help sell any type of core product through information-based supplementary services and can actually deliver many information-based services directly to customers.

• Global Economies of Scale - ISFs typically have to find global scale economies by standardizing production processes rather than through physical concentration, as well as by concentrating the upstream rather than the downstream stages of the value chain. One common solution is to substitute equipment for labor in order to achieve lower costs and better performance, than local companies using traditional business systems.

• Favorable Logistics - This is seldom a barrier to globalization for information- based services. Using electronic channels to deliver such services allows providers to concentrate production in locations that have specific expertise and to offer cost savings or other meaningful advantages.

• Information Technology - For information-based services the growing availability of broadband telecommunication channels capable of moving vast amount of data at a great speed is playing a major role in opening up new markets. Significant economies may be gained by centralizing information hubs on a global basis. The use of information technologies may allow companies to benefit from favorable labor costs or exchange rates by consolidating operations of supplementary services or back-office functions in just one or a few countries.

• Government Policies and Regulations - Nations may perceive both an economic and a cultural threat in unrestricted information-based services through electronic channels. For information based services special policies on education censorship, public ownership of communications and infrastructure quality may apply; technical standards may vary and government policies may distort prices.

• Transferable Competitive Advantage - The single most important competitive globalization drive arises from transferability of competitive advantage. Advantage in management systems can be a basis for globalization.

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Most industry globalization drivers do apply to services, but their impact varies by service type and even by industry. This conclusion highlights the importance of conducting a systematic evaluation of globalization drivers for individual industries, rather than taking generalized views that service businesses can be more or less easily globalized than can manufacturing businesses.

In addition to the globalization drivers stated by LOVELOCK and YIP, MOORE and BIRKENSHAW argue that service firms benefit primarily from the ability to manage their proprietary knowledge1. Elements include assimilating new knowledge from around the world, building new knowledge through alliances and the interaction of professional employees, and disseminating knowledge effectively through the firm.

B.1.2.2 Information-based Service - IJVs

Information-based Services JVs have the potential to create economic value but they are also distinguished by the fact that knowledge may be created and differently appropriated by the partners involved. • Global Location of Value Adding Service Activities: Location of a business's

activities and how to coordinate them constitute critical choices in global strategy. Many service businesses need local presence for their downstream activities. But at the same time, they can take advantage of differences in national comparative advantage to build more efficient and effective value chains.

• Global Marketing of Services: A worldwide business uses global marketing when it takes the same or similar approach or content for one or more elements of the marketing mix. Whether to use it depends on such industry globalization drivers as common customer needs. In contrast, lack of inventories in many service businesses means that such firms need worry less about using global pricing.

• Global market participation: Some types of service business seem very easy to spread around the world and others very difficult. In contrast, some essential services such as banking, telecommunication, hospitals and airlines operate in heavily regulated environments making it difficult to get rapid penetration of foreign markets.

Historically, businesses that rely on the trust and reputation of their personnel have found it difficult to demonstrate quality to potential customers and to adopt a

1 Moore, K. and Birkenshaw, J., Academy of Management Executive, 1998.

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professional style that fits the local culture. By their virtual nature most information-based ISFs should find it the easiest to locate globally.

A key point is that making broad generalizations about services cannot be expected to provide useful insights into opportunities for globalization. Information based services offer management greater flexibility to split the back office and front office with opportunities to centralize the former on a global basis. Key issues in globalization include the constraint imposed by language, culture and government regulations.

Global service firms typically replicate the entire value chain in each country of operation, rather than allocating resources globally for maximum cost efficiency1. Competitive advantage is gained, not through the sharing of activities but through the transfer of intangible assets from country to country, internally or through strategic alliances such as IJVs. These intangible assets include corporate name, image and reputation, proprietary services, operating procedures, and customer knowledge. Increasingly, the sources of these intangible assets are not in the headquarters (HQ) of the organization, but in various affiliates and partners around the world2.

IT has emerged as a key driver for information-based services. In theory, a global company could centralize its billing on a global basis using postal or telecommunication distribution channels to deliver the bills to customers, suitably converted to local currency. Like manufacturers, ISFs should be looking for opportunities to exploit differences in national comparative advantages as they seek to build more efficient value chains.

Difficulties in evaluating ISFs can lead to uncertainty but this problem can be offset by strong branding and a globally consistent use of corporate design elements. Hence, the primary task of the brand name of trademark for a service may be to offer recognition and reassurance rather than performing other functions such as positioning or local adaptation.

1 One prime example for this are the back-activities that can be located in low-cost countries, and

even in professional activities there are benefits to be gained from tapping into well-educated but relatively low-salary countries such as India.

2 Moore, K and Birkenshaw, J., Academy of Management Executive, 1998.

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Which are the benchmarks, the best practice leaders in the „knowledge“ business, the firms whose source of competitive advantage resides in their capacity to tap the collective intelligence of members and to work together to create value for customers?

With their flat structures, service-oriented workforce and participative decision processes, ISFs can provide a model toward which larger, more hierarchical organizations can turn for guidance as they become leaner, quicker and more flexible. ISFs represent a more pure form of knowledge-based business1.

ISF’s have mastered the capabilities for collaboration and learning that created value for the firms beyond the value of each individual’s skills. They have achieved these capabilities by creating a „generative cycle“ of mutually reinforcing, self-sustaining employee and client development. For a global service firm, new knowledge comes primarily from two important sources: interactions with team members within the global organizational network, and interaction with clients.

Nowhere is potential strategic value of learning more evident than in ISFs. The capability for collaboration across boundaries whether functional, geographical or line of business, allows the firms to find broader solutions of today’s client problems. Next, a capacity for collaborative learning unleashes the creativity involved in joint exploration of solutions that transcend technical boundaries and define tomorrow’s possibilities2. Even the ability to collaborate to achieve single- loop learning of an incremental nature is valuable; transformed by leveraging diverse perspectives in double-loop learning that reexamines fundamental assumptions, it can add tremendous value especially in changing environments3.

Service firms across a variety of industries mutually reinforce the processes of employee and market development. Processes for recruiting, developing and retaining professional staff develop a capability for collaborative learning explored together within a strategic context. The processes of individual professional development and business development reinforce each other to produce significant strategic value. The key elements of the model are the process through which, and

1 Liedtka et al., Sloan Management Review, 1997 ; Quinn, J.B. "Intelligence Enterprise", 1992. 2 Lieonard-Barton, D. “Wellspring of Knowledge”, 1995. 3 For further discussion, see next chapter

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the context within which a firm enhances and extends individual expertise through collaboration and the process through which a firm leverages individual learning to create a capacity for collaborative learning. BHATT argues that the interaction between technologies, techniques and people allow an organization to manage its knowledge effectively1. By creating a nurturing and “learning-by-doing” kind of environment, an organization can sustain its competitive advantages.

Figure B.7 Knowledge Generative Cycle

B.2 Knowledge Management Theory

B.2.1 Defining Organizational Knowledge

Knowledge is an organized flow of information that is anchored to commitment and

beliefs of its holder2. Organizational knowledge is represented as storage of belief systems, collective memories of past events, stories, as well as frames of reference and values3. It resides in the relations between individuals, interpreting them, and therefore is more than the sum of all the individual knowledge databases1.

1 Bhatt, C.D., Journal of Knowledge Management, 2001. 2 Nonaka, I., Organization Science, 1994. 3 Lyles, M.A. and Salk, J.E., Journal of International Business Studies, 1996.

Knowledge Evolution Mechanisms

ExternalStimuli &Feedback

CognitionAction

RETENTIONExp. AccumulationInternal Feedback

REPLICATIONKn. Sharing/TransferAdaptive VariationProblem Solving

INTERNAL SELECTIONKn. ArticulationKn.Codification

GENERATIVEVARIATIONScanningRecombination

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Knowledge is considered as one of the most important strategic resources of the organization. Managing it effectively is essential to sustaining competitive advantage2. Knowledge – especially context-specific, tacit knowledge embedded in complex organizational routines – tends to be unique and difficult to imitate. Acquiring knowledge takes time, and firms can greatly reduce their race for learning by entering into strategic alliances with partner firms, especially in highly uncertain environments.

Knowledge can be incorporated in language, stories, and rules, tools, resulting in an increased capacity for decision taking and action to achieve some purpose3. Organizational data, information, knowledge and wisdom, all of which emerge from the social process of an organization are not private. To show the linkages between them, the following definitions are provided and summarized.

According to DAVENPORT and PRUSAK4, knowledge is actually “a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating a new experience and information”. This definition on knowledge is parallel with what LANG has in mind. She has pointed out that human beings are the main element in knowledge creation5. That knowledge is constructed through circulation of knowledge and resides within the individual (in informal, unwritten routine practice) in communities that are brought together by common interests.

1 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995. 2 Kogut, B. and Zander, U., Journal of International Business Studies, 1995; Grant, R.M.,

Organization Science, 1996. 3 Wong, W.L.P. and Radcliffe, D.F., Technology analysis and Strategic Management, 2000. 4 Davenport, T.H. and Prusak, L., “Working Knowledge: How Organizations Manage What They

Know”, 1998. 5 Lang, J.C., Journal of Knowledge Management, 2001.

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Figure B.8 Knowledge value chain

Data constitutes the values of observable, measurable or calculable attribute. Data alone does not provide information. Information, in general terms, is data plus conceptual commitments and interpretations. Information is data extracted, filtered or formatted in some way.

Knowledge is a subset of information, which has been validated according to the rules of its surroundings. Wisdom, finally, has a more active component than data, information, or knowledge. It is the application of knowledge expressed in principles to arrive at prudent, sagacious decisions about complex situations1. Once those engaged in the field of KM become aware of the knowledge base on “metaknowledge” (knowledge about knowledge and its management) it will enable the field of KM to “multiply its options for designing its own future”2.

1 Bellinger, G., kmmgt.htm, 2000. 2 Carrillo, F.J. (1999).

Adapted from :http://www.iftf.org/html/iftflibrary/humanresources/infotoknowledge.pdf

The Knowledge / Information Value Chain

Data

Information

Knowledge

Innovation“Wisdom”

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Knowledge Categorization Explicit and Tacit Knowledge

There is a multitude of knowledge categorizations based on POLYANI's differentiation between tacit and explicit knowledge1. The most relevant to the IJV framework are represented below. POLYANI first categorized the prominence of knowledge as being either tacit or explicit. Explicit knowledge encompasses facts that can be transferred through formal communication and is codifiable in a systematic language2. Explicit knowledge can be expressed in words and numbers and shared in the form of data, scientific formulae, specification manuals, and similar forms. This kind of knowledge can be readily transmitted between individuals formally and systematically.

Tacit knowledge, on the other hand, is difficult to formalize and accordingly to communicate3. It is highly context-specific, has a strong emotional aspect and includes underlying systems of rules and beliefs that guide actions4. Tacit knowledge is anchored and constantly enhanced by personal experience. Indeed, it is a product of this experience and cannot be learned any other way. Tacit knowledge is a continuous activity and embodies an “analogue” quality5. In this context, communication between individuals “may be seen as an analogue process that aims to share tacit knowledge to build mutual understanding. This understanding involves a parallel processing of the complexities of the current issues, as the different dimensions of a problem are processed simultaneously”6. It involves intangible factors embedded in personal beliefs, experiences, and values. An inability to articulate or describe an organizational process indicates that the knowledge is highly tacit. The tacit dimension is often implied in the use and implementation of explicit knowledge, i.e. knowledge that is codified into procedures or hard data.

1 Polyani, M. “ The Tacit Dimension”, 1966. 2 op.cit. 3 Nonaka, J., Organization Science, 1994. 4 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 5 Bateson, G. "Steps to Ecology of Mind", 1973 ; Nonaka, I., Byosiere,C.C., Borucki, P. and

Konno, N., International Business Review , 1994. 6 Nonaka, I., Byosiere, P., Borucki, C.C. and Konno, N., International Business Review, 1994.

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Many studies have gone on to use this differentiation between tacit and explicit knowledge for further categorization and as the base for understanding KM processes1.

Tacit knowledge is highly personal and hard to formalize, making it difficult to communicate or share with others. Subjective insights, intuitions, and hunches fall into this category of knowledge. Tacit knowledge is deeply rooted in an individual's actions and experience as well as in the ideals, values, or emotions the person embraces. There are two dimensions to tacit knowledge. The first is the technical dimension, which encompasses the kind of informal personal skills or crafts often referred to as know-how. The second is the cognitive dimension. It consists of beliefs, ideals, values, schemata, and mental models which are deeply ingrained in individuals and which are often taken for granted. While difficult to articulate, this cognitive dimension of tacit knowledge shapes the way we perceive the world. • Tacit knowledge is complex since it involves, by definition, the ability to cope

with complexity • Tacit knowledge is acquired essentially through experience and through trial and

error • The passing on of tacit knowledge is through demonstration, observation,

imitation, practice, and feedback (a process often labeled as apprenticeship and socialization); These require close personal contact over a prolonged period of time

• The tacit knowledge that results from organizational learning is collective knowledge; this makes the transfer of tacit knowledge even more problematic

• The tacit knowledge that needs to be transferred may not be static but continuously evolving

RYLE distinguishes between know how and know that2. SACKMANN takes this differentiation one step further and differentiated between direction (knowing-what), recipe (knowing-how), and axiomatic (knowing-why) knowledge3. Knowing what describes the content of technical or social knowledge. This knowledge can often be more easily codified and transferred. Knowing how refers to the functionality and the

1 The differentiation between tacit and explicit knowledge has been carried further in various

studies; see Hedlund, G. , Nonaka, J. Models of Knowledge Management in the West and Japan. In “Implementing Strategic Processes, Change, Learning, and Cooperation” 1993 (articulated knowledge); Andersen Knowledge Management Study, 1998 ; Nonaka, I., Organization Science, 1994 ; Ryle, G. “The Concept of Mind”, 1958.

2 Ryle, G. “The Concept of Mind”, 1958. 3 Sackmann, S.A. “Cultural Knowledge in Organizations - Exploring the Collective Mind”, 1991.

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relationships between the elements and direction of knowledge. This is often tacit, and requires a „learning-by-doing“ approach, through which the „skills“1 can be passed on. Finally knowing why constitutes the reasons and principles behind the other types of knowledge. This is the most difficult knowledge to transfer, and it can be created only over a longer period of time. Lack of axiomatic knowledge can lead to causal ambiguity, whereby the reasons for success or failure of an activity remain incomprehensible2.

BLACKLER distinguished five different types of knowledge3: • Embrained: depends on conceptual skills and cognitive abilities • Embodied: action-oriented • Encultured: the process for achieving shared understandings • Embedded: resides in systemic routines • Encoded: information conveyed by signs and signals

DUNNING differentiates four context-specific types of knowledge4 that are relevant to identifying the knowledge gaps that are the motivation for firms to enter into strategic alliances: • Firm-specific knowledge pertains to the business itself such as “the technology

used, the products and operations, the services provided, the management of the employees, the history of the firm, and the systems and structures supporting the firm’s internal activities”5. Technological expertise also describes the „input-output“ processes of the organization’s daily business6.

• Market-specific knowledge is one of the classic motivations behind IJVs. Foreign firms use the IJV as a mode of market entry, for the conditions for transfer of market knowledge from the local parent firm hold the most promise in the surroundings of an independent entity7. Common forms of market-specific knowledge are knowledge of the IJVs customers and suppliers, local restrictions and government policy, and local culture and customs.

1 Nonaka, I. and Takeuchi, H. “The Knowledge Creating Company”, 1995. 2 Rumelt, R.P. Towards a Strategic Theory of the Firm, In "Competitive Strategic Management",

1984. ; Simonin, B. Strategic Management Journal, 1999. 3 Blackler, F. Organization Studies, 1995. 4 Dunning, J.H. Journal of International Business Studies, 1988. 5 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. p. 380 6 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991. 7 Hedlund, G. and Nonaka, I. "Implementing Strategic Processes, Change, Learning and

Cooperation", 1993.

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• Partnering knowledge is learning and knowing how to conduct a successful partnership and is an important source of comparative advantage for partners in IJVs. Up-to date, the main focus has been on financial and control issues, and not on the human and relational issues1. Partnering knowledge is a key benefit of the IJV and other collaboration, for it seems close at hand to say that collaborating is a learned skill as well as a critical success factor of IJVs, and that greater IJV experience leads to higher rates of alliance success2.

• Resource integration knowledge encompasses the technical know-how required to transform the available resources so that they function in the IJV context. The resources that the IJV partners bring to the JV must be integrated to function cohesively and effectively in the new environment3.

Each type of knowledge requires a different approach to knowledge transfer and creation. In order to achieve optimal effectiveness of KM for all categories of knowledge, it is essential that all KM processes be integrated within the organizational framework.

B.2.2 Organizational Learning

The term learning refers to the development of insights, knowledge and associations between past actions, the effectiveness of those actions, and future actions4.

According to CHAKRAVORTY5 and HEDBERG6 the learning process is reflected in structural elements and outcomes that are the result of growing insights and the successful restructuring of organizational problems. Hence learning comprises both action outcomes and changes in the state of knowledge7.

1 Kanter, R.M., Harvard Business Review, 1994. 2 Conference Board. " Strategic Alliances Survey ", 1994. 3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 4 Fiol, C.M. and Lyles, M., Academy of Management Review, 1985. 5 Chakravorty, G.S. "Of Grammatology", 1981. 6 Hedberg, B.L.T. How Organizations Learn and Unlearn. In “Handbook of Organizational

Design”, 1981. 7 Lyles, M. A., International Business Review, 1994.

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Organizational learning consists of the development of skills and knowledge to the associations between past actions, the effectiveness of those actions and future actions1. The translation of new knowledge into action is the basis for creating new skills that underpin a firm’s competitive knowledge2. Among the many critical aspects that make organizational learning of such high importance is the vision of how knowledge migrates from the minds of individuals to a state where it is mutually held in the minds of many.

Organizational learning is a systems-level concept that can become useful only when its component parts are thoroughly understood and brought down to an operational level in order to understand how knowledge travels and changes within organizations and how these processes can be optimized for maximum effectiveness3. Individual knowledge must be shared with other individuals and groups in order for it to have an impact on organizational effectiveness and performance.

New knowledge provides the basis for organizational renewal and sustainable competitive advantage. In various studies, knowledge acquisition has been linked with organizational performance as well with the performance of specific organization tasks. Understanding knowledge means an appreciation for the complexities of acquiring, transferring, and integrating knowledge in a learning environment, and increasing complexity due to cross-border knowledge and the challenge of renewing organizational skills in various different settings.

There are currently two major views on the nature of knowledge. The cognitivist perspective is the most firmly established and well known. "Learning" means the development of increasingly complete representations, and the cognitive system works when its representations correspond to the objects or events "out there". To the cognitivist, knowledge is explicit, capable of being encoded and stored, and easy to transmit to others4.

1 Fiol, C.M. and Lyles, M. A., Academy of Management Review, 1985. 2 Inkpen, A., Academy of Management Executive, 1998. 3 Hedlund, G. and Nonaka, I., Models of Knowledge Management in the West and Japan. "

Implementing Strategic Processes, Change, Learning, and Cooperation", 1993. 4 Van Krogh, G., California Management Review, 1998.

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ARGYRIS defines organizational learning as the process of "detection and correction of errors." In this view, organizations learn through individuals acting as agents for them: "The individuals' learning activities, in turn, are facilitated or inhibited by an ecological system of factors that may be called an organizational learning system"1.

ARGYRIS differentiates between three types of organizational learning: • Single-loop Learning: With single-loop learning, organizational learning occurs

when errors are detected and corrected, but the generative values, i.e. the underlying assumptions remain the same. The fundamental nature of the organization's activities remains intact.

• Double-loop Learning: Double-loop learning is when, in addition to single-loop learning, the organization questions and modifies existing norms, procedures and policies. This involves changing the organization’s knowledge base or firm-specific competencies. Strategic Learning is the “process by which an organization makes sense of its environment in ways that broaden the range of objectives it can pursue or the range of resources or the actions available to it for processing these objectives.”

• Deutero-learning: Deutero-learning occurs when organizations learn how to carry out single-loop and double-loop learning. The first two forms of learning require that organizations must know that learning must occur. Deutero-learning incorporates this “learning to learn” and the creation of the appropriate environment and processes.

Relationship between single and double loop learning has been described by ARGYRIS2.

HUBER considers four constructs as integrally linked to organizational learning. He clarifies that learning need not be conscious or intentional. Furthermore, learning does not always increase the learner's effectiveness, or even potential effectiveness. Moreover, learning need not result in observable changes in behavior1.

The current view of organizations is based on adaptive learning, which is about coping. Adaptive learning or single-loop learning focuses on solving problems in the present without examining the appropriateness of current learning behaviors. Adaptive organizations focus on incremental improvements, often based upon the past track record of success. In principle, they don't question the fundamental 1 Argyris, C. "On Organizational Learning", 1992. 2 Argyris, C., Journal of Management Education, 1977.

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assumptions underlying the existing ways of doing work. The essential difference is between being adaptive and having adaptability.

The learning organization is in many ways, a natural evolution of older management themes, culminating in the emphasis on empowerment and self-management of the recent past.

A learning organization, as defined by SENGE, is characterized by "transformation of the relationship of the organization to the individual and increased capacity for adaptation and change."2 SENGE defines the Learning Organization as the organization "in which you cannot not learn because learning is so insinuated into the fabric of life."3 Also, he defines Learning Organization as "a group of people continually enhancing their capacity to create what they want to create", that is a concern for learning by all organizational members on behalf of the organization. The concept of ‘Learning Organization’ is increasingly relevant given the increasing complexity and uncertainty of the organizational environment. As SENGE remarks: "The rate at which organizations learn may become the only sustainable source of competitive advantage."

McGILL et al. define the ‘Learning Organization’ as "a company that can respond to new information by altering the very "programming" by which information is processed and evaluated."4 The following table summarizes the five key issues of the learning organization:

McGILL et al. do not distinguish between ‘Learning Organization’ and ‘Organizational Learning’. They define ‘Organizational Learning’ as the ability of an organization to gain insight and understanding from experience through experimentation, observation, analysis, and a willingness to examine both successes and failures.

The current view of organizations is based on adaptive learning, which is about coping. SENGE notes that increasing adaptiveness is only the first stage and that

1 Huber, G.P. Organization Science, 1991. 2 Senge, P., Sloan Management Review, 1990. 3 Op.cit.. 4 McGill et al., Organizational Dynamics, 1992.

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companies need to focus on generative learning or "double-loop learning"1. Generative learning emphasizes continuous experimentation and feedback in an ongoing examination of the very way organizations go about defining and solving problems. In SENGE's view, generative learning is about creating - it requires "systemic thinking," "shared vision," "personal mastery," "team learning," and "creative tension" [between the vision and the current reality]. Generative learning, unlike adaptive learning, requires new ways of looking at the world.

In contrast, adaptive learning or single-loop learning focuses on solving problems in the present without examining the appropriateness of current learning behaviors. Adaptive organizations focus on incremental improvements, often based upon the past track record of success. Essentially, they don't question the fundamental assumptions underlying the existing ways of doing work.

The exercise of these 5 "Disciplines" increases organizational effectiveness, greater capacity for organizational adaptation to a complex environment, and a fuller utilization of the knowledge within the organization.

ARGYRIS suggests that there are "deeper" reasons behind the failure to implement Management Information Systems (MIS), especially when the technology was used to deal with the more complex and ill-structured problems faced by the organization. He suggests that the MIS and other KM tools need to be viewed as a part of a more general problem of organizational learning. He avers that an organization may be said to learn to the extent that it identifies and corrects error. This requirement, in turn, implies that learning also requires the capacity to know when it is unable to identify and correct errors.

He further argues that the overwhelming amount of learning done in an organization is single loop because the "underlying program is not questioned": it is designed to identify and correct errors so that the job gets done and the action remains within stated policy guidelines. "The massive technology of MIS, quality control systems, and audits of the quality control systems is designed for single loop learning". The trouble arises when the technology is not effective and when the underlying objectives and policies must be questioned.

1 Argyris, C. "On Organizational Learning", 1992.

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WEICK argues that the defining property of learning is the combination of same stimulus and different responses, however it is rare in organizations; meaning either organizations don't learn or that they learn but in nontraditional ways. He argues that organizational learning perhaps involves a different kind of learning than has been described in the past. "The process within the organization by which knowledge about action-outcome relationships and the effect of the environment on these relationships is developed"1. In his view, "a more radical approach would take the position that individual learning occurs when people give a different response to the same stimulus, but organizational learning occurs when groups of people give the same response to different stimuli2."

The link between manager’s understanding of a changed program, commitment and involvement is described by SAVOLAINEN3.

To maintain adaptability, organizations need to operate themselves as "experimenting" or "self-designing" organizations. They should maintain themselves in a state of frequent, nearly continuous change in structures, processes, foci, and goals. Even in the face of apparently optimal adaptation HEDLUND and NONAKA4 argue that operating in this mode is efficacious, perhaps even required, for survival in fast changing and unpredictable environments5. They reason that probable and desirable consequences of an ongoing state of experimentation are that organizations learn about a variety of design features and remain flexible and attuned to their business environment. • Lower level learning is the result of repetition and routine. It results in standard

operating procedures or success programs or in new management systems that handle repetitive, unchanging systems.

• Higher level learning involves an adjustment of overall missions, beliefs and norms. It results in new frames of reference, new skills for problem formulation or issue perception, new values, unlearning of past success programs and discrimination skills.

1 Duncan, R. and Weiss, A., Research in Organizational Behavior , 1979. 2 Weick, K.E., Organization Science, 1991. 3 Savolainen, T. Journal of Workplace Learning, 2000. 4 Hedlund, G. and Nonaka, I. “Implementing Strategic Processes, Change, Learning, and

Cooperation”, 1993. 5 Nystrom et al., “The Management of Organization Design”,1976; Hedberg et al.,Administrative

Science Quarterly, 1976; Starbuck, W.H., American Sociological Review, 1983 ; Hedberg et al., International Studies of Management and Organization”, 1977.

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The following table summarizes the most relevant typologies of organizational learning.

Figure B.9 Typologies of Organizational Learning

Source Lower Level Higher Level Comments

Argyris &Schon (1978)

Single- loop learning :solves a problem orreacts to a change in itsenvironment withoutchanging the underlyingnorms

Double- loop learning :occurs when more radicalsolutions are required. Anorganization modifies itsunderlying norms, rules,policies, objectives orprocedures in response toexternal stimuli.

Single- loop learning reinforcesestablished ways of working andproblem solving and will not lead tosignificant changes in ways ofworking in the long term. In doubleloop learning the organizationquestions and re-frames the modelswhich guide decision making andbehavior in response to a change intheir external environment andconsequently develops new ways ofworking.

Fiol and Lyles(1985)

Lower level learning:short- term, superficialand temporaryformation ofassociations.

Higher level learning :responses to changes in theenvironment requiring achange in action.

Lower level learning is relativelysimple and may be no more thanrepetition of past behavior. Higherlevel learning results in thedevelopment of new complex rulesand associations which changebehavior.

Senge (1990) Adaptive learning :coping and dealing withthe current environmentin new and better ways,and equates well withsingle- loop learning.

Generative learning :moves beyond adaptation,requiring individuals andorganizations to developnew ways of looking at theworld.

Adaptive learning can essentially beseen as representing organizationsand individuals propensities tobehave in a ‘conservative’ manner.Generative learning can becharacterized as the development ofnew skills and new ways ofworking. Essentially generativelearning may also be thought of asa propensity to ‘innovate’.

DiBella (1998) Incremental learning :focusing knowledge onwhat is already knownor being done.

Transformational learning :knowledge that challengesthe assumptions about whatis known or being done.

Incremental and transformativemodes seen as complementaryrather than competingOrganizations may have apreference for one mode but ‘asound learning system can benefitfrom using both approaches’.

Pedler,Burgoyne andBoydell(1997).

Implementing : doingthings well;conforming; dependentand passive

Improving : doing thingsbetter; competing;independent and active

They identify a third level oflearning which they labelintegrating’ which occurs through‘changing the context orrelationships. A holistic approach- doing better things by seeing andcreating new possibilities.Equivalent to Bateson’s and Argyrisand Schon’s triple loop or deutero -learning.

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Knowledge Management Theories

"Knowledge Management deals with the critical issues of organizational adaptation, survival and competence in face of increasingly discontinuous environmental change. Essentially, it embodies organizational processes that seek synergistic combination of data and information processing capacity of information technologies and the creative and innovative capacity of human beings"1.

The Role of Management in the Learning Organization

The leadership role in the learning organization is that of a designer, teacher, and steward who can build shared vision and challenge in the prevailing mental models. He / she is responsible for building organizations where people are continually expanding their capabilities to shape their future -- that is; leaders are responsible for learning. The management has to support the transition of the organizational network to a knowledge-based one, encourage and manage each step of the knowledge creation chain.

1 Malhotra, Y., Knowledge Management in Inquiring Organizations. In. "Proceedings of the 3rd

American Conference on Information Systems”, Indianopolis, 1997.

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Author Types of Knowledge

Classification Knowledge Transfer

Knowledge Management processes

Knowledge creation

Nonaka (1994) Von Krogh et al (2000)

Tacit Knowledge Explicit Knowledge

Transfer of expertise or strategic market data

Away from static and passive Processes derived from knowledge conversion

Knowledge conversion of explicit and tacit knowledge: Socialization, Combination Internalization, Externalization Knowledge Spiral up through individual, Group, Organizational and Inter-organizational level

Gupta and Govindarajan (1991, 2000, 2002)

Global innovator Integrated Player Local innovator

Use of formal integrative mechanisms

Global mindset

Inkpen and Beamish (1997) Inkpen (2000)

Local knowledge Product knowledge

Instability as factor in knowledge transfer

Knowledge acquisition from IJV partners

Inkpen (1998, 1998, 2000, 2000)

Tacit knowledge Explicit knowledge

Through knowledge connections

Establishment of knowledge connections through generic management processes • Personnel transfers • Alliance-parent • Interaction • Technology sharing • Strategy linkages

Amplification, modification and clarification

Inkpen, Crossan et al. (1995)

Internal transfer of best practices

Interpreting, Integrating institutionalizing

Szulanski (1996) Tacit knowledge Explicit knowledge

Stickiness of knowledge is critical factor for transfer

Parkhe (1991) Interfirm diversity as a factor in knowledge transfer Culture(Corporate and national) Strategy of partners

Building of trust Collaborative learning mindset

Spender (1992) Knowledge generation Knowledge application

Pucik (1991) Technology Product knowledge

Technology transfer as

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knowledge transfer

Simonin (1999)

Ambiguity as a factor for knowledge transfer

Simonin & Helloloid (1993)

Firm knowledge Product knowledge Market knowledge

Organizational learning in IJV

Huber (1991) “grafting” new knowledge internalization process Knowledge acquisition, information distribution, information interpretation, and organizational memory.

Hamel (1991) Skill based view of the firm

SA as opportunities for Internalization of partner’s skills Intent, Transparency Receptivity, As determinant of sustainable learning

IJV as “race to learn”, fundamentally transitory, Value creation , Value appropriation, Creation of a collaborative membrane

Kogut and Zander (1992, 1996) Kogut (2000)

Vertical transfer through language (individual level) Higher order organizational principles Formal / informal structures Horizontal knowledge transfer through boundary spanners

Blackler (1995) Embodied Embrained Encultured Embedded Encoded

Figure B.10 Knowledge Management Theories

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B.2.3 Overview of the Knowledge Management Processes

In a report on the link between KM and organizational learning, the Conference Board emphasized the following definition of KM:

Knowledge Management is an integrated, systematic approach to identifying, managing, and sharing all of an enterprise's information assets, including databases, documents, policies, and procedures, as well as previously unarticulated expertise and experience held by individual workers. Knowledge management is an approach to adding or creating value by more actively leveraging the know-how, experience and judgment resident within and in many cases outside of an organization1.

An effective KM strategy must aim to excel at two central tasks: creating and acquiring new knowledge, and sharing and mobilizing that knowledge throughout the corporate network. GUPTA and GOVINDARAJAN quantify a firm’s intellectual capital as the stock of the knowledge held by individuals and corporate units multiplied by the velocity at which this knowledge flows and is disseminated throughout the organization2. KM is a collective endeavor that is open to social and political processes that can result in conflict from different organizational subcultures and ideologies3.

The task of accumulating knowledge can be divided into 3 subtasks: • Knowledge creation • Knowledge acquisition • Knowledge retention (organizational memory)

The task of mobilizing knowledge can also be divided into a set of subtasks • Knowledge identification (uncovering opportunities for knowledge sharing) • Knowledge outflow ( motivating potential senders of knowledge to share it) • Knowledge transmission (building effective and efficient channels for the

transfer of knowledge) • Knowledge outflow (motivating potential receivers to accept and use the

incoming knowledge) 1 Ruggles, R., California Management Review, 1998. 2 Gupta, A. and Govindarajan, V.J., Academy of Management Review, 1991. 3 DeLong, D. and Seeman, P., Organizational Dynamics, 2000.

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ALMEIDA and GRANT1 classify two categories of knowledge activities. According to SPENDER2, these increase the stock of knowledge as knowledge generation, and those, which involve the utilization of that stock of knowledge application. Their knowledge-leveraging model of the MNC implies a more complex view of the KM processes within the firm. An empirical survey by CHONG identified KM as “a process of leveraging and articulating skill and expertise of employees, supported by IT”3 . BHATT sees KM as “a process of knowledge creation, validation, presentation, distribution and application”4.

Figure B.11 Knowledge Management Processes within the Firm

DAVENPORT and SHORT5 define business process as "a set of logically related tasks performed to achieve a defined business outcome." A process is "a structured, measured set of activities designed to produce a specified output for a particular

1 Almeida, P. and Grant, R.M. International Corporations and Cross Border Knowledge Transfer

in the Semiconductor Industry. "A Report to the Carnegie-Bosch Institute", 1998. 2 Spender, J. -C., Management of Technology III, 1992. 3 Chong, C.W. et al., Journal of Intellectual Capital, 2000. 4 Bhatt, C.D., Journal of Knowledge Management, 2001. 5 Davenport, T.H. and Short, J.E., Sloan Management Review, 1990.

Knowledge Management Processes within the Firm

Knowledge Creation– Knowledge Creation Creating new (mainly technical and

scientific) knowledge through research– Learning-by-doing Accumulating know-how (especially that

relating to processes of experience(“moving down the learning curve”)

– External Learning The transfer of both explicit and tacit knowledge from outside the firm’s boundaries

Knowledge Application– Knowledge Replication Duplicating existing organizational

knowledge(typically in a different location) in order knowledge ecos of scale

– Knowledge Integration Combining different types of knowledge to transform inputs into outputs

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customer or market. It implies a strong emphasis on how work is done within an organization"1. In their view processes have two important characteristics: • They have customers (internal or external) • They cross organizational boundaries, i.e., they occur across or between

organizational sub-units. One technique for identifying business processes in an organization is the value chain method proposed by PORTER and MILLAR2.

The knowledge value chain treats human systems as key components that engage in continuous assessment of information archived in the technological systems. In this view, the human actors do not implement 'best practices' without active inquiry. Human actors engage in an active process of sense making to continuously assess the effectiveness of 'best practices.' The underlying premise is that 'best practices' of yesterday may not be taken for granted as 'best practices' of today or tomorrow. Hence, double-loop learning, unlearning and relearning processes need to be designed into the organizational business processes.

Processes are generally identified in terms of beginning and end points, interfaces and organization units involved. High-impact processes should have process owners, a sole individual responsible for the end-to-end process.

McELROY has pointed out the differences between what he has identified as two generations of KM. First generation KM focuses on knowledge sharing – on how to distribute existing organizational knowledge, usually through technology. In contrast, second generation KM focuses on knowledge creation – how to satisfy organizational needs for new knowledge, usually through processes of learning and value creation3.

Second-generation researchers on KM see knowledge creation, or innovation, as the product of KM processes, the understanding and management of which can lead to dramatic increases in organizational creativity and competitive advantage4. Research along the lines of SENGE view knowledge within its lifecycle, and through the understanding of this life cycle, structure and dynamics of KM processes can

1 Davenport, T.H. “Process Innovation”, 1993. 2 Porter, M. and Millar, V., Harvard Business Review, 1985. 3 McElroy, M.W., Journal of Knowledge Management, 2000. 4 Senge, P., Sloan Management Review, 1990.

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enhance an organization's ability to learn and adapt in highly complex and fast-changing environment.

Business processes can play a similar role. Ideally, processes should allow groups, through negotiation, to align themselves with one another and with the organization as a whole. Business processes can enable productive cross-boundary relations as different groups within an organization, negotiate and propagate a shared interpretation. The processes provide some structure, the negotiations provide room for improvisation and accommodation and the two together can result in

coordinated, loosely coupled, but systemic behavior1.

This process perspective can be applied to what can be managed about knowledge, proposing eight major categories of knowledge focussed activities. • Generating new knowledge • Accessing valuable knowledge from outside sources • Using accessible knowledge in decision making • Embedding knowledge in processes, products, and/or services • Representing knowledge in documents, databases and software • Facilitating knowledge growth through culture and incentives • Transferring existing knowledge into other parts of the organization • Measuring the value of knowledge assets and/or impact of KM • The Knowledge Life Cycle

There are three basic stages in the knowledge life cycle: knowledge acquisition, Knowledge creation, and knowledge retention.

B.2.3.1 Knowledge Evaluation

An important factor of the KM processes of a firm is the constant need for evaluation and re-evaluation and benchmarking, as this knowledge provides primary opportunities (and constraints) from which to compete and grow over the near-to-intermediate term. ZACK also develops the knowledge-based SWOT analysis, mapping the firm’s knowledge resources and resource gaps against its strategic opportunities and threats, to understand their strengths and weaknesses. Organizations can use this map to strategically guide their KM efforts. KM strategy can be thought of as balancing knowledge based resources and capabilities to the knowledge required for attaining a sustainable competitive advantage. Success 1 Weick, K., California Management Review, 1997.

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requires dynamically aligning those knowledge-based requirements and its own capabilities.

First the firm has to categorize the various types of knowledge according to the guidelines shown above. Having performed a strategy evaluation of knowledge-based resources and capabilities, an organization can determine which knowledge should be developed or acquired. The strategic focus of KM within a firm should be to close the knowledge gap, while striving to exploit any “excess knowledge”. Ultimately, the ideal strategy for most companies is to maintain a balance between exploration and exploitation within all areas of strategic management1.

Figure B.12 Outcomes of Explicating Knowledge

1 Zack, M.H., California Management Review, 1999.

Outcomes for Explicating Knowledge

Expl

icab

le ?

Explicated ?

Yes

No

NoYes

Appropriately unexplicated

Inappropriately explicated

Lost Opportunity

Exploited Opportunity

Source: Zack, M.H. (1999): Sloan Management Review, Summer 1999, 47.

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The creation of unique, strategic knowledge takes time, forcing the firm to balance short- and long-term strategic decisions, and allocating knowledge creating and processing efforts accordingly.

B.2.3.2 Knowledge Transfer Processes

The central challenge the organizations face is how to reduce the cost of inter- and intra-firm knowledge transfer while protecting that knowledge from imitation by competition.

Transferring the knowledge while minimizing the risks of both partners, the rate of knowledge dissipation, openness of the organizational culture of the parent companies are all linked to a variety of factors. Such factors include the organizational resources committed to learning1, the type of knowledge creation mechanisms institutionalized within the organization structure of the alliance.

Knowledge transfer is defined as the movement of knowledge between firms, either directly through the IJV, through activities such as buying technology, observing and imitating technology used by the partner, or changing existing technologies according to the directions given by the partner2.

The IJV is in this sense a mode of transfer, a knowledge acquisition channel for the partner firms.

Transfer is also an import and determinant of IJV performance, as the IJV needs to acquire knowledge from the parent in order to carry out the activities the parent intends1. Knowledge that is easily transported, interpreted and integrated is logically the easiest to transfer which would be easily codifiable explicit knowledge. But due to the inherent interdependency between explicit and tacit knowledge, transferring 1 Hamel, G., Strategic Management Journal, 1991. 2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997.

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the explicit part while neglecting the underlying tacit knowledge is unlikely to fulfill the organization's learning objectives. In addition, there is the problem integrating the transferred technical knowledge with existing systems, particularly market-specific systems based on different tacit knowledge2. Barriers and Enablers to Knowledge Transfer

Knowledge faces barriers and is relatively immobile3. KOGUT and ZANDER point to the “inertness of knowledge”4. Knowledge transfer depends on how easily that knowledge can be transported, interpreted, and absorbed5. Knowledge ambiguity emphasizes the more subtle aspects of knowledge. REED and DeFILLIPI observed that a strong barrier to imitation originates from the inability of competitors to comprehend the competencies that are sources of competitive advantages6. In the 1997 study, ERNST & YOUNG found that firm’s main acknowledged barriers to effective knowledge transfer as cultural differences, lack of top management support for knowledge initiatives, organizational structures, and a lack of standardized processes for effective KM7. Internal “stickiness” of knowledge is defined as the difficulty of transferring knowledge within the organization, similar to “difficult to imitate”8.

As in all management processes, problems also exist in the various KM processes. In the transfer phase, for example, barriers to knowledge enhancement can occur at all levels of learning9. At the individual level, the IJV managers in the IJV network may not be able to grasp and interpret the input offered by each other. Communication might be distorted, given different points of view, and the different

1 Lyles, M. and Salk, J., Knowledge Acquisition from Foreign Parents in IJVs. In: “Cooperative

Strategies: European Perspectives”, 1997. 2 Tallman, S. and Shenkar, O., Journal of International Business Studies, 1994. 3 Attewell, P., Organization Science, 1992. 4 Kogut, B. and Zander, U., Organizational Science, 1992. 5 Hamel, G., Strategic Management Journal, 1991. 6 Reed, R. and DeFillipi, R. J., Academy of Management Review, 1990. 7 Ernst and Young, “Executive Perspectives on Knowledge in the Organization “, 1997. 8 Szulanski, G., Academy of Management Best Papers Proceedings, 1995. 9 Lyles, M.A., International Business Review, 1994.

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cultural and societal context1. In addition, the systems and structures of the parent organizations may impede the transfer of knowledge2.

Different interpretations of knowledge also hamper the transformation of knowledge to create knowledge. Often, institutionalized “learning” patterns of the partners have to be unlearned and adapted to the new situation of the IJV, before the KM process can be initialized.

Rather than being enablers, motivation and expectations can become significant barriers to the KM process when they do not distinguish between learning and performance. Expectations focussed only on the visible achievement of productivity and financial performance neglect the other, more intangible, but future-oriented gains achieved through an IJV, such as created partnering knowledge and market-specific knowledge that can be “re-used” in a later venture.

“Habits of mind”3 as described by MARGOLIS also often impede learning. Deeply entrenched and institutionalized thought processes are often subconscious and must be unlearned proactively. Learning can be defined as the changing of these thought patterns4. Changing these corporate habits is a difficult task, requiring recognition of the need to change and adapt to new circumstances, overcoming of the reluctance in the organization to change, and a conscious effort requiring practice and repeated experience to adapt habits in order to coordinate with those of others5. In summary, the following factors encourage knowledge transfer within the organizational network. • Cultivate empowerment and provide organizational “slack”: Goals and

incentives stimulate a demand for new ideas. On the supply side, empowerment and slack play a key role in facilitating knowledge creation.

• Equip each unit with a well-defined “sand-box” for play: Creating a culture that values experimentation means encouraging people to take risks. To keep these risks calculable, people must be given set perimeters in which to try out new ideas, such as, one department, or one set of guidelines.

1 Parkhe, A., Journal of International Business Studies, 1991. 2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 3 Margolis, H. "Paradigms & Barriers: How Habits of Mind Govern Scientific Beliefs", 1993. 4 Op.cit. 5 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A. C. “Cooperative Strategies; North

American Perspectives”, 1997.

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• Cultivate a market for ideas within the company: The company must have a screening mechanism for innovative ideas, in order to prevent the “garbage in, garbage out” syndrome. Most often these mechanisms are in place, but inadequate.

• Ban knowledge hoarding and turn “knowledge givers” into heroes: To maximize knowledge sharing, companies must treat knowledge as a valuable corporate resource; it can be hoarded in one unit. It is important to recognize, honor and reward proactive knowledge giver who facilitates the adoption of knowledge by individuals and other units within the organizational network.

• Rely on group-based incentives: Investing in codifying tacit knowledge can have high payoffs. However, there is a limit to which knowledge can be codified. Nevertheless, a company can reap many rewards from codification. An explicit mapping of the organization’s knowledge is necessary in order to identify its knowledge gaps.

• Match transmission mechanisms to type of knowledge: Transmission mechanisms such as transfer of documents, electronic repositories, conversations, coaching and the transfer of teams must be tailored to the different types of knowledge, both in terms of effectiveness and efficiency.

NEHAPIET and GHOSHAL identified four conditions necessary for the exchange and combination of intellectual capital1: • The opportunity to make the exchange and combination must exist • Parties involved must expect some value-added from the transfer • Parties involved must be able to appropriate this value-added to some degree • The organization must have the capability to combine the knowledge transferred

B.2.3.3 Knowledge Creation

The knowledge-based literature has focussed heavily on issues of knowledge generation. Traditionally, this has meant knowledge creation though innovation. Only in recent years has the interest shifted to firms‘ acquiring knowledge though organizational learning.

The dynamic theory of knowledge creation relies heavily on the idea that an organization's primary role is the integration and explication of tacit knowledge on all organizational levels. It sees the main function of organizations in amplifying the knowledge created by individuals and integrating it into the knowledge network of the organization.

1 Nehapiet, and Ghoshal, Academy of Management Review, 1998.

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According to HAMEL the important distinction between gaining access to skills and actually internalizing a partner’s skills has seldom been drawn1. This distinction is crucial; as long as the partner’s skills are embodied only in the specific outputs of the venture, they have no value outside the narrow terms of the agreement. Once internalized, they can be applied to new geographic markets, new products and new businesses2. This phase of the KM process is called transformation.

NONAKA identified four different types of interaction between tacit and explicit knowledge. These patterns essentially define knowledge creation, the ways in which existing knowledge can be “converted” into new knowledge. The four different “modes or outcomes” of knowledge conversion are3: • Tacit knowledge to tacit knowledge: as mentioned before the key to acquiring

tacit knowledge is experience. Without some form of shared experience, shared emotions, and beliefs it is hardly possible for people to be able to draw the kind of “analogous” conclusions that are the base of tacit knowledge. This mode of knowledge conversion is called “socialization”.

• Explicit knowledge to explicit knowledge: explicit knowledge is “interchanged” by partners through various social and formal processes, such as meetings and reports. Here knowledge can be created through the “combination”, i.e., sorting, adding, and reconfiguring of existing available explicit knowledge.

• Tacit knowledge to explicit knowledge/ explicit knowledge to tacit knowledge: the attempt to formalize tacit into explicit knowledge is known as “externalization”, the inevitable transformation of explicit knowledge into an inherently tacit form through experience4 is “internalization”.

These modes of transformation incorporate the idea that tacit and explicit knowledge is complementary over time through a process of mutual interaction and can expand over through a process of mutual interaction5.

To capture the dynamic movement of knowledge across the various levels, NONAKA developed the concept of a spiral of knowledge creation. In this upward spiral, knowledge moves through the organization, starting at the individual level,

1 Hamel, G. Strategic Management Journal, 1991. 2 op.cit. 3 op.cit. 4 Similar to the traditional notion of “learning”; Nonaka, I, Byosiere, P., Borucki, C.C. and Konno,

N., International Business Review, 1994. 5 Nonaka, I., Organization Science, 1994.

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moving on through the group level, up to the firm level1. As the knowledge spirals up the organization, it may be enriched and amplified as individuals interact with each other and with their organizations2. As individual knowledge becomes accepted by other organizational members and is re-utilized in future processes, knowledge creation occurs due to the multiple perspectives on it3.

The SECI model does not, however, takes fully into account that tacit and explicit knowledge is strongly inter-linked. According to SPENDER, the SECI model does not explain how individuals generate tacit knowledge, how agency problems are resolved, and what the closure means for knowledge creation in organizations1.

Figure B.13 The Spiral of Knowledge

1 op.cit. 2 Inkpen, A. C., "Cooperative Strategies: North American Perspectives ", 1997. 3 op.cit.

Enabling conditionsIntentionAutonomy

Fluctuation / Creative chaosRedundancy

Requisite variety

Sharingtacit knowledge

Creating concepts

Justifyingconcepts

Building anarchetype

Cross-levelling knowledge

Tacit knowledge inOrganizations

Explicit knowledge inOrganizations

Socialization Externalization Combination

Internalization

Sharingtacit knowledge

Tacit knowledge

From users

Market

Internalization by users Explicit knowledge in advertisements, patents,product and/or service

Nonaka, I and Takeuchi, H. The Knowledge-Creating Company, Oxford University Press, New York, 1995, p 84

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Socialization

Tacit knowledge can only be shared if the self is freed to become a larger self that includes the tacit knowledge of the other. In practice, socialization involves capturing knowledge through physical proximity and direct interaction. Examples include walking around inside the company and at the actual job site within the company. Externalization

Externalization requires the expression of tacit knowledge and its translation into comprehensible forms that can be understood by others. In practice externalization is supported by two key factors. First, the articulation of tacit knowledge involves techniques that help to express one's ideas or images as words, concepts, figurative language, and visuals. Dialogue "listening and contribution to the benefit of all participants"2, strongly supports externalization. The second factor involves translating the tacit knowledge of customers or experts into readily understandable forms.

Combination

Key issues are communication and diffusion processes and the systemization of knowledge. In practice, the combination phase relies on three processes: First, capturing and integrating new explicit knowledge is essential. Second, the dissemination of explicit knowledge is based on the process of transferring this form of knowledge directly by using presentations or meetings. Third, the editing or processing of explicit knowledge makes it more usable.

Internalization

Learning by doing, training, and exercises allow the individual to access the knowledge realm of the group and the entire organization.

The four modes of knowledge creation allow the conceptualization of the actualization of knowledge within social institutions through a series of self-transcendental processes.

1 Spender, J., Strategic Management Journal, 1996 2 Bohm, D. " Wholeness and the Implicate Order", 1980.

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In the process of knowledge creation, different learning processes are at work at

every level. At the individual level, the critical process is interpreting1, before that the subconscious intuiting; at the group level, integrating; and at the organization level; integrating and institutionalizing. As individual knowledge becomes accepted by other organizational members and is re-utilized in future processes,

knowledge creation occurs due to the multiple perspectives on it2.

Knowledge creation: Enablers

Reciprocity is a feature of what LAVE and WENGER refer to as " legitimate peripheral participation"3. People learn by taking up a position on the periphery of skill practice and being allowed (hence the importance of legitimacy) to move slowly from the periphery into the community and the practice involved. New communications technologies provide intriguing forms of peripherality. They allow newcomers to "lurk" on the side of interactions in which they are not taking part and of communities of which they are not members.

The rewards of reciprocity are high. Technologies that can recognize and to some extent integrate how relations within communities differ from those between communities may actually help to extend reach between communities without disrupting reciprocity within. A significant issue for new design-of both technologies and organization- will be to understand the challenges of the between relations, as in the IJV.

The process of knowledge creation is further enabled by three factors4: • Creative chaos: this involves reflection on the contradictions in the environment

and inside organizations, • Redundancy of information: this is sharing of tacit knowledge among

organizational members • And requisite variety: the constructing of organizational information processing

channels that match the information imposed by the environment.

SOO et al., (2002) have investigated factors contributing to organizational knowledge creation, incorporating various concepts from the literature such as social

1 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995. 2 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997. 3 op.cit. 4 Nonaka, I. and Takeuchi, H., "The Knowledge-creating Company", 1995

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network theory, absorptive capacity and organizational learning The results present significant and empirical contribution towards KM and Strategy literature while providing recommendations for managers to enhance knowledge creation in organizations1.

VON KROGH determines care as one of the key enablers of knowledge creation2. He identified the five dimensions of behavior that signaled care as mutual trust, active empathy, access to help and lenience in judgment and courage. He believes that low care organizations would have trouble in integrating and creating knowledge, whereas in high care organizations, individual's knowledge would be exchanged through indwelling, which involves joint commitment.

However, in order to be able to exploit their own and their partner’s knowledge resources to the fullest, the tacit dimension of knowledge must be completely integrated into the KMS of the firm and the alliance. Technical and organizational initiatives, when aligned and integrated, can provide a comprehensive infrastructure to support KM processes3.

B.2.3.4 Knowledge Retention

Since KM as a conscious management practice is so young, executives have lacked successful models that they could use as guides. The ISFs such as investment bankers, advertising companies or software companies are forerunners here because knowledge is the core asset of these companies.

Determining when to make articulable knowledge explicit (i.e. exploiting an opportunity) and when to leave inarticulable knowledge in its native form (respecting its inherent strength and value) is central in managing an appropriate balance between tacit and explicit knowledge.

According to HANSEN et al., firms employ two very different KM strategies4:

1 Soo, C.W., et al., INSEAD Working Paper, 2002. 2 Von Krogh, G., California Management Review, 1998 3 Zack, M.H., Sloan Management Review, 1999. 4 Hansen, M., Nohria, N. and Tierney, T., Harvard Business Review, 1999.

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• Codification strategy: Here, KM centers on the use of information technology. Knowledge is carefully codified and stored in databases, where it can be accessed and used easily by anyone in the company.

• Personalization strategy: Here, knowledge is closely tied to the person who developed it and shared mainly through direct person to person contacts. The chief purpose of computers is to help people communicate knowledge, not to store it.

Knowledge is codified using a people-to-documents approach: it is extracted from the person who developed it, uncoupled from its source and reused for various purposes. This development of “knowledge objects” allows the possibility of scale in knowledge reuse. In personalization, there is focus on dialogue between individuals and one-on-one brainstorming sessions.

Codified knowledge is essential for companies that deal with the same situations and problems over and over again. The firm can gain a competitive advantage by building a reliable, high-quality information system faster and a better price than its competitors. Personalized knowledge is needed when a highly customized solution to a unique problem is required.

To remain competitive, an organization must efficiently create, locate, capture, and share knowledge and expertise in order to apply that knowledge to solve problems and exploit opportunities. A firm’s resources and capabilities must be leveraged in order to manage its codified knowledge1.

1 Zack, M., Sloan Management Review, 1999.

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Figure B.14 How Information-based Firms Manage Knowledge

A company’s KM strategy should reflect its competitive strategy, how it creates value for customers, how that value supports an economic model, and how the company’s people deliver on the value and the economics. To make their personalization strategies work, firms invest heavily in building networks of people. Knowledge is not only shared face-to-face but also over the telephone, by e-mail, and via video-conferencing.

How Information-based Firms Manage Knowledge

CodificationProvide high quality, reliableand fast information-systemimplementation reusingcodified knowledge.

Competitive Strategy PersonalizationProvide creative, analyticallyrigorous advice on high-levelstrategic problems bychannelling individualexpertise.

Reuse EconomicsInvest once in knowledge assetand re-use it many times.Use large teams with a high rateof associates to partners.Focus on generating largeoverall revenues.

Economic Model Expert EconomicsCharge high fees for highlycustomized solutions tounique problems.Use small teams with a lowratio of associates topartners.Focus on maintaining highprofit margins.

People-to-DocumentsDevelop an electronicdocument system thatcodifies, stores, disseminatesand allows reuse ofknowledge.

KM Strategy Person-to-PersonDevelop networks for linkingpeople so that tacitknowledge can be shared.

Invest heavily in IT. The goalis to connect people withreusable codified knowledge.

InformationTechnology

Invest moderately in IT. Thegoal is to facilitateconversations and theexchange of tacit knowledge.

Hire new college graduateswho are well suited to thereuse of knowledge and theimplementation of solutions.Train people in groups andthrough computer-baseddistance learning.Reward people for using andcontributing to documentdatabases.

Human Resources Hire M.B.A.s who likeproblem solving and cantolerate ambiguity.Train people with one-on-onementoring.Reward people for directlysharing knowledge withothers.

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B.2.3.4.1 ORGANIZATIONAL MEMORY

Truly improving business performance demands more than just capturing the organization’s knowledge into databases for later reference; it requires leveraging the many ways that knowledge can migrate into the organization and strengthen business performance1. In today’s knowledge-based economy, managers can improve performance deliberately by developing organizational memory and using the growing stores of knowledge to guide organizational activities and decision-making2.

The concept of organizational learning can be made more succinct by viewing it as the development of an organization’s memory3. Organizational structures, physical layout, cultural values, or tacit routines are forms of memory that change only slowly and bear an indirect relationship to business performance. Managers need to know where important forms of memory reside, and companies can leverage learning from key experiences and improve business performance4.

Information technology (IT) is only one of many ways in which learning from an organization’s significant experience can be captured and integrated into its operations. By embedding learning, companies can reduce the information overload of their employees and improve the consistency and effectiveness of knowledge use throughout the organization.

Organizations remember lessons from the past in a variety of ways. An organization’s memory resides in the heads of its employees, and in the relationships between them. It also resides in a codified form in the electronic repositories. Memory is embedded in work processes, and product and service offerings. All these things reflect lessons learned from the firm’s past experiences.

Individual memory and organizational memory

The tacit and explicit knowledge of a firm's employees is crucial to its ability to solve problems and create new knowledge. This knowledge is primarily absorbed

1 Cross, R. and Baird, L., Sloan Management Review, 2000. 2 Fortune, 1998. 3 Stata, R., Sloan Management Review, 1989. 4 Partnership Knowledge

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through one or the other form of social interaction. Often, without opportunities to learn, people are in danger of intellectual stagnation. However, a firm’s most knowledgeable people are those with the least new learning opportunities. They must be given the opportunity to enrich their own knowledge, through external means if no more internal options are available for them.

Employees must be constantly encouraged to develop new and complementary skills, which should be also used as a reward and not just catching up a lag. A high attrition rate also endangers organizational memory, as people are taking what they know with them. While efforts should be made to lower employee attrition, organizations can also combat the problem with programs to capture tacit knowledge. Alternatively, firms are beginning to compensate experts for knowledge sharing in the form of incentives and to offer them new, exiting job arrangements. In addition to this within the knowledge based industries, knowledge sharing is understood as an integral part of the employees' job description.

Knowing how to find and apply relevant information is more practical than trying to master vast amount of information. Often employees turn to an informal network of relationships for advice1. However technology is certainly a central tool for facilitating efficient transfer of knowledge between members of the organization

Two important features are useful for building organizational memory. First, there must be a sense of reciprocity and trust between colleagues, to build up social capital. Second, by working closely together, colleagues build an understanding of each person’s particular knowledge and skills2.

B.2.3.4.2 TOOLS FOR KNOWLEDGE RETENTION

The recent advancement in IT has significantly reduced the data management cost3. There are a multitude of tools that organizations can avail of, in order to build up and maintain their organizational memory. The following provide an overview of the most important KR tools. • Databases: Distributed technology is at the heart of KM efforts and preserving

organizational memory. Early KM initiatives to date concentrated on identifying

1 Kim, G. and Rogers, E. “Diffusion of Innovations”, 1995. 2 Op.cit. 3 Civi, E., Marketing Intelligence and Planning, 2000.

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relevant pockets of knowledge in order to build and implement technical infrastructure that will capture and disseminate knowledge, regardless of time or geographic location.

• Work Processes and Support Systems: Experiential lessons become part of organizational memory by means of alterations in process or support systems (i.e. Total Quality Management, TQM). Many organizations have well-established methods for establishing learning into recurring processes. A few knowledge conscious organizations make an ongoing systematic effort to learn from less structured events such as new product development or previous strategic directives.

• Products and Services: Parent firms transfer specific product knowledge to their partners, respectively the IJV by documenting the processes and the different barriers and enablers, and by transferring and incorporating this into the organizational memory.

CROSS and BAIRD differentiate five types of organizational memory, each with their own set of opportunity and issues1. Employees should learn from experience in a way that will benefit the organization’s future and their current project. Individual learning needs to be maximized and processes have to be in place making that learning available to the rest of the organization. Once individual learning occurs, lessons can be aggregated, validated, and synthesized to produce organizational learning.

Teams accomplish much of the important work in organizations. These relationships and networks are the cornerstone of an organization’s memory. Unfortunately, most management interventions emphasize shared vision and process skills but do little to educate team members about each other’s skills and abilities. Most groups focus on common points: common goals and experiences make it easier to converse with new people. The amount of “unshared knowledge” and lack of realization of the team members’ individual skills and abilities is a large and common problem.

Inter-organizational initiatives that cross organizational boundaries promote networks of relationships. These relationships build the basis for knowledge diffusion between organizations.

Instruments of Learning

Communities of practice - informal groups of individuals that interact regularly around work-related issues and challenges – facilitate collaboration in information-

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based services and play an important role in sharing knowledge. Communities of practice can be particularly useful for organizations that have made the transition from functional to cross-functional team structures.

The ultimate aim in inter-organizational knowledge transfer in an IJV would be to reintegrate the knowledge of these specialists back to the parent company with relatively low cost. Firms must be willing to invest these resources in the form of organizational slack and technology investments, such as an inter-organizational intranet, or relevant access to parents’ intranets and extranets in order to create knowledge synergies.

Organizations that effectively leverage IT to support organizational memory do two things. First, they have the technologies, policies, and procedures to endure that lessons and reusable materials such as legal documents or sales presentations are screened by panels of experts and reentered into the system for later use, so that others can benefit from the knowledge in the system. Second, they have begun to leverage the knowledge contained in databases and the technology that enables employees to engage in dialogues.

Many firms have sophisticated ways to improve routine work processes based on continuous improvement and TQM practices. However, the rapidly diminishing half-life of work processes especially in the knowledge based industries calls for more retained knowledge as projects and processes are disbanded and reorganized. Organizations must to be able to learn from work processes and support systems of the past in order to leverage knowledge for the future.

B.2.4 Knowledge Management Strategy

To create processes that optimally support effective KM, the conditions that facilitate and hinder knowledge flow and creation within the IJV must be determined.

Strategic integration is the linking of an alliance strategy of the parent organization2. COHEN and LEVINTHAL suggested that effective integration at the learning

1 Cross, R. and Baird, L., Sloan Management Review, 2000. 2 Harrigan, K.R. and Newman, W.H., Journal of Management Studies, 1990.

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interface would augment an organization’s learning capacity1. An IJV considered closely related to the parent’s strategy may receive more attention from the parent organization, leading to substantial parent-JV interaction and a greater commitment of resources to the management of the collaboration2.

In the ERNST & YOUNG KM study3, at least a third of the study participants have an effort underway. It is quite apparent that firms are concentrating on technology. The following are the top three necessary initiatives: • Mapping sources of internal expertise (33%) • Creating networks of knowledge workers (30%) • Establishing new knowledge rules (28%)

B.2.4.1 Barriers

Intensifying competition also makes it more difficult for firms to transfer technology overseas through wholly owned subsidiaries. Government regulations often encourage alliances between local and foreign firms, in order to facilitate knowledge transfer into the country. Finally, there are also cases in which the firms themselves propagate widespread use of their own technology. Their strategy is to grow stronger and more prosperous by encouraging other companies to use their own technology.

Barriers to knowledge transfer include: • There is no incentive for anyone to invest time and energy to solve other people's

problems. • Content Management - if no process is in place to monitor the quality of the

written contribution there is the danger of the "garbage in, garbage out" syndrome. Screening mechanisms, such as a creating a community submission process, would be a solution involving a network of experts that on a rotating basis review, comment on and request contribution to the knowledge base.

• Focussing too much on IT tools - Expecting new technology and reengineering of processes to produce a collaborative sharing culture, instead of trying to create a "knowledge friendly" environment. The greatest need often was not new technology but a culture modification program to prepare for a KM initiative.

• Fear of commitment - If the organization and the senior management are not ready to commit themselves whole-heartedly to the KM processes, these initiatives are doomed to fail. If the member of the organization still tend to

1 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997 : Cohen, W.M. and

Levinthal, D., Administrative Science Quarterly, 1990. 2 op.cit.. 3 Ernst & Young, Executive Perspectives on Knowledge in the Organization, 1997.

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hoard knowledge then management may not be ready to move fully into KM, regardless of stated objectives to rhetorical commitments.

• Lack of communication and compatibility - An effective KM initiative must cut across organizational, geographical and technical boundaries. Systems and processes must be compatible, if not uniform, across the whole organizational network

Whenever employees are encouraged to experiment, there is the possibility of failure. A company that does not tolerate failure will severely inhibit creativity, whereas a company that experiences nothing but failures will not survive.

SIMONIN links the intrinsic nature and dimensionalities of knowledge to transferability, and its properties to its transfer across organizational boundaries. He states as knowledge attributes that impede respectively facilitate the transferability of knowledge across organizational barriers as1 a) Tacit vs. explicit, b) Non-teachable vs. teachable, c) Not articulated vs. articulated, d) Not observable in use vs. observable and e) Complex vs. simple

Business pressure is another barrier to the implementation of KM, because it reduces the amount of time available to translate good practices to other parts of the company.

B.2.4.2 Enablers • Knowledge acquisition: Firms must be first movers. • Knowledge retention: Companies often lose sizeable chunks of their knowledge

through the departure of employees. It is important that they cultivate a high degree of loyalty and commitment among its personnel, and strength on the spirit of trust and respect within the company.

• Identifying opportunities to share knowledge: The routine measurement and distribution allowed individual units and corporate headquarters to uncover myriad opportunities to share best practices.

The link between organizational learning, KM and organizational performance is further verified by a survey of the Conference Board2, according to which 80% of the world's biggest companies have KM efforts underway, and organizational

1 Simonin, B. Strategic Management Journal, 1999. 2 Conference Board, Knowledge Management Survey, 2000

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learning and KM "are increasingly similar in terms of the tactics and tools they employ." 1

A great deal of what people learns results from interactions among workers. It is the informal, socially constructed communities of practice that form within organizations that are the true mechanisms through which people learn and through work which gets done. Whether formalized or not, such networks are excellent mediums for knowledge exchange2. A gap exists between the rhetoric of KM and how knowledge is actually managed in organizations3. ”We provide pretty much the same services in every location. But the regional managers would rather die than learn from each other4.”

Factors that facilitate knowledge transfer and creation5 and provide the basis for a two-way learning environment are a) flexible learning objectives, b) leadership commitment, c) climate of trust, d) tolerance for redundancy, e) creative chaos and f) an absence of performance myopia.

Group-based incentives are necessary at every level of the organization. Incentives should ensure that one individual’s performance has a minimal impact on the person’s bonus if the performance of the other individuals remains below par. The incentives should motivate people to share their best practices for the betterment of the whole group.

A company’s knowledge base encompasses a wide spectrum of different types of knowledge from highly structured, codified and thus mobile knowledge to highly unstructured, tacit and embedded knowledge. IT is a highly effective and efficient mechanism for the transmission of codified knowledge and must be exploited to its fullest potential.

Sharing unstructured knowledge is one of the key drivers for building and leveraging core competencies in today’s business world. Transferring tacit knowledge requires rich, interactive transmission channels, such as face to face

1 KPMG. "Knowledge Management", 1998, 2000. 2 Communities of Practice 3 Gupta, A. and Govindarajan,V.J., Sloan Management Review, 2000. 4 Interview, Ogilvy & Mather, Mumbai, India, 1999. 5 Simonin, B., Strategic Management Journal, 1999.

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and/or informal methods of communication and the transfer of people, which is very important in the IJV network.

In order to facilitate intra-unit knowledge transfer, the “not invented here” syndrome must be countered. To maximize knowledge creation and acquisition, companies need to set stretch goals, and provide incentives. Employees must be empowered, and organizational slack provided for experimentation. Knowledge-conscious organizations cultivate a market for ideas within the company. The potential reward has to match the risk else a competent employee won’t stay with the company.

BROWN and DUGUID1 attribute this failure to organizations' ignorance of ways in which knowledge workers communicate and operate through the social processes of collaborating, sharing knowledge, and building on each other's ideas.

In contrast, KM facilitates continuous and ongoing processes of learning and unlearning thus ensuring the need for imposing top-down initiatives. It is ingrained in the day-to-day operations of the business at the grassroots level and driven by the people who interact with the external environment on the frontlines of the business. These are the people who are directly in touch with the dynamically changing reality of the business environment.

Intensifying competition is also making it more difficult for firms to transfer technology overseas through wholly-owned subsidiaries. Government regulations often encourage alliances between local and foreign firms, in order to facilitate knowledge transfer into the country. Finally, there are also cases in which the firms themselves propagate widespread use of their own technology. Their strategy is to grow stronger and more prosperous by encouraging other companies to use their own technology.

Interestingly, the “should do” project types focus much more on people issues than the more technology centric “current projects”. And yet when asked whether their organization’s abilities to compete based on knowledge depends more upon people, process or technology issues, the aggregate responses placed the emphasis heavily on people (50%), with the other two areas carrying equal secondary weight (25%).

1 Brown, J.S. and Duguid, P., California Management Review, 1998.

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When asked about the biggest difficulties managing knowledge in their organizations, 56% of the study participants cited changing people’s behavior. The biggest impediments to knowledge transfer were deemed as lack of change in “culture”. Technology should support not merely the diffusion of know-what, but development of know-how and know-why.

DAVENPORT and PRUSAK argue that an organization should devote a third of its time developing technology initiatives for KM1. The other two-thirds include culture, organizational roles and responsibilities, focussing on the knowledge content itself, strategy and economics, and so forth. Most technological knowledge projects involve building electronic repositories of knowledge—either structured document-based knowledge, informal discussion-type knowledge, or knowledge maps.

B.2.5 The Knowledge Management Environment

Most KM activities cost too much and achieve too little and many top managers are wary of such initiatives that ostensibly bring little fiscal rewards. Knowledge is an emergent property of interpersonal relationships, and the only way to manage it is to create any environment in which open collaboration is the norm, not the exception. Industrial KM deals with techniques in project and document management rather than dealing with fundamental culture issues.

At a fundamental level, the objective is to achieve the synergy of data and information processing capacity of information technologies, and the creative and innovative capacity of their human members. Hence, the knowledge workers need to be well versed in the applications of new technologies to their business contexts. Such understanding is necessary so that they can delegate 'programmable' tasks to technologies to concentrate their time and efforts on value-adding activities that demand creativity and innovation. More importantly, they should have the capability of judging if the organization's 'best practices' are aligned with the dynamics of the business environment. Such knowledge workers are the critical elements of the

1 Davenport, T.H. and Prusak, L. " Working Knowledge: How Organizations Manage What They

Know", 2000.

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double-loop learning and unlearning cycle that should be designed within the organizational business processes1.

The knowledge workers need to have an overall understanding of the business of their organization and how their work contexts fit within it. Such understanding is necessary for their active involvement in the organizational unlearning and relearning processes. They need to act in an intrapreneurial mode that involves a higher degree of responsibility

Social ecology refers to the social system in which people operate. It drives an organization’s formal and informal expectations of individuals, defines the types of people who will fit into the organization, shapes individuals’ to pursue actions without prior approval, and affects how people interact with people both inside and outside the organization. The social system should not be viewed as a selection of individual elements, but as a whole in which the various elements work together with each other. Building an effective social ecology is a crucial requirement for fostering a culture of knowledge sharing, for accumulating and mobilizing knowledge. The determinants of social ecology are: • A culture of knowledge sharing within partnerships • Structure: A top-down KMS should be invoked and organizational “knowledge

roles” clearly defined. • IT systems: The technical infrastructure tools as well as experts and trainers

should be in place in the organization. • Reward systems: knowledge workers within the IJV should be provided with

incentives for knowledge creation and diffusion. • Processes: The core KM processes should be identified and designed for

maximum effectiveness. • People: People management is core to effective KMS • Leadership: senior management should show their full support of the KM

initiative.

Success in knowledge creation range from three elements of its social ecology: superior human capital, high-powered incentives and a high degree of empowerment, which includes a high tolerance for failure and a high degree of accountability. Furthermore, the firm must invest in continuous, on-the-job, multifunctional training. Incentives should be in place to motivate employees, to 1 Argyris, C. "On Organizational Learning", 1992.

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push the boundaries of traditional process and product know-how in order to boost efficiency and effectiveness.

The most important issue for companies is to ensure that they focus on the synergy of data and information processing capacity of information technologies, and the creative and innovative capacity of their members. The human sensors that are interacting continuously on the front lines with the external environment have a rich understanding of the complexity of the phenomena and the changes that are occurring therein. Knowledge Management Roles

KM programs often overemphasize information technology at the expense of well defined KM roles and responsibilities. KMRs address the cross-functional, cross-organizational aspect of KM processes. The CKO’s role is to map knowledge, and integrate the technical and organizational resources allocated to the KM programs and initiatives critical to the KM architecture.

B.2.6 The Knowledge Management Architecture

This framework is a coherent approach to begin designing a capability for managing explicit knowledge.

Knowledge architectures exist within four primary contexts: • Strategic context: This aspect addresses an organization’s intent and ability to

exploit its learning and knowledge capabilities better than the competition, in order to gain a sustainable competitive advantage1. For this, the members of the organization must be convinced that superior knowledge and KM will lead to a competitive advantage (mission and vision). Successful firms interviewed were able to articulate the link between the strategy of their organization and what members must know, share and learn to execute that strategy.

• Knowledge context: the competitiveness of an organization’s knowledge. KM efforts should be directed at closing the organization’s knowledge gaps.

• Organizational context: Organizational context reflects the organization KM role within the organization framework and structure – formal and informal - as well as the socio-cultural factors affecting KM such as culture, power relations, norms, reward systems and management philosophy.

1 Zack, M.H., California Management Review, 1999.

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• Technology context: This addresses the technology infrastructure and capabilities necessary for efficient KM. One viewpoint is that KM is 80% people and 10% technology. However, without the ability to seamlessly collect, index, store, and distribute knowledge electronically whenever and wherever needed, an organization will not fully exploit its capabilities and incentives.

IT is a key enabler for successful KM. However, most firms chose standardized IT solutions for their knowledge / information management needs1. Therefore, IT platforms are mostly neither unique nor proprietary, and provide at best a temporary advantage over the competitors. Sustainable competitive advantage depends on how smart the firm is at using the technology and how smartly it chooses the appropriate IT, an investment for its firm.

A great deal of new technology attends primarily to individuals and the explicit information that passes between them. To support the flow of knowledge, within or between communities and organizations, this focus must expand to encompass communities and the full richness of communication.

However, it is a mistake to conclude that knowledge networks, which require a social context, will spread in the same fashion. Technology to support the spread of new knowledge needs to be able to deal not with the reach involved in delivery so much as with the reciprocity inherent in shared practice.

This disconnect between IT expenditures and the firms' organizational performance may be attributed to an economic transition from an era of competitive advantage based on information to one based on knowledge creation. The earlier era was characterized by relatively slow and predictable change that could be deciphered by most formal information systems. During this period, information systems based on programmable recipes for successes were able to deliver their promises of efficiency based on optimization for given business contexts.

1 e.g., Lotus Notes, SAP etc.,

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Element of the Knowledge-Management Process

Common Pathologies and Challenges

Knowledge Questions

• A track record of past success • Employees are given little discretion to make decisions (knowledge

empowerment) • Absence of an internal market for ideas

Knowledge Acquisition

• How to be an early mover in knowledge acquisition • How to integrate and utilize external knowledge

Knowledge Retention

• Employee turnover (attrition- also learning through job transfer) • Diffusion of propriety knowledge to competitors

Knowledge Identification

• The halo effect (strong in indo-U.S. -- On the U.S. side) • "Garbage in, garbage out" (no filter or 'best practice' websites)

Knowledge Outflow

• "How does it help me?" syndrome • "Knowledge is power" syndrome • Incentives tied to internal relative performance (Is knowledge sharing

reflected in performance based measuring systems)

Knowledge Transmission

• Mismatch between structure of knowledge and structure of transmission channels (The effectiveness and efficiency of different communication channels -- such as face-to face vs. e-mail communication -- varies across different types of knowledge.

Knowledge Inflow

• "Not invented here" syndrome • Reluctance to acknowledge the superiority of peers (* here important -

willingness to receive information from the JV partner)

Source : Gupta, A.K. and Govindarajan. (2000): Sloan Management Review, Fall, 2000, 73.

Figure B.15 Common Pathologies and Challenges in Knowledge Accumulation and Knowledge Sharing in IJVs

The two components of knowledge are structure and content. The structure provides the context for interpreting the accumulated content. The organizational network has many perspectives on the knowledge repository. The base unit of the repository is the knowledge unit. The knowledge unit can be codified, indexed and retrieved in the repository. The unit sizes and formats vary, depending on the type of knowledge.

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Figure B.16 Knowledge Management Architecture

Firms must strive to record in their repositories: • Meaningful concepts, categories, and definitions (declarative knowledge) • Processes, actions, and sequences of events (procedural knowledge ) • Rationale for actions or conclusions (causal knowledge) • Circumstances and intentions of knowledge development and application

(Contextual knowledge)

The refinery knowledge represents the process for creating and distributing the knowledge in the repositories. • Acquisition: Knowledge can be acquired from various internal and external

sources • Refinement: Refinement involves cleansing, labeling, abstracting, standardizing,

integrating, and re-categorizing. • Storage and retrieval: This is the bridge between knowledge creation (upstream)

and knowledge distribution (downstream) • Distribution: these are mechanisms and channels an organization institutes to

make repository content available.

Source: Zack, M.H. (1999): Sloan Management Review, Summer 1999, 52.

Acquire Refine Store Distribute Present

TRI Knowledge Management Architecture

RepositoriesDatabases

Actions

Tools /IT Org

Repository of Research Results

• Reports• Newsletters• Bulletins

Telephone calls andsurveys

Decompose intoknowledge units,

index and link units

Edit and format

Analyze, interpretand report

Index and linkknowledge units

Post on-line viaWeb-enabled Lotus

NotesTM

Interactive selectionof knowledge units

Customers

PCs and desktop software

Analyst

Lotus NotesTM

EditorsInformation systems

Group

Web browser orLotus NotesTM client

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• Presentation: The context that knowledge is presented in influences its value. The firm must develop the capability and flexibility in arranging, selecting, and integrating the knowledge.

The information technology infrastructure provides a seamless “pipeline” for the flow of explicit knowledge through the five stages of the refining process.

Organizations capture and store units of knowledge in forms that assign various labels, categories, and indexes to the input. Effective use of IT to facilitate knowledge processes requires that an organization (in this context the inter-organizational network) share an interpretive context. Knowledge can flow through electronically mediated channels1, such as a central electronic repository. An organization can thus disseminate explicit, factual knowledge within a stable community, sharing a high degree of contextual knowledge. When context is not well shared, and knowledge is primarily tacit, firms can support knowledge flows through the richest and most interactive modes, such as videoconferencing and face-to-face conversation.

According to ZACK, the firm can categorize the knowledge processes within the network into two broad classes: the integrative and the interactive processes. They support well-structured repositories for managing explicit knowledge, while enabling interaction to integrate tacit knowledge.

With the advent of new technologies, such as data mining, intranets, video conferencing, and web casting, several technology vendors are offering such products as holistic solutions for the business challenges of the knowledge era. Some technology experts and academic scholars have, however, observed that there is no direct correlation between IT investments and business performance or KM.

Advanced information technologies can increasingly accomplish 'programmable' tasks traditionally done by humans. However, checks and balances need to be built into the organizational processes to ensure that such programs are continuously updated in alignment with the dynamically changing external environment.2

The creation of technology tools for KM must necessarily be constrained by the technology environment within which it will operate. Rapid advancements in

1 Zack, M.H., Information and Management, 1994. 2 Information week 1996

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technologies must be coupled to existing or legacy systems to bring satisfaction to the user.

STRASSMANN concludes that there is no relationship whatsoever between IT expenditures and company performance1. On a similar note, BROWN underscores that in the last 20 years U.S. industry has invested more than $1 trillion in technology but has realized little improvement in the efficiency or effectiveness of its knowledge workers2. • Translators: Organizational translators are individuals who can frame the

interests of one community in terms of another community's perspective. The translator must be sufficiently knowledgeable about the work of both communities to be able to translate.

• Knowledge Brokers: The role of internal brokers in contrast to that of translators involves participation rather than mediation. GRANOVETTER argued for the "strength of weak ties", suggesting that it was often people informally linked to several communities who facilitated the flow of knowledge among them3.

• Boundary Objects: Boundary objects are another way to forge coordinating links among communities, bringing them intentionally or unintentionally into negotiation. Boundary objects are objects of interest to each community involved but viewed or used differently by each of them. These can be physical objects, technologies or techniques. Contracts, documents, plans and blueprints are examples of boundary objects.

For knowledge acquisition, creators, finders and collectors are needed; to some degree interviewers and transcribers. Furthermore a librarian or knowledge “curator” is necessary to manage the repository. Electronic repositories have additional IT responsibilities (such as the “intranet/Web manager”).

Interactive applications focus primarily on supporting interaction among the members of the organization with tacit knowledge. These applications vary according to the degree of expertise and the complexity of knowledge. Distributed learning is the interaction between expert and novice, which centers on a discrete problem, or problem area4. In contrast, applications among those performing routine tasks (nonetheless tacit) seem to be more emergent. These applications are referred

1 Strassmann, P.A. " The Squandered Computer", 1997. 2 Brown, J., Xerox Park Research Center, 1998. 3 Granovetter, M., American Journal of Sociology, 1976. 4 Zack, M.H., California Management Review, 1999

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to as forums. They create a central marketplace for specific information, brokerage, and the exchange of opinions and experiences.

Interactive applications play a major role in supporting integrative applications. Best practice databases typically require some degree of forum interaction. Attempting to adopt a practice (explicit), one has the opportunity to discuss its reapplication with its creators (tacit), and troubleshoot potential problems. Organization roles here include communicators, recruiters and enablers, who encourage use of these forums, and aid by problem solving. For these knowledge "motivators", for whom knowledge sharing is only a part of their job description, this is an added responsibility.

Their role is to devise an organization of network-wide knowledge strategy appropriate to the firm’s business strategy and implement an organizational and technical architecture appropriate to the network’s knowledge processing needs.

B.3 Knowledge Management within the IJV Framework

In the knowledge-based economy, firms that pursue an aggressive knowledge strategy tend to outperform those competitors who pursue less aggressive ones over time1. In various studies, KM has been linked with organizational performance as well as with the performance of specific organization tasks. Understanding knowledge means an appreciation of the complexities of acquiring, transferring, and integrating knowledge within a learning environment. Increasing complexity due to cross-border knowledge adds the challenge of renewing organizational skills in various different settings.

IJVs can be a powerful source of new knowledge, which would not have been possible without the alliance. Partners acquire knowledge that can be used to enhance partner strategy and operations.

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B.3.1 State of Research on Knowledge Management in IJVs

Even though knowledge has been recognized as a key resource and learning as a core competency for global organizations, there has been little research on learning in international collaborations that describes the channels and processes through which learning takes places, or how to approach an adequate KM in the IJV1.

In the last decade, firms have increasingly begun to create knowledge links: alliances through which a company seeks to learn or jointly create new knowledge and capabilities2. The learning and creation of knowledge define knowledge links. For one organization to acquire knowledge embedded in the routines of another it must form a complex, intimate relationship with it. If two companies want to create new capabilities by combining their knowledge and skills in a unique way, they must create knowledge interfaces to enable personnel and systems from both firms to work together closely1.

Organizations should strive to use their learning experiences to build on or complement knowledge positions that provide a current or future competitive advantage. By using a knowledge map to prioritize and focus its learning experiences, an organization can create leverage for its learning efforts. The knowledge goal of an alliance should be to combine its learning experiences into a “critical learning mass” around particular strategic areas of knowledge. Due to the long lead-time of creating knowledge, strategic alliances are considered a potentially quicker means for gaining access to knowledge2.

In bringing together firms with different skills, knowledge bases, and organization cultures, alliances create unique learning opportunities for the partner firms. A strategic alliance in a difficult to access environment is an effective form of knowledge acquisition. To gain maximum value-added from the alliance in the form of learned competencies the firms must analyze their knowledge gaps, and understand their knowledge requirements. Failure to execute the specific

1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 2 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991. 1 op.cit 2 Zack, M.H., Sloan Management Review, 1999.

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organizational processes needed to access, assimilate and disseminate knowledge will result in premature failure of the IJV, i.e. the IJV objectives will not be met.

Among international collaborative ventures, the IJV is the form that facilitates the transfer of tacit and embedded knowledge most1. This tacit knowledge is "imperfectly imitable", and its transmission cannot be effectively achieved via contractual channels that do not permit a replication of the organization itself2.

From a learning perspective, the IJV is the most effective vehicle for the transfer of knowledge, because it allows for prolonged intensive interaction of managerial and technical personnel and facilitates the replication of organizational routines. Direct interfaces at multiple organizational levels permit direct observation of operations and enable the gradual and experiential learning that is a prerequisite for the successful and efficient transfer of tacit knowledge3. Equity control and profit and loss sharing serve to align the interests of parent firms, reduce opportunism, and eliminate the need for complex ex ante specification of ongoing activities and behavior. The IJV also allows for superior monitoring, since owners are typically entitled to access independently verified information and are also able to observe operations directly4.

The aim is to develop a framework of collaborative learning that should prove instructive for managers trying to exploit alliance learning opportunities and provide practical insights into knowledge creation within the IJV5. Focussing on the IJV allows for a clear delineation of the partner relationship and the nature of alliance knowledge. IJVs are more effective for the acquisition of knowledge than other forms of alliances6 due to the higher level of inter-organizational commitment of resources at all levels.

In the following figure SI and BRUTON summarize the most important knowledge acquisition goals of the IJV and its parent firm.

1 Kogut, B., Strategic Management Journal, 1988 2 op.cit. 3 Killing, J.P. "Strategies for Joint Venture Success", 1983 4 Harrigan, K. "Strategies for Joint Venture Success", 1985. 5 Inkpen, A. C. "Cooperative Strategies: North American Perspectives ", 1997. 6 Mowery, D.C., Oxley, J.C., and Silverman, B. S., Strategic Management Journal, 1996; Inkpen,

A.C. and Madhok, A. “Valuation of Intangible Assets in Global Operations, 2001.

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Figure B.17 Importance of Knowledge Acquisition Goals

The theoretical explanation for the relationship between knowledge acquisition and IJV performance centers on the question which channels provide for the most

efficient acquisition of knowledge with and between firms1. MAKINO and DELIOS postulate that local (market-specific) knowledge transfer is comparable to that of technological (firm-specific) knowledge due to the inherent intangibility of all types

of knowledge2. Local knowledge, such as investment regulations, supplier practices, labor laws, and cultural traditions, can be classified primarily as cognitive knowledge. Local knowledge can be accumulated via experience or from other

firms3, and is usually a key resource of local IJV partners. As a foreign partner increases its knowledge of the local market, instability of the IJV becomes more

1 Kogut, B. and Zander, U., Organizational Science, 1992; Makino, S. and Delios, A. “Cooperative

Strategies: Asian Pacific Perspectives”, 1997. 2 Makino, S. and Delios, A. “Cooperative Strategies: Asian Pacific Perspectives”, 1997. 3 Chang, S.J., Academy of Management Journal, 1995.

Importance of Knowledge Acquisition Goals (In Order of Importance)

Governmental • Understanding Government Behavior • Learning National Policies, Rules & Relevant Laws • Understanding the Partner’s Economic System

Culture • Learning more about the Partner Firm’s National Culture • Learning the Negotiation Styles of the Partner’s Nation • Gaining Knowledge of New Managerial Types and Styles

Market • Learning more about the Partner Firm’s Market Characteristics • Gaining Understanding of Labor Resources • Gaining Understanding of Capital Resources • Learning New Technologies

Source: Si, S.X. and Bruton, G.D. (1999), Academy of Management Executive, 13(1), 89.

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probable, because the foreign firm gains bargaining power. MAKINO and DELIOS

define three distinct local knowledge channels for IJVs1, first by forming an IJV with a local firm, second by learning from the foreign parent's past host country experience and, finally through the accumulation of operational experience in the host country.

Research on Knowledge Transfer in IJVs

The skills of the foreign firm consist of tacit and explicit knowledge; the explicit knowledge in expressed schemata, diagrams and so on is relatively easy to transfer, provided the local partner has the bargaining power to gain access to it. The tacit dimension, the “difficult” one, is the glue that holds together the organizational

routines associated with foreign partners skills2. MÜLLER-STEWENS and OSTERLOH argue that the transfer of knowledge context is often needed for successful knowledge transfer3. Finally, INKPEN and BEAMISH postulate that “skilling” of the local partner is less likely in IJVs than in other types of alliances, most notably technology sharing relationships or R&D alliances. This is because a JV is a separate entity, in which the local partner may have difficulty penetrating the venture’s boundaries to gain access to the foreign partner’s skills. The foreign partner will most likely put up barriers to keep the local partner outside specific skill

areas4. Even if local partners have unhindered access to the foreign partner’s skills, the knowledge required to eliminate a dependency on the foreign partner is usually

more difficult to acquire for the local partner than for the foreign one5. Because firm-specific knowledge is often contained in “cognitive knowledge in the form of mental constructs, skills and knowledge embodied in products and well-defined

services”6, these skills, the core firm-specific knowledge, are the most difficult to transfer from local to foreign partner in IJVs. Also, the foreign partner can and does

take concrete measures to protect the transparency of its skills7. Acquisition of tacit

1 Makino, S. and Delios, A. “Cooperative Strategies: Asian Pacific Perspectives”, 1997. 2 op.cit. 3 Müller-Stewens, G. and Osterloh, G., “Wissensmanagement”, 1996 4 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997. 5 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997. 6 Hedlund, G., Strategic Management Journal, 1994. 7 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997.

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knowledge is highly contact and interface dependent; as the IJV takes place in the local partner's environment, it is easier for the foreign partner to gain access to their tacit knowledge.

Management skills are taken to represent tacit or embedded knowledge1. Management skills are not highly codified and cannot be readily reduced to written formulas. Those skills are difficult to teach because they require gradual and experiential learning, and based on direct observation over a longer period of time. This is particularly true of IJVs in transitional economies, where learning requires an attitudinal, cognitive and behavioral change2. Management skills cannot be easily copied via reverse engineering the way technology can3. It is complex and dependent on groups of experienced executives.

VON GLINOW and TEAGARDEN4 concluded that quantifiable technologies transferred more easily than the "soft", particularly behavioral technologies that are also part of the transfer. Marketing can be classified as "partly tacit"5 as it combines "people skills" with elements of technological knowledge. Managerial skills, by virtue of their integrative function in the IJV, complement marketing and product skills, and hence constitute one of the key ingredients of the firms' absorptive capacity. Organizations represent patterns of interactions among individuals that endure even when individuals leave6.

The difficulty of transferring tacit knowledge helps to explain why dynamic firms are more inclined to transfer abroad the exploitation of new technology than to transfer its creation. What are being transferred are the results of the innovation process, not the process or the capabilities itself. The innovation process also requires dynamic interactions with (and stimulus from) the components of Porter's "national diamond"7 or "the national system of innovation"1.

1 Shenkar, O. and Li, J., Oragnization Science, 1999. 2 Child, J., "Management in China", 1994. 3 Kogut, B. and Zander, U., Organization Science, 1992. 4 Von Glinow, M. and Teagarden, M., Human Resource Management, 1988. 5 Makhija, M. V. and Ganesh, U., Organization Science, 1997. 6 Hedberg, B.L.T. How Organizations Learn and Unlearn. In "Handbook of Organizational

Design", 1981. 7 Porter, M. "The Competitive Advantage of Nations", 1990.

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Organizational members are seldom rewarded or culturally motivated to have as much concern about another organization as for their own. Even though it may be viewed as advantageous for their organization to collaborate, the existing organizational culture more often than not favors more taking than giving2. The systems and structures of the parent organizations may impede the transfer of

knowledge3.

Different interpretations of knowledge also hamper the transformation of knowledge to create knowledge. Often, institutionalized “learning” patterns of the parents have to be unlearned and adapted to the new situation of the IJV, before the KM process can be initialized. Here top management support plays a key role: liaisons of the IJV to the respective parent firms need the support of senior management to facilitate the integration of created knowledge back into the parent firm. Institutionalized thought processes are often entrenched in the subconscious and must be unlearned proactively.

GHOSHAL pinpoints the three major reasons why learning doesn’t take place in

IJVs4: First, subsidiaries may not be sufficiently sensitive, analytical or responsive enough to local environments to learn from them. Second, a tight rein on decision-making by the parent companies is less conducive to sustainable knowledge transfer, than autonomous IJVs who can prioritize at their own discretion. Third, firms may lack the necessary knowledge transfer channels, which are a pre-requisite for a functioning KM process.

Factors that affect knowledge management are: • Tacitness • Asset specificity • Complexity • Experience • Partner protectiveness • Cultural distance • Organizational distance

1 Freemen, C., Cambridge Journal of Economics, 1995. 2 Larrson, R. et al., Organization Science, 1998 3 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 4 Ghoshal, S., Strategic Management Journal, 1987

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• Theoretical Model • Knowledge/ causal ambiguity and knowledge transfer

Moreover, in strategic alliances, the partner whose advantages rest on more codified knowledge may lose to the partner whose advantages are based on more tacit knowledge, because the latter will learn more easily from the former than vice versa.

In the communication model, intra-firm knowledge transfer is seen as a transmission from a source to a recipient in a given context. According to DINUR and INKPEN1, the process follows four stages: • Initiation, where transferred knowledge is recognized • Adaptation, where knowledge is changed at the source location to the perceived

needs of the recipient • Translation, where more alterations occur at the recipient unit as part of the

general problem-solving process of adaptation to new context • Implementation, where knowledge is institutionalized to become an integral part

of the recipient unit

Knowledge generated within the firm is especially valuable because it tends to be unique, specific and tacit. Knowledge from outside the firm can provide for a new perspective and a context benchmarking for internal knowledge. JVs provide an important means to obtain external knowledge that is tacit, has not been widely distributed, and therefore retains its competitive advantage2. Many hi-tech, hi-growth industries thrive on this sort of collaboration.

Grafting is described as the process by which firms internalize knowledge not previously available within the organization1. This knowledge can either be acquired by individual managers or by organizational sub-units. Depending on the valuation of the local knowledge by the foreign parent, the resource contribution of the local parent and the effectiveness of the partner in acquiring knowledge, the IJV's objectives will not be met.

Knowledge creation should be the result of the operational activities of the IJV. The two types of knowledge created in the IJV are resource integration, when the knowledge bases of the partners are combined to synthesize new (IJV-specific) knowledge, and partnering knowledge, which is created as both partners gain more 1 Inkpen, A., and Dinur, A., CBI Working Papers, 1998. 2 op.cit..

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experience in operating an IJV. Viewed as a process, collective knowledge development becomes a tradeoff between different learning strategies to which there is no self-evident solution. The partners in the IJV must be motivated to share their collective knowledge before any knowledge transfer and creation processes can even begin to be effective.

The creation of organizational knowledge requires the sharing and dissemination of individual experiences. INKPEN classified processes he deemed fundamental to knowledge creation and management in IJVs into four categories2. Each process provides a channel for IJV and parent company managers to gain exposure to knowledge and interaction with other actors within the IJV framework. • Technology sharing: The most common approach is the most straightforward –

meetings between IJVs and parent companies. Within technology sharing agreements, there can be explicit terms on licensing and royalties only for product technology. The need for contractual agreements and reciprocal commitment is foremost here.

• JV-parent interactions: JV-parent interactions can provide the basis for communities of practice. A community of practice is a group of individuals that is not necessarily recognizable within strict organizational boundaries. The members share community knowledge and may be willing to challenge the organization’s conventional wisdom3. Communities of practice emerge not when the members absorb abstract knowledge, but when the members become “insiders” and acquire the particular community’s subjective viewpoint and learn to speak its language.

• Personnel movement: The rotation of personnel between the alliance and the parent can be a very effective means of “mobilizing” personal knowledge. It helps to understand the business from a multiplicity of perspectives. Job rotation schemes, external training projects and international personnel transfer all fall under this category.

• Strategy linkage: A JV viewed as important may receive more attention from the parent organization, leading to substantial parent-JV interaction and a greater commitment of resources to the management of the collaboration. To maximize exposure to partner knowledge, alliance partners must go beyond the narrow confines of the JV agreement and work towards expanding cooperation and learning.

1 Huber, G.P., Organization Science, 1991. 2 Inkpen, A.C. An Examination of knowledge management in international joint ventures.

"Cooperative Strategies: North American Perspectives", 1997. 3 Brown, J. S. and Duguid, P., Organization Science, 1991.

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Two of the KM processes, JV-parent interactions and strategy linkages, create the potential for both explicit and tacit knowledge to be created. Technology sharing provides access primarily to explicit knowledge. Personnel movement, while it could be associated with explicit knowledge, will be most effective as a means of gaining access to tacit knowledge1. Inter-organizational Learning

Organizational learning is the development of skills and knowledge to the associations between past actions, the effectiveness of those actions and future actions2. When individual knowledge is incorporated into the organization’s collective database this can be later retrieved from the organization’s history and translated into action.3. The translation of new knowledge into action is the basis for creating new skills that underpin a firm’s competitive knowledge4.

HEDLUND5 recognized the fact that most of the literature on knowledge flows between the IJV and their parent companies focussed on transfer of “raw” knowledge back to the parents, if at all. The transformation of this knowledge to adapt to the parent surroundings and creation of new knowledge in the parents’ database has been relatively neglected. One reason for this is probably the only recent acceptance of the perspective of network relationships as a two-way flow of resources.

Knowledge acquisition is not a random process. Organizations can institute policies, structures, and processes to facilitate learning and knowledge acquisition6. Various collaborative activities have merged as the basis for accessing and exploiting alliance knowledge.

Although the literature focuses to a large extent on the outcome of the learning process, the process of organizational learning and knowledge creation is equally

1 Inkpen, A.C. In "Cooperative Strategies: North American Perspectives", 1997 ; Inkpen, A.C.,

Academy of Management Review, , 1998. 2 Fiol, C. A. and Lyles, M.A., Academy of Management Review, 1985. 3 Walsh, J.P. and Ungson, G.R., Academy of Management Review, 1995. 4 Inkpen, A. C., Academy of Management Executive, 1998. 5 Hedlund, G., Strategic Management Journal, 1994. 6 Nevis, E.C., DiBella, A. and Gould, J.M., Sloan Management Review, 1995.

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important. Studying the processes of KM within the organizational framework will provide a valid basis for understanding and leading towards a more efficient knowledge flow and creation1. Deciding what to invest time and effort in as well as determining what to act upon is a critical task for management.

The "leakiness" of knowledge out of - and into - organizations, however, presents an

interesting contrast to its internal stickiness2. Knowledge often travels more easily between organizations than it does within them. Moving knowledge among groups with similar practices and overlapping memberships can thus sometimes be relatively easy compared to the difficulty of moving it among heterogeneous groups within a firm.

Time is not only important with regard to the life cycle of an alliance but also with regard to the factors influencing knowledge transfer. Even an inter-organizational culture can develop over time. An understanding of time provides an important

foundation for understanding of inter-organizational learning in alliances3.

Technology Transfer in IJVs

Factors that have an impact on knowledge creation and encourage the transfer of technology from the parent to the IJV are: • Success programs are decisions that become standard operating procedures due

to past success rates. In IJV formation, firms develop success programs that define the structure of the IJV in question, and all JVs relating to the organization.

• Organizational knowledge structures are the “filing cabinets” of the “belief systems, memories of past events, legends, stories, frames of references and values” of the firm4. As firms face the challenges of change and growth, the past successes and experiences are not lost in the creation of new generations of management and leadership5. They are called up on again and extended upon to reach “analogue” decisions and strategies.

1 Hedlund, G., and Nonaka, J. Models of Knowledge Management in the West and Japan. In:

“Implementing Strategic Processes, Change, Learning, and Cooperation:”, 1993. 2 Grant, R.M., and Spender, J.-C., Strategic Management Journal, 17 (1996) ; Szulanski, G.,

Strategic Management Journal, 1996. 3 Levinson, N. and Asahi, M., Organizational Dynamics, 1999. 4 Lyles, M.A., International Business Review, 1994. 5 op.cit.

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• Discrimination skills go one step further in the strategic decision process of the firm. These skills are necessary to interpret the situation correctly and distinguish the current situation from the ones before. Discrimination can be applied to JV formation when decision rules are used to define the attributes of one JV situation versus another1.

• Unlearning/innovation: Two big impediments to knowledge creation in IJVs are institutionalized beliefs and learning mechanisms of the parent firms, which can hinder sustainable KM. Unlearning is often only triggered after the failure of an IJV, and is one of the most challenging processes in KM. Here the channels between senior management and IJV managers must be wide open both ways and the impetus for change must come from the top down.

• Superstitious learning is composed of statements that make broad judgments based on past experiences that create new rules-of-thumb2 for the futures strategic orientation of the organization. These are often based on one-time experiences that become “branded” into the corporate memory. MARCH and OLSEN define it as when “organizational behavior is modified as a result of an interpretation of the consequences, but the behavior does not affect the consequences significantly”3.

Organizational Culture and Inter-organizational Learning

LEVINSON and ASAHI4 define four levels of culture that affect inter-organizational learning in alliances: national, organizational, occupational and small groups.

Clearly, national culture influences organizational culture, although the degree of influence varies with culture. Occupational culture differs from group culture in that its values and beliefs come from the occupation and training, where as group culture

is the result of interaction among individuals who work together in a small group5.

In order to examine the origin of organizational culture, it is necessary to examine the nature of a culture and its key values; this view looks at the degree to which a culture embraces change and the concomitant learning that can ensue. The degree to

1 op.cit. 2 Van der Ven, " Innovation Outcomes, Learning and Action Loops", 1989. 3 March, J.G. and Olsen, J., European Journal of Political Research , 1975; Lyles, M.A.,

International Business Review, 1994. 4 Levinson, N. and Asahi, M., Organizational Dynamics, 1999. 5 For further discussion on inter-organizational "knowledge groups" see Chapter C. Communities of

Practice.

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which an organization's culture is institutionalized influences its propensity to learn1. Structure

The actual structure of an alliance influences both organizational and inter-organizational learning. Two main dimensions of structure in particular influence learning. The first is patterns of structure, and the second is the number of organizations in an alliance network. If there are just two participating organizations in an alliance, there is less ability to identify a large range of new ideas. There is a greater tendency, however, for exchange and adoption of new ideas.

Location within a network plays a key role in terms of placement for picking up new ideas and adopting these ideas. There are multiple linkages across organizations when one is linked to the other at different levels. These linkages ensure a more rapid flow of information as well as more stability in the alliance over time. Personal attachments develop at these interfaces.

Technology

New technologies also promote collaborative learning. These technologies can,

according to LEVINSON and ASAHI2, assist and even facilitate inter-organizational learning. Culture plays an important role in influencing whether and how new technologies are successfully used in inter-organizational learning.

Absorptive Capacity

An alliance partner’s effectiveness at learning and acquiring knowledge is equally important. Absorptive capacity is a firm’s capability to recognize the value of knowledge and assimilate the knowledge for commercial purposes3.

Another aspect of general absorptive capacity is the degree to which individuals and individual roles within a participating organization focus on identifying ideas from other organizations. Benchmarking, the practice of comparing one's own activities to

1 For example, many Indian partner firms wish to get a higher absorptive capacity through

institutionalizing and raising the level of professionalism in their internal structures. 2 op. cit. 3 Cohen, W. and Levinthal, D., Administrative Science Quarterly, 1990.

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those of other organizations and then identifying and implementing best practices constitutes an essential component in the absorptive capacity that is requisite for organizational learning. It is also important to adopt an inter-organizational perspective and examine the absorptive capacity as a whole to determine whether it is more than the sum of the participating organizations. Often, one member of an alliance will have a greater absorptive capacity with regard to organizational learning. Over time, overall absorptive capacity expands.

The relatedness of knowledge produced by the internal activities affects the ease to internalize external knowledge. Also, the more extensive the knowledge of an organization, the higher the probability that internalizing the knowledge will succeed.

Factors that influence absorptive capacity are knowledge connections between a firm and its alliance1 and that the knowledge may be further developed and moved upward in the organization. Knowledge connections occur through both formal and informal relationships between individuals and groups.

The argument that new knowledge acquisition is facilitated by having a knowledge base in that area was first suggested by PENROSE2 and taken further by COHEN and LEVINTHAL3 to form the principle of absorptive capacity. The principle suggests that "prior knowledge permits the assimilation and exploitation of new knowledge"4.

From an IJV perspective, absorptive capacity constitutes capabilities, which affect a firm's ability to learn and which make them "effective repositories of embedded knowledge"5. The firm's ability to monitor, process, integrate and deploy new flows of knowledge will depend, among other things, on its ability to link this knowledge to its existing knowledge base. HAMEL1 notes that a firm must already have knowledge and understanding in a given area if it is to learn from its alliance partner. 1 Inkpen, A. C., and Crossan, M. M., Journal of Management Studies, 1995. 2 Penrose, E.T. "The Theory of the Growth of the Firm", 1995. 3 Cohen, W. and Levinthal, D.A., Administrative Science Quarterly, 1990. 4 op.cit. 5 Baddaracco, J. "The Knowledge Link", 1991.

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Being a "good" partner may actually invite opportunistic behavior that can undermine the strategic alliance2. Partners should therefore manage their level of transparency in the alliance interface in order not to lose the learning race.

This inter-organizational learning dilemma stems from it being individually rational for an organization to pursue the maximum organizational share of the joint learning by taking more knowledge than it gives back. At the same time, this relative withholding of knowledge reduces the total amount of joint learning from which the organization appropriates its share. This "competitive" learning3 will turn the IJV partner into a competitive learner as well ensuring that there is hardly any joint learning due to the fact that neither partner is willing to contribute to the collective learning process.

LEVINSON and ASAHI4 identified four steps in inter-organizational learning: The first stage is knowledge acquisition followed by knowledge transfer and then transferring and interpreting this new knowledge. The third phase brings the organization to first-order learning5, and involves knowledge utilization processes. Knowledge institution or second-order learning according to AGYRIS6 is the fourth stage. This involves complex interaction between the new knowledge and the culture, history, power, technologies, and the needs of the receiving organizations.

Relatively little is known about the knowledge-seeking behavior of prospective partners in collaborative ventures, especially where local firms in developing countries are concerned7. In addition to the time delay, measuring the subjective outcomes such as adaptability and responsiveness, and the objective outcomes such as patents, brands, trademarks, capital expenditure and R&D programs are problematic8. Therefore it is necessary to show a relationship between processes and 1 Hamel, G., Strategic Management Journal, 1991. 2 Williamson, O.E. "The Economic Institutions of Capitalism", 1985. 3 Larson B. et al, Organization Science, 1998. 4 op. cit. 5 Argyris, C. "Organizational Learning", 1992. 6 op. cit. 7 Inkpen, A. and Beamish, P.W., Academy of Management Review, 1997; Kogut, B. and Zander, U.,

Organization Science, 1992; and Li, J. and Shenkar, O., In: "Management Issues for China", 1996 ; Shenkar, O. and Li, J., Organization Science, 1999.

8 Mintz, S.L., CFO, 2000.

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performances in other ways. Particularly in situations of risk and uncertainty, for example, financial performance indicators are not as good at evaluating outcomes as qualitative measures such as productivity, financial resource indicators or the ability to adapt and innovate.

According to the learning perspective, a firm will seek knowledge it considers lacking but vital for the fulfillment of its strategic objectives1. In applying and seeking relevant knowledge, a firm will seek knowledge complementary to its own, especially when this facilitates the absorption of other knowledge2. The learning perspective pinpoints the IJV as the preferred vehicle for the transfer of tacit and embedded knowledge, because that mode alone offers both organizational replication and cohabitation, which are vital for the effective learning of such knowledge3. SHENKAR and LI4 introduce as a principle the governing the relationship between knowledge possession and knowledge search between prospective partners.

B.3.2 Knowledge Management Strategy in IJVs

KM has to be grounded in the firm’s business strategy, so that the firm can prioritize and focus their investments in KM and come out ahead of competitors5. Competence substitution through knowledge sharing is based on the resource based view of the firm, the objective is to show how knowledge sharing can avoid competence substitution, and loss of competitive advantage6. Unique knowledge is believed to be most fundamental source of above normal returns7.

The successful exploitation of a competitive advantage internationally requires adaptation of the technology, the system, or the management practices, to the local environment8, especially given different cultural and national contexts in the

1 Harrigan, K., "Strategies for Joint Venture Success", 1985. 2 Beamish, P.W., "Multinational Joint Ventures in Developing Countries", 1988; Harrigan, K.,

op.cit. 3 Kogut, B., Strategic Management Journal, 1988. 4 Shenkar , O. and Li, J., Organization Science, 1999. 5 Inkpen, A.C. and Beamish, P.W., Academy of Management Review, 1997. 6 McEvily, S., Das, S. and McCabe, K., Academy of Management Review, 2000. 7 Teece, T.J., California Management Review, 1998. 8 Casson, M. “Coalitions and Collaborations in international Business “, 1993.

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different countries. Hence, collaborating with a local partner helps ensure correct adaptation and also allows the management team to improve its own capabilities1.

Aggressive firms take a Schumpeterian view of knowledge as an ongoing process of creative destruction. These firms continually seek to obsolete their own knowledge, always staying one step ahead of the competition. They protect their own knowledge resources by recruiting and developing intelligent, loyal, and committed employees and support them with a culture of learning, commitment and collaboration. Generate New Ideas - Globally

Realizing and recognizing the potential knowledge sources available to them and setting up appropriate processes and structures to exploit them fully will prove one of the largest challenges to global managers in the future2. In fact, in a survey of chief executives, knowledge management was put second on their “must do” list after globalization3.

Internal knowledge may be resident within peoples’ heads; embedded in behaviors, procedures, software and equipment; recorded in documents, and stored in databases and online repositories. Knowledge from outside the firm can provide for a new perspective and a context for benchmarking internal knowledge. IJVs provide an important means to obtain external knowledge that is tacit, has not been widely distributed, and therefore retains its competitive advantage4. Many knowledge-based industries thrive on this sort of collaboration. In knowledge intensive industries, firms that pursue an aggressive knowledge strategy tend to outperform those competitors who pursue less aggressive ones over time5.

The ability to cross technical boundaries to find multidisciplinary solutions represents only part of the collaborative value. When collaboration facilitates learning at organizational and individual levels, the solutions tend to be more

1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. “Cooperative Strategies; North

American Perspectives”, 1997. 2 Hamel, G. and Prahalad, C.K., Harvard Business Review, 1989. 3 Laszlo, K.C. and Laszlo, A., Journal of Knowledge Management, 2002; TFPL, 1999. 4 Badarocco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991. 5 Bierly, P. and Chakrabarty, A., Strategic Management Journal, 1996.

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innovative and more integrated. Significant innovation is possible only by bringing together diverse experts who can educate and learn from each other.

The capability for collaboration extends to a capability for organizational learning, and nurtured through professional development processes and leveraged into value for clients. Another benefit of the generative cycle is the increasingly valuable enhanced ability for successfully adapting to a changing market. The quality of the relationships across the formal network allows for the continual reconfiguration of work groups, as demand necessitates. The same context and processes that sustain collaboration and learning about client issues also sustain it for internal management issues.

Transferring the knowledge while minimizing risks of both partners, rate of dissipation, openness to organizational learning of the parent companies are all linked to a variety of factors. Such factors include the organizational resources committed to learning, the type of knowledge creation mechanisms institutionalized within the organizational structure of the alliance. This is part of the KMS of the alliance1.

Integration of knowledge across different contexts opens an organization to different insights. Knowledge that is applied in different contexts increases its scope and value to the organization. By being able to combine experiences across communities and organizations, the scope of experience is broadened, as is the ability to learn from these collaborative experiences and understanding the organization's strategic knowledge requirements within the IJV network.

A wide spectrum of inter-organizational linkages is critical to knowledge diffusion, learning, and technology development. The ability to first leap from information to knowledge, and then from individual level learning and expertise to organizational level learning and routine is key. In short, knowledge of how to collaborate means that information is filtered by a specific context and an ongoing relationship, by experience and reflection, and by interpretation. When multiple participants are involved, and their availability varies, making knowledgeable decisions is a challenge.

1 Hamel, G., Strategic Management Journal, 1991.

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It is ineffective to force all decisions about collaboration to go forward after a committee composed of staff from different business functions has approved them. Such a move can result in a needless delay, which is fatal in a fast moving field, and which can also dampen initiative. Another side effect of formalizing the approval process is to force external relationships underground, into informal linkages, as savvy managers opt to pursue relationships without risking going through the bureaucracy of formal approval. But covert efforts may run risks that key intellectual property or process issues are not addressed at the outset.

A firm whose activities cross national boundaries must acquire knowledge from its environment, or more precisely, from other organizations in its environment, knowledge about new technologies and markets as well as knowledge about how to manage its own operations by adding value to the technology and in dealing with the markets. In this context, strategic alliances are becoming an indispensable mechanism for learning.

A key driving factor of the rush to „learning“ in international alliances is the increasing globalization of knowledge. The globalization of knowledge can be summarized in four propositions1: First, there is a vast pool of potentially commercializable knowledge in the world, and it is expanding rapidly, perhaps at an accelerating pace. Second, there are now more facts about the world that are known, more know-how, more branches of knowledge, and more information about customers, markets, and sources. Third, some of this knowledge is migratory. It can move very quickly and easily because it is encapsulated in formulas, designs, manuals, books or databases, or codified in some other way. Fourth, some of the knowledge being created is embedded knowledge, and it moves slowly.

Following an input-process-output model, with the preconditions of the IJV being the input, followed by the KM process, the logical outcome of the KMP processes would be the question whether knowledge has been transferred to, created in the IJV and / or subsequently returned to the parent firms. The key performance indicators (KPIs) used to measure the outcome must be identified. The possible learning

1 Badaracco, J.L. “The Knowledge Link: How Firms Compete Through Strategic Alliances”, 1991.

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outcomes of an IJV are as follows1: there can either be no learning in either of the partners’ knowledge bases from the cooperation, nor there can be learning just in the situational framework of the IJV. In the best case scenario, the KM processes in place ensure that any knowledge created in the IJV finds its way back and is institutionalized in the parent organization. A highly receptive KMS requires the organization to assert both intent and ability to absorb knowledge.

KPIs are the result of a number of often interrelated factors, so that enhanced

performance, in the form of profitability or longevity2, may arise from factors other than knowledge creation, such as changes in the business or macroeconomic environment. Further, the impact of organizational learning on performance is generally on a long-term basis, for knowledge generated in the IJV and brought back to the parent might find use only in the future activities of the organization.

B.3.3 KM Processes in IJVs

As mentioned above, the role of top management for creating an impetus for knowledge flow back to the parent organization is quintessential. Its role here is also to prioritize knowledge flows from its international collaborations, and to realize and exploit the learning opportunities as well as put the insights generated through partnering knowledge to good use in the future3. Retrieving knowledge that has already been created and tested from the IJV sources in which it resides, and then internalizing it into the parent firm so it can be recalled and used in other applications4 is known as harvesting.

Externally acquired knowledge is of potential strategic value to the IJV partner only to the extent that this knowledge can be institutionalized into the organization. This involves the integration of knowledge acquired by international managers at the alliance level into the parent’s collective knowledge base5. The intensity of the

1 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. , “Cooperative Strategies; North

American Perspectives”, 1997. 2 op.cit. 3 op.cit. 4 op. cit. 5 Inkpen, A.C. " Cooperative Strategies: North American Perspectives ", 1997.

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parent firm’s learning efforts reflects the degree to which the parent is actively trying to internalize the skills and capabilities of its partners1.

BERDROW and LANE describe creating value through successful KM in IJVs and summarize six descriptors that differentiate successful and unsuccessful cases. These descriptors are mindset, controls, strategic integration, training and development, research contributions and integrations, a relationship development. According to this study, those IJVs that were able to successfully transform the knowledge transferred by the parents and to create new knowledge did achieve positive sales, operational and financial performance. In these joint ventures knowledge resources were created and harvested that led to competitive advantage for the IJV and parents2.

Finally, GHOSHAL pinpoints the three major barriers to IJV learning3. First, IJVs may not be sufficiently sensitive, analytical, or responsive enough to local environments to learn from them. Second, a tight rein on decision making by the parent companies is less conducive to sustainable knowledge transfer than autonomous IJVs who can prioritize at their own discretion. Third, firms may lack the necessary knowledge transfer channels, which are a prerequisite for an effective KM strategy.

POWELL's claim is that learning from collaboration is both a function of access to knowledge and possession of capabilities for utilizing and building on such knowledge is not a claim that individuals and organizations are exceedingly calculating or far-sighted4. POWELL is building on research that stresses that skills are embedded in the exercise of routines. The development of these routines is a key feature in explaining the variability of organizations' capacity for learning. Only by building these skills can knowledge be transferred from one project to another, from one unit to another, in a manner that allows insights gained from one set of experiences to shape subsequent activities.

1 op.cit. 2 Berdrow, I. and Lane, H.W., Working Paper Academy of International Business, 2002. 3 Ghoshal, S., Strategic Management Journal, 1987. 4 Powell, W.W., California Management Review, 1998.

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MARCHAND describes, in the framework of IJV management, the importance of interpersonal relations among managers or employees in a company1. Managers at the network interfaces provide the glue that sustains the partner's intentions and efforts. The participants in collaboration often learn at very different speeds, prompting each side to wonder if it is benefiting equally. There are numerous situations for monitoring and interventions are needed to maintain balance in collaboration.

Human Resource Management in the IJV

Trust in a relationship is important, as are the personal interactions of key principles at the executive level and operations level. However, they are still involved in their own companies, whether the parents or the IJV, and it is not always possible to pay the necessary attention to the relationship; other responsibilities and activities prevail. Putting the management of the relationship into the hands of one individual whose role is to act as a liaison and protect that relationship, with an understanding of the different perspectives and the common goals, ensures that the relationship does not suffer because of other priorities2. Individuals function within their own context, which does not always center in the partnership. Placing an individual in the context of the partnership, the boundary between parties, ensures a balance between individual and joint priorities. It also places difficult decisions in the hands of a party who is respected by all but has primary allegiance to the partnership.

The interaction between people from different cultural background is intense and challenging. Successful implementation requires both an understanding of the

business and the partners’ cultures3. Too much emphasis on operative and strategic objectives and ignoring interpersonal relationships with the people can lead to

failure of the IJV4. The International Human Resource Management (IHRM) perspective has concentrated on the selection of executives and their adjustment to a foreign setting independently of the business context, and the international business

1 Marchand, D.A., “Competing with Information”, 2000. 2 Berdrow, I. and Lane, H.W., Working Paper Academy of International Business, 2002. 3 Lane, H.W. and Beamish, P., Management International Review, 1990. 4 Harris, P. and Moran, R.T., " Managing Cultural Differences ", 1991; Evans, P. and Pucik, R.,

“The Global Challenge: Framework for International Human Resource Management”, 2002.

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literature has concentrated on strategy and structure issues independently of the

implementation/behavioral processes involved1.

Building on a model developed by CLARKE and STAUNTON2, SOLIMAN and SPOONER proposed a model of the HRM role in KM3. The main tasks of HRM are to monitor, measure and intervene in construction, embodiment, dissemination and use of knowledge by the employees.

A major influence factor of parent companies is their prerogative to staff the IJV’s key positions. The extent to which the IJV team can successfully operate in an autonomous manner will depend heavily on the skills and motivation of the

individuals selected4.

The potential for influencing IJV performance through recruitment and staffing is not limited to top management. The number and quality of human resources, which are devoted to the JV, influence the nature and extent of organizational learning within the IJV environment. Since critical technology often resides in non-patentable know-how or know-who, careful staffing of these key positions may enable the IJV to more rapidly learn from its parents and transfer the basic concepts necessary for establishing and maintaining competitive advantage. By ensuring that the people selected for these positions have the requisite technical and managerial skills, cultural sensitivity, as well as the learning capability to transfer the knowledge within the IJV.

Given the many challenges facing employees working in an IJV, such as dual parenting demands, complexity and multiplicity of goals, multiple cultural and language differences as well as geographic differences, realistic recruitment is an effective tool. It would help ensure that the individuals who are selected will work effectively within, and cope with, the demands and pressures of the IJV

environment5. The ability to staff a venture with individuals who will be sufficiently flexible in thought and action is a fundamental prerequisite for successful IJV

1 Lane, H.W. and Beamish, P., Management International Review, 1990. 2 Clarke, P. and Staunton, N., “Innovations in Technology and Organization”, 1989. 3 Soliman, F. and Spooner, K., Journal of Knowledge Management, 2000. 4 Geringer, M.J. and Frayne, C.A., Management International review, 1990. 5 op.cit.

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performance1. Particularly for the venture’s top management, it will generally be necessary for the individuals to evidence stronger skills in networking, diplomacy and cultural sensitivity than might be the case for a wholly owned subsidiary. These managers must be capable of functioning effectively within the different national

and corporate cultures, which constitute the IJV’s operating environment2.

Employee training and development includes any attempt to improve current or future employee performance by increasing (through learning) an employee’s ability to perform, usually by changing the employee’s attitudes or increasing their skill level and knowledge. Training can also be used to encourage people to think and behave in ways consistent with the parents’ and other stakeholders’ cultures, objectives and interests3. In order to be effective, it is critical that training be specific to the trainee’s locations, customs and way of thinking, as well as to the actual problems, which are being confronted.

Not all executives are expatriates in the IJV, but IJV employees are more likely in the future to be functioning as part of multi-cultural teams particularly as the use of

cooperative ventures increases4.

KM Tools in the IJV

Technical and organizational initiatives, when aligned and integrated, can provide a comprehensive infrastructure to support KM processes5,6,7. This is an essential link, the first step to an integrated, top-down KM strategy in the IJV framework.

The interactions and the managers’ exposure to their partner’s knowledge may lead to the recognition of partner skill differences embodied in the alliance operation, which in turn may lead to knowledge creation at the alliance level. The second

1 Cobbe, G. " Building an Alliance in Korea. Paper Presented at the Strategic Alliance ", 1989. 2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 3 op.cit. 4 Adler, N.J., " International Dimensions of Organizational Behavior ", 1991. 5 Zack, M.H. California Management review, 1999. 6 Duffy, J., Information Management Journal, 2000. 7 Martenssen, Journal of Knowledge Management, 2000.

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process involves the integration of knowledge acquired by individual managers at the alliance level into the partner’s collective base1.

The IJV managers can communicate their alliance experiences to others and form the foundation of their parents’ and the IJV’s knowledge bases. Although the KM processes are not complex or difficult to understand, the lack of complexity should not be associated with a lack of effectiveness. The processes deal with both operational and strategic knowledge and taken together, provide a comprehensive view as to how alliance knowledge can cross organizational boundaries and become the basis for knowledge creation within the IJV network2.

Only few firms have had the insight that developing routines for the transmission of information and experience does not necessarily entail formalization. Information can be conveyed routinely through informal means. Formal repositories and powerful task forces can be useful but they are not a forum in which outside entities is allowed. Building routines for regular contact without formalization allows for the possibility that participants not only contribute ideas, but also spread lessons learned in unexpected and unobtrusive ways.

Much less refined is the more mundane but difficult and vital task of transferring information and knowledge obtained from external parties throughout the organization. All these activities reflect efforts to see that information becomes more widely diffused and that with reflection and interpretation becomes "thickened" into organizational knowledge. Developing routines for knowledge dissemination is always a double-edged sword. Informal mechanisms may preclude wide dissemination, while formal procedures can inhibit learning. The challenge is to develop regular venues for the informal transmission of information so that the process itself becomes tied to knowledge seeking and creation.

An enormous amount of information and knowledge resides in the minds and electronic mail of key people, but this material is rarely organized in a fashion that allows for its transmission to others. Some firms build repositories, where contracts, milestone agreements, working papers, publications, press releases and overheads are stored. Discussion databases are more active sources, where key participants

1 Inkpen, A. Academy of Management Executive. 1998. 2 op.cit.

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record their experiences as well as respond to others, and are potentially quite valuable.

Informal seminars on lessons learned from a partnership, particularly when staff from multiple functions are involved, are a good way to transmit experience across projects and partnering knowledge back to the parent firms. Only limited effort needs to be made to organize such presentations, so they have the advantage of freshness and a hands-on feel.

B.3.4 Developing the Framework

Strategic planning: Developing a Global Knowledge Strategy

Organizational learning should be a top management priority in order to facilitate a receptive learning environment1. The top management should be the initiator and the architect of the organization’s KM strategy2. The top-down approach is also crucial in integrating the strategies of both parent companies. Top management creates the organizational intention by asking questions on behalf of the entire organization and creating the challenges of intellectual growth3.

The aim of the top management in the parent firms should be to provide vision, focus and guidelines for a global knowledge strategy encompassing the whole IJV framework and beyond. Alliance Management: Inter-organizational Knowledge Management in the IJV

A second key issue influencing KM specific to alliance management is cross-cultural management. The manner in which individual managers deal with the challenge of integrating members of culturally diverse backgrounds into a coherent organization provides insight into the sources of competitive advantage of an international organization. The transfer of organizational knowledge necessarily involves an examination of how factors in the cultural environment will influence the implementation of new organizational practices and routines.

1 Hamel, G., Strategic Management Journal, 1991. 2 Hedlund, G., Strategic Management Journal, 1994. 3 Nonaka, I., Organization Science, 1994.

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In IJVs, cultural differences produce additional difficulties and challenges for managers, who must allocate more time on communication, design of compatible work routines and development of common managerial approaches1. As this aspect is especially pertinent in cross-border alliances, it should be integrated into the management of international alliances. The importance of knowledge can also be determined at the level of a country’s cultural environment.

In contrast, a cultural knowledge approach places the study of national culture within the broader strategic framework of international management. IHRM: Managing Knowledge Workers in the IJV Framework

The importance of the human element in KM is key; accessing embedded knowledge and skills in the highly complex IJV environment is a difficult task, and must be approached with sensitivity. According to GERINGER and FRAYNE, the failure of IJVs is at least in part due to the managerial complexity involved in dealing with two often contrasting corporate and national cultures. The management costs attributed to this increased complexity, the lack of productivity due to friction at the workplace, and the costs involved in getting the employee motivation needed for a successful venture are often substantial2.

In this regard, IJV performance is largely affected by the ability to manage human resources in multicultural contexts. It remains to explore the role of national / cultural affiliations in shaping the commitment of local employees to the IJV3. It would be apparently a major mistake for parent company managers, unaware of the cultural differences, to adopt a strategy developed in the parent company culture to elicit commitment from local employees. Managers of IJVs, then, need to be trained

1 Olk, P. and Xin, Journal of International Technology Management, 1997. 2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.

3 Nam, S.H., International Journal of Human Resource Management, 1995. For example, in his study on U.S. –Asian IJVs by Nam, he found that top management sets out to find the most technically competent and qualified people to manage the firm in a belief that hiring the best people (in terms of qualification) would result in a profitable and dynamic company. Asians, on the other hand, wanted to focus on effective recruitment and training of new managers and staff who exhibited exemplary interpersonal skills and who were committed to enhancing corporate success.

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to be able to select an appropriate mix of determinants of organizational commitment depending on the cultural orientation of their employees.

Expatriate management is a key issue in IJV management, especially when the assignment is in a highly complex environment such as a developing country. They can be essential to the process of transferring embedded, tacit knowledge to the IJV from the foreign parent company. Expatriates, while in a good position to implement the parent firm’s policies and values in a diplomatic manner and a channel for knowledge, can also be a major source of friction if they handle things insensitively.

Technology Management: Implementing Global Knowledge Tools in the IJV

Though it is a common mistake of organizations to equate it with KM, technological knowledge tools are undoubtedly an integral part of KM strategy. On the one hand, such global tools can bring together and form a united platform throughout the organizations overcoming geographical and structural constraints. On the other hand, implementing technology on a global basis poses its own set of complex problems.

Within an IJV, both parent firms’ technology strategies have to be integrated and compatible with each others to a certain degree. The IJV has to be connected to both parents, and issues such as accessibilities have to be tackled. Furthermore, infrastructural constraints in the foreign setting have to be taken into consideration.

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Figure B 18. Key Issues in the Knowledge Management Processes

Key Issues in the Knowledge Management Processes(not exhaustive)

• Strategic Planning: Developing a global knowledge StrategyFinding a strategic fit between the parents’ knowledge strategiesImplementing the global knowledge strategy in the IJVIncorporating the IJV in the global organization• Alliance Management: Inter-organizational Knowledge TransferAlliance NegotiationAlliance FormationDefining knowledge channels between the actorsCross-cultural management• IHRM: Managing Knowledge Workers in the IJV FrameworkImplementing global parent IHRM guidelines in the IJVExpatriate managementManaging local knowledge workersJob rotation•Technology Management: Implement global Knowledge Tools in the IJVGlobal knowledge tools Implementing parents’ knowledge strategies in the IJVEnvironmental/ Cultural factors affecting knowledge tools

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C Core Knowledge Management Process in International Joint Ventures

C.1 Introduction

In Chapter B the theoretical aspects of knowledge management in IJVs was dealt with. In line with the conceptual framework and research focus of this dissertation, this section attempts to examine the theoretical considerations for the core knowledge management process and the status of knowledge management in the knowledge-based Indo-US JVs1.

This Chapter is structured to address the four key processes in KM, i.e., Strategic Management (SM), Alliance Management (AM), Human Resource Management (HRM) and Technology Management (TM). In each section the theoretical aspects of the core processes are considered followed by empirical evidence on how these processes are handled in the Indo-US IJV’s with in-depth case studies. Methodology and Data collection

A number of case studies with Indo-US JV firms focussing on professional service sectors (IT, advertising, telecommunication, insurance, banking and financial services)2, following the methodology outlined below, formed the basis of the analysis of the KM processes within the Indo-US JVs. While this provided valuable and rich information on various aspects of knowledge management in information-based Indo-US IJV's and gave ground for theory building, the author considered it appropriate to focus on selected case studies to give a realistic picture of core KM processes in Indo-US JVs3.

The six Indo-US IJV firms chosen for case studies were as follows: 1. DSP Merrill Lynch 2. JM Morgan Stanley 3. Max New York Life

1 In this chapter an IJV represents an Indo-US JV - the main focus of this study. 2 See Annex (E) for list of interview partners 3 The sample size in a multiple-site study cannot be large. Eisenhardt (1989) recommends a sample

size of four to ten organzations (sites).

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4. Birla AT&T 5. Sprint RPG 6. Ogilvy & Mather

Key information and data on the selected Indo-US IJVs are given in the next section.

The case studies were chosen on the basis of the full sets of information provided by all key actors of the IJV framework. Choosing IJVs from the key sectors defined in the conceptual framework (Chapter A), the author aimed to capture and assess as many aspects of knowledge flows and processes as possible. The case studies were examined within the principal objectives presented and discussed in the previous chapters. The goal (research question at hand) was to determine whether the IJVs (here Indo-US IJVs) had initiated knowledge management initiatives and / or recognized the need for an integrated approach to knowledge management within the IJV framework. The figure below recapitulates the research questions posed at the beginning of the research.

An analysis of the data gathered with regard to the research questions was followed by the presentation of the empirical data obtained. Finally the key findings with respect to the research questions all case studies were compared.

To allow valid comparison across cases, the selections of IJVs used in this study have the following criteria: • Indian and U.S. parents • Joint venture located in India

• What are the key strategic and organizational processes that

constitute knowledge management within the framework of the IJV? (PRQ1)

• What are the dominant internal and external factors in the IJV environment, and B) the main barriers to effective knowledge management and inherent weaknesses within these processes? (PRQ 2a/2b)

• Does an integrated knowledge management strategy within the IJV facilitate effective knowledge management and how can it be developed and implemented within the IJV framework? (PRQ3)

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• A professional services firm, in either financial services (including insurance), telecommunications, or advertising.

• A greenfield joint venture • the parent companies should have made first steps into the analysis of their own

knowledge management processes, and that this has direct impact on the knowledge management processes within the IJV and between the IJV and the parent companies

Qualitative research instruments chosen for the study and the process of data collection are described below. The use of different types of data collection instruments is key to a qualitative study1: • semi-structured interviews • secondary information • expert interviews2

Preliminary open-ended and expert interviews were aimed at identifying important areas of knowledge management and to form the basis for the hypotheses. Primary and secondary data was collected during the research period from January 1999 to November 2000.

For the interviews with the actors within the IJV framework semi-structured interviews were chosen for the format of the interviews. In the semi-structured interview, the interview skeleton gives the interview structure and focus3. The interview questions were open and non-scaled, which reflected the explorative nature of the research.

The interviews were conducted in Indo-U.S. JVs in India, as well as the Indian and U.S. parents companies, and in the U.S. firms‘ AP headquarters. Interviewees within the JVs held the positions of CEO (Corporate Executive Officer), COO (Corporate Operating Officer), CIO/ CTO (Corporate Information Officer), and HR heads. Managers as well as international and functional heads from both the parent

1 Glaser, B.G. and Strauss, A.L. "Discovery of Grounded Theory: Strategies for Qualitative

Research", 1967. 2 These consisted mostly of interviews with management consultants in India, as well as members of the academia who advised the IJVs and parent firms on various aspects of strategy in India. This instrument allows for a different focus for interpretation of the collected data. 3 The interview skeletons for the different participants, differentiated by competency, can be found

in Appendix.

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companies were involved in strategic planning for the firms‘ overall corporate strategy. As interfaces between the parent companies and the JV, these managers are expected to have an important influence on parent’s access to and management of alliance knowledge.

The interview data was collected through personal and telephone interviews in India, the United States, Hong Kong and Singapore. The timeframe for the interviews was from September 1999 to October 2000.

The questions are segmented into key areas, which address the core processes of the knowledge management strategy. The interview checklist had six groups of questions: background data, history and rationale for the IJV, questions regarding the four core knowledge management processes: • Implementing a global knowledge management strategy • Knowledge transfer within the IJV network • Managing the knowledge worker in the IJV • Implementing global knowledge management tools.

The final set of questions concerned lessons learned and future potential of the IJV.

The interview skeletons were differentiated according to the expertise area of the interviewee (strategic planning, alliance management, international human resources, and technology management). Due to the open nature of the questions, interviewees possessing specific knowledge of certain areas were permitted to elaborate, if they so wished. The skeletons for the “expert interviews” also had a different emphasis, focussing on a more „objective“ and general perspective. The answers of the interviewees to these specific questions were documented precisely, along two categories: factual answers (descriptive), and opinions and quotes (subjective views). Finally, the interview was summarized with the key statements to the relevant core processes of the knowledge management strategy being restated.

After conducting the semi-structured interview, it was then transcribed to allow for preliminary data analysis. At the beginning of the interview transcript, there is a short biography of the interviewee followed by a synopsis of the history of the IJV.

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The interview write ups were based on a classification scheme approximating the main analytic concepts1, such as parent experience, parent interactions, IJV organization, the knowledge management processes, linked core processes and IJV performance. The secondary data provided further information on the firm and the IJV. Interviews from the individual JVs and the parent companies were grouped to provide integrated sets of data for a flow analysis on the knowledge management process within the Indo-U.S. joint venture framework.

Adjacent to the interviews, different sources of firm-specific secondary data were used. The idea behind this was to gain a complete picture of the firm-specific context and surroundings of the interviewee. This secondary information includes documents, memos, as well as information from the firm-internal Intranet, and other externally accessible information.

In the second stage of data collection a multiple case study approach was used, based on theoretical replication2 because the choice of cases is directed by the emerging theory developed from stage one. A set number of cases of U.S. companies involved or in the process of entering IJVs in India, with local companies were specified. The data for these cases was collected through interviews with parent company executives (host and home) and IJV executives. The cases were chosen based upon the integrated sets of data available.

The study of process requires an approach to data collection that differs from the conventional survey methods, or from reliance on secondary data sources, that typifies much of the process research in IJVs. The case study method, especially if derived from the first interview stage is most likely to capture the dynamic elements of the processes in the integrated knowledge management framework. As during the interview process four sets of interviews were conducted within each IJV framework, these will build the base for all case studies.

Qualitative data from this mixture of methodologies provided a realistic picture of the processual linkages between cross-cultural management and knowledge transfer and management within the IJV. Questionnaires and structured interviews

1 Miles, M.B. and Hubermann, A.M. " Qualitative Data Analysis – a source book of new methods

1984. 2 Yin, R.K. " Case Study Research: Design and Methods ", 1994.

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completed in numerous companies provide a necessary breadth of understanding the types of problems managers' experience in the IJV. Clinical research provides an important depth of understanding of individuals, their motivations, problems,

decisions, and their operating environments1.

C.2 Key Information on Case Study Partners

C.2.1 DSP Merrill Lynch (DSPML)

DSP Merrill Lynch (DSPML) is an IJV between DSP Financial Consultants Ltd (DSP) and Merrill Lynch (ML) with a 60:40 ownership structure. There are three main divisions within DSPML: Merrill Lynch Securities Ltd., Investment Banking and Asset Management. One quarter of all DSPML business comes from multinational companies. DSPML does receive clients from abroad but this is usually under ML AP directives. DSPML has been the largest mobilizer of funds for the past four years, covering all types of instruments and all issuer categories. The net worth of DSPML for the financial year 2000 (9 month period) was 214.70 Crores Rs, with a profit after tax of 49.34 Crore Rs2.

C.2.1.1 Indian Parent - DSP Financial Consultants (DSP)

The Indian parent company, DSP Financial Consultants was newly formed from DS Prabhoodhas & Sons, a reputable 130-year stockbroker house and merchant bank, and one of the major players in the Indian financial market. DSPML’s current chairman is a 4th generation broker of the family, as well as being the president of the Bombay Stock Exchange (BSE).

1 Lane, H.W. and Beamish, P., Management International Review, 1990. As is typical of theory

building research, this study used an iterative approach of data gathering, analysis, and examination of the literature (Eisenhardt, 1989; Glaser & Strauss, 1967). At the beginning of the project, the researcher had no particular theoretical frame. The interviews were intentionally left open-ended to allow any findings to emerge from the data.

2 DSPML Financials shown correspond to 9 month period ended 31.12.2000 DSP Merrill Lynch Securities Limited., DSP Merrill Lynch, Annual Report,2001 ; 1 Crore = 10 million ; I US$ = ~ 57 Rs.

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DSP was one of the first private banks to enter the investment-banking field1. In the 1980s, DSP envisioned several potential partnerships with foreign banks2 wishing to enter the Indian market.

C.2.1.2 U.S. Parent – Merrill Lynch (ML)

ML has a proven past of international experience and leadership. It is one of the

"most global investment banks of the new Millennium"3. It has an extensive resource base and a well-structured organization. ML has the strong commitment to principles essential for success in the global financial sector. These principles are Client Focus, Respect for Individuals, Teamwork, Responsible Citizenship and Integrity.

Figure C. 1 DSP Merrill Lynch Key Data

1 At this time equity pricing was still controlled by the Indian government. 2 DSP considered partnerships with Dresdner Bank, Nextaxis, and the Swiss Bank Corporation

(SBC). 3 http://www.Globalf.vwh.net, Global Finance, 1998: Merrill Lynch, Morgan Stanley Dean Witter,

and Goldman Sachs are determined as the three most global investment banks (based on revenue outside the U.S.).

DSP Merril Lynch (DSPML)

Parents: DSP Financial Consultants and Merril LynchYear of creation: 1993Ownership Structure: 60% DSP, 40% Merril LynchBoard representation: Equal, under ML Asia Pacific directivesBusiness Model: Aligned to Merril LynchAsia Pacific HQ: Hong KongAssets* ($ in millions): Merril Lynch 407,200

DSP <25Revenues* ($ in millions) Merril Lynch 44,872

DSP < 2

* As per financial year 2000

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C.2.1.3 The IJV – DSP Merrill Lynch (DSPML)

The complementary sets of strengths of the two partners have been essential in order to overcome each other's weaknesses. DSP, an owner-driven, family based business aimed to be more institutionalized and professional. ML, on the other hand, was trying to gain access and expertise in a lucrative but highly complex market.

The fit between product offerings was given, with DSP dealing with equity, debt, and retail distribution, and Merrill Lynch with its product palette of equity, debt, advisory services, asset management and private clients. ML was not operating in India before the IJV, and DSP has no operations outside the country. The objective was to achieve critical size and leadership at low cost, saving ML the effort of building operations from the ground up and allowing DSP access to ML's considerable resources. ML accords to a relationship of mutual trust, which was established through a long relationship. There are minimal conflicts, and both partners are comfortable in the partnership.

DSP’s partnership with ML started in 1984. In 1986 the first country fund was launched, and ML started managing funds at that point.

After the beginning of economic liberalization in 1991 the capital markets in India offered great potential for foreign investors. In 1993 the MOI1 was signed between DSP and ML. The two companies had similar history and organizational culture. In 1994 the IJV was formed and a major re-organization took place within DSP in the form of an ownership structure. Milestones of the IJV were: • 1974 - Formation of DSP Financial Consultants Ltd. (DSP) by the promoter of a

130-year old stockbroker house (DS Prabhoodas & Sons) partner in various deals.

• 1984 - DSP Financial Consultants Ltd. and Merrill Lynch (ML) worked closely • 1993 - Merrill Lynch takes 29% equity stake in DSP • 1994 - Merrill Lynch and DSP form the IJV • To date - Continuance of a thriving relationship between Merrill Lynch and

DSP2

1 MOI - Memorandum of Intent 2 ML has also invested in a separate joint venture with DSP ML – DSP Merrill Lynch Investment

Managers Ltd (DSPMLIM) ; http://www.dspml.co.in/

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Motives - One of the main motives for the IJV between DSP and ML was the FDI regulations that MNCs from abroad reduce their ownership of wholly owned subsidiaries to minority shareholders1. To tackle the threats of the competition, ML aims at global diversification, while DSP hoped to gain access to its partner's large resource and skill base. The strategic objective of the IJV was to exploit the opportunities thrown open by liberalization and globalization. DSPML was an addition to the long list of successful strategic expansions by ML, and an important part of its Asian strategy in the late 1990s.

A key driver for the formation of the IJV was the convergence among the many national markets for financial services and the erosion of international trade barriers, among other things through the revolution in IT. With increasing globalization and liberalization, the Indian business environment became competitive for Indian firms and potentially lucrative for international ones. The financial institutions had an opportunity to help Indian players tackle competition from outside the country and to help international players enter and grow. The relevance of international financial products has increased considerably in the Indian context.

For ML, the globalization of capital markets led to the realization of the need to pursue a "think globally, act locally" strategy. The global nature of its business allowed it to reap full benefits of globalization of capital markets, while the local aspect required ML to enhance the capability to participate in rapidly growing key local market activities.

DSP has an impressive history in the Indian Capital markets. It had a strong client base consisting of both local corporate and government institutions and state governments. DSP also has an impeccable reputation in the local financial circles, and a widespread network of connections in the Indian business and political environment.

DSP felt the need to gain access to international experience and market place. A perfect strategic fit between DSP and ML led to the joint venture. The four firm-specific factors contributed to this were: • Complementary set of strengths • Economic rationale

1 See Annex : E.2.

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• Commitment to identical principles and values • Mutual trust established through a long relationship

The organization of DSPML was structured along the business model and structure of ML. The board representation is equal on both sides, even though it is a minority joint venture (therefore non-consolidated) for ML and the consensus approach is taken to all major decisions. The business model did not require much local adaptation.

The big challenge in the restructuring and formation of DSPML was changing from a family firm to a professional financial-services institution. DSPML had to re-align the "ML way" integrating the relationship within the two companies and expanding the services to new areas and a bigger product range.

ML is characterized by a tight structuring and guided by strict decision-making processes and empowerment of the divisional heads. It required a mind-set change of local management through observation of and learning from expatriate top management. ML (US) brought the professional approach to the IJV, which is necessary for one of the largest global financial companies. DSP, on the other hand, had the family culture and the expertise of the local Indian market as well as the large network of relationships in the local business and regulatory environment.

Among the adaptations to the local environment were the integration of back office services and the offering of financial corporate services customized for Indian firms. For DSPML it was critical to enable and facilitate global, contribution-based strategies as they felt it was a common purpose and communication that drive success in a relationship.

DSPML is one of the leaders in the Indian capital markets, for both local as well as international products, and is the largest fundraiser in the domestic markets1. They have been advisors to unique and path-breaking transactions and are leaders in managing international capital market offerings by Indian companies.

In India, DSPML is the leading underwriter and broker for debt and equity securities and a leading advisor to corporations, institutions and state governments. For private customers, the platform of products and services provides access to a robust range of

1 1995-96 and 1998-99

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investing and wealth building tools with the personal guidance of financial consultants. DSP ML is also among the first firms to set up a full-fledged research team in India. The Company is among the major players in the debt and equity markets and is also a primary dealer of Government Securities. DSP Merrill Lynch's credentials are best supported with accolades received from highly respected institutions. Finance Asia has ranked DSP ML as "The Best Domestic Investment Bank" for 2000. Also Euromoney voted DSP ML " Best Domestic M&A House in India" as well as "Best Domestic Equity House in India" in their Awards of Excellence for 2000.

The IJV has been successful in continually reinventing itself, launching new business initiatives such as the Private Client Group, Asset Management, Management & Advisory services, and establishing primary dealership over a variety of products.

Voices on the IJV1

The CEO of DSPML points out, "It's continuous innovation, ability to deliver, execution of capabilities and integrity of a firm that makes all the difference".

DSPML recognizes itself to be a full service investment bank, offering a wide and complete range of services under one roof. "Today, every client wants their own solution. A full service investment bank, like us, plays a key part in the corporate strategy and in the execution of the financial strategy of a company" says the executive Chairman of DSPML.

The vice-Chairman, DSPML remarks "There could be competition from someone who puts up an investment bank from the Net, so we can't be complacent."

C.2.2 JM Morgan Stanley (JMMS)

JM Morgan Stanley (JMMS) is a joint venture between the investment banking division of Morgan Stanley Dean Witter (MSDW) and JM Financial & Investment Consultancy Services (JMF). JMMS is a fully integrated investment bank offering services for resource mobilization, privatization, corporate structuring, capital structuring, valuations, joint ventures and investment structuring.

1 http:// www.india-today.com/btoday/20001006/ef.html

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JMMS is the only IJV between two corporate partners of MS in the world1. MS was present in the Indian financial market with a wholly owned subsidiary from 1993. However, MS top management in New York realized with the Indian CEO’s (an U.S. Indian expatriate) help that an IJV with a well known merchant banking firm in India would be the most promising, if not the only way to break in to the exceedingly difficult investment banking market in India.

C.2.2.1 Indian Parent – J.M. Financials (JMF)

The KAMPANIs are veterans in Mumbai’s financial scene, with excellent business and political networks, among other premier Indian business groups like the Tatas and the BIRLAs, and even with transnational firms entering the national market and seeking financial advisory services. J. KAMPANI set up JM Financials in 1973.

C.2.2.2 U.S. Parent – Morgan Stanley Dean Witter (MS)

MSDW was established in 1935 and has consistently maintained leading positions in Resource Mobilization, Financial Advisory, Mergers & Acquisitions, Securities, Asset Management and Credit Card Transaction Services. MSDW began Indian operations in 1989 with the India Magnum Offshore Fund. The fund catered principally to institutional investors at the time it was established.

MS was the biggest financial investment institution in India with over 1.7 billion US$ transaction through offshore mutual funds.

Activities of MS in India included investment banking and stock brokerage. MS soon realized that contacts and government connections as well as personal networking were needed to gain a foothold in the investment-banking sector. MS had the international expertise but realized that it would not be able to create a sufficient market share within a reasonable period of time. So MS was faced with three alternatives: • Expand, but the potential turnover did not make the investment lucrative • Close down the subsidiary in India • Enter into partnership with a local investment banker.

1 The other one is in China, which is with a government partner and in a highly controlled

regulatory environment.

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C.2.2.3 The IJV – JM Morgan Stanley (JMMS)

JMMS was established in 1999, with an 18-month integration phase. The management model and organizational structure were those of MS. Integration is very slow especially in IB as the vast majority of investment bankers are ex-JM workers1. The organizational structure that is now in place at JMMS is somewhat different from the MS structure as they feel that sudden changes are contra-productive and adaptation is necessary e.g., JMMS has more levels of hierarchy and different designations2 for hierarchical and pay structure. Day to day business of the JV has been relegated to COO of MS, who is also in charge of the integration phase, and the ex-second in command to the CEO.

JM financials merged completely into MS (India) to become JMMS. There are two entities in the JV i.e., investment banking and asset management, which are split in to two different companies.

Several foreign banks were looking to partner with JM, for they had a very good reputation and a large network within Indian corporate and regulatory environment. In the early 1990s, JM had an MOI with Credit Suisse First Boston (CFSB) but the IJV did not materialize.

Investment banking is the most lucrative sector in the financial environment but MS was lacking the deal flow and necessary local knowledge to gain an adequate market share. When the CSFB / JMF MOI started to break up, JMF started looking out for a new partner and the Head of MS India could convince MS management in New York to start negotiations with them.

1 In the investment banking 65 are from JM and only 4 from MS 2 VP, Executive Director vs. GM

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Figure C.2 JM Financial Morgan Stanley Key Data

MS learned from the IJV the importance of local access and knowledge of the local surrounding and the advantages of buying a good local brand name for shorter time to market share. The IJV has proven a valuable source of partnering knowledge for future MS endeavors and other MS affiliates. From the beginning, both partners were determined to make the partnership long-term and earn the trust they put in the IJV.

JM Financial Morgan Stanley (JMMS)

Parents: JM Financial & Investment and Morgan StanleyYear of creation: 1999Ownership Structure: JM Financial merged to Morgan Stanley (India) ;

IB Division - JMMS & JMF 51%, MS 49%AM Division - MS 51%, JMF 49%

Board representation: 6 MS and 4 JMFBusiness Model: Aligned to Morgan StanelyAsia Pacific HQ: SingaporeAssets* ($ in millions) JM Financial Consultants ~ 50

Morgan Stanley 426,794

Revenue * ($ in millions) JM Financial Consultants < 25Morgan Stanley 26,427

* As per financial year 2000

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Figure C.3 Business Structure of JMMS1

"We are able to give a complete solution and the best option to the client, be it in the global market or the domestic market"2, CEO, JMMS.

"We are a full service banker, with strong domain knowledge, distribution, and ability to innovate, which translates trends into transactions that create value3." Vice-Chairman, JMMS.

C.2.3 Max New York Life (MNYL)

Max New York Life Insurance company (MNYL) is a partnership between Max India, one of India's leading multi-business conglomerates and New York Life, a Fortune 100 U.S. company based in New York. Through a wide network of highly competent "insurance advisors" providing "innovative products", Max New York Life is looking to create a "partnership for life" with its customers in India.

1 http://www.jmmsdirect.com/aboutus/business.php3 2 http://www.india-today.com/btoday/20001006/ef.html 3 http://www.india-today.com/btoday/20001006/ef.html

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Figure C.4 Max New York Life Key Data

Milestones of the Partnership • In November 1999 Max India Limited entered a joint venture with New York

Life International Inc., the global arm of New York Life Insurance Company USA, to offer life insurance products in India. The IJV-MAX New York Life Insurance Company Ltd -- the partnership between Max India Ltd and New York Life -- became the first joint venture insurance company to register under the Indian Companies Act.

• In October 2000 Max New York Life was given in principle approval by Insurance Regulatory and Development Authority (IRDA) to commence business.

• The IJV put up a core team of professionals to prepare the business plan and was in business by 2Q 2001. MNYL aims to be India’s premier private sector life insurance company.

C.2.3.1 Indian Parent – Max India Ltd (MI)

Max India, a young, modern and entrepreneurial Indian company had its major growth phase in the period of liberalization, free markets and partnerships after

Max New York Life (MNYL)

Parents: Max India and New York LifeYear of creation: 2000Ownership Structure: Max India 74%, New York Life 26%Board representation: Represents ownershipBusiness Model: Aligned to New York Life, standardized to IndianAsia Pacific HQ: Hong KongAssets* ($ in millions): Max India 48

New York Life 138,242Revenue* ($ in millions) Max India N.A.

New York Life 11,676

* As per financial year 2000N.A. Not available

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1991. The Max conglomerate concentrates its business activities on the high-growth knowledge industries. Max’ strategic mission has been to be progressive and willing to take on fresh challenges in newer high-growth markets. It has grown independently on its own and by joining hands in partnerships with major international companies where specific business opportunities are best addressed through joint ventures. Therefore, Max India has a long and varied history of partnering experience.

Max India was established in 1984, with its roots in the pharmaceutical and chemical bulk production. In 1989, the first diversification of Max India’s business activities took place. New windows of opportunity were explored through partnerships with foreign firms, which were seen as the best way of expanding and strengthening the business. The first partnerships were in Max India’s core business in bulk pharmaceuticals. Here the primary learning between the partners was in the transfer of technology to the IJV’s manufacturing facilities. Avnet Max, Max IJV with Avnet Corporation, is a world leader in electronic component distribution.

In 1994-95, after the Indian Telecom Bill was passed, Max India decided to enter the telecom services market. Max India entered a partnership with Comsat International, the satellite communications provider and Hutchinson, the Hong Kong based telecom provider. Max India’s partners in the telecom industry had the firm-specific expertise and financial backing that Max India lacked, while Max India had the market knowledge and connections with local regulatory authorities, as well the brand recognition with mass consumers in India.

In addition Max India has a significant presence in the most vital & fast growing sectors of the Indian economy, telecommunication services, electronic components distribution, specialty plastic films and bulk pharmaceuticals. These diversified businesses are organized as Max India's 100% owned Business Units (BU) and equity IJVs. Each of these is fully empowered to lead their operations, have grown and obtained leadership position in their respective industries by providing high quality products and services, working closely with their customers. The Max India of the next century strives to provide high-value global products and services, designed and delivered by global talent, for global markets.

Max India is the Indian partner in a number of IJVs, both up and coming. In 1999, Max India was involved in three Indo-American IJVs, Avnet Max, an electronic

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component distributor in partnership with Avnet, Comsat Max, a satellite communications IJV with Comsat International, USA; and Max Atotech, one of Max India’s oldest IJVs. Max Atotech is situated in Max’s former core business area of chemical manufacturing, and is now in a partnership with Elf Aquitaine of France.

Starting early 1999, Max India has refocussed itself into building a corporation based on the knowledge platform that India represents, and has exited from IJVs that were no longer part of its new core business. Today, Max India is building businesses in the emerging knowledge-based areas of healthcare, financial services and IT. In each of these areas Max India plans to innovate to deliver products and services in a manner that is effective and unique. By being an early entrant into these sectors Max India will proactively work to influence industry trends and contribute to the development of these early stage service businesses1.

Max New York Life was given in principle approval by the IRDA, the Indian Insurance Panel, in October 23, 2000 subject to the capitalization of the company. The Vice-Chairman Max India and Chairman MNYL said, "Our focus has been on building our new business areas of healthcare, life insurance, and IT. The creation of the IJV is an important milestone in [Max'] vision to excel in the knowledge-based, people oriented service businesses. I am confident that Max New York Life will emerge as the life insurance brand of first choice."

Max India sees its core competencies in the area of identifying new business opportunities, finding the suitable format, allowing for autonomous management at the strategic level. Max India sees the role of the top management in a scanning function restricted primarily to the strategic direction of the group as a whole.

1 Max India Annual Report, 2000.

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C.2.3.2 U.S. Parent – New York Life International Inc. (NYL)

New York Life International Inc., (NYL) is a Fortune 100 company, and in 1998 the company had total revenues amounting to almost US $ 20 billion, and was rated the number one provider of new life insurance policies in the United States. In the same year, New York Life was also the leader in insurance sales to the growing Indian community in the United States.

New York Life's move into the international marketplace began in 1870 with the appointment of a general Agent to Great Britain and Europe. Headquarters for the European region was established in London. The opening of offices in France, Germany, Belgium, Russia, Italy, Switzerland and Austria in the 1870s quickly followed this. Elsewhere in the world other branches were opened in rapid succession. A West Indies operation established in 1873 was quickly followed by operations in Mexico, British Guyana and Venezuela. In Asia, operations were set-up in India, China, Australia, and the Philippines and in Japan. By 1898, New York Life had inscribed on its policies and on its official company letterhead, "The Great International Life Insurance Company." The following year it had operations in 83 countries and one billion dollars of insurance in force. The worldwide agency force of 8,000 men and women operated out of 208 branches by 1905.

International business was an important part of the company's financial growth and stability from the beginning. After World War I, New York Life confined its operations to North America until 1988, when it reentered the world marketplace by establishing New York Life Worldwide Holding Company, Inc., later renamed New York Life International, Inc.

NYL brings to the joint venture financial strength and acknowledged expertise in developing and selling life insurance products that appeal to a broad market.

C.2.3.4 The IJV – Max New York Life (MNYL)

Max India (MI) wanted to enter the insurance industry with an experienced global partner in the life and non-life sector and New York Life was looking for a partner with a good track record in IJVs, a strong brand name and reputation in India. During the partner evaluation NYL actively sought references from MI's current and former IJV partners. Both partners had various past JV experience and large stock of partnering knowledge.

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MI entered into an IJV in November 1999 with NYL, the global arm of New York Life Insurance Company USA to address the life insurance sector in India and went into business in November of 2000, when the Indian Insurance Bill was finally passed with a delay of 11 months. The alliance has great potential to grow and become one of the leading players in the industry, with the regulatory environment now allowing private insurance companies to participate in this sector.

As specified by the IDRA Bill of India, 1999, the Indian partner MI has 74% and NYL will subscribe to 26% of the equity. New York Life International brings to the joint venture financial strength and acknowledged expertise in developing and selling life insurance products that appeal to a broad and heterogeneous market.

From the beginning both partners were committed to a long-term relationship. The key alliance inputs were from the side of Max India - knowledge of the Indian market, management expertise and government connections and from the New York Life - experience in the life and non-life insurance sector and financial backing. Together, Max India Limited and New York Life aim to become India's preferred insurance brand. This vision is mirrored in the IJV's mission statement which underlines the following values: • Offer the customers the best information possible enabling them to take decisions

that better their lives. • Understand the customers and their needs thoroughly. • Be transparent in dealings with the customers. • Offer innovative solutions with an objective professional advice and a highly

personalized service.

This mission statement is derived in language and format from the NYL mission statement, even though it is in accordance with the principles of MI. Voices on the IJV:

The CEO of the company's Asia region "Establishing a significant presence in the Indian market is a cornerstone of New York Life's strategy to grow our global business in high-potential emerging markets around the world." He goes on to say "India is a complex and varied market. Having an Indian national as the head -

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someone who knows the market and knows Indian consumers - is extremely important." 1

The Managing Director, Max India Ltd, said: ``Max New York Life is a partnership that is committed to the Indian insurance sector. It is our endeavor to set industry benchmarks and provide the highest standards of service to the Indian public. This requires us to make investments in human resources. We are proud to be the first insurance joint venture company to register in India, as it will give us the opportunity to create a team of service leaders.2''.

The Chairman and Chief Executive Officer, New York Life International Inc, said: ``The announcement of a policy framework to the final awarding of licenses is expected to be completed in the next six-eight months. However, insurance is a service industry, which requires huge investments in manpower training and development over a period of time. The registration of the new company will enable Max New York Life Insurance Company to employ and effectively train the best talent in the Indian market and so ensure that we are ready to operate in India when we get the license. '' He further adds, "We look forward to fulfilling that trust and are exited to be in the forefront of the changing Indian Insurance market.3"

"We are working towards developing and launching mass-customized life insurance products and solutions for our consumers,” said the new CEO of Max New York Life. He also highlighted the cooperation he witnessed between the two companies. "By law, Max New York Life is a 74-26 joint venture, but the spirit here is of a 50-50 partnership from beginning to end1".

C.2.4 Birla AT&T Communications Ltd.

The coming together of the Aditya Birla Group with AT&T in 1995 marked the making of one of India's largest partnerships in the telecommunications sector. Birla-AT&T Communications Ltd., is a joint venture between the Aditya V. Birla Group (51%) and AT&T Wireless Services (49%). Milestones in the formation of IJV 1 http://www.indiacore.net/news/finnenews12.html 2 Interview, Max India Ltd., New Delhi, India, 2000. 3 http://in.biz.yahoo.com/001115/18/bxpu.html

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• 1995 – Aditya Birla Group and AT&T start negotiations for an IJV. • 1996 – The MOU for the JV was signed. • 1997 – Startup of Birla AT&T • 1999 – Telecom bill ratified to allow AT&T to have a majority stake. • 2000- Birla AT&T and Tata Communications to merge2

C.2.4.1 Indian Parent – Aditya Birla Group

The Aditya V. Birla Group is the second largest industrial houses in India, with extensive overseas operations, knowledge and experience in implementing large projects and annual revenues of US$ 4 billion3. It has manufacturing and marketing operations in man-made fibers, aluminum, cement, petroleum products, carbon black, chemicals, fertilizers, sponge iron, caustic soda and insulators. Some of the better known companies in the Group are Grasim Ind. Ltd, Indo-Gulf Fertilizer and Chemicals Corporation, Mangalore Refineries and Petrochemicals Ltd., Century Textiles and Century-Enka Ltd.

The group has operations spread across Egypt, Indonesia, Philippines, Thailand, Poland, Rumania, Russia, and Vietnam. It is the world's largest producer of viscose fiber and possesses the world's largest palm oil refinery.

K. M. BIRLA inherited a $5 billion empire in 16 countries on the untimely death of his father Aditya in 1995. Birla Group's flagship Grasim Industries Ltd. makes everything from fabric to chemicals to cement and may find tough competition in these industries down the road. Group profits have been soft, and the consensus is that the company is stretched too thin. BIRLA has had the foresight to put new projects--such as a paper pulp plant--on hold. The BIRLA group aims to be future oriented, while maintaining its long tradition as a major force in the Indian business environment. And despite his Western education, his empire remains closed and

1 op.cit. 2 http://www.adityabirla.com/companies/grtelecomm.html ; The Aditya Birla Group, AT&T and

Tata Industries Limited have signed a Memorandum of Understanding expressing their intent to merge the cellular properties owned by Birla AT&T Communications Limited and Tata Communications Limited. This combination will result in a joint venture company wherein each of the three partners will have an equal holding.

3 http://www.adityabirla.com/group/index.html

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secretive. In some cases, deregulation could give the large groups new businesses for the future.

Figure C.5 Birla AT&T Key Data

C.2.4.2 U.S. Parent AT&T Wireless Services

AT&T has 120 years of experience in the telecommunications industry and earned communications services revenues in 2000 of US$ 51 billion. AT&T Wireless Services is the world's largest cellular company1. It employs over 12'000 people and has more than 6.5 million subscribers. AT&T provides a full range of communications services to business, consumers, telecommunication service providers, and government agencies, including advanced voice, data, wireless, electronic and consulting services.

AT&T consists of 4 business groups, which include cellular, messaging, wireless data, and aviation communications. AT&T currently has 107 licenses and offers cellular services in more than 5000 cities throughout the North American cellular

1 http://www.att.com

Birla AT&T

Parents: Aditya Birla Group and AT&T WirelessYear of creation: 1997Ownership Structure: Aditya Birla Group 51%, AT&T 49%Board representation:Business Model: Aligned to AT&T, standardized to own IJV Indian modelAsia Pacific HQ: Hong KongAssets* ($ in millions): Aditya Birla Group 1,213

AT&T 242,223

Revenue* ($ in millions) Aditya Birla Group 910AT&T >200,000

* As per financial year 2000

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network and worldwide. AT&T Asia-Pacific provides a broad range of wired wireless and online services to customers across Asia-Pacific. AT&T has offices in 14 countries across the region and joint ventures in China, Australia, Hong Kong, India, Japan and the Philippines.

AT&T does business in approximately 200 countries and is the world's networking leader, providing communication services to businesses, consumers, and government agencies. Their worldwide intelligent network carries 185 million voice, data, video, and fax messages every business day.

AT&T is a major player in long distance communication services. They expanded into wireless services as they bought McCaw communications in 19941. They started their international thrust in AP and South America after home growth started stagnating. AT&T needed an IJV partner in most countries. They opted for a cascade structure in most regions and in Asia-Pacific started out in Singapore. AT&T Telecom in AP is experiencing phenomenal growth and the business environment is constantly changing.

AT&T Wireless Services' partnership in India is an important step of the company's extensive Asian presence. AT&T has further IJVs in strategic locations in Asia-Pacific region.

C.2.4.3 The IJV – Birla AT&T

Birla was AT&T’s partner of choice. AT&T approached all the large industrial houses e.g., TATA’s, Birla’s etc., but the reasons for choosing Birla’s was the following. Birla had as of yet no exposure in the service sectors and they were always in their core sector. Shortly before this time A. BIRLA, the founder of the group, wanted to get into the service sector, his prime choices being insurance and telecom sector as these are on their way to privatization.

The MOI for the joint venture between the Aditya Birla Group and AT&T was signed in 1996, and the companies came together in 1997. The telecom policy of 1994 mandated a minority interest for foreign telecommunications companies so the ownership of the IJV was 49% AT&T and 51% the Aditya Birla group. AT&T was uncomfortable with its minority stake and while using its brand name to the product. 1 Note: McCaw management still have a large influence in AT&T wireless IJV’s

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The activities of the joint venture are as of yet restricted to AT&T wireless service but the real strength of AT&T, such as long distance services, will be expanded into as soon as the appropriate telecom bill is ratified by the government1.

The coming together of the Aditya Birla Group with AT&T in 1995 marked the making of one of India's largest partnerships in the telecommunications sector. AT&T thought that the TATA’s were too bureaucratic and assumed that the BIRLA’s had the financial power to invest and backup in IJV. During the IJV it became clear that AT&T could manage on its own as far as the finances were concerned. Control issues were agreed upon. These funds were used for increasing network coverage, improving network quality, and bringing in state of the art product delivery and back office enhancements. "This tranche of investments takes Birla AT&T's total investments in its cellular venture to Rs. 1,700 crore, which will catapult Birla AT&T to becoming a world-class network provider", says Birla AT&T president and CEO.

Gearing up to establish India's largest cellular network, Birla AT&T plans to set up 300 cell sites, 5 MSCs (Mobile Switching Centres) and cover half of all district headquarters that come within its area over the first three years. Upon completion of the network, Birla AT&T will have one of the largest private microwave communication systems in India.

Apart from strengthening the domestic coverage, Birla AT&T is all set to become the leading international roaming service provider in the country with access to over 200 GSM networks worldwide with special emphasis on the US continent.

This announcement marks the completion of the major aspects of the first phase of the US$ 1.5 billion project to build India's largest cellular network. Voices on the IJV:

"The joint venture is committed to building a world-class cellular network in the two states, providing quality of service that will exceed the expectations of our

customers"2.

1 Note. Done in October 1999; stable BJP govt. 2 AT&T News Release, Oct. 24, 1996

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"The Birla AT&T joint venture is a critical element of AT&T's global wireless strategy", said the Vice President-international, AT&T Wireless Services. "We are pleased to be offering cellular services in India that meet the highest international standards."

Its performance in the last fiscal year has been very good as it has grown by about 70 % in terms of revenues and by over 58 percent in terms of subscriber base in both the circles put together. From Rs 54.38 crore in 1997-98 Birla AT&T’s revenues is estimated to have gone up to Rs 92.85 crore in last fiscal and the total subscriber base has gone up from 54,363 in 1998 to 86,017 by April 19991.

C.2.5 Sprint RPG Sprint RPG India Ltd is a 50:50 joint venture between Sprint International, USA, and RPG Enterprise. Sprint RPG India is the provider of business communication services, which include integrated network solutions and global traveler services. Integrated network solutions services cover services like network systems integration and E-mail. • 1994: The company launched its E-mail service—SprintMail, which offers

reliable, cost-effective, and a faster communication service. The company's E-mail service has already acquired a name in the world.

• 1995: introduction of its second global voice service, prepaid calling cards. In this, the customer can pay in advance for a fixed amount of long distance international calling over Sprint's global fiber optic network.

C.2.5.1 Indian Parent: RPG Enterprises

RPG Enterprises is India’s 4th largest industrial family2. There are 30-35 companies in the RPG group ranging from tire manufacturers, agricultural business to supermarkets chains to telecom providers (e.g., Ceat and Dunlop tyres, Foodworld, RPG Sprint).

R.P. GOENKA, Founder of the Group, presently the Chairman Emeritus, is a pioneer of Indian business. H.V.Goenka is the Chairman of the US $ 1.6 billion RPG Enterprises which is amongst the five largest groups in India. He is a past

1 Crore = 10 million ; 1 US$ = ~ 47 Rs. 2 http://www.rpgnet.com

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president of the Indian Merchant's Chamber, Bombay Chamber's Best Manager of the year 1995, and Committee member of Federation of Industries Chamber of Commerce. SANJIV GOENKA, youngest son of R.P.GOENKA, is the Vice-Chairman of the Group. RPG Enterprises is one of India's best-managed group of companies with a diversified but integrated presence. The group's operating style seeks to achieve the right fusion of professional management and entrepreneurial drive. The group's financials and sector wise turnover show its enormous strength in forging a strong economic path for itself.

Figure C.6 Sprint RPG Key Data

RPG has a turnover of 6 billion US$, assets of 2.1 billion US$, and employs over 63000 people1

In the mid-1990s, the RPG Group set a major strategic redirection, as the international competition intensified in the wake of Indian economic liberalization.

1 http://www.rpgnet.com/

Sprint RPG

Parents: RPG Enterprises and Sprint International / Global OneYear of creation: 1994Ownership Structure: RPG Enterprises 50%, Sprint Global One 50%Board representation:Business Model: Aligned to Sprint Global One, standardized to own IJV

Indian modelAsia Pacific HQ: Hong KongAssets* ($ in millions) RPG Enterprises 1250

Sprint Global One 42,601Revenue* ($ in millions) RPG Enterprises 1220

Sprint Global One 23,643

* As per Financial Year 2000

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After restructuring, RPG led its business activities along specific company lines. For the new decade, RPG is aiming its sights at the knowledge-based sectors such as the insurance and Internet technology industries.

RPG sees the core competency its partner brings to the IJV as technological skills, leadership skills and industry specific skills. RPG feels that the management of Indian human capital is the core strength of the corporation and as RPG pronounces "our knowledge is easily transferable"1.

C.2.5.2 U.S. Parent - Sprint International / Global One

Global One was launched as a joint venture of Deutsche Telekom, France Telecom and Sprint in 1996. In January 2000, France Telecom announced it was acquiring Global One in its totality. Since then, Global One has reorganized and operated as an independent company within the France Telecom Group2.

At that time, Global One will fully integrate its operations and personnel with those of Equant, creating a company numbering 13,000 employees and approximately 3,700 large business customers, including more than three-quarters of the world's top 100 companies. Pro-forma annualized revenues for the combined company was predicted to be US$ 2.5 to 3 billion for the year 2000. In the period leading up to the merger, Global One will continue to provide its customers the full range of its

world-class services and meet all of its contractual commitments3.

Global One offers a single source for high quality IP, data and voice telecommunication services worldwide, with a primary focus on the multinational business market. A recognized leader in providing integrated e-business solutions to meet customers' enterprise-wide needs, Global One has one of the world's most advanced global networks to support convergent services and applications. Global One has a local sales presence in more than 70 countries and had revenues of US$ 1.1 billion in 1999. 1 Interview quote, RPG Group, Mumbai, India, 1999 2 On November 20, 2000, France Telecom and Equant -- the Amsterdam-based carrier with a

network spanning 220 countries -- announced an agreement to create a world-leading global provider by merging Global One with Equant. France Telecom will be the majority shareholder with a 54.3 per cent stake in the combined Equant/Global One company. Regulatory approval for Equant/Global One is expected by mid-2001.

3 http://www.global-one.net/

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C.2.5.3 The IJV: Sprint RPG India Ltd

Sprint RPG's main business is to provide e-mail service within India for business customers using leased lines. Sprint RPG does not export any services, and does not import parts of services except for maintenance services from Sprint and maintenance parts from Tandem, the supplier of the computers that power the e-mail service.

Sprint Fax, a dedicated, high-speed data network with a single message multiple destinations facility, was introduced also in 1995.It has some novel features like broadcast, paper-free transmission, and deferred delivery options. Its state-of-the-art software center in Delhi has already reached its full capacity. The workstations on LAN are connected to the IBM mainframe in the US. At its head office in Delhi, it has got a modern messaging center, which houses the Tandem mainframe host computer. This is the main center for the control of Sprint RPG's messaging solutions. Another important service, which is provided by Sprint RPG, is Help Desk for customer support round-the-clock.

Now, Sprint RPG provides consultancy and turnkey services for enterprise-wide networking in partnership with RPG Satcom. Already it has acquired a respectable position in the highly competitive Indian value-added services market1.

Three years ago, while the critics speculated the economic viability of setting up an electronic network in India, Sprint RPG was among the first few who took the bold step of setting and started building a countrywide X.25 Electronic network. Today, after three years, Sprint RPG is not only the market leader in the corporate segment but also showed that such a business is economically viable for Sprint RPG India Ltd2.

C.2.6 Ogilvy and Mather (O&M) Ogilvy & Mather, India (O&M India) is a joint venture between S.G. Benson, which was integrated into the JV, and Ogilvy & Mather world wide, which is part of the EEP group.

1 http://www.sprintrpg.com 2 http://www.royans.net/v1/articles/other/srilarticle.shtml

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C.2.6.1 Indian Parent – S. G. Benson

Core competency of O&M India is brand management. Local clients are Unilever, Tata’s and Cadbury Schwepp among others. O&M sometimes adapt worldwide O&M brand strategies to local environment. As a sign that O&M India is gaining recognition in O&M worldwide, the next worldwide board meeting will take place in India.

C.2.6.2 U.S. Parent – Ogilvy & Mather

Ogilvy and Mather (O&M) is one of the largest marketing communications networks in the world. O&M services more Fortune Global 500 companies in five or more countries than any other agency.

The key message of O&M has been “One brand, One voice”, “360º Branding” with over 50 years of brand building. Over the past 50 years, O&M has helped to build some of the most recognizable brands in the world: American Express, Sears, Ford, Shell, Barbie, Pond's, Dove, and Maxwell House among them, and more recently, IBM and Kodak. As brand stewards, O&M works to leverage the brands of their multinational clients by combining local know-how with a worldwide network, creating powerful campaigns that address local market needs while still reinforcing the same universal brand identity. O&M’s history is the evolution of its founder’s thoughts, talents, and work ethic translated into a company culture and a defining business strategy1.

The hallmark of their brand-building capabilities is a balance of global and local brands. Their local clients keep them in tune with local market nuances, which is critical for the success of their multinational accounts, and the source of O&M's largest knowledge database. O&M is a member of the WPP Group plc, one of the largest communication services companies in the world. There are more than 60 companies in the group, including J. Walter Thompson, Hill and Knowlton, Ogilvy Public Relations, Millward Brown, Research International, Mindshare, and Enterprize IG. Through the WPP family, O&M has access to top-rated expertise in the communications spectrum, such as design, research, public relations, identity, retail marketing, sales promotion and new media.

1 http://www.ogilvy.com/history/default.asp

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Figure C.7 Ogilvy & Mather India Key Data

C.2.6.4 The IJV – Ogilvy Consulting India Ltd. Milestones of the Partnership: • 1972 – Ogilvy & Mather buys 40% of SG Benson • 1996 – Equity ratio 60:40 in favor of Ogilvy & Mather • 1998 – Ogilvy Consulting created out of a division of Ogilvy & Mather

O&M bought 40% of SG Benson in India in 1972. Ownership structure is 51 % OM, 49% Management, before 1996 ratio was 60:40 in favor of O&M.

Ogilvy Consulting (OC) was created out of a division of O&M in the beginning of 1998. It is a knowledge-based consultancy to advice clients on brand strategy and innovation. OC functions as multidisciplinary solution provider as they can draw on OM’s vast global experience (wants to be in the league of McKinsey & Co). OC was conceived in India as a thinktank for clients to provide knowledge in the local environment. O&M India acquired new products etc. from its parent in New York. Main interaction is with O&M AP.

Ogilvy & Mather (O&M)

Parents: S.Benson (merged to O&M India) and Ogilvy & Mather(worldwide)

Year of creation: 1998Ownership Structure: 49% merged S.G. Benson O&M (India), 51% Ogilvy and

Mather (worldwide)Board representation: O&M (worldwide) 3 and O&M (India) 2Business Model: Aligned to O & M (worldwide)Asia Pacific HQ: Hong KongAssets* ($ in millions): O & M (India) N.A.

WPP plc (O&M parent) 8,116

Revenue* ($ in millions) O&M (India) 4.5WPP plc(O&M parent) 547

*As per financial year 2000

N.A. = Not available

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C.2.7 Analysis of the literature context and data

In addition, this analysis includes reactions to the relevant literature, as they related to the interviews and emerging insights. A) Classification of literature according to the elements of the theoretical

framework, i.e. IJV theory, knowledge management in organizations, and inter-organizational knowledge management

B) According to the actors in the IJV Framework, i.e. parents, and IJV, knowledge givers and receivers, top and middle management.

C) According to knowledge management processes, i.e., strategic planning, alliance management, international human resource management, and technology management.

Eventually, this effort involved categorizing, combining, and eliminating insights until a parsimonious but accurate representation of the overall data emerged for each process.

C.2.8 Indian Economic Environment

The Indian economic environment increased significantly in interest for foreign MNCs when the Controller of Capital Issues was abolished in 1992, as a first step towards Indian economic liberalization. The following year access to international markets was allowed and many restrictions on the interest rates on debt issuance were lifted.

Changing patterns of demand is driving the rise of the service sectors. But after a decade of liberalization, the service boom is also a competitive response to globalization. The high cost of capital, caused by vast government borrowing, is India's biggest source of competitive disadvantage.

There are two main types of Indian companies favored and in a position to be suitable IJV partners to US multinationals. Of the first, the family- owned industrial conglomerates are rapidly sinking into decline, while new investor-friendly businesses in high-growth, knowledge-based sectors have burst into prominence. RATAN TATA of Tata Sons, and K. BIRLA of Aditya Birla, India's two largest industrial houses, are in the process of adapting their business strategy in line with the requirements of the knowledge-based industry. Media, advertising, retail,

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personal financial services, entertainment, tourism, leisure are the most growth-driven segments of the economy.1

Under the aspect of the value of the individual firms’ knowledge assets and protection, Indian intellectual property rights protection laws, though perceived to be

very poor in global business rankings2, appear to adhere to WTO standards in most respects except patents and the uncertainty of actual enforcement. In recent years, this fear has been somewhat allayed by higher transparency in legal issues, particularly in new, high growth industries.

The telecommunication industry is sizeable, with a total expenditure on telecom

services and equipment of 6.5$ billion US in 19953. Telecommunication infrastructure enjoys fiscal benefits such as tax holidays and subsidized import duties. It is a high growth industry, since India has one of the lowest telephone densities in the world, and the fact that economic growth has been rapid since the 1991 liberalization of the basic telecommunication - local and domestic long distance telephone and fax service through fixed wires - is provided by government monopolies. Value-added telecommunication - e-mail, cellular mobile telephone, radio paging, and satellite data transmission - was first available in India in 1995, and is supplied by private sector companies and most of these are joint ventures with foreign MNCs.

1 Financial Times, India, April 27, 1999. 2 Mansfield, E, "Intellectual Property Protection", 1994 3 Voice and Data, 1997

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C.3 Strategic Planning: Implementing a Global Knowledge Management Strategy in the IJV

"Any company that depends on smart people and the flow of ideas must choose a

KM strategy"1

Thomas Stewarts' conclusion about the role of knowledge is typical: „The new economy is about the growing value of knowledge as an input and an output, making it the most important ingredient what people buy and sell“ 2.

"What is important is not what we do but why we do it- the underlying philosophy and view of people on the business that provides foundation for the practices. The emphasis should be placed on the tangible explicit aspects of knowledge that characterizes most KM projects is unlikely to provide much value and maybe, at worst a diversion from where and how companies should be focussing their attention"3.

External or inter-organizational possibilities, such as IJVs, may be at least as attractive and ultimately more important.

First, KM is a people-to-people process; relationships precede and are required for meaningful sharing and transfer. Second, learning and knowledge transfer are interactive, ongoing and dynamic processes that cannot rest on a static body of knowledge. Finally, it all comes back to a personal and organizational willingness and desire to learn.

C.3.1 Global Knowledge Management Strategy

One of the major challenges of managing knowledge in an information-based services environment is the fact that value lies locked in peoples’ heads. This should be one of the key aspects of KM techniques used to implement a global KM strategy.

1 Hansen M.T, Nohira, N., and Tierney, T., Harvard Business Review, 1999. 2 Stewart, T., Fortune, 10.12.1998. 3 Pfeffer, J. and Sutton, R. I., California Management Review, 1999.

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KM involves the definition, capture, creation and retention of knowledge in order to create value for the organization. Strategic planning activities can be classified as dealing with the complexity, uncertainty and unpredictability of the future of the organization. If knowledge is deemed as the service firm's most important resource, then KM should be a priority in the strategic planning activities of an organization.

The need for a defined KM strategy arises when there is: • Lack of attention to the explicit or formal management of knowledge in the

current organization • Failure to leverage the implicit value of knowledge in business development and

strategic planning • Failure to learn from past failures and successes in corporate decision-making • Creation of value-added or „making money“ from knowledge embedded in

products, processes or held by employees

Corporate or organizational knowledge reveals not just what an organization does, but also how and why it does and what it does. Knowledge is not confined to systems and documents, but exists in the firm culture and in the minds and interactions of its people.

An IJV KM strategy requires a philosophy or set of guidelines about how an IJV will operate, and its core values and core assumptions. IJVs learn and change and do things consistently while implementing their general principles to enhance organizational performance, operating on the basis of a general business model or theory of organizational performance. A set of core values and an underlying philosophy for the IJV framework would permit organizations to avoid the problem of becoming stuck in the past or mired in ineffective ways. Consequently, these firms are able to learn and adapt, to communicate with partners and across large geographic distances, and to do so in ways consistent with their basic understanding of what creates success and high performance in their particular business.

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Figure C.8 Value Creation

Organizations need to acknowledge new sources of knowledge that can stimulate innovation. The real payoff comes from capturing knowledge that lies outside

traditional boundaries and can spur change1.

Companies need to look beyond standard corporate processes and structures to capture and act on the insights of employees away from the established center of the organization. While measuring the resources and gaps empirically, it must be defined that each firm has its own approach to describing and classifying its strategic and competitive knowledge.

Coordination and a common approach require the leadership of the CEO and the firm's strategic planning taskforce. When strategically managing knowledge within the IJV of the parent company and the IJVs, the CEOs should be sure about the

Source: Kim, W.C. and Mauborgne, R. Sloan Management Review, Summer 1999, 45.

Relationships among Value Creation, Value Innovation, and Technology Innovation

Value Creation

Value Innovation

TechnologyInnovation

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priority given to KM. Top-down commitment is necessary to choose, implement and overcome resistance to a new KM strategy. The top management of the organization should be committed to the implementation of the KM strategy.

Having performed a strategic evaluation of knowledge-based resources and capabilities, an organization can determine which knowledge should be developed or acquired.

On the other hand a firm must strive to exploit any “excess knowledge”. Ultimately, the ideal for most companies is to maintain a balance between exploration and exploitation within all areas of strategic management. The creation of unique, strategic knowledge takes time, forcing the firm to balance short- and long-term strategic decisions, and allocate knowledge creating and processing efforts accordingly.

Figure C.9 Developing a Knowledge Strategy

Knowledge is essentially dynamic, so what is innovative knowledge today will ultimately become the core knowledge of tomorrow. To gain maximum value added from the alliance, firms must analyze their knowledge gaps, to understand what they need to expect from a potential partner in order to fill external knowledge gaps2. 1 Brown, J.S., Management and Information Technologies, 1998. 2 Zack, M.H. California Management Review, 1999.

Linking Knowledge with Strategy

Source: Zack, M., Developing a Knowledge Strategy, CMR Spring 1999

Knowledge Gap

Strategic Gap

What firmmust know

What firmmust do

What firmknows

What firmcan do

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This constitutes the strategic knowledge map of the parent firms should be complementary to each other to have the maximum learning gain from the alliance1.

Global KM Efforts

In the 1997 DELPHI study2 of 300 companies and their knowledge initiatives, the KM mandate in over half of them came from the corporate executive offices. Only in 51 companies did IT management sponsor the KM initiative.

Collaboration means that „the result is the product of common effort, the goal is shared, and each members' success is linked with every others…ideas and materials too, will be shared, labor will sometimes be divided and everyone in the group will be rewarded for successful completion of the task“3. Turning knowledge into action is easier in organizations that have driven fear and internal competition out of the culture. Instead of confusing motivation with competition, there should be an interest in enhancing organizational performance and winning the battle in the marketplace.

There are two principal foci of KM within the IJV framework. The first is the better transfer and sharing of existing knowledge. The second approach is that of creating new knowledge and converting it into valuable products, services or processes and transferring the knowledge back to the parent company. Here the focus is on better and faster innovation.

Information-based services focus on two key knowledge levers.

Knowledge in processes: This is vital meta-knowledge that can help an organization be much more effective.

Knowledge in people: Perhaps 90 % of information-based services organizational knowledge lies with the people. Many professionals feel that it is their knowledge that makes them valuable. When this knowledge is shared and integrated into the organization it becomes much more valuable to the firm as a whole. Personal, hard-won knowledge is not readily shared in the highly competitive information-based

1 For complementary vs. identical knowledge in strategic alliances see Levinson, N.S., and Ashahi,

M., Organizational Dynamics, 1999. 2 Delphi Study, 1997. 3 Kohn, A., " No Contest: The Case Against Competition ", 1992.

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services sector. This is a fundamental cultural and behavioral issue, where an organization needs role models. The top management must support all incentives for encouraging employees to share their knowledge with others and encourage a "knowledge-sharing" environment.

DAVIS et al1 define organic knowledge as "a set of activities using individual and external knowledge to produce outputs characterized by information content".

In the knowledge integration phase, barriers arise “because individuals in the parent organization have often had very little interaction with the IJV, and therefore have difficulty interpreting its highly specific and sometimes newly created assets”2. Here top management support plays an important role: liaisons of the IJV to the respective parent firms need the support of senior management to facilitate the integration of created knowledge back into the parent firm.

KM systems seem to work best when the people who generate the knowledge are also those who store it, explain it to others, and coach them as they try to implement knowledge. The fact that knowledge is acquired through experience and is often intangible and tacit produces a further problem in turning knowledge into action. Although specific practices are obviously important, such practices evolve and make sense only as part of some system that is often reorganized according to some philosophy of performance and critical mass. Until recently, KM efforts could be characterized by the following guidelines. • KM efforts mostly emphasize technology and the transfer of codified

information • KM tends to treat knowledge as a tangible thing as a stock or a quantity and

therefore as something from the use of that thing. • Formal systems can’t easily store or transfer tacit knowledge. • The people responsible for transferring and implementing KM frequently don’t

understand the actual work being documented. • KM tends to focus on specific practices and ignore the importance of a holistic

strategy.

1 Davis, G. et al., MISRC Working paper, 1991. 2 Tiemessan, I., Lane, H.W., Crossan, M.M. and Inkpen, A.C. In “Cooperative Strategies; North

American Perspectives”, 1997.

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A KM strategy that does not try to be "all things to all people", but still is based on an integrated approach, is most likely to be credible and successful.

This recognition enhances the importance of contributions that experienced employees make but still KM is more than knowledge it captures. It also identifies the nature of that cannot be captured by knowledge, disseminates the information about it so people can query those resources - those experts - as needed and incidentally provides good reasons to retain them in the enterprise.

C.3.1.1 The Knowledge Audit

Know your assets

A specialized enquiry what knowledge the partner has, where it is located, and how it flows through the enterprise are required. A knowledge audit can show what changes are needed in organizational and personal behavior, business processes and enabling technologies so knowledge can be applied to improve competitive advantage. A successful audit can identify intellectual assets of value to the company.

The audit should cover explicit and tacit knowledge assets of both partners. To begin an inventory of tacit knowledge assets, the experts within the organization must be identified - employees who seem to do their jobs better, more efficiently or more intelligently than others do.

A knowledge audit is a more qualitative valuation than a quantitative one. A complete knowledge audit must evaluate, in ascending order of difficulty, the state of the company's technology, how well its processes support knowledge sharing, and the work styles and culture of its people. Knowledge Mapping captures the patterns of knowledge flow within the organization. This knowledge flow audit examines how people process information, since ultimately that determines how well an organization uses and shares its knowledge.

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Figure C.10 Intangible Assets

The goal of knowledge due diligence is to examine people's attitudes toward and habits concerning knowledge sharing in the firm and learn with whom they collaborate, how they get the information they need, whether and when they document their own knowledge, how they store and distribute knowledge. It often includes a written survey, facilitated group discussions and individual interviews. When all levels are involved, findings better reflect reality because the perspectives of workers at a single level cannot skew overall results. Multilevel involvement also reveals the expectations and perceptions of both senior and middle management. "If there is a big gap between management and employee thinking in the organization, it might be a sign that leadership is giving lip service to KM but isn't providing a

place for it in the daily life of the corporation."1

1 Herzog, M., Managing Director KPMG, New York, Knowledge Management Magazine, 1999.

Source: Knowledge Management Magazine, 1999

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Tools to measure knowledge

The knowledge audit can also reveal how knowledge is shared across departments. The audit may also determine whether business processes are designed to support intra- and interorganizational knowledge sharing. For example, audits ask whether a company provides time for knowledge capture within workflow1.

A knowledge audit can also uncover best practices within the organization2. Often, knowledge initiatives are launched too quickly, in response to executive pressure inspired by the projects of competitors or because due to an interesting analyst report or journal article. Without the kind of understanding of an individual organization's KM strengths and weaknesses that an audit provides, initiative may seek solutions to non-existent problems or ignore problems that need immediate attention.

Audit tools, such as the knowledge-based SWOT analysis, which maps organization's knowledge resources and gaps against the firms' strategic opportunities and threats are helpful to understand the organization's strengths and weaknesses.

The knowledge goal of an alliance should be to combine its learning experiences into a “critical learning mass” around particular strategic areas of knowledge. By using a knowledge map to prioritize and focus its learning experiences, organizations can create leverage for their learning efforts.

C.3.1.2 Top Down KM Strategy

Top management must come to the realization that knowledge needs to be nurtured, supported, enhanced, and cared for. Thinking in terms of systems and ecology1 can help provide for the creation of platforms and cultures in which knowledge can really emerge. Executive commitment, sponsorship, and leadership are critical success factors for KM initiatives to succeed and realize business value.

The top management of the organization, whom LYLES describes as “the key decision makers”, initiates higher level learning. She argues that as top management undoubtedly has a large influence on the attitudes and beliefs of others in the firm, 1 DELPHI study 2 See C, TBP

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they determine the “core area” of the organization’s knowledge structure2. As top management also determines the strategic direction of the organization, they should articulate the global knowledge strategy, design the change initiative and communicate these changes to the rest of the organization.

Knowledge is manageable only insofar as leaders embrace and foster the dynamic nature of knowledge creation. The role of the top management of the IJV is as the providers of a supporting environment for knowledge creation and manage knowledge emergence. Leaders must support emerging processes with visionary proposals and a personal commitment of time and power. The success of knowledge creation depends on management's assumption of responsibility, justification, financial backing and commitment.

As with change processes in most organizations, it is not essential that the leaders initially endorse it, only that they don’t subvert the pockets of innovation as they occur. This first requires that the leadership itself be convinced that transfer has merit and real impact.

One of the main reasons that KM efforts are often divorced from day to day activities is that the internal and external individuals who design, build and implement the systems have limited often inaccurate views of how people actually use knowledge, so-called „working knowledge“ in their jobs3. This validates a knowledge audit as a preliminary step to implementing KM in the IJV.

The following factors may be indicator of the commitment of an organization’s senior executives towards KM.

Power: Even those studies that do look at the motivation to learn have not typically investigated the role of power4. Organizational learning and the flow of knowledge will have many more barriers when senior managers do not actively influence a KM initiative.

1 Brown, J.S. and Duguid, P., Organization Science, 1991. 2 Lyles, M. A., International Business Review, 1994. 3 Harper, D., Quantitative Sociology, 1997. 4 Szulanski, G., Strategic Management Journal, 1996.

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• Culture: Moving towards a knowledge sharing environment is primarily a cultural change and senior executives must actively sponsor and guide the organization's journey towards a knowledge-sharing environment.

• Commitment: It is not enough for executives to set the direction and make sure the organization is headed that way. Top management cannot "push" others in the organization to change. Senior managers must be at the front of the change, and motivate the others to follow by setting an example. They must also use the knowledge that has been contributed by others, and make this known. Organizing reward and recognition processes to celebrate knowledge sharing achievements are also powerful motivators for human performance. In summary, executives must demonstrate leadership in their behavior; consistency in action is a powerful signal to help steer an organization forward. As in any large-scale initiative, if top management does not change, there is little incentive for employees to follow.

• Funding and Resources: In addition to providing leadership through sharing of knowledge, senior managers must lead the efforts by securing support to others. In a highly competitive global economy, it is no longer sufficient to have a single executive for a fundamental change initiative. Developing a sponsorship strategy that aligns agreement to the change journey, strategy objectives, initiatives, expected value, success measures, risks and constraints is a critical condition for ensuring support and acceptance by key stakeholders. Global efforts and resources, as well as global communication can only ensure the success of global KM initiative

• Credibility: Support and public commitment by top management can also be important for the credibility of the initiative. It underscores the fact that the initiative is part of an integrated KM strategy.

C.3.1.3 Creating the Environment for Global Knowledge Management within the IJV

Good, prior, personal relationships—what organizational sociologists have called social capital or embeddedness1—are critical to the success of KM. That is, the relationship effect seemed to derive from the presence of a common language and a higher degree of comfort with the people involved. One reason for this result is that close ties, as in partnerships, facilitate the transfer of complex knowledge2. A critical aspect for creating an environment that supports the implementation of KM

1 Granovetter, M., American Journal of Sociology, 1985; Uzzi, B., Administrative Science

Quarterly, 1997. 2 Ghoshal, S., Korine, H. and Szulanski, G., Management Science 1994; Hansen, M.T.,

Administrative Science Quarterly, 1999; Szulanski, G., Strategic Management Journal,1996; Uzzi, B., Administrative Science Quarterly, 1997.

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initiatives should be the facilitation of networks of individual connections and to create the conditions needed to grow and share robust contextual knowledge.

C.3.1.4 Implementing The KM Strategy

Research indicates that implementation of KM strategy is more difficult. Diffusion proceeds slowly and fitfully and backsliding is common. Senior Management must play a very active role in navigating the cultural change around knowledge initiatives and settling milestones initially by defining the course and direction for the initiative. By working to define a clear vision for KM within their organization, executives will set and keep their organizations on track.

There is a tendency to let planning, decision making, meetings, and talk to substitute for implementation. Preparing a white paper layout and the associated processes such as analysis, writing, critique and revision for key procedures is important but action is more critical.

What is the company’s response? Does the firm provide soft landings? Or does it treat failure and error so harshly that people are encouraged to engage in perpetual analysis, discussion, and meetings, but not to do anything because they are afraid of failure? All learning involves some failure, something from which one can continue to learn and reasonable failure should never be received with anger.

For effective KM processes, a key element benefiting the flow of knowledge is the support of powerful and influential actors in the organization. While there are several potential sources of organizational power—e.g., location in the

communication network, reputation, performance1, two stood out for these knowledge-intensive linchpins: (1) hierarchical power, especially senior management support, and (2) structural power of key business units or technical experts.

HAMMER and CHAMPY’s aggressive methods are at one end of a continuum for improving knowledge processes2. At the other extreme is a laissez-faire approach to KM in the organization. Neither extreme seems appropriate for most companies’ knowledge work environments. The laissez-faire approach might be characterized as 1 Pfeffer, J." Managing with Power: Politics and Influence in Organizations ", 1992. 2 Hammer, M. and Champy, J. “Reengineering the Corporation”, 1993.

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finding good knowledge workers and leaving to their own devices only to measure performance.

The need for knowledge worker participation was cited in order to secure their help for the implementation of a new process. For example, organizations attempting to improve knowledge creation processes should steer toward the laissez-faire end of the continuum. These knowledge workers are perhaps the most autonomous and resistant to micro-level activity design. At the other extreme, firms wanting to reduce or eliminate the amount of administrative activity in knowledge work processes might employ change approaches closer to the reengineering end of the spectrum. Laissez-faire approaches take longer to implement but involve lower risk of obvious failure. Reengineering approaches are more visibly risky but can be fully implemented within a year or two.

People or sub-units that play a central role among the task interdependencies in an organization’s division of labor can be said to have structural power1.

Pressure and fear often make managers do erratic inconsistent, even irrational things2. They build cultures in which even the concept of failure is not particularly relevant. Fear starts or stops at the top. Leaders who inspire respect, affection, or admiration but not fear frequently lead organizations that are successful in turning knowledge into action.

Professionals in service organizations say that initiatives like KM fail in their organizations due to the fact that the correct, supportive culture is not in place3, and because the realization wasn't there that different parts of the organization are unlikely to recognize the larger benefits of the corporation creating more integrated types of knowledge. There is a difference in the kind of business environment that supports initiative such as KM, and the commitment to creating a culture which supports the client-oriented processes and structures necessary to ensure their implementation.

The answer to the question of whether the “knowing-doing gap” actually matters for organizational performance is not as obvious as it might seem at first. It is possible 1 Astley, W.G. and Zajac, E.J., Organization Studies, 1990. 2 Brennemann, G., Harvard Business Review, 1998. 3 Interview quote, Morgan Stanley, India, 1999.

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that differences in organizational performance come from differences in what firms know – the quality and depth of their insights about business strategy, technologies, products, customers and operations – rather than from their ability to translate that knowledge into action. There are important differences in knowledge across firms, such as differences in the sophistication of their understanding of management and operations. But such differences are only part of the reason for the differences in performance of firms; a much larger source of variation in performance stems from the ability to turn knowledge into action1.

Organizations use a combination of information technology tools such as e-mail, "best practices databases," data warehousing, internal directories, and Groupware to support employees seeking knowledge and collaboration across the organization. But they should not rely on the technology tools to create their own market. After all, although people have telephones, they don't automatically "reach out and touch" someone they don't know. The knowledge sharing culture has to be instilled within the organization, not just the culture.

Typical KM strategy and processes focus instead on the stock of knowledge, the number of patterns, the compilation of skills inventories and knowledge captured on overheads or reports and made available over some form of group ware. Such systems certainly don’t capture whether or not this knowledge is actually being used. Organizations that are serious about turning knowledge into action should measure the knowing doing gap itself and focus knowledge activities specifically.

The explicit attempts to manage knowledge as a strategic resource include: • Designing and installing techniques and processes to create, protect and use

known knowledge. • Designing and creating appropriate „knowledge friendly“ environments. • Articulating the purpose and nature of managing knowledge as a resource and

embodying it in other initiatives and programs.

People need incentives to participate in the knowledge sharing process. Different KM strategies call for different incentive systems. In fact, the level and quality of employees' contributions to the document database should be part of the job description and the annual performance review. During performance appraisals,

1 Pfeffer, J. and Sutton, R., California Management Review, 1999.

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employees are evaluated along a "knowledge dimension" according to their contribution to and utilization of the knowledge assets of the firm.

Leadership can help by promoting, recognizing, and rewarding people who model sharing behavior, as well as those who adopt best practices. It helps to design approaches that reward for collective improvement as well as individual contributions of time, talent, and expertise. It is necessary to constantly reinforce the need for people at all levels to take responsibility for voluntarily participating in this activity of sharing and leveraging knowledge. Managers should ask regularly what people are learning from others and how have they shared with management ideas they think are worthy and be sure to support teams that invest or "give up" resources to make this sharing happen, especially if they do not directly benefit.

Organizational learning theory has been geared largely towards organizational information processing, decision-making, and learning skills as barriers and enablers of a KM strategy1 from the concepts of ability, comfort and power more concrete to implementation of KM strategy.

What factors within the IJV framework cause a resistance to learning? Who is resistant to learning? Which incentives and enablers can decrease resistance to learning? These are questions that must be answered before the KM strategy can be implemented.

The most effective IJV knowledge initiatives are those that are demand-driven (the pull to learn and change comes from the person or unit that has a problem or need) rather than push or laissez-faire (if you let them know about it, they will seek it out) approaches. Leadership can help create and support demand, but it can't make it happen. Leaders can encourage collaboration across boundaries of structure, time, and function. Ways to do this are to: • Promulgate success stories, • Provide infrastructure and support, and • Change the reward system to remove barriers.

Indeed, a useful way to understand any organizational action, including the flow of knowledge, is to focus on both the desire and ability of the organization or of its

1 Huber, G. P., Organization Science, 1991.

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members to perform that action1. When we say that organizational learning and the flow of knowledge can only occur if the people involved want to and are able to do so, it seems, in retrospect, almost self-evident. For it may not be enough for organizational learning to take place if there is only an ability to absorb new knowledge and a high degree of comfort in doing so. Rather, supporters had to have the power and influence in the organization to make the knowledge flow happen, to overcome inertia2 and resistance3. Initiating this culture change and the acceptance of KM is a crucial factor for success.

C.3.2 Types of KM Strategy

Organizations that use knowledge effectively pursue either codification or primarily personal and use the second strategy to support the first. Eighty percent of their knowledge sharing follows one strategy, 20% the other. Executives who try to excel at both strategies risk failing at both, and extol far too many valuable resources on the process.

Business strategy must be the driver for KM strategy. It is important for managers to make the explicit connection between their company's competitive strategy and how they use and manage knowledge to support it. A few of the basic questions the IJV must ask itself are: • Are our knowledge requirements standardized or customized? This decision is

to be made depending on the services that the organization offers4. • Are our services mature or innovative? For mature services a codification

strategy would increase efficiency and eliminate redundancies and for innovative services, a personalized approach to KM would ensure a high quality and cost-efficient service.

• Is our knowledge base primarily explicit or tacit? For explicit knowledge codification would offer the most benefit and for the extraction of tacit knowledge, a personalization strategy would prove most effective.

1 Levin, D.Z. and Shortell, S.M. " Desire to Implement and Ability to Implement: The Case of Total

Quality Management", 1996; Zajac, E.J and Kraatz, M.S., Strategic Management Journal, 1993; Zajac, E.J. and Shortell, S.M., Strategic Management Journal, 1989.

2 Hannan, M.T. and Freeman, J., American Sociological Review, 1984 3 Dougherty, D. and Hardy, C., Academy of Management Journal, 1996; Maidique,M.A., Sloan

Management Review, 1980. 4 Some knowledge-intensive products and services - e.g., Investment banking, mature over time and

become standardized commodities. In effective companies the KM model stays the same even as new services mature.

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COHEN noted „in the US, most knowledge practice focuses on collecting, distributing, reusing, and measuring codified knowledge and information. Practitioners often look to information technology to capture and distributes this explicit knowledge; firms measure success by near term economic returns on knowledge investment“1.

Surveys indicate that organizations are according KM an increasingly higher priority2. The technology aspect and the explicitness of a major part of corporate knowledge are the two elements that receive the most attention. Technologies that support data warehousing, data mining and portals (single, browser-based points of entry to internal and external information), that disseminate knowledge throughout an organization, and that allow for real-time communication across geographic and functional boundaries are considered staples of the KM discipline. Knowledge categories such as best practices, customer requirements, competitive intelligence and transactional history are typically cited as cornerstones of KM content initiatives.

The sharing of tacit knowledge in informal, personal settings can also have dramatically positive effects. Together, the explicit and the tacit, the complexly technical and simply personal combine to create a holistic approach to KM in order to get closer to customers, to become more responsive (and, coincidentally, more efficient) and lead to the success of the IJV.

Most of first generation KM efforts put the emphasis on technology and the storage, and transfer of codified information such as facts, statistics, presentations and written reports. GREENGARD asserted that „it is clear that an Intranet is one of the most powerful tools for achieving results within the KM arena“3.

HANSEN et al. found that providers of highly specialized services also needed to

choose a KM approach that fits their needs and goals4.

Knowledge initiatives in organizations include: • Redesign strategies for knowledge work processes 1 Cohen, D., California Management Review, 1998. 2 Ernst & Young, DELPHI, KPMG 3 Greengard, S., Workforce, 1998. 4 Hansen M.T, Nohira, N., Tierney, T., Harvard Business Review, 1999.

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• Firms can change knowledge themselves by reducing a unit of knowledge that workers can reuse or access or by improving knowledge capture techniques.

• Firms can improve knowledge work by changing the physical location of where and with whom people work.

• Firms can use technology to bolster knowledge work by, among other things, creating knowledge bases and enabling telecommunications, infrastructure and applications.

• Make knowledge more portable, modular, accessible and recordable. Firms also address knowledge work improvement by changing the way they captured and stored knowledge e.g., a book of process knowledge for cross-reference.

• Changing where and with whom people work • Business planners: Often, shared physical experience is essential for a shared

view of the process. These should be from different business functions. • Cross-functional team of HQ marketers, field managers, and representative

franchise supervisors.

When the improvement goal is better creation of knowledge, design strategies involving where and with who people interact are more likely to be effective. Knowledge orientation is only one aspect in the choice of a design strategy. Other factors such as culture, strategy, competitive environment and IT infrastructure can significantly affect design efficacy.

Information-based Service Firms (ISFs) offer their clients advice that is rich in tacit knowledge. The process of sharing deep knowledge is time consuming, expensive and slow and can't truly be systemized and requires one-on-one training. Nevertheless, their highly customized offerings allow them to charge much higher prices than firms offering more standardized services can.

In a personalization strategy, technical knowledge must get transferred to product development teams, in a timely fashion through person-to-person exchanges, and encouraging travel and visits1.

1 Hewlett Packard took the person-to-person approach and sent experts from Product Development

teams to meetings and divisions to a global conference. Strategic planners had to choose of the two distinct KM strategies namely, codification or personalization. Highly customized service offerings or a product innovation strategy invested in person-to-person knowledge sharing and also in the development and training of productive knowledge workers

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C.3.3 Organizational Knowledge Roles

C.3.3.1 Knowledge Structure in the IJV Network

CEOs set strategic priorities by highlighting a small set of business priorities whose importance they consistently reinforce over a period of time in their words and behaviors.

They recognize that IT investments and applications may be needed to support business strategy. This is often characterized as the alignment problem - ensuring that the right IT applications and technical infrastructure are in place to support the current business strategy and prevent inappropriate investments in technology.

CEOs differ from other members of their organization in one important aspect: the CEOs beliefs are communicated to the rest of the IJV framework. In speeches, documents, meetings, and daily interactions, the CEO signals individual’s beliefs. Positive signals about the importance of KM - and what is expected of the members in the organization - are critically important. Of course, internal communication must support external messages to be credible. The CEO must be able to communicate the value-added to everyone involved.

Actions that provide top down signaling effectiveness will help promote KM throughout the organizational network.

A good relationship, formal or informal, between the CIO and CEO is key to

ensuring that IT is regarded and exploited as an asset1. The same goes for the CKO and the HR Heads, as well as other senior managers. Such value added relationships

are vital for the KM strategy to filter down and be implemented in the whole organization.

Reflecting and talking extensively to others on how those technologies might impact their own industry and business is key. The initial emphasis is on grasping the concepts and trends in knowledge technology, be they Intranet, and Extranet technology in data warehousing or virtual reality. What are the development

1 Earl, M.J. and Feeny, D., Sloan Management Review, 1994.

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directions and trends in each case and what is the forecast of changes in the technology's functionality and price/performance?

Figure C.11 Global Management Perspectives

Keeping abreast of new technologies is not just about envisioning new applications and possible implications for the business strategy. It means knowing which questions to ask about current initiatives and sensing when and how to ask experts about them. Analysis of industry trend, environmental scanning, and organizational capabilities go hand in hand. Classically, the process involves a cross- business management team taking one or two components of the wider future vision of the business and thinking through how to achieve step-change performance improvements in those components.

The CEO should engage with the firm's executive team in a collective education and development exercise, which confronts the industry's future, works out the firm's future and starts to build it objectively.

Source: Hirsch, H. and Swierczek, F. (1994): European Management Journal, 12(2), -207.

LEADERSHIP

CUSTOMER FOCUSED

FLEXIBLEORGANIZATION

MULTICULTURALTECHNIQUESAPPROACHES

ENTERPRENEURSHIPAND

INNOVATION

STRATEGY

GLOBAL MANAGEMENT PERSPECTIVES

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Figure C.12 Knowledge Reporting Structure in the IJV Network

C.3.3.2 The Role of the Chief Knowledge Officer

The first task of the Chief Knowledge Officer (CKO) of the first generation is to articulate a global KM program for the organization. The CKO must emphasize the value potential of knowledge and the need for effective KM and has to sell the individual’s concept on a local as well as on a global scale, to corporate and to line management. CKOs need to engage and gain support from senior executives in both parents so that they are able to identify individual and local knowledge gaps or opportunities. CKOs therefore spend a lot of time „walking around the organization“. They interact with four types of managers1: • Knowledge champions: „knowledge-friendly“ individuals who are excited about

a particular KM project, have seen the potential for improvement and are open to new ideas.

• Sponsors: The CKO also needs the support of senior level executives. These sponsors are convinced by the idea of KM and are willing to publicly support it.

1 Earl, M.J. and Scott, I.A., Sloan Management Review, 1999.

The Knowledge Reporting Structure in the IJV network

CEO CEO

CKO CKO

VP HRCIO CEO IJV VP HR CIO

VP HRIT

US Parent Indian Parent

Source : Author

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• Knowledge skeptics: CKOs also identify executives who are hostile to KM and/or question the need for a CKO (know your enemy). Doubters and reactionaries must be converted to the cause or avoided.

• Knowledge partners: The CKO needs allies in implementation of the KM strategy throughout the organization. Typically these are CIO, the HR Head, and in the case of implementing the KM strategy in an IJV, the support of the CEO of the IJV, and the HR and CIO.

Figure C.13 The Model CKO

CKOs are designers of knowledge directories and infrastructure, knowledge-based systems, and knowledge-intensive business and management processes. They offer a vision for effective KM (with its value for the future of the business), provide its conceptualization, and oversee its implementation. They inject thinking into the process of change from the emerging KM practice.

Sometimes CKOs promote and contract manage the construction of meeting, eating, and resting places to encourage informal social interaction, reflection, and chance conversations. They drive initiatives to both measure and protect intellectual capital. The CKOs interviewed believed that early opportunities to exploit knowledge exist, and this is where they look for champions and sponsors. One CKO described the ratio of technology change to cultural change as „20 to 80“. The KM initiatives can

Source: Earl, M.J. and Scott, I.A. Sloan Management Review, Winter 1999, 31

CKO

KnowledgeChampions

KnowledgeSkeptics

KnowledgeSponsors

KnowledgePartners

The Model CKO

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be categorized according to the type of knowledge that they address, and whether the initiatives are of an organizational nature or of technological nature.

One common phenomenon is the isolation KM “champions" feel in their companies, frustrated at the lack of acceptance for KM initiatives as a tool for improving business performance. Part of the frustration is no doubt due to the difficulty in measuring the "direct" gain of KM initiatives.

According to EARL and SCOTT1, CKOs have two principal design competencies; as technologists and environmentalists. They encourage and initiate investments in IT and also in the social environment, the CKOs must be enterprising and excited by business development. They must have an in-depth knowledge of the ideas and projects behind KM. The CKOs have a greater depth of knowledge in their field than is expected of the CEO, and a more holistic perspective of KM in the organization than the CIO (or HR Head).

The entrepreneurial and consulting dimensions of being a CKO suggest the importance of organizational reputation and credibility. Knowing the organization, its culture, and its key players probably renders acceptability and yields advantages in the consulting and influencing aspects of the job. CKOs are open-minded and curious about knowledge related phenomena and reflective about their CKO experiences to date. They need to be goal-oriented and interested in change, yet neither naïve nor driven by self-glorification.

Ideally, any KM projects or investments are corporately funded if organization-wide, locally funded at the business unit or individual level (cost allocation). Most CKOs envisage their role as finite, for the ultimate aim is to achieve embedded knowledge capabilities. But CKOs emphasize the quality of the resources available. Perhaps the most important „resource“ is CEO support and sponsorship, and organizational slack.

1 Earl, M.J. and Scott, I.A., Sloan Management Review, 1999.

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Figure C.14 The Model CKO

The CKO must make the senior executive team and prominent line managers believe in KM. Some knowledge projects are comprised of a long term agenda, such as those that require substantial technology infrastructure implementation.

The role of the CKO is created by companies, to initiate, drive and coordinate KM programs1. Most CKOs agree on the following points. • Knowledge today is a necessary and sustainable source of competitive

advantage. Several sectors, such as the information-based service sectors, depend on knowledge as their principal way to create value, and classify it as a basic economic resource2.

• It is widely realized that companies have increasing difficulties managing the volume and effectiveness of the knowledge within the firm. Firms often underinvest in knowledge initiatives, not realizing their full potential.

1 Earl, M.J. and Scott, I. A., Sloan Management Review, 1999. 2 Nonaka, I., Harvard Business Review, 1991.

Source: Earl, M.J. and Scott, I.A. Sloan Management Review, Winter 1999, 33

Entrepreneur

TechnologistEnvironmentalist

Consultant

Leading

Managing

The Model CKO

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Recognizing the potential of knowledge in value creation and the failure to fully exploit it, some corporations have embarked on KM programs1.

C.3.3.3 Other Knowledge Roles in the IJV

The role of the CIO is quite different. CIO has distinct responsibilities – IT strategy, IT operations, and managing the IT function – and so far has not formally taken on the full range of KM activities2.

First, because there are too many activities and organizations involved in acquiring and disseminating knowledge to plausibly maintain that there are performance „secrets“. Thus knowledge brokers make a business of transferring performance knowledge.

A firm dedicated to effective KM must define and reward roles that facilitate knowledge capture refinement, retrieval, interpretation, and use. Perhaps the most important role for explicit knowledge is that of subject matter expert, to ensure the quality and validity of the content of the knowledge circulated. The repository manager assures the quality of the context in which explicit knowledge is abstracted and passed on.

Other knowledge roles in organizations include knowledge editors, knowledge engineers, knowledge navigators, knowledge brokers, and knowledge stewards, with responsibilities ranging from repository management to coaching and facilitation. The knowledge strategist’s job is to focus on the role knowledge plays in shaping the organization and its strategic direction.

1 Earl, M. J. and Scott, I. A., London Business School and IBM Inc., Research report, 1998.,

http://www.skyrme.com 2 see C.4.x : CIO

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C.3.4 Incorporating KM Processes in Strategy

An important factor of the KMS of a firm is the constant need for re-evaluation, and benchmarking, as this knowledge provides the primary opportunity (and constraint) from which to compete and grow over the near-to-intermediate term1.

Improving Organizational Knowledge Routines

What does it actually mean to say in the context of the core KM processes that an organization has the ability to absorb new knowledge? Indeed, it is probably more useful for both research and practice to step down a level from the broad area of “ability” to look at its key sub-components. There are likely numerous sub-components that make up an organization’s ability to absorb knowledge—also known as “absorptive capacity”2 - as part of a knowledge-intensive process. For one, it means that the organization has sufficient technical competence in the relevant domain. For example, when people in an organization are skilled and capable in a particular domain, then they understand and can better absorb new knowledge pertaining to that domain3. Besides this issue, though, some of the sample firms found additional ways to boost their ability to absorb knowledge without the often prohibitive expense of adding more skills or more people. Two such ways in particular emerged from the case studies as critical. People were better able to absorb knowledge when they were able to develop a common language across different groups or functions and when they found intelligent ways to reduce the complexity of the situation. Each of these three sub-categories will now be discussed in greater detail.

Technical Competence: Skills

One useful definition of this concept is the organization’s ability to understand enough of how a technology works so that it can incorporate it into its processes. This concept is, in much way, closely related to notions of core competence4 and

1 Zack, M.H., California Management Review, 1999. 2 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990. 3 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990. 4 Prahalad, C. K., and Hamel, G., Harvard Business Review, 1990.

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capabilities1, as well as absorptive capacity2. In practice, technical competence often takes the form of tacit knowledge and so its transfer across sub-units to where it is needed is rarely easy or straightforward3.

The knowledge in question must be strongly desired, even actively sought after, by the knowledge receivers. These situations had much more favorable outcomes. At the other end of the spectrum is “castor oil” knowledge transfer in the case where an organization or its members do not want to learn or transfer knowledge. The knowledge in question was supposedly good for the organization, at least in some people’s eyes, but the potential receivers saw either the knowledge or its implications as undesirable. This "anti-learning" culture is one of the main barriers to the implementing the KM strategy within the IJV framework.

Much of the literature depicts organizational learning as a kind of sterile, anonymous process of building organizational skills and competencies. This research finds organizations that have the knowledge and skills in place are still not fully successful at implementing a knowledge-intensive routine.

Organizational processes form the basis for organizational learning4, yet “much remains to be done at both the empirical and the theoretical level”5. Focussing on the routine, or process - defined here as a repeated set of related activities - results in research that • Better reflects the reality of organizational life, • Better understands the terminology, jargon, and thought patterns (i.e., the

“cognitive categories”) that organizational members use to describe their organization and how work gets done,

• Better discerns how firms adapt in a dynamic way to rapidly changing environments,

• Better connects strategic (macro) and project (micro) levels of analysis6, and

1 Stalk, G., Evans, P. and & Shulman, L.E., Harvard Business Review, 1992. 2 Cohen, W.M. and Levinthal, D., Administrative Science Quarterly, 1990. 3 The KM cases in this research also exhibited evidence supporting the beneficial effects of

reducing complexity, especially in terms of effectiveness and efficiency. Moreover, complexity reduction seems particularly helpful for converting tacit knowledge into explicit knowledge

4 Levitt, B. and March, J.G., Annual Review of Sociology, 1988. 5 Grant, R.M., Organization Science,1996. 6 Burgelman, R.A., Administrative Science Quarterly, 1983.

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• Better translates rigorous research into findings that are useful to practitioners, a goal recently endorsed by several organization science leaders1.

By studying these processes, we delve into the “heart” of an organization’s efforts to manage the flow of knowledge.

Each year more than 60 billion US$ is spent on training in and by organizations particularly in management training. Much of this training is based on knowledge and principles that are fundamentally timeless – unchanged and changing. Nevertheless, the training is often repeated. Regardless of the quality of the content the delivery, or the frequency of repetition, management education is often ineffective in changing organizational practices2.

In the study, the top three business drivers cited are 1) to improve knowledge- and information-sharing across operating units, 2) to improve competitive response, and 3) to accelerate an organization’s rate of innovation. Respondents indicate that primary providers are still technology providers, including Lotus, Oracle, Microsoft and IBM. For consultancy companies, that’s a signal that KM is already blending with e-business, and encompassing Web-based initiatives using either Intranets, extra-nets or both3.

C.3.5 Measuring the Success of KM Efforts

No organization would like to undertake a knowledge initiative as an experiment. It will need to know what kind of return to expect from the effort to find and share its knowledge assets. Competitive advantage tops the list of potential benefits. Most payoffs of a KM effort will not be measured in direct cash dividends.

According to DAVENPORT, when KM benefits can be measured, they usually are found in process-oriented improvements4. For KM in the IJV to be successful, the partner organizations have to encourage their employees to share explicit and tacit knowledge across organizational boundaries. The key to success is to build structures that support the creation and exchange of organizational knowledge.

1 Galunic, C.D. and Rodan, INSEAD Working Paper, 97/89/OB/SM.1997; Hambrick, D.C., Academy of Management Review, 1994 ; Mowday, R.T., Academy of Management Review,1997. 2 Pfeffer, J. and Sutton, R. I., California Management Review, 1999. 3 Ernst & Young Study, 1998 4 Davenport, T.H., “Process Innovation”, 1993.

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The vast majority of CKOs and CEOs still rely on anecdotal data to justify their investments. To quote one CKO:" There are no financial measures of success, but we know that's its working, because we have the success stories."1 Another quote from an IJV CEO: "Measuring the success of the KM initiative is the hardest issue. How can we get quantitative measures for improving the efficiency of management?’"2

For managers, the three major theoretical components—ability, comfort, and power—could serve as leading indicators of optimization for key KM processes. This characteristic is an important contribution because one of the most intractable problems in the technology management and innovation arena is the question of how to measure results3. What CKOs need is a set of metrics that can act as leading indicators, so they can take appropriate action today.

C.3.6 Transfer of Best Practices Across the IJV Network

„you would think that …better practices would spread like wildfire in the entire organization, they don’t4“

Internal benchmarking and Transfer of Best Practices (TBP) are core knowledge management tools in order to leverage internal knowledge. External benchmarking, with all of its power, overlooks the vast amount of untapped knowledge and best practices already residing inside organizations, which can be determined through internal benchmarking.

The barriers to TBP fall into three major categories: 1) lack of motivation to adopt the practice; 2) inadequate information about how to adapt the practice and make it work; 3) lack of absorptive capacity, the resources and skill to make it work.

Before one can deploy TBP, it is necessary to define and find best practices within the organizations. The four approaches for this are: • Best Practice Teams may be an enduring part of the networking infrastructure of

an organization.

1 CKO, Modi Group, New Delhi, India, 2000. 2 CEO, Sprint RPG, Mumbai, India, 1999. 3 Berry, S., Kortum, S. and Pakes, A., Proceedings of the National Academy of Science, 1996. 4 Ogilvy & Mather, Mumbai, India, 1999.

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• Knowledge and Practice Networks emerge as a grass-roots response to the breakup of former networks due to downsizing, reengineering and restructuring. Once an organization creates the environment and technology to support networks, they often emerge.

• Internal assessment and audits can range in form from formal technical assessments (often art of benchmarking and best practice teams) to internal award programs1

• Benchmarking Teams often start their benchmarking efforts by trying to compare measures and results in order to identify best practices.

The natural desire to share knowledge is thwarted by a variety of logistical, structural, and cultural hurdles and deterrents in organizations. These include: • Organizational structures that promote „silo“ thinking. People have little

incentive to overcome other obstacles that time and space creates. • A culture that values personal technical expertise and knowledge creation over

knowledge sharing. Another cultural barrier is the „not invented here“ syndrome and the lack of experience learning in from outside ones own small group.

• The lack of contact, relationships, and common perspectives among people who don’t work side by side. There is a need to create and catalogue the corporate memory of an organization’s expertise and abilities so others can build networks and solutions together.

• An over reliance on explicit rather then tacit knowledge. • Not allowing or rewarding people for taking the time to learn and share and help

each other outside of their own area.

TBP is necessitated through • A compelling call to action • A demonstrated success • Decentralization and downsizing has tripped out corporate support networks and

forced operating units to take responsibility for improvement. • Benchmarking evidence • Recognition of the potential gain

Knowledge of how to enhance performance doesn’t transfer easily or readily even within firms. In the study by RICKETTS there was not much consistency in management practices or philosophy across different facilities within the same company2.

1 Malcom Baldridge National Quality Award 2 Ricketts, R., Oil and Gas Journal, 1994.

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Technology is no longer a major barrier to identifying and notifying the organization of best practices. All the necessary software solutions already exist (Lotus Notes, Intranet, e-mail etc.).

Research on TBP in organizations has led to the following insights: • The really important and useful information is too complex to put online: Too

much tacit knowledge is required to make a process work. So, most firms have turned to directory and pointer systems that can supplement the search for best practices.

• The database is not designed to replace existing sharing mechanisms but to enhance and support them. It gives all users a wider range of information than has ever been available before but does not offer a specific solution for every problem.

• There has to be a framework for classifying information, such as the Process Classification Framework1 by American Productivity and Quality Center (APQC).

• Entering information into the system must be made part of someone’s job. Busy managers and professional will rarely take the time to enter a practice unless it is mandatory2.

• Culture and behaviors are the key drivers and inhibitors of internal sharing. The real issues aren’t technical. How do you get people to contribute and use the system? What are the people systems surrounding the network? How do you reward people for sharing their knowledge with others?

Seven Keys to Effective Transfer: • Competitive or best-in-class benchmarking can create a sense of urgency as well

as demonstrate the value of looking outside for ideas and comparison. • Focus initial efforts on critical business issues that have high payoff and are

aligned with organization values and strategy. Real action-learning and transfer is a time- and talent-consuming activity.

• Make sure that every plane allowed to take off has a runway available for landing. In the initial zeal and excitement that come from imagining the improvements and gains possible from the transfer of best practices, there is a tendency to forget that an organization can only invest in and support a finite amount of change at any one time.

• Don't let measurement get in the way. Comparative measures will improve over time, but only if acted upon.

• Change the reward system to encourage sharing and transfer. Real internal transfer is a people-to-people process and usually requires personal generosity or enlightened self-interest.

1 see C 6.1.2 2 e.g., In Ogilvy & Mather the role of a knowledge sponsor within each department was created.

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• Use technology as a catalyst to support networks and the internal search for best practices, but don't rely on it as a solution.

• Leaders will need to spread consistently and constantly the message of sharing and leveraging knowledge.

If there is widespread diffusion of information on „best“ (or at least „better“) practices, the evidence suggests that many successful interventions rely more on implementation of simple knowledge than on creating new insights. This conclusion means that although knowledge creation, benchmarking, and KM may be important, transferring knowledge into organizational action is at least as important to organizational success1.

C.3.7 Potential questions for further research

Senior management support is critical for nearly any significant organizational action and change initiative. Still there is a gap in theory that stems from the difficulty researchers have in imagining that any factor other than ability would affect organizational learning.

"Senior management support does not necessarily take the form of active involvement, or championing, but it does mean, at a minimum, approval by the senior managers in the various units involved. Examples of top management include initiative and involvement, for global KM strategy in the IJV (secondary, the IJV leadership is the responsible one for the integration of the IJV in the two corporate knowledge strategies2".

Literature on KM activities in strategic planning in an IJV environment is quite extensive as detailed in the review. However, pertinent aspects of integrated KM in strategic planning in an IJV scenario, in particular from a network perspective have not been researched sufficiently. This can be ascribed to the lack of an organized study in the area. One area for further research is the relevance of parent company global KM strategies on the IJV KM strategy. Further, the importance placed on the various knowledge roles has to be examined, as well as the communication of KM initiatives throughout the IJV framework and the nature and role of external factors in the IJV KM strategy. Any light shed on these areas could serve as an

1 Skyrme D. http://www.skyrme.com/pubs/lawlib99.htm 2 Earl, M.J. and Scott I. A., Sloan Management Review, 1999.

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augmentation of the literature on KM in IJVs and be of practical use to the IJV managers. In the current exploratory study answers to these questions were sought from the IJV case studies.

C.3.8 KM Practices in IJV Case Studies: Strategic Planning

C.3.8.1 DSP Merrill Lynch

After the formation of the IJV, DSPML was organized after the ML model and took on the ML worldwide mission statement.

"It is a seamless organization where you don't know where DSP begins and Merrill Lynch ends", says the CEO1.

The drivers behind the successful and thriving IJV are its power, processes and people. The equity partnership is 60:40 (DSP:ML), but both the partners have got equal representation on the board of directors. The management structure minimizes the conflicts, maximizes the integration, communication and co-ordination, and enhances the mutual trust and comfort. For strategic direction a 3-year plan is formulated with ML and then signed off by the board.

C.3.8.2 JM Morgan Stanley

MS' strategic objectives in the IJV were to raise their deal flow and turnover in the IB market in India i.e., achieve a market share that they would otherwise not be able to achieve in such a short time and to build up their client network in India. J. KAMPANI and JM top management’s primary objective was to initiate the institutionalization of the business from personal and family run to structure, role and process-oriented.

The most positive results of the IJV during its short history, the much higher and much smoother deal flow in place, were noticeable even in the preparatory phase, indicating the attainment of its strategic objectives. MS brings the institutional expertise and experience as well as the corporate culture to be a major player in the financial environment to the IJV.

1 http://www.india-today.com/btoday/20001006.cf.html

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JMMS functions on an executive committee basis for most operational strategic decisions so as to avoid going to the board of directors for all decisions. The executive committee consists of the CFO, COO, and HR Head of the IJV and relevant invitees. These meetings are described as formal/informal as far as seeking a primary solution suitable to all participants. The difference to this structure to the regular MS subsidiary model is that it is lot more formal than the MS matrix structure with dual reporting lines. Information and decision-making channels are more institutionalized, than in the rest of the MS global network, due to the integration phase and the still vested interest between JM and MS. In due course, the strategic aim of the IJV top management is to deformalize information flows within the IJV network and instill the knowledge culture of MS within the employees in the IJV. In time, Asia Pacific headquarters has also come to accept the IJV as an integrated part of the MS global network.

C.3.8.3 Max New York Life

MI has set up an integrated network of "sharing best practices" which evolved over time. The best practice network came about part due to introspection and part to the external consultants within the framework of an integrated knowledge sharing strategy within MI's JVs and businesses. However, Transfer of Best Practices does take place between the IJV and the parent affiliates, and between the various companies of the MI network.

MNYL is a minority i.e., non-consolidated partnership of NYL. Therefore the reporting structures to its U.S. parents are less direct. MYNL officially started business as of November 2000. Quarterly board meetings are held where strategic targets and rolling business plans are set up by the IJV's top management and sanctioned by the board of directors.

The life insurance business unit redesigned customer interfaces and experiences to increase loyalty, to enhance cross-selling of multiple products, and to better retain its customers. To do so, it decided to expand its call center customer service teams, making them a primary vehicle for customers to interact with the company. By taking a knowledge-focussed approach, and by surfacing and capturing the tacit knowledge of high-performance, highly effective customer service representatives, the organization was able to accomplish several objectives: increased asset retention:

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improved hiring and training result; and customer service workstations better able to support decision making and customer service.

C.3.8.4 Birla AT&T

In the organizational structure of Birla AT&T there is a division of functions between the parent companies. The engineering department, Sales and Marketing, and customer care are run by AT&T while finance, information systems and personnel development are the managerial responsibilities of Birla.

The transfer of technology was a contract to AT&T. The JV uses the GSM network, which is the same technology as in Europe, and they have very close links with the TDMA, which is the wireless association in Europe.

C.3.8.5 Sprint RPG

The RPG group management believes in empowerment at the company level. RPG strategic planning taskforce sees its role in the management of the Group’s portfolio, setting up long term plans, and monitoring Group activities. It also sets the future strategic direction for the Group as a whole.

The RPG Group has initiated a group wide knowledge management program, termed “knowledge integration”. Initiatives launched under this umbrella include benchmarking, TBP, knowledge flow-back and encouraging the group wide dissemination of knowledge. Along with the knowledge integration program a range of technology initiatives were launched in the course of 2000. The Group’s first CIO was hired in 1999, the first step in a definite thrust toward leveraging IT technologies for the Group’s business success. Other knowledge initiatives include a quality council, responsible for strategic intervention on the part of the group companies. RPG is divided among six sectors and the executive committee is made up of Chairman and Vice Chairman, the strategic planning taskforce, made up the head of SP (COO) and the CFO, as well as the individual sector heads. The CIO is placed at company head level.

The CEOs report to Sector Head and Head of Strategic Planning. The strategic planning taskforce is responsible for anything that has to do with the strategic direction of the Group company.

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RPG, a household name in India, brings to the joint venture its brand reputation. They have a big group leverage, and extensive market knowledge of mass consumers (for telecom services). The strategic planning unit sees itself as a “knowledge scanner” for the whole group, monitoring the business environment for opportunities.

Explicit knowledge within the corporation is in the form of blue prints and proprietary knowledge assigned through contractual agreements. Tacit knowledge is transferred through the movement of people and unified trading strategies and senior management with the correct skillsets.

C.3.8.6 Ogilvy & Mather

OM (India) has 700 employees in 4 offices all across India and no expatriates. They have a MD. The board of directors comprises of 5 directors 3 of which are from O&M. MD and CEO is on the board. Below the board of directors there is an executive management committee, which consists of the head of departments, and the heads of Strategic Business Units (SBU’s) such as Ogilvy Consulting. The executive management committee consists of 14 people.

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C.4 Alliance Management: Inter-organizational Knowledge Sharing

C.4.1 Knowledge Management during Different Phases of Alliance Management

"One must have a common understanding of the receiver’s requirements and the sender’s capabilities from the start1"

A key element of the ability to absorb knowledge is the existence of a common language between the partners in a knowledge-intensive IJV. The more orthodox and sterile view of knowledge flows, with its emphasis on technical skills, core competencies and capabilities, often overlooks the aspect of an organization’s ability to absorb knowledge; namely, the ability of one group in the organization to understand what the other group is talking about. Bridging this gap is not a trivial matter, since different functions have been shown to inhabit very different “thought worlds”2. One technique to bridge this gap is to use boundary-spanning individuals3.

The knowledge perspective presented here stresses the entrepreneurial rather than the administrative side of corporate governance. Accordingly, boundary issues are not determined by transactions cost considerations alone. Rather, they are strongly influenced by tacit knowledge and imitability and replicability considerations4. The tacit component of knowledge cannot frequently be transferred without the transfer of personal and organizational systems and routines. Tacit knowledge and its transfer properties help determine the boundaries of the firm and may well swamp transaction cost considerations (they function as "protection costs"). Competitive advantage can be attributed not only to the ownership of knowledge assets and other assets complementary to them but also to the ability to combine knowledge assets with other assets needed to create value.

New forms of business organizations - and new management styles that enable intangibles to be developed and dynamic capabilities to be practiced - are clearly

1 Interview, Morgan Stanley, Hong Kong, 2000. 2 Dougherty, D., Organization Science, 1992. 3 Allen, T., Managing the Flow of Technology: Technology Transfer and the Dissemination of

Technological Information within the R&D Organization 1977. 4 Kogut, B., Strategic Management Journal, 1988.

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critical. Moreover, modern information technology clearly enables a greater variety of transactional structures than was hitherto thought possible.

A firm's decision to enter into an IJV is associated with a multitude of decisions, the first of which is to determine the goals and scope of the venture. It is critical to the success of the IJV that all lines of communication be open from this early stage on. There is an absolute necessity at this point for a clear enunciated, shared, understood, and accepted business objective1. The detailed IJV agreement should focus on some or all of the following areas: • Governance • Contributions • Responsibilities and risks • Intellectual property • Technology transfers • Force majeure • Governing laws concerning all aspects of the IJV • Formalization The Pre-IJV Phase

This is the stage that requires the ability to sense and then to seize new opportunities, and to reconfigure and protect knowledge assets, competencies, and complementary assets and technologies to achieve sustainable competitive advantage.

During "sense making" the organization receives and interprets messages about new markets, new technologies, and competitive threats. This information is evaluated in the light of the organizations' experience and knowledge. 'Sensemaking' tools (Knowledge Tools) include tools such as scenario planning can assist making sense.

1 Business Laws Inc., "Overview of Transactional Joint Venture", 1999

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Figure C.16 Process Framework of the Development of Cooperative Inter-organizational relationships

The fundamental challenge to making sense is bounded rationality1. One cannot learn all there is to learn about a situation or an opportunity, and action must proceed, based on hunches and informed guesses about the true state of the world.

The openness of markets, stronger intellectual property protection, increasing returns, the unbundling of artifacts and information, and the possibility for integration using new IT are important factors in environmental scanning. Information receipt and interpretation is by no means restricted in its importance to the understanding of business, market and technological trends. There is also the need to identify relevant external technology and bring it into the firm.

1 Simon, H.A., Models of Bounded Rationality. Vol. 3, In: " Empirically Grounded Economic

Reason", (1997).

Negotiations

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informal sense-making

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of commitments through

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psychological contract

Assessmentsbased on

efficiency

equity

Source : Ring, P.S. and Van De Van, A.H.(1994): Academy of Management Review, 19(1), 90

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The Decision to form the Venture

It is important to understand the motivation and ultimate objectives behind the decision to form an IJV. Most ventures are poorly conceived and probably should

never have been formed in the first place1. Strategic and economic benefits should be prerequisites for entering an IJV, but other considerations should definitely be taken into account. Even if there are sound strategic and economic reasons for the venture, the firm’s and the employees’ capability and commitment to function in a

cooperative mode must be realistically assessed2. This would allow prediction of how the firm would respond to difficult situations that are common in international business ventures.

Partner Selection

Identifying and selecting a partner is possibly the most important consideration in establishing a cooperative venture. Many firms are impatient to find a partner in order to attain short-term goals. As a result, they are careless in their selection process and mistakenly trade incompatibility for quick action. Partners are often selected only for short-term and political reasons. When the situation changes and

the partner has nothing more to offer, the relationship ends3.

Major differences in the performance of JVs relate whether the long-term need and commitment between the partners exists. Firms that recognize their specific long-

term needs and recruit partners to fill these needs accordingly4 aim for a strategic and a cultural fit. In the case of IJVs, in which knowledge acquisition has been set as a primary goal, partners need to have a more complex skill set.

Often foreign firms deem local (market) knowledge a short-term need that can be accessed quickly. In-depth market knowledge has a lot of tacit aspects that require a higher level of intimacy and commitment.

1 Bleeke, J. and Ernst, D., Harvard Business Review, 1991. 2 Lane, H. W. and Beamish, P., Management International Review, 1990. 3 Lane, H.W. and Beamish, P., Management International Review, 1990. 4 Beamish, P.W. "Multinational Joint Ventures in Developing Countries", 1988.

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Knowledge Due-Diligence

Potential partners should be visited in their environment to see how they plan, reformulate and operate. Often, working together on smaller projects before actually forming an IJV with all its organizational and legal implications provides a good

“testing ground” for a future partnership1. Also, prior experience with a potential partner can prove to be a source of valuable knowledge, but it is not a prerequisite.

Cultural attitudes towards business differ significantly from country to country. In developing countries, the business environment is much more formalized. The firms are often very closely held by the owners who are heavily involved in decision-making. There is often a distinct lack of professionalism and institutionalized structures. Unequal partners can also create conflict through an unintended power

imbalance, or slow and inflexible decision-making processes in large partner firms2, where the JV does not have such a high priority.

The most important link between the partner selection process lies in the selection and preparation of the venture partner “evaluators”, the managers in charge of finding an appropriate venture partner. They must know more than the financial aspects and operations. They must be sensitive to the impact of culture on behavior and have some background on the social, economic, political environment and

history of the potential host country3. They must be able to assess the full knowledge potential of their partners within the course of the due diligence.

C.4.1.1 IJV Negotiation Phase

Negotiating the IJV formation is difficult and costly. Not surprisingly, the quality of IJV contract negotiations during the formation can have an impact upon three

consequences of importance namely, IJV formation, satisfaction and IJV process4.

1 Lane, H.W. and Beamish, P., Management International Review, 1990. 2 Di Stefano, J.J. and Lane, H.W. " International Management Behavior", 1988. 3 Lane, H.W. and Beamish, P., Management International Review, 1990. 4 Lei, D., Slocum, J.W. and Pitts, R.A., Journal of World Business, 1997

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Figure C.17 Bargaining Power

Central to the success of the contractual agreement are the bargaining processes and strategies used by both partners.

Essentially, parent firms and the IJV need the right people who are willing and able

to learn trust and transfer and / or share knowledge between them1. They need communication systems that can deal with the complexity of the IJV relationship.

The bargaining power perspective is particularly appropriate for examining the stability of the IJV, because all JVs involve a negotiated bargain between the

partners2. The relative bargaining powers of the potential JV partners are based on

the resources each partner has to offer to the JV3. The consequences of the shift in bargaining power are clear, the need for cooperation becomes greater for one party

1 Westney, E., In: "Cooperative Strategies in International Business", 1988 2 Inkpen, A.C. and Beamish, P.W. Academy of Management Review, 1997. 3 Harrigan, K.R. and Newman, W.H., Journal of Management Studies., 1990.

Instability of the IJV and Bargaining Power

The Foreignpartner’s

Intent for the IJV

Valuation ofLocal Knowledge

by the Foreign Partner

ResourceContributions:

Local KnowledgeResponsibility of

the Foreign Partner

Effectiveness of theForeign Partner’s

KnowledgeContribution

Shifts in Balanceof Bargaining

Power

Individualand

StructuralAttachmentBetween the

Partners

Instabilityof the IJV

Source: Inkpen, A./ Beamish, P., AMR 1997

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than for the other, until the point where one of the partners’ transactions costs outweigh their costs of internalization, and they no longer see the need for the alliance.

HAMEL identified learning as the most important element in determining relative

bargaining power1. Substantial knowledge acquisition by one partner over another can erode the value of the knowledge contributed by the other one, shifting the bargaining power towards a more unstable relationship.

The main classes of assets that are not tradable today are location assets, knowledge

assets and competencies2. • Recognition of trading opportunities - partners typically don't know who owns

what, and who might be interested. • Disclosure of performance features3 - Partners4 may be reluctant to negotiate

because their intellectual property rights are problematic. Partners may be reluctant to negotiate because of fear that disclosure, even if pursuant to a non-disclosure agreement might inadvertently lead intellectual property rights to be jeopardized.

• Uncertain legal rights - Partners may be uncertain about factors such as the enforceability to use restrictions and sublicensing right or simply about the ability to measure and collect royalties.

• Item of Sale - The "item of sale" may be know-how, or intellectual property rights, complete or partial. Ownership requires special policing powers for value preservation. Confidence in contracting and the legal system is necessary to support value.

• Unit of consumption - Intellectual property is rarely exchanged as a whole. Hence financial arrangements of some kind must be devised. The value is a function of other intellectual property located alongside the intellectual property at issue.

An evolving calculus of the applicable laws shapes the JV relationship, the confidence each party has in each other, and the cultural and business systems of the relevant countries. By carefully examining the issues before negotiations begin, the

1 Hamel, G. Strategic Management Journal., 1991. 2 Competencies may in turn be embedded in other corporate assets, including assets complementary

to knowledge assets. 3 See C = contractual agreements 4 Note that instead of sellers, I have incorporated partners as knowledge traders in this instance

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strategic issues associated with joint venturing can be addressed during the negotiation and formation processes.

As a potential JV partner, the question remains to be asked whether there is a mutual value creation perspective that respect and supports the counterpart's collaborative objectives. JV longevity does not influence JV value creation and many firms view JVs as intentionally temporary and recognize that their ventures will not last indefinitely.

The partners may have nothing to share if they do not create value jointly. In the absence of a mutual value creation perspective during the negotiation, there is a much higher probability that commitment and trust will be lacking in the negotiation.

Although some authorities argue that mutual value creation is an inappropriate focus, given the often transitional nature of JVs, recent research and interviews with alliance managers indicate that a focus solely on "what is in it for me?" will not lead to successful collaboration.

New JVs that start with an existing stock of "relationship assets" may begin with a honeymoon period that effectively buffers the firm from early break-up of the JV. The firms must ensure that the need for relationship building is clearly established and understood prior to negotiations, regardless of past relationships.

Ideally, firms will be able to enter the negotiation process with substantive knowledge about their potential partners, including the other firm's motivation for the IJV, the firm's strengths and weaknesses and the firm's reputation and experience with JVs. Detailed knowledge about the potential partner can help in planning the negotiation strategy and increase the probability of collaborative success. Knowledge about the partner can also be a source of bargaining power in the negotiation process.

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Figure C.18 Alliance Knowledge Acquisition Process

One especially useful technique used to bridge the “language barrier” is to use structured process templates. A common language in the form of structured, codified1 templates is critical for productive talks. The result is a means “to view and present the data…in a way that is not only attractive but very understandable to the people looking at it”. That is, it gives all actors involved the ability to absorb the knowledge.

Is prior experience with the partner the answer to generating comfort in a knowledge-intensive alliance? Interestingly, the answer appears to be, no, but it

Are there learning connectionsbetween the alliance and the partner?

Is the alliance knowledge related towhat is already known?

Is the managerial culture in thealliance aligned with the managerial culture in the partner?

How valuable is thealliance knowledge?

Low value, nopartner

learning efforts

High value, knowledgeacquisition is an

objective

Is the alliance knowledge accessible?

Is the firm effectiveat learning?

How protective is the alliance partnerof its knowledge

How tacit is the knowledge?

The Alliance Knowledge Acquisition Process

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does make it easier. Thus, while experience might be helpful2, it is not sufficient for generating a trust in relationship. In fact, several cases used various comfort-inducing mechanisms to increase teamwork as well as trust.

Managers often lose sight of the reality that partner trust and forbearance are directly linked to the strength of inter-personal relations. In any alliance, the strength of inter-firm relationships is largely a function of the relationships between individual managers who are involved in the day to day venture management. The individuals

who are involved in JV negotiations should be chosen carefully. INKPEN and LI3 strongly suggest that firms involve operational managers in the JV formation process, beginning with initiation of potential ventures through to formation and start-up.

Ideally, managers involved in the formation process will also become part of the JV management team. These are the people expected to produce results when the JV is formed and, therefore, they will want answers to key operational and strategic questions during a negotiation.

The preliminary decisions about JV management must be made before negotiations begin. As a high level of trust develops, safeguarding procedures and monitoring costs can be reduced.

After IJVs are formed, it is inevitable that the partners will learn more about each other, which may lead to an expansion or reassessment of the IJV. As a result,

INKPEN and LI4 believe that firms should plan on building into their agreements as much scope as possible for uncomplicated and non-legalistic changes.

The danger is that the issues that have been identified - venture management, governance, risk, culture, and so on - are not given sufficient attention, with the result that the partnering firms end up in reactive rather than proactive states.

The checklist for both partners to run through during the course of the negotiation phase in regard to knowledge goal is as follows: 1 Nonaka, I., Organization Science, 1994. 2 Allen, T., Managing the Flow of Technology: Technology Transfer and the Dissemination of

Technological Information within the R&D Organization 1977. 3 Inkpen, A. and Li, K.Q., Organizational Dynamics, 1999. 4 Inkpen, A. and Li, K.Q., Organizational Dynamics, 1999.

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• Are there clearly understood and agreed upon objectives before venture

formation? • How will the IJV be integrated within the parent firm's KM strategy? • Will there be cultural compatibility and organizational fit between the partners? • Does the IJV leverage the complementary skills and competencies? • Will an exit strategy be defined upfront? • Is there a monitoring process for the new IJVs? • Have all the partnering risks and potential sources of conflict been identified and

accounted for?

Managers have to recognize that a knowledge gathering phase in alliance management is essential, not an option.

Figure C.19 Knowledge Model to Guide International Joint Venture Evaluation

Intellectual Property

Patents are, in one sense, the strongest form of intellectual property because they grant the ability to exclude, whereas copyright and trade secrets do not prevent firms that make independent but duplicative discoveries from practicing their inventions/innovations. This also applies to competencies, which can be thought of as clusters of know-how assets.

Adapted from: Si, S.X. and Bruton, G.D. (1999). Academy of Management Executive,13(1), 84.

Knowledge Model to Guide International Joint Venture Evaluation

StrategicPerformance

Gap

IncorporateKnowledge

Acquisition GoalsThrough

Investment of Resources forJoint Venture

Success

LimitedResourcesDevoted toKnowledge Acquisition

Goals

Evaluate Knowledge Goalsand Their Impact on Joint

Venture Success

IndiaKnowledge

Market for Output

Technologyutilized

PartnerCharacteristics

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Figure C.20 Knowledge Acquisition and Instability

C.4.1.2 IJV Formation Phase

Many of the performance problems experienced by IJVs have been linked to the

unique managerial requirements of these ventures1. Due to the increased complexity of IJVs, they are more difficult to manage and often result in significant additional or unforeseen transaction costs incurred by problems in coordination and communication. The ultimate objective of an effective IJV human resource management would be to minimize these costs. Domination based on financial ownership and tight control is giving way to partnership based on mutual interests, trust and management on collaborative knowledge based relationships. IJVs may force a shift in executive behavior towards improved skill in working

collaboratively, communicating and gaining consensus2. 1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 2 Palmer, I and Hardy, C. " Thinking About Management: Implications of Organizational Debates

for Practice", 2000.

Knowledge Acquisition and Instability

Access

Acquisition

Access Acquisition

Foreign Partner’sEvaluation of

Local Partner’sKnowledge

Local Partner’s Evaluation ofForeign Partner’s Knowledge

Very StableCooperative

Very UnstableCompetitive

Race to Learn

Potentially unstable

Source: Inkpen, A./ Beamish P., Academy of Management Review, 1997

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Figure C.21 Joint Venture Development and Multicultural Features

The overall costs incurred through faulty management can be quite substantial. In addition to consuming large amounts of management time, money and other scarce resources, this may also expose critical aspects of the IJV's strategy, technology or other know-how to competitors, thereby threatening to compromise the parent’s

long-term competitive position1. Although many IJV performance problems have

been linked to poor design and execution of learning issues2, companies often fail to adequately plan for and utilize their knowledge resources.

The advancement stage of the IJV process involves: • Learning from the partner • Transferring knowledge and learning to the parents • Transferring knowledge and learning to other locations

Consequently, parent firms need to establish conditions: • Reduce the possibilities of differential learning • Increase the chance of forbearance behavior when differential learning occurs • Increase the levels of trust in and knowledge of each other.

1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 2 Shenkar, O. and Zeira, Y., Academy of Management Review, 1987.

Source: Hirsch, H. and Swierczek, F. (1994): European Managemtn Journal, 12(2), -200.

Performanceand

Control

Uncertainty(Risk)

Management

PowerDistance

Individualand

GroupComplement-

arity

Achievement&

Affiliation

ImplementationAgreementNegotiation

Joint Venture Development and Multicultural Features

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Partner firms should jointly assess their learning capabilities and their overall goals of the IJV process; and they should continue to ensure that formal and informal communication channels remain open and are used constantly.

Just as knowledge about the strategy and objectives of potential partners are critical, so is knowledge about the partner's national culture if the proposed JV is international1. Ideally, individuals slated to negotiate and manage the IJV should have a solid cross-cultural knowledge base. If not, firms must ensure that either internal or external expertise is obtained.

In their study of Australian-Indian IJVs, AS-SABER et al.2 found that significant freedom of decision making by the JV management was a critical HRM related factor in the venture's success. The non-hierarchic, egalitarian sharing practices of more competitive Indian and foreign firms are having their impact.

Board composition

In all the IJVs examined except one, CEOs were not members of the board of directors. According to Indian Company law, a full-time board member cannot hold a full-time management position in a company and receive compensation for both positions. Thus there is a negative incentive for CEOs to serve as board members as they do not receive remuneration for it.

Higher demand for experienced local managers

With the rapid growth of the Indian economy, the demand for skilled managers is increasing at a rapid pace. This affects the remuneration of local managers. According to a survey of global compensation trends, India has been experiencing

rapid increase in managerial compensation packages during the last few years3. During the implementation stage, the problem of hiring and retaining staff became a critical issue. This scenario is particularly common in high-growth industries, such as telecommunications and computer software development.

1 Inkpen, A ., and Dinur, A., Working Papers CBI, 1998. 2 As-Saber, S., et al., International Journal Human Resource Management, 1998. 3 Koretz, G., Business Week., 1996.

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IJV Control

In the IJVs the selection of the CEO was usually made with the prior approval of both the host and foreign partners. In most of the cases, foreign parents play significant roles in selecting people for key IJV positions such as IJV general managers and financial controllers.

In designing the venture, decisions must be made about the equity structure, how and by whom the venture will be staffed, and who has the decision-making responsibilities and, in which area. The most important issue is to establish a fair,

equitable and workable commercial relationship1. Decision-making can either be shared, or dominated by one of the partners.

Shared control does not mean that each decision is made jointly by the partners. More practicably, the decisions are split up among the partners based on knowledge, skill, experience and understanding of the particular issue. The foreign partner may have more firm specific knowledge, whereas the local partner has the necessary market knowledge. Some decisions will still have to be jointly made, arrived at through consensus after discussions. Consensus decision making takes time and creates potential conflict even within a single culture. The potential for misunderstanding and conflict across cultures can be enormous.

It requires a shift from control to influence through creating relationships and behavior interaction. Ownership and other legal considerations of a venture are often complicated, structural issues that are critical to the success of an IJV. However, it has been observed that these issues often divert attention and effort from the even

more important, dynamic, but less tangible, human relationships2.

The use of a large proportion of local managers rather than expatriates is recommended to ensure the foreign parent acquires the necessary knowledge of the local economy, politics and culture. This also increases the need for training

executives in the foreign parent company’s headquarters in cross-cultural issues3 to enhance the flow of knowledge back from the IJV.

1 Lane, H.W. and Beamish, P., Management International Review., 1990. 2 op.cit. 3 op.cit.

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Figure C.22 Cycle of Fair Processes

Majority ownership and expatriate top management often reflects a lack of trust in local nationals and may be also a lack of understanding of the local culture. It is the role of IHRM to make up for this gap in skills. Learning to work as part of a multicultural management team is being recognized as an important management skill. The more successful cross-cultural JVs are those engaging in mixed

management teams and cross-cultural training1. Technology Transfer

The need to translate between the language of marketing and technology is a frequent hurdle related to the question of a common language. Moreover, this translation needs to be done at a detailed level to be useful. Technical competence is of great importance to the technology transfer process.

1 Radway, R. J. , The Currency Forecasters Digest,1986.

Source: Kim, W.C. and Mauborgne, R. Sloan Management Review, Summer 1999, 52.

The Positively Reinforcing Cycle of Fair Processes

Fair Process

• Engagement• Explanation• Expectation Clarity

Value InnovationPlans and RapidExecution

Idea Sharing andVoluntaryCooperation

Organizational Confidenceand Respect forColleagues’ Intellectualand Emotional Worth

Strengthensdesire for fairprocess

Strengthensability to valueinnovate

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Figure C.23 Factors Affecting Technology Transfer Across Nations

C.4.1.3 IJV Management Phase

Most firms enter into an IJV where knowledge acquisition is one of a complex set of goals. Shared ownership and joint decision making often serve to significantly complicate both the management and the control of IJVs as compared to more

conventional forms of ownership. Yet GERINGER and FRAYNE1 have argued that parent companies typically do not need to exercise full control over all aspects of an

IJV in order to ensure that it meets their interests2.

When both parents place high value on the IJV success, they get involved in all the key decisions made early on. Under these conditions, the board of directors is likely to be composed equally of representatives of the parents and the IJV.

1 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 2 Janger, A.R., "Organization of International Joint Ventures", 1980 ; Kobrin, S.J., In : "Cooperative

Strategies in International Business", 1988 ; Geringer, M. J. and Hebert, L., Journal of International Business Studies, 1989 ; Geringer, J.M. and Woodcock, P., Business Quarterly, 1989.

Source: Kedia, B.L. and Bhagat, R.S (1988): Academy of Management Review, 13(4), 559-571.

AntecedentCharacteristics of Technology InvolvedProduct-embodiedProcess-embodiedPerson-embodied

AntecedentDifferences inOrganizationalcultures betweenthe transactingorganizations

Societal Culture-BasedDifferences in Terms ofUncertainty avoidancePower distanceIndividualism vs.. femininityAbstractive vs. associative

Absorptive Capacity of the Recipient OrganizationLocal vs. cosmopolitan orientationExistence of an already sophisticatedtechnical careStrategic management process

Effectiveness of Technology TransferAcross Nations

Presumed casualinfluences

Presumed moderatinginfluences

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The challenge for the parents then is to select a high-quality top management team and provide them with appropriate autonomy. The higher the quality of the top management teams, the greater is their ability to manage the operations and respond to the multiple stakeholders at the local level. The better the IJV's top management, the greater likelihood the absorptive capacity of the IJV will develop, and the higher the likelihood of organizational learning and knowledge transfer within the IJV network.

Attitudes towards business differ significantly between U.S. and India. Indian family firms are often very closely held and the owners heavily involved in decision-making. Size differentials between the firms can also create conflict through an unintended power imbalance, or slow and inflexible decision-making processes in large partner firms1.

Further, managerial values that are national culture-based, organizational culture-based and firm ownership-based can enhance or inhibit individual and organizational performance and satisfaction. Some specific Indian managerial values relating to power, decision-making, ethical priorities and ethical work climate pose HR challenges (especially when trying to implement foreign guidelines and / or combine Indian and US guidelines). Indian managerial values that centralize rather than decentralize power, reduce rather than share decision making information, neglect the ethical infrastructure and moral climate of workplaces, and avoid improvement of extra-organizational support for principled practices, can encumber the creation of a “knowledge-friendly” Indo-U.S. IJV environment.

LEI, SLOCUM and PITTS describe one type of formal communication channel and knowledge transfer used by IJV parents across national and organizational boundaries:

Smooth implementation to facilitate learning requires all levels of management to work on developing "alliance protocols" that enable careful knowledge creation and sharing among the partners. In their simplest form, alliance protocols represent the communication channels by which the alliance's managers and technical staff share technologies, skills and managerial expertise. Some alliances use "gatekeepers" or "collaboration" departments that serve as a structural mechanism by which partner

1 DiStefano, J.J. and Lane, H.W., International Management Behavior", 1988.

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can access each other's technologies, jointly developing and agreeing to these protocols early on. This is important for maintaining a balanced relationship, whereby neither partner feels that their contributions or opportunities to learn from the other are neglected or undervalued. Protocols are instrumental in setting up the mental "parameters" that limit what partners can ask from one another in terms of what constitute proprietary vs. non-proprietary technologies or processes. Protocols provide an "invisible fence" that defines the boundaries between co-operation and

competition1.

The partner firms may also jointly assess their belief systems and assumptions. The more the partners are able to discard their own belief systems, and assumptions, and revise, if necessary, the more likely that there will be useful learning from the

knowledge transferred. PFEFFER2 suggests many socio-psychological barriers that exist in transferring information from one organization to another and that these can be some of the most challenging to overcome.

For parent firms, building trust with the IJV itself is important. Without trust, the IJV may try to avoid transferring knowledge back to the parent, reducing interaction

to the periodic reporting3. Notable U.S. firms doing well at transferring knowledge from the IJV to the parent use two different techniques: either through largely oral (but not informal) communication, or through a disciplined written (online) approach.

Mechanisms for knowledge and information transfer between IJV and parent include4,5: • Top management support • Staff rotation • Staff training and development • Site visits • Rewards and recognition • Repatriation management 1 Lei, D., Slocum, J.W. and Pitts, R.A., Journal of World Business., 1997. 2 Pfeffer, J., Organizational Dynamics, 1996. 3 e.g, production reports, quarterly balance sheets and income statements. 4 Inkpen, A. and Crossan, M., 1995; Lei, D., Slocum, J.W. and Pitts, D., Journal of World Business, 1997. 5 See Chapter C.5 for elaboration on these knowledge acquisition channels.

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DOZ found that successful alliance partnership were highly evolutionary, going through a series of interactive cycles of learning, reevaluation, and adjustment. As new knowledge is obtained and levels of inter-partner trust shift, JV managers must

be willing to make changes in the balance and foci of their cooperative relationship1.

Best practice transfer was defined by SZULANSKI2 as “a replication of an internal practice that is performed in a superior way to alternate internal practices and known alternatives outside the company".

The "stickiness" of the knowledge, or the difficulty involved in the transfer, is concentrated mainly at the knowledge-receiving unit. Lack of motivation at the recipient location and its lack of absorptive capacity were found to be positively correlated with stickiness of knowledge transferred. Local Knowledge Transfer

Globalizing Knowledge Flow

Viewing individuals as knowledge nodes creates a framework for evaluation of how the network as a whole performs, so that weaknesses in capability can be evaluated across the whole company and interventions can be targeted to increase capabilities and strengthen the entire organization.

Differing goals of the parent firms do not automatically lead to JV dissatisfaction, nor do the differences necessarily need to be eliminated. The lack of understanding each partner's knowledge needs may be the root cause of an IJV's performance problems.

U.S. firms seek to learn about the market and how to compete in it, while Indian firms desire knowledge about relevant new technologies or management skills. Firms lean heavily on their past JV experiences and use them to direct present and future actions, building on their understanding of markets, technologies, or management styles each time they ally with another firm. As part of three broad categories that typically summarize knowledge acquisition in mature economies: • Knowledge of governmental issues • Knowledge of culture 1 Doz, Y., Strategic Management Journal, 1996. 2 Szulanski, G., Strategic Management Journal, 1996.

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• Knowledge of market characteristics1

A firm with prior experience in India may have built relationships and internal knowledge and can therefore overcome these problems without devoting new resources.

When both the Indian and the U.S. partner are also from the same industry, there is greater potential and desire to obtain knowledge from each other. Firms where the knowledge goals of both parties were in harmony throughout the JV processes were found to have prospered. In a successful IJV, the firms actively state their knowledge needs to its partner and inquires directly as to its partner's needs. The IJV records these issues and they become part of the firm's performance evaluation process.

Accordingly, there is a relatively free flow of information between the partners, and the latest technology is employed in the IJV. Consistent with this outlook, when the IJV holds training sessions, it invites not only the employees of the JV, but also employees of the partner2.

There are various explicit mechanisms to enable knowledge sharing on a more operational basis between the IJV parents and the IJV. The most evident approach is the institutionalization of regular meeting between IJV and parent managers. By having regular monthly, bi-annual and annual meetings at different organizational levels, knowledge sharing on a formal and informal basis is encouraged3.

When the JV is technology-intensive, there is a strong need for good communication and working relationships between partners because of the faster pace of change and

greater complexity4. Partners must communicate fully and work together toward all of their goals if they are to avoid conflict. Additionally, this IJV is aided by a continued escalation of the technological level of the operations. A local partner may leave a JV once it has learned all it can from the international partner, but if the technology employed is at the cutting edge, there is less incentive to leave. For the

1 Hamel, G., Strategic Management Journal, 1991; Parkhe, A., Journal of International Business

Studies, 1991. 2 See C.5 3 Inkpen, A., California Management Review, 1996 4 Singh, K. Academy of Management Journal, 1997

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IJV be on par, which is fully integrated in the IJV framework, technology must be compatible at all level and across the organization.

Over time, JV-experienced firms tend to learn what works and what doesn't for their organizations. These firms will have internalized a set of firm-specific guidelines based on prior partnering experience.

C.4.2 Cross-cultural Management and Learning

Increased internationalization in the economic, political, and social arenas has led to a greater frequency of, and depth in, cross-cultural interactions. These are defined as contacts between two or more people from different cultural backgrounds. An IJV by definition has a high density of cross-cultural interactions, which can be a source of potential and conflict. In the IJV, unsuccessful cross-cultural interactions are even more significant, for the costs of failure are much higher than in short term involvement.

Although capturing learning and institutionalizing skills is key, in most companies

learning is unstructured and the transfer of skills inefficient1.

Cross-cultural research usually examines cultural effects from a static perspective: societies, and individuals from within those societies, are assumed to maintain consistent preferences over time and across contexts. In contrast, a cultural knowledge approach places the study of national culture within the broader strategic framework of international management.

There is the recognition of the need to address behavioral and cultural issues that underline how knowledge is created, shared and used. IJV performance is determined to a large part by people, not contracts. Management of the people dimension, IHRM, is an integral tool for influencing interaction within the IJV2.

Attainment of a firm’s objectives within an IJV is contingent upon its ability to implement a strategy, which exploits distinctive competencies along one or several

critical dimensions of corporate activity3. An effective IJV control system is one

1 Schuler, R.S., Human Resource Management, 2001; Harbison, J.R. "Strategic Alliances", 1996. 2 The core KM processes do overlap; for example, cross-cultural diversity training is an integral

part of IHRM and alliance management in IJVs. 3 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.

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that promotes the attainment of the strategic objectives for the venture. These strategic objectives often differ significantly for the parent firms as well as the IJV as a separate entity. Due to the unique feature of shared ownership and decision-making, the control mechanisms deployed in IJVs must account for all major stakeholders, most importantly parent firms, venture management, employees and host government.

Cross-cultural interaction takes place in the overlap of one’s own familiar culture, customs and patterns of thought and the unknown ones of a partner from a different cultural background. Cross-cultural interaction stems from the cultural differences between the partners, their own individual differences, and their past cross-cultural

experience1. Cultural differences and diversity determine the length of adaptation difficulties. Here factors such as age, cognitive capabilities, and education play a role. Cross-cultural experience plays a major role at the beginning of the interaction. The more an individual has had to deal with different cultures, the quicker the individual can adapt to new circumstances.

The contexts within which adaptation and inter-cultural communication skills take place must be analyzed to construct a framework for cross-cultural management.

A cross-culturally effective employee can be defined as one who feels good about and is capable of interacting with other groups (minority or majority), where tasks requiring interaction (with various degrees of intensity) are completed effectively

with neither of the party suffering from invisible stress-related symptoms2 or conflict.

A detailed treatise on factors affecting cross-cultural effectiveness and culture theories is given in section B.

1 Bergemann, N. and Sourisseux, A.L. " Interkulturelles Management., 1992. 2 Brislin,R.W. et al., " Intercultural Interactions: A Practical Guide, Cross-Cultural Research and

Methodology Series", 1986.

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C.4.2.1 Cultural Context in the IJV

Measures to overcome cultural tension but also maybe even more importantly to understand cultural diversity, such as programs to promote inter-cultural awareness will increasingly become more cost-effective, especially in view of the enormous

costs of failed IJVs1. The cross-cultural interactions found in global alliances bring together people who have different patterns of behaving and believing, and different

cognitive blueprints for interpreting their surroundings2. Corporate culture on the other hand is of firm-specific nature based on the ideologies, beliefs and values that

characterize an organization3.

Developing awareness of the impact of culture and management systems on business

behavior and decisions4 requires constant training and senior management attention. Business or technical skills are only part of the required package of skills for executives involved in cooperative ventures. Without cultural sensitivity, adaptability, interpersonal and communication skills, the executives from the foreign

parent may not survive long enough in the new setting to utilize their other skills5. Even if they do, their relationships are sure to be under a lot of strain. Training and skill development must address the need for technical and cross-cultural skills and be tied as closely to the specific situation as possible.

1 Parkhe, A., Journal of International Business Studies, 1991. 2 Black, J.S. and Mendendall, M., Academy of Management Review, 1990. 3 Peters, T.J. and Waterman, R.H. " In Search of Excellence ",1982. 4 Hofstede, G. " Culture’s Consequences: International Differences in Work Related Values ",

1980. 5 Lane, H.W. and Beamish, P., Management International Review, 1990.

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Figure C.24 Impact of Cross Cultural Training

The skills deemed necessary to function effectively in a multi-cultural setting (the

IJV) can be categorized into three dimensions1. • The self dimension, skills related to the maintenance of self, such as mental

health, psychological well-being, stress reduction, and confidence2 • The relationship dimension, relating to the fostering of relationships with host

nationals • The perception dimension, consisting of cognitive skills that promote a correct

perception of the host environment and its social systems

The limited literature on concrete skills that an IJV manager should possess, i.e. what characteristic they should have to start out with, and what they can be trained

for, states the most obvious characteristics as3:

1 Mendenhall, M. and Oddou, G. Academy of Management Review, 1985. 2 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990. 3 Bergemann, N. and Sourisseux, A.L., "Interkulturelles Management ", 1992.

Source: Stewart Black, J. and Mendenhall, M. Academy of Management Review, 15(1), 127

Performance

Adjustment

Incentives

Individual Differences

Locus of Control

Efficacy Expectations Outcome Expectations

Motivation

Cross-CulturalTraining

Attention Retention Reproduction Skill Development

Training rigor,gradual modellingprocesses, symbolicand participativemodelling processes

paid to the modelledbehaviours and toanticipated andexperiencedconsequencesduring cross-cultural training

of the learnedbehavioursappropriate in thefuture cross-culturalsituation

of the learnedbehaviours bycognitive andbehaviouralrehearsal inpreparation for andduring cross-cultural interactions

Self Dimension

Relational

Perceptional

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• flexibility and ability to adjust in building social networks • no ethnocentric predisposition • open-mindedness, tolerance, and respect • willingness to learn • high consciousness of own culture • cultural empathy

Inter-cultural adaptation is facilitated by knowledge of those aspects of cultural

diversity that quick to meet the eye, such as1: • Language • Paraverbal communication (gestures, signals and signs) • Social norms and customs (i.e. greeting, presents, punctuality, courtesy etc.) • Social relationships (family, hierarchy, class and caste system) • Motives and motivation • Values and ideologies

Studies have found that between 16 and 40 % of all expatriate managers who are given foreign assignments end these assignments early because of their poor

performance or inability to adjust to the foreign environment2.

To overcome the inevitable problems and maintain the high level of trust, commitment towards each other and the long-term objectives of the IJV is imperative from both sides. Some foreign parents take an arm’s-length, investment approach to the IJV. On the other extreme, the foreign parent manages the IJV as if

it were a wholly owned subsidiary3. Both show an inherent unwillingness to confront the other partner and their culture, and an aim to keep the relationship to a minimum.

1 Bergemann, N. and Sourisseux, A.L. "Interkulturelles Management ", 1992. 2 Black, J.S., Journal of International Business Studies., 1988. 3 Lane, H.W. and Beamish, P., Management International Review, 1990.

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Figure C.25 Western / Asian Values

In the contemporary context, multiple layers of values have emerged where societal values remained very much rooted to the ancient traditions, while institutional and corporate values reflected values of the colonial era. Among the most important factors creating the change in Indian management are the homogenization of social structure1, foreign investment changing infrastructure and urbanization of values. With respect to the Indian corporations, a striking feature is evident in the differences of managerial values espoused by large tradition-bound organizations and born global new generation organizations.

To understand the diversity of firm practices in India, it is necessary to appreciate the broader socio-economic and cultural environments that shape them, while recognizing the growing diversity of sub-cultural influences.

Historically, three broad socio-economic forces shaped work organizations in India: The traditional caste system, British colonization, and post-Independence

1 Anthropological Survey of India, People of India Report, 1992.

Source: Hirsch, H. and Swierczek, F. (1994): European Management Journal, 12(2), 203.

BASIC VALUES

ORGANIZATION MANAGEMENT STYLE

ACTION

WESTERN

WESTERN

WESTERN

WESTERN

ASIAN

ASIAN

ASIAN

ASIAN

FORMALFRAGMENTEDHIERARCHIALCOMPETITIVE

GROUPTRUSTCOMPROMISEFLUID

INDIVIDUALLEGALCONFRONTATIONANALYTIC

RELATIONSHIPSFLEXIBLEADAPTIVEUNDERSTANDING

RATIONALITYSTRUCTUREDDIRECTIVEDOING

SHORT TERMCONTROLCONFLICTONE PRODUCTSERVICEFOCUSED

LONG TERMHUMANRESOURCECOLLABORATIVECUSTOMERFOCUSED

INFORMALGENERALISTINTEGRATEDCO-OPERATIVE

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Socialism1. The caste system originally was comprised of inter-dependent occupational groups, which later evolved into a stratified, hierarchical socio-economic class system. The British colonization resulted in administrative bureaucratization and polarization of manager and non-manager groups. Post-Independence, development goals with socialistic ideology strongly influenced the business community.

While it is difficult to characterize a common Indian cultural pattern, because of its

heterogeneous demographics, some generic attributes were identified2. Predominant were submissiveness, fatalism, and clan-orientation with in-group/out-group distinctions and power consciousness. In addition were willingness to delegate but not accept authority, possessiveness towards subordinates, fear of independent

decision making and resistance to change3. Decisions were ad hoc varying with the personalities of individuals at the top, rather than being impersonally institutionalized into policies and practices to be uniformly followed. Traditional authority and relationships based on power, social position and personal and group orientation were in conflict with the dictates of a globally competitive economy where relationships are based on competence, impersonal task roles and

organizational commitment4.

Such overall collectivism, however, has weakened over the years due to various influences such as urbanization, changes in the economy, government affirmative action programs in education and employment and competitive pressures. This compel organizations to redefine their management values and HRM practices, and changes in the demographics whereby the young, educated and trained employees - including women - emerged at all levels with new expectations, particularly among

professional and managerial groups5.

1 Virmani, B. and Guptan, S. "Indian Management", 1991 2 Sharma, I.J., Management and Labour Studies, 9(2), 1984; Sinha, J.P., "Work Culture in the

Indian Context", 1990. 3 Sharma, I.J., Management and Labour Studies, 9(2), 1984; Kakar, S., Administrative Science

Quarterly, 1971. 4 Parikh, I.J. and Garg, P.K., "Managing in Developing Countries", 1990; Venkata Ratnam,

"Employment Relations in the Growing Asian Economies", 1995. 5 Venkataratnam, C.S. In: "Employment Relations in the Growing Asian Economies", 1995.

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As a further step, cultural integration within the IJV should be viewed as an

important function of alliance management, and must be addressed specifically1.

Tradition and modernity have combined to transform the managerial mindset in a unique way and this has created dualities of value that is often difficult for others to understand2. It was suggested that the Indian managers gave much more importance to organizational stability than in other countries3. Indian managers generally feel comfortable with the traditional system of hierarchy in all spheres of life and a sense of discomfort with the managerial culture of instant feedback, performance and empowerment.

Managers regarded physical work conditions and convenient work hours as the least important of their work goals. Also of low importance was salary and job security. CHATTERJEE observed that the Indian managers placed work quality ahead of all of the other items, which are commonly stereotyped and have greater priority in the Indian context. Such ambivalence points to a definite shift and confirms a transition in the perceptions of societal values amongst senior managers. In the emerging competitive Indian marketplace managers are being increasingly confronted with ethical dilemmas. This suggests the need for both a guiding framework as well as managerial education to reduce the gap between standards and normative societal conceptualization of ethical codes.

There is an emergence of global value paradigms amongst the senior level Indian managers. CHATTERJEE and PEARSON4 suggest that Indian managerial work goals tend to be in line with attributes needed in a market-dominated business culture.

The traditional Indian hierarchic values that emphasize power distance run counter to progressive and egalitarian US management trends, and the extend of resistance to

1 Maddox, R.C. " Cross-Cultural Problems in International Business: The Role of the Cultural

Integration Function ", 1993. 2 Garg, P.K. and Parikh, I., "Crossroads of Culture", 1995. 3 England, G.W., Columbia Journal of World Business, 1978. 4 Chatterjee, S.R. and Pearson, A.L., Management International Review, 2000.

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or acceptance of such Western management values is one indication of the transformational pressures that exist in Indian firms today1.

The traditional Indian perspective calls for business conduct that acknowledges and recognizes moral duties. The concept calls for one's obligation to the primary group

as well as to social welfare2. On the contrary, other argues that the dharma, obligation, applies only to the primary group (kinship and caste), that is, limited to

in-group loyalty3.

Recently, however, the business community in India has expressed concern about the erosion of ethical values in business over the last two decades, with personal values of managers compromised in business decisions. Evidence was lacking about practices in family firms, where more control over workplace moral decisions existed but fewer resources to resolve issues were available. The ethical values and work climate issues, therefore, warrant exploration, as Indian managers are now confronting intense global external market competition and domestic privatization of government enterprises and sectors.

The growing lack of support for hierarchic work values and the endorsement of more democratic work practices may well indicate that "authoritative bearing" may be socially desirable in India in some traditional work contexts. However, modern workplace expectations are being transformed to encourage competent input, trust and initiative from lower level managers and their employees.

1 Amba-Rao, S.C., Petrick, J.A., Gupta, J., Von der Embse, T.J., International Journal of Human

Resource Management, 2000. 2 Sinha, D.P. "Management: Asian Context", 1994 3 Gopalan, S. and Riveira, J. International Journal of Organizational Analysis, 1997.

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HOFSTEDE1 TROMPENAAR2 • Low uncertainty avoidance at work

commensurate with Hindu belief in karma, which promotes a sense of fatalistic acceptance of current uncertainty rather than proactive efforts to reduce it.

• High power distance reflective of traditional Indian social respect for paternalistic, hierarchic authority by age, caste, family status and gender.

• Medium collectivist orientation influenced by extended family, caste, religious and linguistic affiliations, with the resultant in-group and out-group relationship orientation.

• Medium masculinity reflected in moderate levels of assertiveness, interest in acquiring money and things, relative to affiliation and social relationship.

• Strong long term time orientation as opposed to short term horizons consistent with cultural respect for past traditions and wide spread belief in the forces controlling the future outcome of events3.

• In the human nature orientation, the belief humans are evil, unchangeable and shaped by past life activities.

• In the man-nature orientation, a belief in external forces controlling life events that leads to an external locus of control and lower levels of ambition, especially in middle to lower management.

• In the time orientation, reflected at work in a lack of urgency and a preference for tried and true conventional procedures.

• In the activity orientation, enculturated to admire ascetic contemplators over practical doers; Indians are motivated by duty (dharma) to their life roles and family welfare rather than to the intrinsic value of occupational accomplishment; a sense of socio-moral obligation rather to organizational commitment.

• In the relational orientation, consistent with collectivism, hierarchy, and paternalism so that at work there is a likely acceptance of status in a quality, factionalism, supervisory-subordinate reciprocity and dependence4,5.

Figure C.26 Cultural Classification of Indian Management

The examination of SINGH6 and SAHYAY et al7 is of particular relevance arriving at the following conclusions:

1 Hofstede, G. " Culture's Consequences", 1980; Klukhohn, F and Strodtbeck, F. " Variations in

Value Orientations", 1961. 2 Trompenaars, F. "Riding the Wave of Culture", 1993. 3 Ronen, S. and Shenkar, O., Academy of Management Review, 1985. 4 Gopalan, S. and Riveira, J., International Journal of Organizational Analysis, 1997. 5 While the above models provide a basic understanding of Indian culture and its manifestations in

the work place, other empirical studies found that the HOFSTEDE dimension were either unstable or had weak links: see Singh, J.P. "Organizational Studies", 1990 and Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.

6 Singh, J.P., Organisation Studies, 1990. 7 Sahay, S. and Walsham, G., "Using GIS in Developing Countries: Social and Management

Issues", (1997).

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As a group, Indian managers are low on all four dimensions. They tend to underplay use of power (managers prefer and use a consultative style and subordinates are not hesitant to disagree with supervisors), feel comfortable in dealing with uncertainties at work and life, emphasize loyalty and belongingness, are caring and do not consider managerial assertiveness to be important.

Indian managers' attitude varied selectively with age, education, occupation (function) and economic sector. For example, general managers differed from the functional department heads in their advocacy of centralized controls and protection of privileges.

These egalitarian managerial values, that is, employee involvement and total quality participation, entail a normative shift from the paternalistic, authoritarian managerial style to the supportive, facilitative managerial style.

Foreign firms and family businesses, however, need to earn public trust and credibility and, therefore, are more likely to accord ethical standards more priority than economic efficiency and legal compliance in organizational decision making.

The process of selection in getting the top team is critical. To facilitate the objectives of the partnership and the IJV, the managing director and the HR manager may need to be sourced locally, and with criteria agreed upon by both parents. Both, however,

may need to be acquainted with the parents1. Asians wanted to focus on effective recruitment and training of new managers and staff who exhibited exemplary interpersonal skills and who were committed to enhancing corporate success.

C.4.2.2 Learning and Culture

The transfer of organizational knowledge necessarily involves an examination of how factors in the cultural environment will influence the implementation of new

organizational practices and routines2. The manner in which individual managers deal with the challenge of integrating members of culturally diverse backgrounds into a coherent organization provides insight into the sources of competitive advantage of international organization.

1 Schuler, R., Dowling, P.J. and DeCieri, H., European Management Journal, 1992. 2 Knowledge Management Magazine, August 2000

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The measurement of cross-cultural effectiveness in regard to the KM process is derived from the outcomes of the learning process. The optimal solution would be a dichotomous mix of efficiency and effectiveness, a way that offers the longest sustainable competitive advantage.

It would be apparently a major mistake for parent company managers, unaware of the cultural differences, to adopt a strategy developed in the parent company culture to elicit commitment from local employees. Managers of IJVs, then, need to be trained to be able to select an appropriate mix of determinants of organizational commitment depending on the cultural orientation of their employees.

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Figure C.27 Managing Cultural Differences

Cultural Barriers and Enablers to Knowledge Transfer

The application of ethical ideas in the contemporary context needs a much deeper level of understanding and should be given greater emphasis. This calls for a broadening of management education and development to incorporate value-based inputs and processes.

Host Culture Integration

Source: Harris, P. and Moran, R.T Managing Culturel Differences, Gulf Publishing, Houston, 1987, p 219

1. Selection and preparation ofF.D. Staff

2. Recruitment of overseascandidates

3. Selection of personnel for foreignservice

4. General cultural or area training5. Specific culture and language training6. Departure and travel7. Onsite orientation and briefings

8. Culture shock/adjustment9. Overseas monitoring and support

services10. Acculturation-making host friends11. Withdrawal, psychologically

anticipating going home12. Exit-transition, travel home or visit

other countries13. Reentry shock14. Readjustment15. Reassignment in parent organization

Re-

entr

y Pr

oces

s

Entr

y Pr

oces

s

Home Culture Integration

IndividualTeam or Family

Steps 6 to 10

Steps 14 and 15

Step

s 11

to 1

3

Step

s 1

to 5

151

2

3

4

5 11

109876

13

12

14

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While diversity training and awareness are on the increase in U.S. firms, language training and cultural sharing are not. The ability to completely understand each other has not been addressed or adequately resolved. Obviously, this limits organizational effectiveness, while at the same time being relatively easily reversible.

U.S. multinationals generally expect all employees to be fluent in English and assume they understand all of the colloquialisms, similes and metaphors of American English. Many Americans simply presume comprehension because they come from a generally unified language and culture. When a foreign multinational attempts to do business in the U.S., the problem is even greater, Americans tend to be even less able to embrace cultural or language differences than workers in other countries, where multiple language comprehension is the norm.

However, not only must the multinational firm enable ubiquitous information but it must also make sure the information is contextualized in such a fashion that it has the same meaning to a person regardless of their cultural or native language.

These are the areas to which special attention has to be paid in the context of a well-rounded cross-cultural training for IJV personnel. However, it is important to remember that the specific context of the IJV and the assignment has to be taken into consideration. Cross-cultural training is most effective in a customized form that fits the needs and scope of the individual employee1.

A successful international IJV is a stable, healthy and profitable business operation, which is probably most representative of the globalization process. It is based on two-way communication, mutual respect and commitment. However, international managers need assistance and guidance in developing and nurturing the necessary skills and knowledge required to run a successful operation and to overcome their company’s and their own shortcomings. Cross-cultural aptitude can not be taken for granted as it requires effort and time and must be integrated into the IJV framework on a permanent basis. Learning to behave cooperatively in a multicultural environment often requires a change in attitude, specialized training and constant rethinking of objectives and environment.

1 For an extended treatise on cross cultural management, see Training within the IJV in C.5.5.2

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C.4.3 Potential questions for further research

In emerging markets such as India, IJV alliance between a very strong established industry leader from developed countries (e.g., U.S.) has to adjust often with a technology weak and business driven partner in a different cultural and business environment. This aspect has been scarcely attended to in the literature. In IJVs with diverse culture and business model issues such as knowledge due diligence, initial agreements on transfer of knowledge, types of knowledge and impact of cross cultural management on this transfer are very crucial to the success of an IJV alliance and the literature is sparse in this respect. In the case studies the author has attempted to query exactly these issues in the IJV case studies.

C.4.4 KM Practices within the IJV Framework: Case Studies

C.4.4.1 DSP Merrill Lynch

The processes necessary to ensure a 100% integration and co-ordination of both businesses as well as support functions were put into place from the outset of the IJV. The resources include on-line access to the international research database of ML, and access to the experience of the international workforce and global competencies of ML worldwide. The transition process from DSP's indigenous practice to Merrill Lynch's international management style and practice was designed to be smooth and foolproof. During the merger process and the restructuring relationship managers served as liaison and single point of contact between the IJV employees and the parent companies.

C.4.4.2 JM Morgan Stanley

There are two sets of people who have to come to terms with change in the IJV. Subsequently the IJV management was aware of the fact that knowledge channels within the IJV framework had to be to be adapted accordingly. The first group of people is those in support functions in Hong Kong (MS Asia Pacific headquarters). The APHQ views the IJV employees as no longer MS employees but IJV employees. The decision to enter into a JV was taken by the Head Office in New York. For this reason the APHQ did not feel an exact link to the venture from the beginning stage, as they would have normally done, Indian operations being under the APHQ's operative directives. The JV employees have different designations and due to their legal status do not figure in head counts and in consolidated balance

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sheets. Top management feels that it is important to make clear to all actors in the IJV network that the IJV is very much a part of MS worldwide and to make sure that all information and communication channels remain wide open. This viewpoint and aim is communicated throughout MS and the IJV.

In all MS subsidiaries worldwide the dual reporting channels are very open (i.e., functional and local, reporting to AP HQ in Hong Kong). Due to the fact that JMMS is an IJV, these reporting channels are not as open as they used to be and the link is perceived to be more restricted and less permeable. This is one of the major challenges for the JMMS top management.

The main groups of people who have to undergo a change in mindset are the former MS employees in India. There was quite a bit of initial skepticism, if not resistance, insecurity about the IJV. JMMS employees were unwilling to give up their MS position. It was important for these employees to identify with the JV as well as internally within the MS global network and externally to clients in India. However, this is a process that could be rushed and adaptation programs implemented in the starting phase. One of the programs initiated were weekly brown bag sessions, where all employees in the various divisions were encouraged to voice their integration sentiments.

In the last 17 months the COO has been in the process of JV preparation and trying to persuade those resisting the change. Now that the JV is in place, there is little resistance left. JM financials was dissolved as a company and became integrated as a part of the JV. 65 investment bankers came to join the 4 investment bankers from MS in 1998. The plan to equalize both the company structures is a relatively long term one.

MS brought in the international expertise and the necessary global infrastructure and technology pertaining to the international capital market, private equity placement and distribution and financial advisory. JM made the deal flow possible due to their widespread relations to government, other clients and institutions. Here the local knowledge consists to a major part of „knowing who“. In India’s financial environment the government is one of the biggest purveyors of deals and JM financials was in a position to see its venture partner through the regulatory hurdles that they would not themselves have been able to overcome. MS entered the venture relatively later, much after DSP Merrill Lynch, whom they consider to be their major competitor in India.

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The strategic issue of sharing and transferring knowledge between the partners was never specifically addressed in the negotiation stage, as other issues such as legal compliance and financial credibility were given a higher priority, and it was assumed that the MS culture would be adopted automatically within the IJV. According to MS and IJV top management this view was in part due to MS’ lack of experience in global IJVs.

During the alliance negotiation stage there were many protective agreements on software, patents, branding from both sides. MS has enhanced its reputation in investment banking in India through JM Financials. MS, has at least in its partner’s eyes, learnt a fair amount of cost-control from JMF, which is inherent in every traditional business house and lacking to that extent in a foreign global player. Compliance standards and internal policy was more or less the same in both partners so that adjustment was easy there.

As one former JMF employee put it, “Americans are more open and sometimes expect results too quickly whereas Indians have vast knowledge but lack a certain amount of two-way communication skills”.

JMMS values talent and offers opportunities to grow for the individual while meeting company and parent objectives. The working environment is free and energetic.

The IJV employees have full access to all MS global training programs such as the MS Analyst training. The few new people who have come as well as existing ex-JM bankers were and are encouraged to get to know the culture and processes in MS in order to help them integrate within it. However, concrete measures to support the IJV employees in this endeavor1 were few.

C.4.4.3 Max New York Life

Within the MI organization it is common for the IJVs to be relatively autonomous from the parent companies and each other. There is monthly financial reporting. The executive committee meeting is strictly for internal targeting and review, with the MI shareholders present. There is a dual reporting structure with the NYL,

1 Interview, JMMS, Mumbai, India, 1999.

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financial and operational reporting goes to the CEO of MNYL as well as the NYL AP Head in Singapore and Japan.

NYL has a strong brand name in its other markets, but in India, where the insurance market is in its infancy. However, NYL aims to pass on the same service mentality and quality assurance to its employees in MNYL. NYL sees India as a prime growth market in Asia, especially in the coming years.

The IJV receives the operative guidelines and policies from the APHQ of New York Life in Singapore and Japan. AP’s main input was to build a functional business plan for the IJV and ensuring that it would not be a stand-alone and integrated within the NYL network, and that all channels for knowledge transfer were open.

C.4.4.4 Birla AT&T

The CEO is appointed by AT&T to manage the alliance. The first CEO to be appointed by AT&T was an expatriate from the AT&T Headquarters who stayed for three years, an extremely dynamic person who really got the IJV up and running. The CFO was appointed by Birla. The IJV operates in two areas i.e., the basic telecommunications and cellular licensing.

AT&T provides the technical expertise, the management team/model/vision statement and the engineering team to build up the network RF and civil construction engineers. There is a vice-president in Seattle who is responsible for Indian operations. The JV Financial structure is debt equity which is supported by AT&T worldwide. Birla supplies the local market knowledge i.e., knowledge of the general Indian customer per se not sectorial knowledge. Birla also supplied the necessary government connections, where they definitely have the edge over the foreign companies. Birla activities are pro-active with the government and they provide advisory services to the JV.

This has led to a cultural split within the IJV with the different departments being run differently. The split is thought of as being “formal/informal”. Officially the organizational structure throughout the JV is the same but the “Birla side’ is more hierarchically structured with a higher cost-control whereas the AT&T run departments are more performance driven and open to the unknown. This is of high value in departments such as customer care where models previously unknown to the Indian market and consumer have to be implemented.

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Through the years the separation has become somewhat diluted but is still palpable with the traditional departments being more risk averse in light of company activities. At the beginning of the IJV the conflict was more real as the cost controlling, risk-averse, preserving assets of the Birlas did not match the entrepreneurial spirit of AT&T in India. This was seen as a speed breaker for the development of the JV. The pro-active CEO was essentially the glue that held the JV together. The CEO has the final say and makes decisions that are the best for the IJV as a whole.

AT&T relied heavily on its brand name as a source of global brand equity. A tarnish in reputation could affect AT&T on a global scale. The AT&T brand equity affects all departments, primarily Sales and Marketing, and most importantly customer care. All aspects of customer care have to adhere to global AT&T standards and guidelines and the GM of customer care operations has to confer directly with the brand manager. Service is being marketed under the AT&T brand name, marking the first time the AT&T brand has been used for an Asian joint venture. Service quality is being held to the same high standards as AT&T's operations around the world.

C.4.4.5 Sprint RPG

The senior IJV management reports to the board. The CEO has allegiance to both partners but for administrative purposes RPG is the majority partner. The Board of Directors has the final say in all strategic decisions of the IJV. Parent IJV meetings are dominated by financial issues. The board of directors meets on a quarterly basis to review operation.

A Global One manager said1: "In a joint venture the most important thing is trust between the joint venture partners. This is more important than intellectual property rights laws, which depend on implementation and enforcement. If Global One had a 100% wholly owned subsidiary it would transfer more technology. To transfer advanced, valuable technology, you want management control." Detailed performance data is regularly distributed to all units. The unit heads meet several times a year to review each unit’s performance and to develop and implement formal plans for the transfer of best practices on a global scale. Unit

1 Interview quote, Global One, U.S., 2000.

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managers periodically visit each other, in order to go beyond performance data and understand firsthand the factors that make particular practices superior or inferior. A start-up group is responsible for designing and managing any new project. Thus the embedded and underlying process knowledge is carried over, and start up expertise can become one of the organization’s core competencies.

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4

IJV

W

as k

now

ledg

e du

e di

ligen

ce p

erfo

rmed

be

fore

par

tner

sele

ctio

n?

Wha

t pr

elim

inar

y ag

reem

ents

, if

any,

wer

e m

ade

for

the

trans

fer

of k

now

ledg

e w

ithin

th

e IJ

V fr

amew

ork

in th

e ne

gotia

tion

pha

se?

Wha

t ty

pes

of

know

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e w

ere

cons

ider

ed m

ost

impo

rtant

for

tra

nsfe

r w

ithin

the

IJV

fram

ewor

k?

Wha

t is

th

e im

pact

of

cr

oss

cultu

ral

man

agem

ent o

n th

e kn

owle

dge

trans

fer

with

in

the

IJV

fram

ewor

k?

DSP

Mer

rill

Lyn

ch

• M

erril

l Lyn

ch c

ondu

cted

a

know

ledg

e du

e di

ligen

ce o

f var

ious

po

tent

ial p

artn

ers w

ith re

gard

to

mar

ket,

regu

lato

ry, a

nd p

artn

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g kn

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Acc

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o th

e IJ

V

partn

er’s

kno

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dge

was

vie

wed

as a

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s fac

tor.

• A

gree

men

t to

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in D

SP,

thro

ugh

trans

fer o

f pro

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kno

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dge

from

ML

to th

e IJ

V.

• IJ

V h

as fu

ll ac

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to M

L ex

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glob

al re

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ase.

• A

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men

t to

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IJV

as f

ar a

s po

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le to

ML

glob

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lines

.

Mer

rill L

ynch

• M

arke

t kno

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• R

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DSP

• G

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h da

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se

ML

• Pr

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t kno

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• Pr

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s kno

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• Ex

patri

ates

wer

e tra

ined

and

had

kn

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dge

of th

e In

dian

env

ironm

ent,

very

succ

essf

ul in

tern

atio

nal a

ssig

nmen

ts

• In

tern

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nal p

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nnel

mov

emen

t at a

ll le

vels

of m

anag

emen

t with

follo

w u

p fe

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ncou

rage

d ad

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of

partn

er m

anag

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t sty

les i

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e IJ

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espe

cial

ly in

rega

rd to

pro

fess

iona

lism

.

• C

ross

-cul

tura

l tra

inin

g in

itiat

ive

impl

emen

ted

thro

ugho

ut th

e IJ

V

fram

ewor

k.

JM M

orga

n St

anle

y

• M

orga

n St

anle

y co

nduc

ted

a du

e di

ligen

ce o

f JM

, inc

ludi

ng in

tang

ible

as

sets

.

• Pr

elim

inar

y ag

reem

ent t

o af

ford

the

IJV

rest

ricte

d ac

cess

to M

S gl

obal

re

sour

ce b

ase.

No

spec

ifics

det

erm

ined

.

• M

orga

n St

anle

y

• m

arke

t kno

wle

dge

• cl

ient

kno

wle

dge

• re

gula

tory

kno

wle

dge

• N

o sp

ecifi

ed c

ross

-cul

tura

l tra

inin

g /

man

agem

ent i

nitia

tives

led

to

sym

ptom

atic

trea

tmen

t of c

ross

-cul

tura

l is

sues

spec

ific

to th

e IJ

V.

• Fa

ilure

to a

ddre

ss c

ross

-cul

tura

l iss

ues

led

to fr

ictio

n lo

ss a

nd la

ck o

f co

mm

unic

atio

n in

the

form

atio

n st

age

of

the

IJV

.

Max

New

Y

ork

Life

• N

o kn

owle

dge

due

dilig

ence

was

co

nduc

ted

by N

YL,

as c

ritic

al m

ass

and

dist

ribut

ion

chan

nels

wer

e co

nsid

ered

key

attr

ibut

es o

f MI,

the

IJV

par

tner

.

• Te

chno

logy

tran

sfer

agr

eem

ent f

or IT

an

d M

IS sy

stem

s fro

m N

YL.

• A

gree

men

t tha

t NY

L w

ould

take

ove

r al

l tra

inin

g pr

ogra

ms (

life

insu

ranc

e-sp

ecifi

c) fo

r loc

al e

mpl

oyee

s.

• N

ew Y

ork

Life

• m

arke

t kno

wle

dge

• M

ax In

dia

• Pr

oduc

t/ In

dust

ry

know

ledg

e

Bir

la A

T&

T

• B

irla

Gro

up’s

mar

ket k

now

ledg

e w

as

• A

gree

men

t for

pro

duct

trai

ning

of l

ocal

AT&

T •

Cro

ss-c

ultu

ral i

nitia

tives

and

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5

cons

ider

ed a

key

fact

or. N

o sp

ecifi

c kn

owle

dge

due

dilig

ence

was

co

nduc

ted

on b

ehal

f of A

T&T

othe

r th

an th

e cr

edib

ility

of B

irla

Gro

up.

• B

irla

Gro

up c

ondu

cted

due

dili

genc

e of

var

ious

glo

bal

tele

com

mun

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ions

firm

s wis

hing

to

ente

r the

Indi

an m

arke

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ing

fact

ors s

uch

as b

rand

and

pro

duct

kn

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empl

oyee

s by

AT&

T (a

t U.S

. fac

ilitie

s)

• A

gree

men

t for

pro

tect

ion

of A

T&T

Bra

nd k

now

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ssig

nmen

t of

AT&

T B

rand

Man

ager

to th

e IJ

V)

• A

cces

s to

AT&

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ase

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ugh

AT&

T kn

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liais

on

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e.

• m

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• co

nsum

er k

now

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e

• B

irla

Gro

up

• Pr

oduc

t/ in

dust

ry

know

ledg

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• Pr

oces

s kno

wle

dge

unde

rsta

ndin

g (a

lso

thro

ugh

best

pra

ctic

e da

taba

se) l

ed to

loca

l, su

cces

sful

ad

apta

tion

of g

loba

l pro

cess

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.g. c

all

cent

er a

nd q

ualit

y co

ntro

l pro

cess

es)

• In

sigh

ts g

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C.5 International Human Resource Management: The Global Knowledge Worker within the IJV Framework

„A few years ago, human resources weren’t important to the business. What’s different now is the degree in support and commitment from the executive team „. The new economy with its relentless competition and for talent and the focus on intellectual resources has driven home the message […] that people are important. But in large multinational companies, often the HR Director is still trying to grapple with more efficient HR administration services, whereas the focus should be on how to maximize human potential. 1

As invisible assets are embodied in people, policies regarding human resources (HR) are critical to organizational learning. The objective of the HR activities is to complement line management in providing a supporting climate and appropriate systems to guide the process of learning2.

This study wants to propose an agenda in which knowledge creation and learning underpin the International Human Resource Management (IHRM) debate. In this regard, the firm's stock of expertise is perceived in terms of the collection of skills, talent and abilities (resources) and the human resource practices and policies through which the resources are deployed and utilized (capabilities)3.

C.5.1 Human Resource Management in IJVs

The objectives of the IJV should be reflected in the corporation’s IHRM systems, and the individuals’ personal performance targets. However, the unilateral setting of business goals and executives’ performance targets in the foreign parent firm without input from the local partner can lead, not only to unmet objectives, but also

to potential conflict and to deterioration of the relationship4.

The IHRM function should also contribute to the evaluation of the potential venture partner's systems and practices, and determine future training needs. The

1 Wall Street Journal, 2000. 2 Pucik, V., Human Resource Management, 1988 3 Kamoche, K., International Journal of Human Resource Management, 1996. 4 DiStefano, J.J. and Lane, H.W. "International Management Behavior", 1988.

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development of local human resources could contribute to the IJV’s competitive advantage and protect the parent’s investment.

C.5.2 Knowledge Management Issues in IJVs

Pucik categorized the key IHRM activities as follows:

Staffing Practices College Recruiting Ability tests Personal interviews Internal Referrals or recommendations External referrals or recommendations Previous work Educational background

Evaluation Practices Written performance evaluation MBO system

Succession Planning Training practices On the Job Internal training by staff Internal training by consultants External training

Written Job Descriptions Compensation Practices Job evaluations Seniority as pay criterion Performance as pay criterion Profit sharing

Figure C.29 HR Practices

In the 1990s, the concept of IHRM gained recognition as an important and a distinct

field of social inquiry1. IHRM objectives include the quest for control. This is especially true when the financial performance of a venture is in doubt, and where the business risks require close supervision of the operations. This involves the placement of foreign parent nationals (expatriates) in key positions. Associated with

1 For a critique of the contemporary trends in IHRM research see: Forster, N., International Journal

of Human Resource Management, 1992; Kamoche, K., International Journal of Human Resource Management, 1996a; Kochan, T.A. et al., "Research Frontiers in Industrial Relations and Human Resources", 1992; Schuler, R. et al., International Journal of Human Resource Management, 1993

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the notion of control is the common view that knowledge is transferred from the headquarters to the IJVs and not the other way around.

Much of the IHRM literature is currently concerned with expatriation and repatriation and in particular the problems that managers face in adjusting to foreign

cultures and also subsequently adjusting to the "parent country"1. Other themes include the factors affecting the performance of international managers and the need

for cultural sensitivity and language training2.

The examination of human resource issues and activities associated with IJVs

requires a depth of analysis not necessary for other types of alliances3. The asymmetric appropriation of intangible resources - such as the acquisition of product or market know-how for use outside of the partnership framework or even to support a competitive strategy targeted at the partner - cannot be easily protected. The asymmetry results from the internal dynamics of the strategic alliance. Benefits are appropriated asymmetrically due to differences in the organizational learning capacity of the partners. The shifts in relative power in a competitive partnership are

related to the speed at which the partners can learn from each other4.

Effective management of various HR related issues could influence IJV success. Major HRM issues are: • Freedom of decision making by the IJV management • Appropriate selection of the IJV personnel • Use of experienced expatriates • Training of expatriate managers about local culture • Training of local managers about foreign cultures • Joint training of nationals and expatriates • Provision of special compensation of expatriates

1 see Black, J., Management International Review, 1990; Black, J. and Gregersen, H., Human

Relations, 1991; Black, J. and Stephens,G., Journal of Management, 1989; Black, J and Grergersen, H., Harvard Business Review, 1999; Forster, N., International Journal of Human Resource Management, 1994

2 Forster, N., International Journal of Human Resource Management, 1992 3 Child, J. and Faulkner, D., "Strategies of Cooperation", 1998; Cyr, D.J., " The Human Resource

Challenge of International Joint Ventures", 1995, Schuler R.S., International Journal Human Resource Management, 2001.

4 Pucik, V., Human Resource Management, 1988

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• Using locals in key IJV positions • Inter-partner learning • Building a separate IJV culture

The following figure depicts the four stages of the IJV process. The relevant activities pertaining to human resource management and managing the knowledge worker must be determined and examined.

Figure C.30 HR Implications in the Four Stages of the IJV Process

HR Implications in the Four Stages of the IJV Process: IJV Stages

Stage 1 – Formation

• Human resource planning• Identifying reasons• Planning for utilization• Selecting dedicated manager• Finding potential partners• Selecting likely partners• Resolving critical issues• Negotiating the arrangement

The more important learning is, the greaterthe role for HRM:Knowledge needs to be managedSystematic selection is essentialCast a wide net in partner searchBe thorough for compatibilityEnsure extensive communicationsMore skilled negotiators are more effective.Integrative strategies for learning

Stage 2 – Development

• Locating the IJV• Establishing the right structure• Getting the right senior managers• Job design and job analysis• Recruitment, selection and orientation

Concerns of multiple sets of stakeholdersneed to be considered for long term viabilityand acceptanceThe structure will impact the learning andknowledge management processes. Theseare impacted by the quality of IJV managersRecruiting, selecting and managing seniorstaff are critical issues in the IJV

Stage 3 – Implementation

• Establishing the vision, mission, values,strategy and structure

• Developing HR policies and practices• Staffing and managing the employees• Training, socialization and assimilation• Remuneration (compensation)

These will provide meaning and direction tothe IJV and employeesThese will impact what is learned and sharedNeed to design policies and practices withlocal – global considerationsThe people will make the place

Stage 4 – Advancement and Beyond

• Learning from the partner• Transferring the new knowledge to the

parents• Transferring the new knowledge to other

locations• Employee welfare• Communications

Partners need to have the capacity to learnfrom each otherHR systems need to be established tosupport knowledge flow to the parent andlearning by the parentSharing through the parent is critical

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At the organization level, HR activities need to reflect and support: • Structure: a network-orientation • Values: self-control; initiative; co-operation • Knowledge: sharing; transferring • Teams and cross-unit interactions

The motivation that appears to be gaining substantial momentum involves learning

and knowledge sharing and transfer1. Within the IJV context and within KM there are multitudes of organizational issues that are at the same time human resource

issues. LEI and SLOCUM2 state that there are three key aspects of HR management that are important for efficient IJV operation: training and developing managers in negotiation and conflict-resolution skills; acculturation of managers to work with a foreign partner; and the harmonization of management styles.

KAMOCHE3 takes the view that before IHRM can even begin to examine the individual's capacity to adjust to new or previously familiar circumstances, it is necessary to clarify the specific purposes of international assignments.

The significance of this concept is outlined in particular with regard to how firms can best create and utilize an international stock of expertise. This perspective allows assessing the organization dynamics of resource heterogeneity that permit the diffusion of learning. It is argued here that, through the integration of IHRM into the KM strategy, the interaction of the firm's stock of knowledge and human resource practices can enhance organizational effectiveness in a diversified international context.

The issues associated with managing people need to reflect consideration of such factors as local culture, labor market conditions, religion, laws, local politics and

local competitive pressures4. Locally developed human resource activities,

1 see Hedlund, G and Nonaka, I. In: "Implementing Strategic Process", 1993; Grant, R.M. and

Spender, J.C., Strategic Management Journal, 1996. 2 Lei, D. and Slocum, J.W. Organizational Dynamics, 1991. 3 Kamoche, K., International Journal of Human Resource Management, 1997. 4 Porter, M.E., "Competitive Advantage of Nations", 1990.

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particularly under the guidance of a local HR professional, are more apt to

incorporate these local conditions and thus be more effective1.

The ability to manage human resources in a multi-cultural context has significant

impact on IJV performance2. The importance of complying with local HR practices vis a vis the urge from the foreign parent company to maintain a desired level of parent-country practices is likely to create difficulties in managing HR within an IJV environment. LORANGE argues that IJV must have its own strong, full-fledged HR

function with clear methods of working closely with each partner3. Appropriate staffing of the IJV using the local nationals, expatriates and third country expatriates; developing and maintaining a separate HR policy mix adopting from both the parents and host environments and using management development to establish a shared vision and mindset towards a joint HR culture are important for a

successful IJV operation4. Intensive on-the-job training may reduce the psychological distance and help build up a team spirit in such cross-cultural setting. This may also be done through reciprocal arrangements between the foreign

companies and their overseas operations to exchange managers and specialists5. Knowledge and IHRM

The concept of learning is located at the heart of IHRM for two reasons6. First, in recognition of the potential strategic value of knowledge. Second, the strategic value of resources is sustainable to the extent that the knowledge generated from the utilization of these resources in the firm's productive activities subsequently enhances the firm's capacity to carry out these activities. The implications for IHRM are that this scope for organizational learning exists if the knowledge acquired by individuals in international assignments can be diffused across the organization. The notion of "experiential learning" therefore appears relevant to IHRM due to the role

1 Indeed , in the IJV, examined in the study, all the IJVs had local HR heads, often from the Indian

parent, who saw HR as a mechanism for control within the IJV. 2 Nam, S.H., International Journal of Human Resource Management, 1995 3 Lorange, P., International Journal of Human Resource Management, 1986 4 Nam, S.H., International Journal of Human Resource Management, 1995 5 Zeira, Y, and Pazy, A., Training and Development Journal, 1985 6 Kamoche, K., International Journal of Human Resource Management, 1997.

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of "experience" in knowledge creation in international activities, where individuals develop mechanisms for adaptability and task accomplishment in new cultural settings. • Role behavior perspective: Instead of using specific behaviors and job

performances as the fundamental components, this perspective shifts the focus from individuals to social systems characterized by multiple roles, multiple role senders, and multiple role elevators1. HR is the organization's primary means for sending role information through the organization, supporting desired behaviors and evaluating role performance. It is effective, therefore, when it communicates internally consistent expectations and evaluates performances in ways that are congruent with the systems behavioral requirements.

• Institutional Theory: A role theory perspective assumes individuals respond to normative pressures as they seek approval for their performance in socially defined roles. Similarly, institutional theory views organizations as social entities that seek approval for their performance in socially constructed environments2.

• Human Capital Theory: Human capital refers to the productive capabilities of people. Skills, experience, and knowledge have economic value to organizations. Thus, people constitute the organization's human capital. Like other assets, human capital has value in the marketplace, but unlike other assets, the potential value of human capital can be fully realized only with the cooperation of the person.

• Make/Buy proposition: In human capital theory, contextual factors such as market conditions, unions, business strategies, and culture are important because they have a direct impact on human capital. This way, alternative approaches in HR can be used in order to increase the value of the organization's human capital and the value of the anticipated returns, such as productivity gains.

The theme of learning in IHRM has been mentioned briefly in a number of studies, thus pointing to the need for a more robust exposition of this concept. FORSTER calls for further research in "learning processes in organizations and in an

international context"3. WELCH and WELCH suggest that such a firm "needs to develop systems which enable it to transfer that knowledge around the organization

as well as create new knowledge and skills"4. These themes are developed further along three inter-related dimensions: • Re-examining the paradigmatic status of IHRM

1 Katz, D. and Kahn, R.L., "The Social Psychology of Organizations", 1978. 2 DiMaggio, P.J. and Powell, W., American Sociology Review, 1983. 3 Forster, N., International Journal of Human Resource Management, 1992. 4 Welch, D. and Welch, L., International Journal of Human Resource Management, 1994

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• Identifying the strategic and operational issues pertinent to knowledge creation and the transfer of learning and

• Identifying the problem of retaining knowledge within the organization.

Thus, the more the locally developed human resource activities support and reinforce learning and sharing of knowledge, the more learning and sharing will take

place, thereby increasing the chances of success for the IJV1.

The importance of the human element in KM is key; accessing embedded knowledge and skills in the highly complex IJV environment is a difficult task, and must be approached with sensitivity. This is especially true in the knowledge-based service sector, where a large part of the firm’s assets is the intellectual capital of its employees, a lot of it tacit. According to GERINGER and FRAYNE, the failure of IJVs is at least in part due to the managerial complexity involved in dealing with two often contrasting corporate and national cultures. The management costs attributed to this increased complexity, the lack of productivity due to friction at the workplace, and the costs involved in getting the employee motivation needed for a

successful venture are often substantial2.

According to the human capital perspective, this tacit knowledge can be more effectively retained and transferred through HRM that fosters loyalty and

commitment to the organization3, and underlines the importance of long-term relationship. Such activities include extensive socialization and career development programs; performance appraisal criteria that include processes as well as output; and compensation that rewards longer term process behavior and team-based

activities4.

As PARKHE and PUCIK describe, learning, knowledge flow, sharing and transfer are crucial indicators of the success of the IJV itself5,6. Establishing guidelines and processes that will support learning and knowledge sharing and creation will be in

1 Child, J. and Faulkner, D. "Strategies of Cooperation", 1998. 2 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.

3 Lei, D, Slocum, J.W., and Pitts, R.A., Journal of World Business, 1997 4 op.cit.. 5 Parkhe, A., Journal of International Business Studies, 1991 6 Pucik, V., Human Resource Management, 1988

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the interest of both the IJV and the parent. This will be played out with the development of the HR policies and practices for the IJV.

Figure C.31 Importance of HRM in IJVs: Individual / Group Level

KAMOCHE1 makes the case for a thorough reevaluation of the paradigmatic status of IHRM. There is currently little evidence of a coherent epistemological foundation for IHRM. Socio-psychological issues or focus on staffing and the relative mix of parents' influence are prevalent. Corporate control through international assignments is a further enduring concern. Applying ARGYRIS's model of double-loop learning to IHRM, the current tendency to pursue the variety of objectives characterized above is consistent with single-loop learning.

A double-loop approach would encourage firms to access critically what particular underlying values and circumstances in IHRM need to be re-examined or altered before prescriptive measures proposed in regard to second-order decisions. A

Importance of HRM in IJVs - Issues at Individual / Group Level

• Learning, sharing, and transferring of knowledge to enable the otheremployees and team to learn and grow

• Competencies (knowledge, skills, abilities, personality and habits) toperform the organizational role

• Behaviors, actions and attitudes that are consistent with needs of thebusiness, customers and colleagues

• Motivation and commitment to be productive, stay with the firm and attractothers to the firm

• Lack of business success in the IJV due to human resource issues suchas lack of competent and motivated staff, staff not matched with therequirements of the competitive strategy, or staff not socialized andcommitted to the IJV itself or staff not able to manage dual loyalties

• Expatriates, local staffing, adapting guidelines

Source: Schuler, R.J. (2001): The International Journal of Human Resource Management (in press)http://www.rci.rutgers.edu/-schuler/Hrissues.htm

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learning perspective in IHRM is underpinned by the creation of a stock of expertise, which is available across the firm, for example through a process of "cross-

pollination"2.

By not having a coherent strategic vision about the value of internationally generated expertise, the organization neglects to provide adequate supportive mechanisms, preparatory training, and an opportunity for repatriates to utilize and pass on their expertise on return. The operational and social mechanisms constitute a sound basis for IHRM capabilities. Sustainable learning will not take place unless there is a clearly defined paradigmatic approach to the generation and utilization of knowledge.

Therefore, there is a need to develop specific mechanisms for knowledge transfer and a more robust conception of learning. These are the "thought constructs" that determine how people view and interpret the reality around them. Based on his

study, WHIPP3 identifies the role of knowledge in creating "differential advantages" through HRM. He finds that "Learning becomes the central means of generating, maintaining and regenerating that knowledge. An HRM approach can be a vital

means of developing that learning capacity."4

Knowledge transfer can take a number of forms. • The creation of global teams and networks of experts; this involves the actual

mobility of people which may in some cases be constrained by geographical, financial and other factors. These reasons explain why this approach is often limited to managers and specialists.

• Maintaining effective communication systems and databases that people at different sites can draw from; this is an alternative to mobility and is accessible to a wider range of personnel.

• Having a systematic evaluation of individuals' experience upon completion of an international assignment, and ensuring that where valuable knowledge has been acquired, this knowledge is built into the organizational routines and taught to others.

1 Kamoche, K., International Journal of Human Resource Management, 1997. 2 Bartlett, C.A. and Ghoshal, S., Harvard Business Review, 1992. 3 Whipp, R., International Journal of Human Resource Management, 1991. 4 op.cit.

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Mechanisms of knowledge transfer such as teams and communication help to establish the link between the individual and the organization. Where the organization climate allows it, individuals' experience will ultimately become embedded in the organizational stock of knowledge, which can then be applied to

new IHRM activities and problems1. It is evident from the above that the mobility of people, effective communication systems and a willingness to challenge traditional wisdom are the cornerstones of the mechanisms for the diffusion of knowledge.

C.5.3 Implementing Global Human Resources Guidelines in the IJVs

The three major roles of the IJV HR department are 1) to assign and motivate people via job skills, compatibility of styles, and communication compatibility, 2) to manage human resources strategically and 3) to ensure that learning is being created, shared and transferred so that the IJV is seen as a vehicle to produce not only financial rewards but also managerial capabilities and expertise that can be used

later in other settings2.

In the majority of the IJVs interviewed the resulting personnel policies at the IJV read very much like the policies of the American partner. The major differences or adaptation to the Indian surroundings were in certain sensitive aspects such as remuneration and designation, and adjustment to local tax laws.

Developing the HR policies and Practices

Who actually develops HR policies and practices can range from one or both of the parents to the IJV exclusively. The more that the development is left with the IJV, the greater likelihood that the practices will be effective for local adaptation, but not

as effective for global integration and learning transfer3. Successful HR managers, however, aim to develop locally responsive HR policies and

1 see Inkpen, A, and Crossan, M., Journal of Management Studies, 1995: in their "learning

schema", the authors deemed that "a concept of individual learning should be embedded in a concept of group learning, which in turn should be embedded in a concept of organization learning" (p.598)

2 Lorange, P., International Journal of Human Resource Management, 1986 3 Child, J. and Faulkner, D., "Strategies of Cooperation", 1998

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practices, while taking into consideration the HR guidelines and values of the parent firms.

There are many HR issues that unfold during the formation and set up of the IJV

such as1: • The assignment of managers • Managers' foci during IJV operation • Top management evaluation • Managing loyalty issues • Career and benefit planning

Each partner may have different expectations from the IJV. A partner giving the IJV low priority in its global strategy may assign relatively weak human resources to the IJV. The quality of the top management is one of the most important factors in the

IJV's success2, and so assigning weak managers may endanger the IJV. This balance should also reflect the input and views of the IJV's top management team. According to PUCIK the IJV's top management should have the final say in the staffing of any

positions within the IJV itself3. As trust needs are high, especially in the early phases, and the parents have the needed competencies, the parents may be able to

dictate initial and temporary staffing needs4.

The use of a large proportion of local managers rather than expatriates is recommended to ensure the foreign parent acquires the necessary knowledge of the local economy, politics and culture. This also increases the need for training executives in the foreign parent companies headquarters in cross-cultural issues5.

Majority ownership and expatriate top management often reflect a lack of trust in local nationals and also may be a lack of understanding of the local culture. It is the role of IHRM to make up for this gap in skills. The more successful cross-national

JVs are those engaging in mixed management teams and cross-cultural training6.

1 Zeira, Y. and Shenkar, O., Academy of Management Review, 1987 2 Hamel, G and Doz, Y.L., "Alliance Advantage", 1998. 3 Pucik, V., Human Resource Management, 1988. 4 e.g., Parent company designees, such as a brand manager, chief engineer, technical expert. 5 Lane, H.W. and Beamish, P., Management International Review, 1990. 6 Radway, R.J., The Currency Forecasters Digest, 1986.

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The difference in the role of HRM departments in IJVs in enabling and encouraging an ethical work climate may reflect the different degree of influence that HRM has

on the IJV strategic policies and operational level tactics1. In addition, the difference can be attributed to three factors in the IJV, more employee heterogeneity, greater exposure to the risks of diverse, moral standards through borderless competition, and more resources to devote to internal creation or external contracting of services to develop an explicit ethical code. As workforce diversity and mobility increase and external pressures for total quality performance escalate to IJV levels, parent firms will need to match other firms in proactively fostering an ethical climate through their HRM involvement.

Hence IJVs in India can provide pacesetting leadership in the implementation of organizational ethic development systems to improve workplace justice and productivity, to retain talented Indian workers, attract domestic and foreign investment and build reputational capital to sustain global competitiveness

advantages2.

There may or may not be a transfer of culturally influenced HRM practices from the

parent firm's home country to its IJVs. As CAPELLI and McELRATH3 discuss, the tendency of MNCs to transfer parent firm HRM practices to IJVs may vary by firm, by the country of origin of the parent firm(s) and by the country in which the IJV is located. In addition, the transfer of HRM practices from parent firms may vary over time, especially as the parent firms global involvement changes4.

For example, SPARROW and BUDHWAR5 found that Indian HRM practices were low on quality circles, empowerment and other elements that require individual and team involvement and development. Other researchers, however, found that managerial and non-managerial employees prefer or encourage participative

1 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997. 2 Amba-Rao, S.C., International Journal of Human Resource Management, 1994. 3 Capelli, P. and McElrath, R., "Transfer of HRM Practices through Multinationals", 1992. 4 The Indian government's policy of regulating HR practices, along with the preference for using

host country nationals (HCN) by the parent companies, has contributed to the evolution of a unique set of HR practices within foreign- Indian IJVs4. The Indian regulatory environment is a major concern with a relatively large number of laws regulating HRM practices. See Lawler, J.J. et. al., International Journal of Human Resource Management, 1995.

5 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.

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leadership and involvement in decision making1. Even where hierarchical relationships exist, employees expect and respond to consultative leadership with low controls, and to task-oriented nurturing leadership, with better performance and

satisfaction2. Furthermore, HRM practices involve ethical issues, for example, justice and equity in the assessment, development and rewarding of human resources. Yet, research on ethical issues in relation to HRM practices in India is

lacking3. VENKATA RATNAM4 concludes that foreign firms are capital intensive and have fewer jobs, with highly competitive pay and better working conditions than indigenous firms do. Further, some managers in India regard US management practices as to aggressively market-oriented, inflexible, impersonal and lacking social and humanistic concerns.

In a six-country survey of US subsidiaries including India5, it was found that technological, economic, legal and political conditions explain the differences in managerial actions. The managerial systems and practices were divided into three areas and a transfer model was offered. 1) Technological core activities influenced by contextual variables, economic conditions and managerial practices; 2) organizational social system influenced by socio-cultural factors; 3) institutional or external relationships influenced by political, legal, and economic conditions.

KIGGUNDU, JORGENSEN, and HAFSI6 found that American practices related to the organization's core activity work well in developing countries, but when the environment is involved, adjustments may be needed to fit theory to practice.

Referring primarily to HOFSTEDE's 1980 dimensions7 of cultural differences among countries, some authors showed contradictions among Western HR practices

1 Kanungo, R.N. and Misra, S., International Journal of Psychology, 1988. 2 Kakar, S., Administrative Quarterly, 1971 ; Sinha, J.B.P. "Work Culture in the Indian Context",

1990 ; Virmani, B. and Guptan, S. "Indian Management", 1991. 3 Jain, H.C., Lawler, J.J. and Morishima, M., International Journal of Human Resource

Management, 1998 ; Rosen, S. and Juris, H. "Handbook of Human Resource Management", 1995

4 Venkata Ratnam, C.S., International Journal of Human Resource Management, 1998. 5 Negandhi, A.R. and Prasad, B. "Comparative Management", 1971. 6 Kiggundu, N.M. et al., Administrative Science Quarterly,1983. 7 Hofstede, G. " Culture’s Consequences: International Differences in Work Related Values ",

1980.

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and developing countries' culture. At the same time, they also discussed indigenous adaptation1.

The "learning experience" of western management training included exposure and willingness to experiment with new administrative concepts and organizational change. As one executive indicated, at this point managerial orientation was influenced by status, departmental and personal goals competing with organizational and national mission. Employee performance was encouraged but delegation and communication were selectively used towards these personal ends. For example, departmental staff meetings were infrequently held and the grapevine became a common source of information2.

These managerial values reflect an organization's orientation towards its employees and their environment and are of significance in adapting to a rapidly transforming economy in the Indian cultural milieu3.

In general, Indian managers are characterized as favoring centralized decision making with tight controls with personalized leadership prevailing over institutional arrangements on power sharing4,5. The large family firms, while multiple levels are not an issue in view of their size, may reinforce the social hierarchy, culture and paternalism, and, based on the level of distrust of outsiders, information sharing and decision making may be limited. Personal connections become more valued than task competence. Hence, even when they hire professional managers, decision making remains with senior family members discouraging empowered,

entrepreneurial activity by the professional managers6.

Regarding HRM's role in integrating HRM with the corporate level and in

delegating responsibility to line managers, BUDHWAR and SPARROW7 found that their respondents in India were low on both dimensions.

1 Jaeger, A.M. and Kanungo, R.N. "Management in Developing Countries", 1990. 2 Interview, JM Financials, India, 1999. 3 Amba-Rao, S.C., Journal of Business Ethics, 1993. 4 Virmani, B. and Guptan, S. "Indian Management", 1991. 5 Kakar, S., Administrative Science Quarterly, 1971 6 Mendonca, M. and Kanungo, R.N., In: "Management in Developing Countries", 1990 7 Sparrow, P.R. and Budhwar, P.S., Journal of World Business, 1997.

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C.5.4 Managing the Knowledge Worker

As COHEN and LEVINTHAL1 stated, the cognitive structures of individuals provide the basis for organizational learning. Certainly learning occurs at the individual, group and organizational levels. This implies that behaviors and styles of managers in organizations have a significant impact on the ability and willingness of

a firm to learn2. LEI and SLOCUM3 suggest that learning-oriented managers need to demonstrate cultural awareness and "humility" which respects the values and customs of others: "cultural-functional narrowness and/or ethnocentricity results in an educated incapacity that reduces the ability of organizations and managers to

learn"4.

The central challenge will be to make knowledge workers more productive. Knowledge workers are rapidly becoming the largest single group of the work force of every developed country.

The task of making the knowledge worker more productive should be approached from the quality of the work rather than the quantity; it also means that we will have to learn to define quality. The job definition and performance measurement criteria require extensive worker input. A job description is not static.

Once the task has been defined the knowledge workers themselves can tackle the next requirements. The requirements are. • Knowledge workers bear responsibility for their own contribution. It is their

decision that they should be held accountable for in terms of quality with respect to time and cost.

• Knowledge workers have to have autonomy and that entails responsibility. • Continuous innovation has to be built into knowledge workers job. • Continuous learning and teaching has to be built into the job.

To be productive, knowledge workers must be considered a key asset. Knowledge workers, however, own the means of production and the "knowledge between their ears" is a portable asset. Knowledge worker and organization are in a symbiotic

1 Cohen, W.M. and Levinthal, D.A., Administrative Science Quarterly, 1990. 2 Geringer, J.M. and Frayne, C.A., Management International Review, 1990 3 Lei, D. and Slocum, J.W., California Management Review, 1992 4 op.cit.., p. 11

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relationship. Knowledge workers must be given incentives and allowed input to increase their productivity in performance capacity for the organization.

Productivity of the knowledge worker will almost always require that the work itself be restructured and be made part of a system. Higher productivity requires a change in attitude, on the part of the whole organization. It therefore has to be “piloted” by top management as any change process would. The first step is to find a receptive group of knowledge workers. The next step is to sell it to them, and gradually integrate in their work schemes, and patterns, until full acceptance is achieved. The first attempts will certainly make clear the numerous pitfalls and fallacies of the initiative. Only after first successes in the trial group, the initiative can be extended organization wide. At this point, resistance will be located, (e.g., middle management) or what changes in task, organization, measurement or attitude are needed for full effectiveness. The pilot stage is vital for damage control, and later success of the revised initiative.

According to DAVENPORT et al.1, the knowledge worker's primary activity is the acquisition, creation, packaging or application of knowledge. Knowledge work processes include such activities as research and product development, advertising, education, and professional services like law, accounting, consulting and strategic

planning2.

A governing or organizing body trains and accredits practitioners, defines performance standards and monitors complaints with standards. Managing professionals is a different task from managing administrative or operational staff, requiring a manager to cede day-to-day task control to the professional while maintaining control and direction over strategic issues.

Knowledge workers are likely to resist standard routines, in fact, the level of discretion and autonomy often separates knowledge workers from administrative workers.

IT often makes new process designs possible in operational and administrative areas. As work becomes more knowledge-intensive, rapid manipulation of data across 1 Davenport, T.H. et al., Sloan Management Review, 1996. 2 This is consistent with Mintzberg's analysis of managerial work, see: Mintzberg, H. "Mintzberg

on Management", 1989

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distances has less impact; “richer”, more face-to-face communications are more important. Technology can support knowledge work processes, but it must be implemented with sensitivity to the nature of the work and its practitioners. • Some processes consist of finding knowledge which existed – understanding

knowledge requirements, searching for it among multiple sources, and passing it along to the requester or user. e.g., competitive intelligence processes.

• Other processes involve creating new knowledge such as research activities, creative process in advertising process, writing books or articles, or developing a movie.

• Knowledge work processes can package or assemble knowledge created externally to the process. Knowledge packaging involves editing, design and proofing processes.

• Certain processes primarily apply or use existing knowledge. The creation of new bodies of knowledge might be actively discouraged. The auditor has to interpret and apply existing procedures to a company’s transactions.

• Some firms have a primary focus on the reuse of knowledge.

C.5.5 Human Resources Knowledge Activities in the IJVs

C.5.5.1 Recruiting and Staffing

Associated with both control and international experience is the practice of socializing managers in order to elicit their commitment to corporate culture and values. The subtlety of socialization as a control mechanism is particularly realizable where managers and staff from the IJV are posted to or trained at the corporate headquarters, as opposed to the more common approach of sending headquarter personnel to the IJV. Where such postings and training programs are linked to the individual's perceived potential and uniqueness, a high degree of loyalty is likely to result where such individuals are held up as the "lucky ones" or the "chosen few".

This perhaps explains the preoccupation of IHRM with high performers and high-potential personnel and why the geocentric staffing policy will continue to apply to a

small proportion of managerial and professional personnel1. The narrow focus on a small cadre of high-fliers prevents the organization from tapping into and cultivating a comprehensive stock of expertise. The effect of this narrows the scope for learning

1 Dowling, P. et al., "International Dimensions of Human Resource Management", 1994.

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due to the underlying assumption that this small cadre provides the only source of knowledge for organizational renewal and growth.

To maximize the people potential in the ventures, IJV staffing, according to CYR1, ideally involves: • Exchange of staff from the parents who are strong contributors with appropriate

skill sets • Allocation of sufficient numbers of staff to the IJV to maximize the benefits of

continuous improvement through high-employee involvement • Hiring managers to the JV with special skills beyond those of traditional

managers (e.g., possessing political expertise as well as knowledge of management techniques)

• Staffing at "the top" (e.g., The IJV board) with managers who have exemplary personal skills, the ability to communicate effectively, and flexible and

• The development of HR policy that protects the interests of the IJV (ex. retain key JV personnel) but at the same time allows flexibility in order that staff don't feel "trapped" in the venture

The selection criteria should include: • The ability to perform the job • Acceptance of the mission, values, strategy, structure, policies and practices of

the IJV • Motivation and ability to learn and share tacit and explicit knowledge1

Recruitment and selection practices adapted to local conditions have a greater chance of attracting a large pool of well-qualified job applicants. A critical criterion in the recruitment and selection process in the IJV is an applicant's capacity for learning and "knowledge-friendliness".

In the study, local nationals staffed most of the key positions. For the parent companies, additional reasons for using local nationals included avoiding extra costs to relocate expatriates and the reluctance of many foreign managers to live in India. Availability of experienced local nationals at a lower cost further increases the likelihood of local staffing.

C.5.5.1.1 IJV TOP MANAGEMENT

Recruitment and staffing of IJV employees, particularly those in top-management positions, represent a crucial strategic control mechanism for an IJV parent. Even if 1 Cyr, D.J. "The Human Resource Challenge of International Joint Ventures", 1995, p. 120

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it is only a 50/50 or a minority partner, a parent may be able to effectively influence the management and performance of an IJV by influencing staffing of the IJV's key positions. Unless the venture is staffed with personnel appropriately qualified for the IJV's specific circumstances, parent objectives are unlikely to be achieved. Therefore, by influencing the techniques and process used to recruit and staff the ventures key positions, a parent may be able to influence IJV performance.

The potential for influencing venture performance through recruitment and staffing is not limited to the IJV general manager position. The number and quality of human resources, which are devoted to the venture, may influence the nature and extent of organizational learning, which occurs within the IJV environment. Key areas for exercising such influence may therefore occur throughout the value chain of the IJV, including financial, legal and administrative staff and sales personnel. Since critical technology often resides in non-patentable know-how or know-who, careful staffing of these positions may enable the IJV to learn more rapidly from its parents and transfer the basic concepts necessary for establishing and maintaining its competitive advantage. Influencing these staffing decisions may be particularly important when the skills critical to IJV performance are asymmetrically distributed among the parent firms. Therefore, by ensuring that the people selected for the key positions have the requisite technical and interpersonal (cross-cultural) skills, receptivity to new ideas and ability to disseminate what they have learned throughout the organization, a parent may be able to promote successful IJV performance and attainment of its goals.

When recruiting individuals for positions within the IJV, the parent firm might employ a realistic recruitment approach, which includes a realistic job description, as well as personnel techniques such as psychological tests, and simulations, which assess the fit of the individual skills with the demands of the IJV operation.

Many parent firms have adopted the maxim that responsibility for IJV recruiting and staffing should be assigned to the local partner, in particular when difficulties accessing the local labor markets are anticipated.

1 Child, J. and Faulkner, D. "Strategies of Cooperation", 1998

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The IJV will have established its own set of HR practices, policies and procedures. Thus, the HR head needs to possess many of the same skills of the HR head in the parent firms. The HR head in the IJV needs to have an understanding of the IJV and parent firms. Competencies in negotiation, communications and tolerance are critical in this additional role. The HR leader also needs to manage the process of gaining independence from the parents. As part of a high-quality top management team, the HR head will see the desire for greater control of the IJV by the local management team.

Particularly for the venture's general manager, it will generally be necessary for the individuals to evidence stronger skills in networking, diplomacy and cultural sensitivity than might be the case for a wholly owned subsidiary. These individuals must be capable of understanding and functioning effectively within, the different national and corporate cultures, which constitute the IJV's operating environment.

Bringing the right attitude and personality to work in the multi-cultural setting of the IJV can be considered as an inherent skill that the employee should bring along to the position. Dealing with an unpredictable and largely unknown environment, the expatriate (as well the local employee) has to have certain traits such as flexibility, self-confidence, self-efficacy, openness, motivation, orientation to knowledge,

cultural empathy, openness to information and optimism1. Such traits can only be developed over a longer period of time, and some of them even require a certain predisposition.

Employees working in an IJV face many challenges such as dual parenting demands, complexity and multiplicity of goals, multiple cultural and language differences, as well as geographic distances. The ability to staff a venture with individuals who will be sufficiently flexible in thought and action is a fundamental prerequisite for

successful IJV performance2.

All firms look for analytic talent to do the technical work, human qualities of the relationship work and entrepreneurial instincts to do organization building work. They seek „multi-skilled“ individuals capable of managing both content and

1 Mamman, A., International Journal of Human Resource Management ,1995. 2 Cobbe, G., Strategic Alliance Executive Forum, 1989.

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process1. The qualities for relationship work is a combination of interpersonal skills and personal qualities of integrity and respect are essential in developing what is referred to as „team consciousness“.

Retain Top Performers

Top managers see a sense of stewardship in their role. Participation in decision making on governance issues was also critical to maintaining partners‘ commitment. Reward systems, which partners saw as equitable and supportive were also key to the high levels of engagement and retention of top performers.

Finally, the dedication to their work is one of the most important factors. For partners, shared values, sense of enjoyment, stewardship, equitable rewards systems, and inclusive decision processes together created significant barriers to exit.

Firms aim to develop the individual’s technical expertise, team consciousness, institution wide focus, and a deep sense of engagement with the firm and its partners through mentoring. This is a voice in governance and an equitable reward system and shared values.

These managers are the links between the two parents and an important communication channel within the IJV itself. In this capacity, these managers are likely to interact with their counterparts in the parent companies. The more knowledge and experience these individuals have, particularly pertaining to their IJV knowledge, the more likely they can cope with potential sources of conflict. But the organization will also be more dependent upon these individuals, so there will be a need to develop the incentives to increase the likelihood that these individuals will remain with the company.

Ownership distribution may matter less than how operating control and participation

in decision-making actually are allocated2. For a parent with minority ownership, for example, the right to appoint key personnel can be used as a control

1 Leonard-Barton, D. "Wellsprings of Knowledge - Building and Sustaining the sources of

Innovation ", 1995. 2 Harrigan, K.R. "Managing for Joint Venture Success", 1986.

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mechanism1. Control can be achieved by appointing managers loyal to the parent

company and its organizational ethos2.

The members / positions of the IJV management include the board of directors, the managing director (general manager), HR leader and the chief operating officer

C.5.5.1.2 EXPATRIATE MANAGEMENT

Expatriate management is a key issue in IJV management, especially when the assignment is in a high-complexity environment such as a developing country. Expatriates can be essential to the process of transferring embedded, tacit knowledge to the IJV from the foreign parent company. Expatriates, while in a good position to implement the parent firm’s policies and values in a diplomatic manner, can also be a major source of friction if they act in an inappropriate manner.

BLACK and GREGERSEN3 found that between 10 and 20% of US managers sent abroad returned early because of job dissatisfaction or difficulties in adjusting to a foreign country. More problematic was the fact that one fourth of those who finished their assignment left the company with their acquired skills and IJV knowledge.

While firms realize that negotiating and marketing strategies do vary from culture to culture, most do not, however believe that the variance is sufficient to warrant the expense of programs designed to select and train candidates for international assignments. Often, people at the home office find it difficult to imagine that returning expatriates need help readjusting after a few years away.

According to the BLACK AND GREGERSEN survey, few HR managers have worked abroad themselves, most have little understanding of a global assignment’s unique personal and professional challenges. Successful companies make the following three practices an integral art of their IHR practices: • When making international assignments, they focus on knowledge creation and

global leadership development. People are given foreign assignments for two reasons: to generate and transfer knowledge, and to develop their global leadership skills.

1 Schann, J.L. "Parent Control and Joint Venture Success", 1983. 2 Killing, J.P. "Strategies for Joint Venture Success", 1983. 3 Black, J.S. and Gregersen, H.B., Harvard Business Review, 1999.

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• They assign overseas posts to people whose technical skills match their cross-cultural abilities

• They end expatriate assignments with a deliberate repatriation process.

For example, BOYACIGILLER1 has noted that the expatriate is often expected to teach the locals how things are done at the headquarters. Similarly INKPEN and

CROSSAN2 have observed JV partners' reluctance to accept their new organization as a "legitimate teacher" especially where the "child" is outperforming the "parent". International assignments also seek to provide managers with experience, which is considered vital for a career in top management. HRM research within the "national" context also suggests that management development facilitates organizational perpetuation that has important implications for the role of learning in achieving organizational continuity in the international context3.

The value of the know-how and experience gained from utilizing human resources in international management is realizable when directed towards improving the firm's effectiveness in specific activities. While this seems obvious, current expatriation-repatriation trends raise doubts about the extent to which this actually takes place.

C.4.5.1.3 EXPATRIATE FAILURE: UNREALIZED SCOPE FOR LEARNING

If an international assignment represents an opportunity to learn, it is clear that "expatriate failure" must represent the waste of such an opportunity. Estimates of

expatriate failure have been placed between 10 and 12%, and even up to 40%4. Not only is learning experience wasted, but the individual can also acquire cynical and potentially damaging views about international assignments in general, thus creating attitudinal barriers to learning. This highlights the need to build on the developmental aspects, including training and career management and to isolate and resolve the negative aspects.

While the exercise of expatriation offers the opportunity to acquire knowledge from international assignments, repatriation offers the opportunity to transfer this

1 Boyacigiller, N., Journal of International Business Studies, 1990 2 Inkpen, A.C. and Crossan, M.M., Journal of Management Studies, 1995. 3 Preston, D., Human Resource Management Journal, 1993. 4 Mendenhall, M. and Oddou, G. Journal of International Business Studies, 1985.

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knowledge and utilize it in the organization. These are concerns about "reverse

culture shock" which some observers place at about 60% of expatriates1. On another level, this problem is reflected in the failure to integrate the management of

international mobility into the IJV planning process2. Research on repatriation must go beyond adaptability to the physical and social environment and the stress associated with it. A suggested approach is to examine the implications of knowledge transfer back to the parent firm and how this is affected by the individual's social well being. Socio-psychological problems constitute a barrier to learning when they impede the individual's performance. When these problems are caused by the firm's failure to provide support to returning personnel, the firm in itself creates barriers to learning. The ultimate price to pay for this is dysfunctional labor attrition and loss of knowledge.

The motivation of executives assigned to an IJV can be enhanced by the creation of a clear linkage between the assignment and an assignee's future career. Parent organizations should offer career planning to counter the ambiguity and risks associated with IJV assignment, and to limit the potential for unsatisfying

repatriation experiences3.

Apart from career-path disturbances, the assignment to an IJV post usually requires relocation to a foreign country with all the disruption to family and social life that such a posting entails. Benefits packages must be designed to maintain the economic and social lifestyle of the manager, so that the individual does not lose through the

IJV assignment4.

Parent firms might attempt to maintain expatriates in the IJV for a longer term, in order to help transfer the tacit knowledge back to the parent. But in order to do this the individual will have to be trusted by the parents and the IJV. So here the parents and the IJV have to recognize and reward the individual for developing a dual loyalty. For these individuals, HR activities from both parents and the IJV will be

1 Black, T.R., Management International Review, 1990. 2 Forster, N., International Journal of Human Resource Management, 1992. 3 Black, J.S. and Gregersen, H.B., Harvard Business Review, 1999; Caliguiri, P.M. and Lazarova,

M., In: "Developing Global Business Leaders", 2000. 4 Dowling, P.J., Welch, D.E. and Schuler, R.S., "International Human Resource Management",

1999.

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long-term oriented. Both parents and the IJV will strive to put longer-term, dual oriented loyalties and HR polices in place to motivate and retain these individuals.

Career planning and benefits provide managers with an understanding of and assurance in relationships with the parents and the IJV itself. This is provided through pre- assignment posting activities for the expatriate and family, specific terms and conditions of the assignment itself, education and housing benefits for the

expatriate and family and finally, repatriation processes1.

Done effectively, all of these processes can help ensure that the expatriate will

perform as anticipated and that premature recall can be avoided2. The effect will be to help ensure the likelihood of the IJV success. • The experience dimension: Expatriates who have had prior experience with

foreign assignments are more likely to find easier to adjust to a foreign setting than those who have not are3. Similarly, it can be argued that the longer an employee stays in a multi-cultural workplace the more likely he/she will acquire the knowledge relevant for reducing uncertainty during intercultural interaction4.

• The organizational factor: Given that pre-departure training has found to improve expatriate intercultural effectiveness5,6 it would seem reasonable to argue that organizational support for workforce diversity could influence inter-cultural effectiveness. The organization’s policies, systems and structures will enhance cross-cultural interaction. Pre-departure training programs and the integration of a ”multicultural mindset” in a holistic approach to IHRM within the organization are two examples of the organizational factor behind cross-cultural effectiveness.

The growing care of talented expatriates of Indian origin who have been educated and exposed to western social and work cultures can provide useful personal role models for Indian management by nurturing the leadership styles of the parent firm. Many technically trained and educated graduates from India have been spotlighted

1 Caliguiri, P.M. and Lazarova, M., In: "Developing Global Business Leaders", 2000. 2 Black, J.S. and Gregersen, H.B. Harvard Business Review, 1999. 3 Black, T.R., Management International Review, 1990. 4 Torbion, I., " Living Abroad: Personal Adjustment and Personnel Policy in the Overseas Setting ",

1982. 5 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990. 6 see Chap. 3.2.

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as world class technical leaders capable of entrepreneurial leadership1. As more of these managers can be induced to return periodically or permanently to India, they can serve as change agents to promote new standards and practices.

A majority of respondents from the IJV and two parent companies agreed that employing experienced expatriate is useful at the beginning of IJV operations. For technology based IJVs use of short term expatriates as technical experts is essential at the beginning of technical operations (this is also the case when the industry is new to India, such as telecom, insurance (private), and investment banking e.g.). The quality of the expatriates must be high to ensure IJV success.

C.5.5.2 Training

Employee training and development includes any attempt to improve current or future employee performance by increasing (through learning) an employee's ability to perform, usually by changing the employee's attitudes or increasing the individual’s skill level and knowledge. When implemented correctly, employee training and development can be a useful control mechanism by removing performance deficiencies, thereby allowing the organization to be more effective.

Due to the need for IJV managers to network with many different managers in each parent company, as well as within the IJV itself, providing these managers with training in interpersonal skills could also enhance IJV performance2. By fostering improved communications, such training can help increase awareness of other stakeholders' objectives and reduce the incidence of uncertainty, surprise and potential conflict. Similarly, since many IJV issues are resolved through persuasion and negotiation, a parent firm may be able to influence the venture by training IJV managers or key parent company employees in negotiation or conflict resolution skills. Moreover, IJV's offer the opportunity for a firm to improve its operations by observing how another organization operates, such as in managing business development programs and management of overseas subsidiaries.

Develop Individual Competencies over Time

1 Kripalani, M. et al., Business Week, 1998 2 Harris, P. and Morran, R., " Managing Cultural Differences" , 1991.

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This requires a willingness to invest in initiatives to educate and refine employees' skills.

Three particular aspects of the professional development processes at the ISFs stood out1: • An apprenticeship approach that relies heavily on senior managers as models

with a willingness to invest time to work closely with younger staff. • A belief that learning does not stop with promotion. • Continuous feedback.

Expatriates in the IJV framework are more likely in the future to be functioning as

part of multi-cultural teams particularly as the use of cooperative venture increases2.

Expatriates are most likely to interact directly with upper level managers in the venture, and are also most dependent on their support. The many principles of instruction and learning that typically comprise cross-cultural training programs are western-developed3, and the effective transfer of these principles is not always that easy. The appropriateness and generalizability of the training principles should be carefully examined before applied to host country worker training projects.

Several theories also support the training of local IJV workforce:

Exchange theory: According to this perspective, any power of influence that is exercised in a management situation is granted by those who are managed in return

for something they value4. Local staff dealing with expatriates in the IJV represents a willful party in the social exchange involving power and influence. The failure to consider this would lead to incomplete venture management.

Participative management: Proponents of this perspective have long recognized the important contribution which subordinates can make to work innovation, efficiency

and overall productivity5.

1 In the IJVs in the study this model was prevalent, based on global guidelines. 2 Adler, N.J. " International Dimensions of Organizational Behavior ", 1991. 3 Vance, C., Wohlihan, J. and Paderon, E., Research on Personnel and Human Resources

Management, 1993. 4 Blau, P.M., " Exchange and Power in Social Life ", 1964. 5 Vance, C., Wohlihan, J. and Paderon, E., Research on Personnel and Human Resources

Management, 1993.

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Communications theory: In the effective management situation, communication is not one-way but two-way; both parties should actively receive and send information. The accurate reception and interpretation of information has a significant impact on

the success of the IJV1. Just as a manager’s effectiveness can be enhanced through cross-cultural training and awareness, so could subordinate performance be enhanced through similar training.

Organizational development: Increased levels of trust, respect, open communication, understanding, and common commitment among individuals and groups are often cited goals for organizational development efforts. Effective organizational development can avoid misunderstanding, redundancy and the costs

that come with them2. Local training incorporated in the organizational setting of the IJV for increased cross-cultural awareness would help contribute to this.

The Attitudes and Personality dimension

Bringing the right attitude and personality to work in the multi-cultural setting of the IJV can be considered as an inherent “skill” that the employee should bring along to the position. Dealing with an unpredictable and largely unknown environment, the expatriate (as well the local employee) has to have certain traits such as flexibility, self-confidence, self-efficacy, openness, motivation, orientation to knowledge,

cultural empathy, openness to information and optimism3. Without this cultural sensitivity, the employee is prone to misinterpret other’s attitudes and behaviors, resulting in interpersonal and inter-organizational conflict.

At the same time training can also create common understanding among the workers of a global understanding, but the acculturation of training must address commonality while being sensitive to differences. Cultural differences can distort what would otherwise be the expectations of training effectiveness.

The interaction between people from different cultural background can be intense. Successful implementation requires both an understanding of the business and the

1 op.cit.. 2 Huse, E. and Cummings, T.G., " Organization Development and Change", 1985. 3 Mamman, A., The International Journal of Human Resource Management, 1995.

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partners’ cultures1. The IHRM perspective has concentrated on the selection of executives and their adjustment to a foreign setting independently of the business context, and the international business literature has concentrated on strategy and structure issues independently of the implementation/behavioral processes

involved2.

Various reasons have been cited by business organizations for the low use of cross-cultural training, the most prevalent being that such training is not thought to be

effective3, so that top management sees no need for it. Such a culturally insensitive perspective seems to be a reason for many faulty international human resource

practices and the high expatriate failure rates4.

Language and cultural training can improve the extent and quality of communication within the IJV as well as between the venture and its parents. Training programs can also increase opportunities for corrective action by identifying and reducing errors in

performance5. By fostering improved communications, such training can reduce the

incidence of uncertainty, surprise and potent conflict6. This in turn facilitates transfer of knowledge between the venture partners and within the IIV itself, encouraging institutionalized learning.

A majority of the interviewees agreed that the training of foreign managers about Indian culture and conducting joint training of host country nationals and parent country nationals are important preconditions for IJV learning. All the IJV managers had a similar background - they were either educating in the West or had prior experience with Western business culture. In addition, the quest for inter-partner learning was found to be more important during the implementation stage than was anticipated during the motivation stage.

1 Lane, H.W. and Beamish, P., Management International Review, 1990. 2 op.cit. 3 Black, J.S. and Mendenhall, M., Academy of Management Review, 1990. 4 Adler, N.J. " International Dimensions of Organizational Behavior", 1991. 5 Geringer, M.J. and Frayne, C.A., Management International Review, 1990. 6 Geringer, M.J. and Frayne, C.A., Management International Review, 1990.

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C.5.5.3 Personnel Movement

One of the most effective ways in which joint contribution by senders and receivers to the technology transfer process occurs is in the use of personnel transfer1. In fact, in the view of at least one interviewee, “This is the most important thing in technology transfer: personnel transfer2”. In this way, the overall organization’s technical competence can flow to where it was most needed.

Utilization of joint task forces from each partner and temporary assignments of employees from one parent to another assist in formal and informal transfer of knowledge. Firms that have had experience with knowledge and information management will be more likely to do so and more effective in future relationships. Such firms facilitate the transfer of learning and knowledge that are associated with small events as well as large ones.

C.5.5.4 Communities of Practice

A great deal of knowledge is both produced and held collectively3. The critical challenge, from this perspective, is to make this knowledge cohere. A core competency requires the more elusive know-how - the particular ability to put know-what into practice4. Know-how is sui generis, and thus relatively easy to protect. Conversely, however, it can be hard to spread, coordinate, benchmark, or change. Know-how embraces the ability to put know-what into practice. Thus, know-how is critical in making knowledge actionable and operational.

A group across which such know-how and sense making are shared - the group, which needs to work together for its dispositional know-how to be out into practice - is called a "community of practice". Through experience, a community of practice develops a shared understanding of what it does, of how to do it, and how it relates to other communities and their practices - in all, a "world view". This changing understanding comprises the communities' collective knowledge base.

1 Inkpen, A.C., Academy of Management Executive, 1998. 2 Interview Quote, AT&T, USA, 2000. 3 Lave, J. and Wenger, E., " Situated Learning: Legitimate peri.part", 1991. 4 Ryle, G. " The Concept of Mind ", 1958.

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This picture of knowledge embedded in practice and communities does not dismiss the idea of personal, private knowledge. What people have by virtue of membership in a community of practice, however, is not so much personal, modular knowledge as shared partial knowledge1.

Most formal organizations are not single communities of practice, but rather hybrid groups of overlapping and interdependent communities. Inter-communal relationships allow the organization to develop collective coherent synergistic organizational knowledge out of the potentially separate independent contributions of the individual communities.

“Much of the power of the community of practice metaphor lies in its ability to move beyond the traditional dichotomies. Perhaps most prominently a focus on a community of practice refuses to see individual interests at odds with those of the organization. Yet in doing so, community of practice challenges the organization to find the shared purpose that individual development with the institutional direction in a far more reciprocal way than the old dictum of „what’s good for the firm…2”.

Informal exchange has value and deserves to be nurtured. Hence the growing interest in communities of practice - far flung ad hoc networks of people who have common interests. The members of these communities, often operating across organizational and hierarchical boundaries, share knowledge, solve problems and exchange insights in ways that departmental structures don't promote. Sustaining communities of practice takes plenty of persistence3.

1 Polyani, M. ” The Tacit Dimension", 1966. 2 Brown, J.S., Duguid, P., California Management Review, 1998. 3 Eisenhart, M., Knowledge Management Magazine, October 2000

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Figure C.32 Implications for Leveraging Knowledge through Communities of Practice

Effective communities of practice increase "social capital": the economic value of the relationships within an organization. Communities of practice can serve as an ongoing archive and consulting resource to help firms respond to new opportunities and tackle challenges.

Clear communication should prevail within the group, as well as a sense of shared purpose. Defining the relationship between the community and the corporate structure is a delicate task. It is important for the group to have a sense of accountability, even though it may not deliver tangibles, and beneficial for it to have an executive sponsor.

The success of any community of practice depends on how well management provides "convenience and commitment" in the form of facilitation, technological tools, scheduling meetings for minimal conflict and the like.

Tools and Techniques

While technology plays a vital role in facilitating community interactions, particularly in the aftermath of globalization, using it inappropriately can be counter-productive. To make it easy for employees to find the information they need, organizing the archive efficiently is important.

Implications for Leveraging Knowledge through Communities of Practice

1. To leverage knowledge, develop communities. 2. Focus on knowledge important to both the business and the people. 3 Create forums for thinking as well systems for sharing information 4. Let the community decide what to share and how to share it. 5. Create a community support structure. 6. Use the community's terms for organizing knowledge. 7. Integrate sharing knowledge into the natural flow of work. 8. Treat culture change as a community issue. Source: McDermott, R., California Management Review, 41(4), 1999.

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As companies grow, and people on to new responsibilities, their memberships in communities allow participants to retain their allegiance to a group and bring to it the insights they acquire in their new positions.

The business organization as a community of practice is one held together by a shared concern for both the outcomes it achieves for customers and its members personal development. Agreement on the „how“ of process and the „why“ of purpose is the foundation of shared meaning.

Search and Retrieval

Certainly, most managers will acknowledge that getting knowledge to move around organizations can de difficult. Given the opportunity, information appears to follow readily. Intranets are indeed valuable, but social knowledge suggests that there is more to consider both with regards to search and retrieval. The tasks undertaken by communities of practice develop particular, local, and highly specialized knowledge within the community. Communities develop their own distinct criteria for what counts as evidence and provides "warrants" - the endorsements for knowledge that encourage people to rely on it and hence make it actionable. Within communities, producing, warranting, and propagating knowledge are almost indivisible.

Organizational Blindness

Hierarchical divisions of labor often distinguish thinkers from doers, mental from manual labor, strategy (the knowledge at the top) from tactics (the knowledge at the bottom). Above all, a mental/manual division predisposes organizations to ignore a central asset, the value of the know-how created throughout all its parts. Successful organizational synthesis of knowledge requires discovering knowledge as it emerges in practice. That can't be done if when and where to look is predetermined ex ante1.

Communities of practice help to generate knowledge and distill collective know-how. Consequently, trying to move the knowledge without the practice involves moving know-what without the know-how.

Due to its social origins, knowledge moves differently within communities than it does between them. Within communities, knowledge is continuously embedded in

1 Barley, S., Administrative Science Quarterly, 1966; Chesbrough, H . and Teece, D.J., Harvard

Business Review, 1996.

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practice and thus circulates easily. Members of the community implicitly share a sense of what practice is and what the standards for judgment are, and thus supports the spread of knowledge.

Between communities, however, where by definition practice is no longer shared, the know-how, know-what, and warrants embedded in practice must spread out for knowledge to circulate. Different communities of practice have different standards, different ideas of what is significant, different priorities, and different evaluating criteria.

C.5.5.5 Incentives and Compensation

C.5.5.5.1 INCENTIVES

The transfer of knowledge within the organization, while needing to recognize and overcome the barriers to such knowledge transfer can be facilitated by the appraisal and reward systems. Here it must be distinguished between appraisal that focuses on output-oriented result and those that focus on process-oriented behaviors. The process-oriented appraisal systems are more supportive of managerial behavior that

is necessary for learning and knowledge transfer1. Performance appraisals can also be categorized into those that focus on performance and those that focus on longer-term oriented organizational qualities such as trust, collaboration and inter-

organizational relationships2, as well as knowledge sharing and creating activities. According to LEI, SLOCUM and PITTS, reward systems that focus on the longer-term organizational qualities is more conducive to creating a knowledge supportive environment.

Managers should be aware of the barriers, real or potential, that might impede the realization of learning even when knowledge and experience have been acquired. At the individual level, these might be considered in terms of attitudinal, social and job performance variables. Attitudinal and social barriers include the negative attitudes and belief individuals espouse about international assignments and their lack of

commitment to the IHRM agenda. DE CIERI et al.3 found that personal factors 1 Lei, D., Slocum, J.W., and Pitts, R.A., Journal of World Business, 1997. 2 op.cit.. 3 De Cieri, H., Dowling, P.J and Taylor, K.F., International Journal of Human Resource

Management, 1991.

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associated with successful expatriation-repatriation include self-esteem, social support and satisfaction with life and with family relationships. If these factors are not sufficiently met, they constitute a potential barrier to learning.

Organizational barriers to learning are directly related to the absence of the mechanism identified. Culture is normally perceived in terms of its integrative ethos and its capacity to create and embody shared values. However, culture itself can be a barrier to change and hence to learning.

The benefits of knowledge being created in an IJV may be visible across the firm. The learning may be compromised through a failure to institute networking, because units are loathe to "lose" key performers to other units, even in the form of job rotation or because a "not invented here" syndrome precludes the adoption of new technologies.

International assignments can be designed in such a way as to enhance the creation and utilization of knowledge. This highlights the need for organizations to adopt an IHRM perspective, which ensures generation and optimal allocation of technical, social and personal skills in international assignments.

Additionally, organizations should provide an opportunity in which this collective knowledge is nurtured and utilized in their diverse productive activities. Those who design international assignments will need to go beyond the current concerns with social, adaptability and operational issues, and pay more attention to the development of "best practice" and the competencies that are transferable across the organization.

DIRZIN1 recommends that companies conduct annual internal audits of employee satisfaction and their perception of employer ethics. Management should act on the knowledge they gather from these audits. More enlightened organizations use a variety of incentives to show that they are serious about sharing knowledge. For example, some have rewards and recognition programs for knowledge sharers. These range from recognition in the company newsletter to substantial pay bonus2.

1 Dirzin, M., Vice President of business alliances. 2 Stevens, L., Knowledge Management Magazine, 2000.

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"You have to show people what knowledge sharing can do for them - how it can help

in their jobs"1. PRUSAK says while organizations may achieve some improvement through individual incentives and education, substantive change requires that the formation of new types of social groups. "There is already a lot of sharing in corporations, but it is within teams. If you want to increase sharing, put more people in teams." It is best to encourage knowledge-sharing behaviors from the beginning,

which starts with the hiring process2. • Develop Trust: Knowledge sharing can be encouraged by developing an

atmosphere among employees and between the company and the individual. Supervisors consider how often employees have responded to questions posted by other employees and how often they have posted ideas or thoughts on the company Intranet. "We don't promote people unless they demonstrate that they share knowledge". This is then reflected in the performance appraisal.

• Vary Motivation: For department heads and divisions, it is too important to present benefits relevant to each division. On the individual level, organizations should explicitly identify behaviors they want to encourage and others they want to eliminate and then positive behaviors are rewarded with incentives. Knowledge sharing should be a factor in employee appraisals, measuring performance on a scale. Employees cannot earn a four or a five unless they have participated in knowledge sharing activities, such as responding to posted questions or publishing research.

• Show Public Recognition: Employees who have excelled at knowledge sharing are acknowledged in some way. Another variety is to recognize employees who use knowledge to contribute directly to the company's success. The programs demonstrate the company's commitment to sharing knowledge3. A company can encourage sharing among people of separate teams using various incentives, or it can restructure the organization so people are members of many different teams, which increases the pool of knowledge sharers. Intergroup knowledge sharing can be encouraged through conferences, classes and mentoring programs. The basis for forming a community is employee interest, not an organizational mandate; people willingly share knowledge when they have common interests. The creation of groups centered on interests is the incentive. Within such groups knowledge sharing happens automatically and in unpredictable ways. Sometimes a small group of KM enthusiasts inside a company can be the catalyst for sharing.

1 Edwards, A.R., Junior CEO of Lighthouse Consultant Group in: s. above 2 Taylor, E., CEO of Collective Technologies, Austin, Texas in: s. above. 3 e.g., In AT&T the "Rising Star" program was implemented to support promising junior staff in

career development.

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The need to address IJV parent performance appraisal (PA) practices and specific managerial values arises for four reasons. First, high performance work systems have been shown to be crucial to sustaining global competitiveness and they rely

upon objective, adequate PA processes1. However, in a recent comparative analysis

of global HRM practices, SPARROW and BUDHWAR2 highlight employee PA as a relatively under-emphasized factor in Indian managerial practices. Second, the productivity of work cultures in Indian organizations is jeopardized by employee PA practices that appear to be biased, ad hoc and not integrated into a globally

competitive HRM system3. The lack of Indian PA practices formally integrated into a quality performance-based HRM system allows Indian managers to over-control, and under-control employees. This abuse of PA authority adversely impacts Indian employees who have already been described as low on "efficiency emphasis". That is, low on initiative for process improvement, low on risk taking propensity to

increase productivity and low on self-monitoring inclinations4. Employees regard

PA judgments as unfair and withhold productive efforts5.

Third, Indian managers have been criticized for not involving employees in the PA process. The prevailing absence of this mutual influence in India, especially managerial receptiveness to employee feedback has provoked skepticism and resistance to the implementation of formal PA systems6.

Specific characteristics of uses of PA reported by most firms are: a) agreement between the employee and the supervisor formed the basis for appraisal, b) an open discussion to identify strengths and deficiencies, and opportunities for counseling and c) a means of identification of training and developmental needs, assessment of promotion potential and source of confidential ratings.

1 Marquardt, M.J. and Engel, D.W. "Global Human Resource Development", 1993. 2 Sparrow, P.R., and Budhwar, P.S., Journal of World Business, 32 (3), 1997. 3 Mendonca, M., and Kanungo, R.N. In: "Performance Management in Developing Countries",

1990; Shenkar, O. "Global Perspectives of Human Resource Management", 1995; Virmani, B. and Guptan, S. "Indian Management", 1991.

4 Sparrow, P.R., and Budhwar, P.S. Journal of World Business, 1997. 5 Mendonca, M., and Kanungo, R.N. In: "Performance Management in Developing Countries",

1990; Sinha, J.P., "Work Culture in the Indian Context", 1990. 6 e.g., PA guidelines of Lucent Technologies were implemented in Tata Lucent. Interview Tata

Lucent, Bangalore, India, 1999.

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C.4.5.5.2 COMPENSATION

The three major organizational needs that compensation addresses are the attraction of potential employees to the organization, the motivation of employees to perform and the retention of good employees.

In designing an IJV's compensation and reward system, it is essential that the system is balanced in terms of internal equality and external competitiveness in order to

attract and retain qualified and committed personnel1. As part of the effective compensation and reward system, and to provide the basis for effective performance appraisals, it is essential that the systems objectives and procedures are able to be clearly and consistently communicated to, and understood by, the IJV personnel. For the IJV to be successful, the performance appraisal and reward systems should reflect the fundamental strategy objectives of both partners, as well as the needs of the venture itself. However, while sensitivity to the practices of the host country or a local partner is important, it should not result in an abdication of responsibility.

Indeed, as noted by PUCIK2, such an approach is likely to be detrimental both to the foreign and the long-term viability of the IJV itself.

It may be both unnecessary and undesirable to use the same reward system in the IJV as is employed by the parent firms. In determining whether and how parent and IJV reward systems should differ, parents can establish universal salary management, job evaluation norms, benchmarks, compare individual country and parent firm practices against these norms, and then modify the practices within the

framework to overall corporate objectives3.

Job evaluation, performance-based pay and profit sharing4 are all consistent with more structured and rationalized employment systems. Seniority is taken as a pay criterion to be associated with less structured and rationalized employment systems.

1 Geringer, J.M. and Frayne, C.A., Management International Review, 1990. 2 Pucik, V., "Technology Transfer in International Business", 1991 3 Geringer, J.M. and Frayne, C.A., Management International Review, 1990. 4 Interview, Lucent Finolex, Pune, India, 1999.

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C.5.6 Potential questions for further research

KM in IHRM has been addressed in various literature as detailed in the earlier part of this section. The literature could be well extended if certain hitherto not addressed aspects of HRM practices in KM are surveyed, particularly in the light of wide gaps in HRM practices in parent firms from developed countries and from emerging countries. This is particularly true for partners from Asian subcontinent where cultural issues in HRM play a key role and has a sustained impact on how knowledge workers are managed. Answers to certain underrepresented areas in the literature on KM in HRM, such as HR measures to support KM, influence of parent’s HR policies on IJV, training measures supporting KM and evaluation of KM workers have been sought through the case studies presented in this section.

C.5.7 Knowledge Management within the IJV Framework: Case Studies

C.5.7.1 DSP Merrill Lynch

Both the Chairman and the Managing Director are host country nationals. The chairman is a 4th generation member of the D.S. PRABHOODAS family. ML initially appointed the CEO, CFO, Head of Equity and the Head of Research. Expatriates filled all these positions but only the Head of Research remains an expatriate as he has the knowledge and access to the global ML knowledge network. The market research employees in ML make up its largest Community of Practice, with a high formal and informal connectivity. This is meant to enhance and support the knowledge flow between the AP HQ, the parent firms and the IJV. Expatriates are more experienced with the knowledge flow channels within the global network. All the top management positions were initially held by Americans who were well accepted by the local Indian management as they were „mature enough to see that things had to be adapted to the Indian circumstances“1, mostly because of the regulatory environment and the close knit Indian business community.

DSPML has implemented a HR Performance Appraisal System in conformity with ML worldwide standards. The organizational hierarchies of the old system are being redefined by the ML guidelines for becoming as lean as those of ML worldwide.

1 Interview, DSPML, Mumbai, India, 1999.

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People at DSPML are considered a source of competitive advantage in today's and tomorrow's knowledge driven world. DSPML demands the highest quality in skills and knowledge from its employees. Local managers from India are also sent to ML New York for a 3-6 month period in order to learn and transfer their knowledge back to the IJV. Such foreign transfers are not institutionalized. The IJV has adopted ML’s institutionalized HR guidelines for managing knowledge workers. Constant interaction with the international workforce in the IJV network through formal and informal communication channels is aimed to derive maximum benefit from each other's experience and is encouraged and embedded within the HR KM processes in DSPML. The IJV aims to help employees to share knowledge and learn from each other, and introduce the technology that makes it easier to do a global scale. There is rigorous and comprehensive on-the-job training, partially in international offices. The DSPML compensation system is based on a merit system and performance-oriented rewards are at the core of it.

C.5.7.2 JM Morgan Stanley

The reporting structure at MS is very flat, unbureaucratic on both sides with MS channels being more institutionalized and JM having more hierarchical layers. There is a white phone policy in MS, with people being able to request for support through central liaison and co-ordination. Knowledge connections within the IJV network are access to all databases, video conferencing, training programs and the MS Intranet. MS (India) is now working on getting full connectivity. JM did not have global reach and access before. The full technology is in place but there are shortcomings in infrastructure i.e., the availability of bandwidth access. In theory, JMMS employees have full access to the MS Intranet, but there are still certain restrictions to global access and internal information.

C.5.7.3 Max New York Life

The CEOs for all of MI's IJVs are recruited independently, under the criterion "best person for the job". The CEO is an IJV employee and MI does not have any expatriate as an IJV CEO. The board represents the equity structure (24:76). Key issues during the pre IJV and IJV formation process are:

Until 1999 a group wide HR function for Max India was not actively pursued, and in 1999 with the re-focussing of the group business strategy, a group HR head was put in place and plans for group wide HR initiatives were made. The group HR strategy

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is to be a unified force through all businesses, in alignment with the corporate vision. There is a higher level of direction for future businesses for Max India.

HR is viewed as a key business and KM enabler within Max India. All the IJVs have management responsibilities and management imperatives tend to come from Max India and not from New York Life. There is a quarterly HR conference for all Max India companies and IJVs. There are 1700 employees in the Max India group. At this conference a common company philosophy is set for issues such as compensation, services and performance appraisals.

November 2000 was the deadline set for the alignment of all HR guidelines. Until then it was more characteristic of the IJV and the industry and the regional scientific processes. The MI group also had a benchmarking study conducted with respect to HR practices in India. As of now the IJV only reports to MI. Due to the minority IJV there are no plans for a dual reporting structure. Other HR practices that are meant to enhance the efficient use of knowledge resources within the group are setting up of a MI group wide resource pool and development of centers of excellence and the facilitation of cross border knowledge and skill transfer. There is no job rotation between the different MI group companies. There are MI internal and external training initiatives consisting of organizational development and various behavioral programs. MI wishes to attain the status of “preferred employer" in India through this restructuring initiative. Three HR areas are to be built up further are relationship management, upskilling and more employee involvement in strategic business processes. Max India believes that HR practices in India are more advanced, but need to be more institutionalized and professionalized1. Furthermore, the Indian business environment has yet to realize the full benefit of HR in relation to its cost. Max India is aware of the fact that the quality, availability and cost in Indian human capital differ from region to region, and labor laws are still restrictive. They feel that it brings to the partnership the local expertise and hopes to learn valuable lessons in HR for other group companies from the IJV.

All insurance training programs are established and led by NYL training units and there will be local training with NYL bringing in trainers from AP HQ as well as

1 Interview, Max India Ltd., New Delhi, India, 2000.

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global HQ in order to train the agents. Senior management was and will partially be trained in the US.

C.5.7.4 Birla AT&T

The president and CEO of Birla AT&T has led the start-up of operations and the recruitment of more than 240 people staff that grew to a total of 350 employees by the end of 1996. The new staff underwent extensive training in India and the U.S. in preparation for the launch of the cellular service.

India has a high growth rate in the internet hosting services, wireless and online services. Birla AT&T employs more than 350 professionals. More than 305 of them have been sourced locally.

The management model is that of AT&T, but the IJV principles are its own which were worked out in the first three months by the CEO et al. They have been adapted to Indian standards. The management training programs offered are from AT&T i.e., service excellence and branding, and customer satisfaction. These are conducted externally and their input is of technical nature, management training and people development. In the sales and market department there was the largest adaptation to Indian surroundings. Two people were sent from AT&T originally in the areas of customer care and marketing to initially setup the team. They wanted to ensure that benchmarks were set for the future i.e., response time and number of calls.

C.5.7.5 Sprint RPG

Group HR activities include benchmarking internally and externally, ESO, unified training initiatives, as well as senior management headhunting. The Group CFO is responsible for Group funding and multinational accounting. Corporate communications is aimed at presenting a unified image of the RPG externally.

Barriers to knowledge transfer within the RPG include different goals between partners due to convergence of services and technological advances over time. The only expatriates Sprint RPG has are technical experts who stay for a couple of months. This is according to RPG's HR policies: “Indian companies have to have

Indian faces1"

1 Interview quote, RPG group, Mumbai, India, 1999.

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Sprint RPG is a venture into a new field for RPG, which sees its core competencies in its contacts to the government, reputation in India. RPG has a status in India as a “preferred employer”. RPG feels that it “knows the Indian customer”, and has extensive market knowledge, which includes vast market research resources, and customer profiling.

RPG policy towards HR is to get the person with the appropriate skill sets. The CEO and other top executives are chosen through headhunters. RPG is generally looking for “younger” people, who have experience in the knowledge-based economy. This is not a common approach for family run businesses in India, where tradition, conservatism and loyalties are often valued more. There are bi-annual HR group meetings, where the top 200 HR managers get together. There is a regulated personnel movement program within the RPG Group companies.

In RPG Sprint the HR policies follow basic RPG guidelines. The management committee makes any joint decision regarding HR, and both partners have equal votes. As far as possible, important issues are dealt with at the level of the management committee. For the senior management, RPG group, in general, and Sprint RPG have a variable compensation plan linked to performance. Senior management receives an end of year reward for performance for up to three months compensation.

RPG's group training initiatives are available to all group companies and the same training investments are made for both subsidiaries and JVs. RPG sees itself as a central unbiased arbitration point for training and knowledge resources.

Personnel movement within the RPG group is very common especially for upper middle management and technical experts, a foreign assignment and career enhancement.

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C.5.7.6 Ogilvy & Mather (India)

Graduates for recruitment go through media communications, written test and personal interviews. Personnel transfer or rotation is encouraged with the possibility of a sabbatical abroad in London, AP or New York. There are also international and intercultural project teams that work on one project but when they return there is no formal process to re-incorporate their experiences.

O&M worldwide has re-focussed itself from an advertising agency to a communications company. Codifiable knowledge is contained in a worldwide database to which all O&M management employees have access. Knowledge from the few employees who go abroad does not go back into the company „ we can’t force them to produce fantastic results just because they have been abroad“1. The initiative to share their know-how has to come from the employees themselves. In other AP countries the database is used more because „they have it longer“. Promotion of database use through a „knowledge head“, who is a knowledge centered individual who encourages others to share and access knowledge.

1 Interview, O&M (India), Mumbia, India, 2000

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C.6 Technology Management: Implementing Global Knowledge Management Tools

C.6.1 Bridging Information Management, Technology Management and Knowledge Management

Experts in intelligence have striven to create improved systems for information collection, management, and analysis under various guises since the 1940s1. The widespread availability and adoption of computers during the past three decades has brought more highly evolved systems for constructing, acquiring, storing, and representing knowledge.

With the advent of new technologies, such as data mining, Intranets, video conferencing, web casting, leading on to Internet technologies and enterprise portals, and several technology vendors are offering such solutions as panaceas for the business challenges of the knowledge era. Trade press coverage of the "productivity paradox" has further added to the speed of the IT treadmill by suggesting that increasing investment in new information technologies should somehow result in improved business performance2.

Companies are still struggling to understand how to put information to work so that it improves business performance. Information technology (IT) and information management (IM) are part of the organizational KM. They are aimed towards creating the systems and processes to store or classify information rather than improving the way people behave with information. When information management is confused with or substituted for KM, senior executives still find it difficult to justify technology investments with superior business performance, even after having spent billions of dollars. Even so, this has often not encouraged more people-centered IM initiatives.

The information processing perspective as organizational theory is based on the premise that organizations are created to facilitate the flow of information for

1 Crevier, D. " The Tumultuous History of the Search for Artificial Intelligence ", 1993. 2 Davenport/ Prusak, " Working Knowledge: How Organizations Manage What They Know " 2000.

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effective individual and organizational decision-making1. The focus is on the capacity and facilitation characteristics of organizational structure and processes that support, encourage and reward transfer of information within the organizations, across its boundaries to IJV partners and the IJV itself, and that enable the organization to acquire knowledge to transform the data and information. KM addresses how the organization can use this information in a creative way to better

deal with and learn from the environment and its own experiences2.

C.6.1.1 Information Management

The link between Information Orientation (IO) and business performance is more powerful than a simple correlation. IO represents a measure of how effectively a company manages and uses information, thus encouraging superior business performance, external shock notwithstanding. However, companies with a high IO may have an easier time recovering from these shocks.

Information technology practices (ITP): A company’s capability to effectively manage IT applications and infrastructure to support operations, business processes, innovation and managerial decision making.

Information Management practices (IMP): A company’s capability to effectively manage information over the lifecycle of its use, including sensing, collecting organizing, processing and maintaining information.

Information behavior and values (IBV): A company’s capability to instill and promote behaviors and values in its people for effective use of information.

The Anderson IO model identifies four levels of IT support: • IT operational support • IT for business process management • IT for innovation support • IT for management support

1 Egelhoff, W.G., Journal of International Business Studies, 1991. 2 Makhija, M.V. and Ganesh, U., Organizational Science, 1997.

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Figure C.34 How Managers view Effective Information Use

For operations support, IT is focussed on making branch employees more productive through the standardization and centralization of the back office, which give staff more time to spend with customers1.

IT for innovation support applications allows customers, tracking of potential customer, and identification of internal new business opportunities. Information gathered through these applications is fed into existing management support systems to speed, among other things, future strategy formulation.

The mental model created in the ANDERSON study determined the sets of „information capabilities” consists in total of 15 specific competencies associated with effective information use. These three information capabilities are seen as components of one higher level idea termed as „information orientation“ (IO), which measures a company’s capabilities to effectively manage and use information. The results of the study indicate that IT practices, management of information and

How Managers View Effective Information Use

InformationTechnology Practices

(ITP)

InformationManagement Practices

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Information Behaviorsand Values

(IBV)

• Capability• IT for Operational

Support• IT for Business

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• Capability• Sensing• Collecting• Organizing• Processing• Maintaining

• Capability• Integrity• Formality• Control• Sharing• Transparency• Proactiveness

Source : Marchand, D.M., Kettinger, W.J. and Rollins, J.D. (2000): Sloan Management Review,Summer 2000, 7.

Information Orientation (IO)

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information behaviors all must be strong and working together, in order to increase business performance.

Guidelines towards a higher IO (gained from benchmarking and best practices):

Guideline 1: Focus Your Best IT resources on what makes your company distinctive: In most companies, the time, attention, expertise and money of top-quality IT people are in short supply. The high IO company leverages IT to create new products and services and improve management decision making. In contrast, low IO companies dissipate their IT investments on basic operational support and infrastructure. IT investments must have a strategic aim, not only an operational one.

Guideline 2: Effective IT operations support effective business processes, which then provide information for decision making. For many companies with low IO, poor information for management support of strategic and tactical decisions is a direct result of ill-designed business processes. Companies with high IO focus on getting support for key processes.

Guideline 3: Good IT practices can uncover new business opportunities and lead to innovative management actions. A company with high IO benefits not only from tying its IT practices loosely to the way it creates business value, but also from new business opportunities and management initiatives. IT choices directly influence business strategy (and vice versa). Superior IT practices also continues to play a critical role in its global expansion and merger strategy.

Information Management Practices of High IO Companies

The IO model has five separate phases: sensing, collecting, organizing, processing and maintaining. Companies with high IO (or who wants to achieve it) pay special attention to training other employees to collect, organize, and process information about customers, products and performance. Effective information management must be instilled in the members of an organization. Good sensing and information-valuation and information processing practices are critical elements of a high IO company.

1 For example, GE is in the process of outsourcing all back office processing to its Indian

subsidiary. Interview, GE Capital, New Delhi, India, 2000.

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Guideline 4: Companies with high IO actively manage all phases of the information life cycle. Companies with high IO view information as having a life cycle with discrete valuation points. These are reinforced through communication, formalization of best practices and on-the-job training. New information is first evaluated for its relevance, then collected (IT practices) for decision making. After processing information must be updated or discarded. High IO companies understand the importance of each of these practices and know that inadequate attention to one practice can disrupt the cycle.

Guideline 5: Managers and employees must develop an explicit, focussed view of the information necessary to run the business. Good information management should constantly focus on the decision contexts of managers and employees. All employees have their „information responsibilities“, which means information accountability for everybody1.

Guideline 6: When people do not understand the business, they cannot sense the right information to change the business. People can sense information effectively only when they understand what drives a company’s business performance and how they personally can help to improve performance. Sensing is enhanced and information valuation assessments become more precise.

Information Behaviors and Values of high IO companies

The IO model identifies six information behaviors and values: integrity, formality, control, transparency, sharing, and proactiveness. A firm with low IO will install maybe some, but not all of the behaviors. In a working environment in which people understand how individual and team performance is built up, people are more likely to share and use information that benefit others. Effective information use ultimately depends on their ability to create and motivate information user proactiveness.

IO Guideline 7: Do not compromise on information integrity: In organizations, integrity develops trust among members by defying boundaries within which they can legitimately use power and influence.

IO Guideline 8: Team-based performance information creates openness and improves information sharing. Performance indicators, tied only to an overall

1 Marchand, D.A., Davenport, T.H. and Dickson, T., "Mastering Information Management", 2000.

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business measure- such as EBIT – may not give enough information to provide adequate information control.

IO Guideline 9: People who understand the business and are informed will be proactive. The process of openly sharing performance-based information inside a company creates powerful support for employees and managers to seek new ideas and information inside a company.

Virtual teams need to build a relationship, often through face to face meetings, before they effectively collaborate electronically1. If a group of people doesn’t have contact, don’t already share knowledge, and don’t understand what insights and information will be useful to the other party, IT is not likely to facilitate this exchange. There is typically too much focus on Information Systems – identifying what information to capture, constructing taxonomies for organizing information, determining access, and so on, rather then focussing on making sure that effective and efficient KM processes and tools are in place.

Although, HUBER2 explicitly specifies the role of IS in the learning organization as primarily serving organizational memory, IS can serve the other three processes (knowledge acquisition, information distribution, and information interpretation) as well. At the planning level, scenario-planning tools can be used for generating the possible future trends. Similarly, use of Groupware tools, Intranets, e-mail, and bulletin boards can facilitate the processes of information distribution and information interpretation. The archives of these communication mediums can provide the elements of the organizational memory (OM), which needs to be continuously updated and refreshed. The technical infrastructure of the OM suggested by HUBER can lead to organizational rigidity when it becomes "hi-tech hide bound"3 and is unable to continuously adapt its "theory of the business"4.

HUBER1 notes that "it might be reasonable to conclude that more learning has occurred when more and more varied interpretations have been developed, because such development changes the range of the organization's potential behaviors...". 1 Lynne Markus, M. and Benjamin, R.I., Sloan Management Review, Winter 1997. 2 Huber, G. P., Organization Science, 1991. 3 Kakola, T.K., Accounting, Management and Information Technologies ,1995. 4 Drucker, P.F., California management Review, 1999.

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However, most extant information systems focus on the convergence of interpretation and are not geared for multiple interpretations2.

ARGYRIS3 has argued that the "massive technology of Management Information Systems (MIS), quality control systems, and audits of quality control systems is designed for single loop learning." Essentially, he asserts that the problem of using IT is in its reinforcement of the prevailing rigid structures4. He attributes the overarching command-and-control structures for the "gaps of knowledge" that top managers design to manage effectively: "Another set of attitudes usually developed is that lower level managers and employees can be trusted only to the extent that they can be monitored". He argues that the problems related to MIS implementation are more related to organizational factors than to misappropriation of the underlying technology. His analysis suggests that many of the recommendations to overcome the barriers may be inadequate and, in some cases, counterproductive.

In developing an information management policy that can be incorporated within the framework, alliance negotiators should openly discuss and agree upon the level of confidentiality for different categories of information. This agreement should be contractually fixed during alliance negotiations. Ongoing attention to information management issues is required as an alliance grows more complex or and develops over time. When defining information boundaries, however, key alliance personnel must have the authority and autonomy to expedite communication and work flows between the firms. An overly restrictive information policy will damage trust, hamper learning, and impede the development of interpersonal relationships across organizations.

A web of interpersonal connections supports information-flow circuit, enhanced learning and the formation of strategies. Frequent interactions and the timely exchange of information across organizations resolve conflict, build trust, speed decision making, and uncover new opportunities for the partnership.

1 op.cit. 2 Argyris, C., Journal of Management Education, 1977. 3 Argyris, C., Journal of Management Education, 1977. 4 Orlikowski, W.J., Accounting, Management and Information Technology , 1991.

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C.6.1.2 Technology Management

"In the last 20 years, US industry has invested more than $1 trillion in technology but has realized little improvement in the efficiency or effectiveness of its knowledge workers… This failure was due to organizations' ignorance of ways in which knowledge workers communicate and operate through the social processes of collaborating, sharing knowledge, and building on each others' ideas."1

Companies are still struggling to understand how to put information to work so that it improves business performance. After huge investments in Information Technology (IT) it is still difficult for senior executives to link the company’s technology investments to its business performance. Companies must do more than excel at investing in and deploying IT2. They must combine those capabilities with excellence in collecting, organizing and maintaining information, and with getting their people to embrace the right behaviors and values for working with information.

Technology is a key enabler for the implementation of KM. Indeed, it would be impossible for many companies to have pursued their approaches to KM if existing IT capabilities were not available3.

Successful companies learn from partners and quickly diffuse the acquired knowledge through the firm, not by building large electronic repositories, but by connecting the right people together4. Information technology has led many organizations to believe in a New World of leveraged knowledge. Web-based technologies have made it possible for professionals to draw on the latest thinking of their peers no matter where these are located. As a result, many companies are rethinking how work gets done and linking people through electronic media or through a best practices database so they can leverage each other's knowledge. These companies believe that by simply getting to document their insights and draw on each other's work, they could create a web of global knowledge that would enable their staff to work with greater effectiveness and efficiency. While IT has inspired and facilitated this vision, it itself cannot bring the vision into being. 1 John Seely Brown, Director of Xerox Park Research Center 2 Marchand, D.A., Kettinger, W.J., and Rollins, J.D. Sloan Management Review, 2000. 3 APQC, Knowledge Management Report, 1998. 4 McDermott, R., California Management Review, 1999.

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IT usually reinforces an organization's norms about documenting, sharing information, and using the ideas of others. The relation between IT expenditures and „success“ of KM measures is attributed to an economic transition from an era of competitive advantage based on information acquisition to one based on knowledge creation1. There is also a continuous redefinition of organizational goals, purposes, and strategy. This new business environment demands a faster cycle of knowledge creation and action based on this new knowledge.

IT supports the complex tasks of autonomous knowledge workers. As technology infringes on the domain of symbolic abstract work the interaction between user and tool becomes more complex, especially in the realm of professional services where human capital is the key asset and their tools is their sustenance. A primary focus of the knowledge industries has been to gain influence over knowledge workers, in order to increase their productivity2.

The increasing sophistication of the IT infrastructure has heightened this tension. More often, computer technologies are not passive but active tools that manage work processes. Expert systems, which specifically aim at codifying knowledge and creating a specific method to do a task, are especially "proactive" in this respect. In an APQC report, the technologies determined as having the most impact on internal knowledge sharing were Groupware, the Internet and Intranets, and databases and pointer systems. "Its role is emerging as an integrator of communications technology, rather than a sole keeper of information. The critical role of IT lies in its ability to support communication, collaboration and those searching for information, not static repositories of 'best practices'. Lessons learned include the need to adopt early on a common user-friendly platform"3.

Most of the preliminary KM management initiatives consist of implementing collaborative systems, such as Lotus Notes / Domino, and intellectual asset management applications. But with KM being increasingly driven by the Internet, e-business and the company Intranet, content management applications have also been on the rise for the past few years.

1 Malhotra, 1998., New world of business, http. 2 Sviokla, J.J., Sloan Management Review, 1996. 3 APQC Report, 1998.

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Previous research has shown that environmental context can have a significant

influence on the likelihood that an organization will adopt new technology1. Company strategy and other contextual factors shape technology use in the firm. Organization structure, distribution structure, compensation systems, and product and service mix, training, job roles, and potential career paths are among the important variables.

Key issues in the implementation of new technology are: • The role of the technology sponsor • The role of the technology champion • The design of the implementation process • The rationale behind the radical change

WALTON, in a study of new IT in organizations, has noted the importance of how

management values the meaning of new technology2 for business strategy. In addition to sponsorship, the initiative has to have adequate funding from the start. The implementation methods can draw from previous change management approaches.

A pilot implementation gives the necessary information to make that judgment. The manager's role as implementer is to make the technology available for the individual to judge.

The job of a manager is to think broadly about options and perhaps search for possible approaches, which may be surprisingly different. Strategizing must be done early in implementation for the complete design of the process.

The nature of the supporting organization also has an impact on implementation. Many organizational theorists argue that radical change is best effected quickly and painlessly. Managers who intuitively understand these economies of scale may see their roles as technology champions to be less like scientists and more like change agents for rapid achievement of economies in social knowledge.

There is probably no optimal way for an organization to implement a technology. The natural propensity when implementing technology to support autonomous professionals is to adopt caveat emptor strategy, because it implicitly relies on 1 Etillie, J.E., R&D Management,, Oct. 1983. 2 Walton, R. "Up and Running: Integrating IT and the Organization", 1989.

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independent judgment for the technology's acceptance and subsequent use. But radical software technologies also need concentrated action. Projects have life and momentum. The managers of a project must assume a strategy of "diffuse or die". If the project does not grow, it will probably end.

After studying existing and emerging technologies and their application to KM it becomes evident that while their usefulness is growing, there is much room for improvement. Issues such as tacit knowledge sharing, creativity, and innovation represent fundamental challenges. The application of technology to those issues, and frameworks to support their adoption within the enterprise, have the potential for dramatically improving the business value chain.

IT architecture, the conceptual design of the technological infrastructure of the business, can be anathema to senior executives. "Architecture" sounds too abstract; it is embodied in standards whose currency and relevance arouse controversy and emotion; it can be positioned as an obstacle to innovation and rapid systems development.

CEOs can sponsor IT architecture in three ways:

In dialogue with technologists in Information Systems and elsewhere proposals and their implications for the business can be evaluated. There is evidence that this combination of technologies will facilitate. The technologists have to establish the robustness and the risks inherent in the architecture and benchmark against rival technologies.

They use the vision and authority to ensure architecture standards are respected across the business; usually this is confined to making just a few of standards of policies sacrosanct. Second, they establish seed-corn funds - available at key stages - to implement important features ahead of proven benefits.

Today's business visions require sponsorship of external as well as internal IT architectures, defining how the infrastructure will provide linkage to suppliers, channels customers and allies.

The assessment of the KM tools should two-pronged. First, a look at the knowledge sharing vision or processes those has been defined and identify which technologies are necessary to enable these processes. Second, a review of the technologies that are available in the market today that could be integrated into a knowledge-sharing

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environment and determine if the types of processes these technologies can enable would provide value to the organization. In other words, they have to identify technologies to support their requirements, and review the technologies if leveraging them should prove advantageous.

C.6.2 Supporting Global Knowledge Flow through Effective Technology Management

Technology based conceptualizations have been primarily based upon heuristics, embedded into procedural manuals, mathematical models or programmed logic - that capture the preferred solutions to the given repertoire of organizational problems.

Such „off the shelf“ solutions for storing, best practices, for example may be used later for crunching out pre-determined solutions based on pre-defined parameters. Such systems, however, can be discordant with a complex business environment.

Standardized KM solutions define the basic assumptions about organizational routines, which then get embedded in the firm’s strategy. The hardwiring of such assumptions in the organizational knowledge databases may lead to a perpetual insensitivity of the organization to the changing business environment. Whereas institutionalized „best practices“ may provide solutions for routine problems, this may not work for new situations with a high level of complexity.

Experts in training, technology, and financial planning led the effort. As rational as this approach was - and as scientific as the pilot design attempted to be - both companies failed to achieve adoption1. Other explanation for successful implementation: Each organization's strong culture may have helped to reinforce the implementation process. Culture is an important variable at the company level.

"Everybody has equal access to the technology tools now...phase two of KM focuses on motivating the people to use all the tools2"

1 New York Life's CEO was the sponsor; the day-to-day champion was a knowledge friendly line

manager. AIG created an extremely targeted implementation approach that aimed for significant adoption by building up support in each local office.

2 AT&T Wireless, 2000.

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Creating an organization where KM goes beyond IT and the creation of knowledge databases can be accomplished by integrating the principles and tools of KM into the day-to-day pursuit of operational initiatives.

Rather than relying solely on databases to search for information, one approach is to create the process tools and collaborative techniques that enable people to share knowledge in real time.

IJV technology management in the knowledge perspective deals with the assessment of the partner’s technology, the concrete process of technology transfer from the parents to the IJV, and the management and global implementation of the technological KM tools that complement the firm’s global knowledge strategy. These tools can be aimed at managing internal knowledge within the IJV framework, or bringing in external knowledge, i.e. customers, suppliers and other actors.

Information technology has provided the tools to better perform the activity of building knowledge capital. Two important areas in particular have contributed to the birth of modern KM systems: communication (or network technologies) and relational databases.1 The parent firms must decide which processes of knowledge transfer and creation can be automated, and how the IJV can be incorporated into this system. The parent firms must re-evaluate the position of the IJV within their respective networks, and how much internal knowledge they want the IJV to have access to.

Until now, the main focus has been to develop new applications of information technology for the digital capture, storage, retrieval and distribution of the organization’s explicit knowledge. New KM tools, technologies, and capabilities continue to be developed. Increased sophistication will play a major role in furthering the growth of KM.

1 Savary, M., California Management Review, 1999.

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C.6.3 Knowledge Management Tools

C.6.3.1 Repositories

Knowledge repositories capture explicit, codified information wrapped in varying levels of context. Such repositories include data warehouses. More sophisticated repository approaches attempt to wrap more contexts around information as it is captured. Whatever the level of sophistication, repositories essentially capture data, information and knowledge in forms and through processes that enable access throughout the company. Over time, these repositories contribute to the maintenance-shared intelligence and organizational memories.

Data warehousing can be defined as a process that extracts data captured by multiple business application and organizes it in a way that is meaningful to the business, supporting the need to inform decision makers. Data-warehousing products include tools and application software that support design, development, and implementation of these solutions.

C.6.3.2 Process Redesign

Effective knowledge programs will put emphasis on capturing from every work experience and from assignments1. Decision diaries, reflection times at meetings and after action reviews (AAR) are potentially powerful tools. AAR is a technique first developed in the US army to capture lessons from battlefield engagements, in the form of structured sessions. Another useful technique is that of „knowledge refining“. A series of memos, emails or meeting minutes are examined for their relevant and reusable content, which is stored in an evolving and structured knowledge base.

The primary learning objectives of these knowledge maps that employees will discuss and understand are: • The entire process of delivering a product or service to a customer. The steps that

precede the customer request such as sales & marketing, the actual customer exchange, and the follow-through of the customer’s request by the rest of the

1 David Skryme: Knowledge Management: Making it work ; http://skyrme.com

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organization (in particular those parts of the organization that do not have direct interaction with the customer)

• The critical hand-offs that need to occur in the value chain and the key variables that ensure a proper hand-off

• The role that each employee plays in the value chain (each employee should be able to "find themselves" in the process that is visualized)

• How decisions people make can have a positive or negative impact on the value chain "upstream" and "downstream" from them

• Any major changes to the process that have been introduced recently and the rationale for them

• Process metrics – data related to customer satisfaction with the value chain, internal metrics tracking the key hand-offs, and their process metrics that employees need to understand

The existence of performance barriers and initiatives that need to be implemented to remove those barriers: Implementing decision-support tools

Making available the wealth of knowledge that exists throughout the organization is of real benefit to firms that wish to improve the ability of employees to make decisions1. Expertise is elicited from leading practitioners, formed into rules and guidelines, and then made available to others, usually via computers to ease the upgrading of the knowledge base. Members can not only draw from but also contribute to a dynamic evolving firm-wide experience base.

Intranet and Internet Technologies

The explosive growth of Internet and Intranet technologies has also proven a catalyst to KM initiatives. They are especially successful at supporting a common platform where members of the organizational network can find each other and gain access to the knowledge they require. Furthermore, one common platform goes a long way towards presenting a unified front internally an externally. IJVs that have access to both the parents' Intranets, with firewalls if required, can have much more efficient access to knowledge and knowledge sources, as well as feeling as part of the integrated parent company network.

1 Marshall, C., Prusak, L. and Shpilberg, D., California Management Review, 1996.

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Intranets use the infrastructure and standards of the internet but are cordoned off from the public Internet through software programs known as „firewalls“: Employees can venture out onto the net, but unauthorized users can’t gain access1.

The Intranet is an inexpensive yet powerful alternative to other forms of internal communication, including conventional computer setups. One of an Intranet’s most obvious virtues is its ability to greatly reduce the need for paper. All sorts of documents – internal phone books, procedure manuals, training materials, requisition forms – can be converted to electronic form on the Web and constantly updated for future reference.

But Intranets do something far more important. They pull all the computers, software, and databases in the corporate landscape into a single system that enables employees to find information and knowledge. Scientist working in fields such as genetics and biotechnology credit Intranets with allowing them to share information with colleagues and quickly sift through data that might have taken days to find in the past. Across the business world, employees from engineers to office workers are creating their own home pages and sharing details of their projects with the rest of the company.

Not only do corporations already have the networking infrastructure – and the money to actually pay for software – but they also require the technology that finally gets information out of the arcane world of databases into a format anyone can use. It requires little if any training – and makes including electronic information simple enough for everyone in a company. Another advantage of Intranets is the relatively low cost of ownership. These simple information-sharing setups can already provide a significant strategic advantage.

Intranets are often used to support knowledge access and exchange within organizations. Using technologies such as TCP/IP protocols and linked hypertext WebPages, Intranets operate within firm's boundaries, which are usually delineated by firewalls and password access. Increasingly, however these boundaries are drawn to include close allies, suppliers, and customers in order to allow them to participate in the exchange of knowledge.

1 Business Week, 1996.

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Portals

The fragmentation of Intranets has led to a need for an enterprise knowledge portal- a single point of access to enterprise resources. This can be an information portal (one that offers access to all information sources), a collaborative portal (one that enables users to establish their own virtual project communities with conferencing, work flow, query tools and document management) or an expertise portal (one that allows expertise to be contributed and networked throughout the enterprise). A fourth possibility is an enterprise knowledge portal, which combines the attributes of information, collaboration and expertise.

Many CIOs have discovered a problem with enterprise information portals: No matter how usable or how personalized they are, users must still be persuaded to visit the portal in order to find all the valuable information and knowledge on the Intranet sites it leads to.

A portal requires highly intelligent searching and categorization functions, and this technology, which previously was available only in proprietary KM systems, is now a part of generic software packages. The key to this new generation of KM systems is server-based software that read documents in the document server, or e-mail in the server and can bring all the information together as one consistent knowledge base.

The portals will need to interface with existing systems and competing products that come into the portal infrastructure, such as document management systems, collaborative systems, data warehousing, business intelligence tools, search engines and categorization tools. Companies engaged in Web-based KM need better automatic categorization and better navigational tools.

Four critical elements for the enterprise knowledge portal: • An enterprise table of contents • Corporations now use metadata (historically considered the glue for lower-level

data, or data about data) to provide relationships between systems and people • The need for the individual worker's personal portfolio • The ability to analyze and structure data

C.6.3.3 Information Technology Applications Overview of IT Applications

The first step in building a knowledge base is to capture large volumes of structured and unstructured information that exist on paper, film, faxes, microfiche and photos,

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and convert it into a digital format readily accepted by back-end applications, such as the document management, and enterprise resource planning systems.

Remote scanning is another trend in document capture. Companies have traditionally relied on centralized production groups with high-volume scanners. Now they want to capture documents such as bills at the point where they enter the organization, send them over the internet to central facilities, avoiding the delays and resulting cost, of shipping them to the centralized production groups.

Workforce Management

Managing the workforce entails not only knowing about the time and resources that employees consume, but also the content of their work. It involves integrating structured data with less structured data - statements of work, contracts, engagements and status reports - all with the ultimate purpose of helping employees make judgments. Workforce management is also a means of understanding how people do their work and using that information to create tools that help new employees progress more rapidly.

Alternative Products & Services

Developing a simulation of the financial decisions within a company is also another option. Primary goals, employee composition and the existing level of business or financial knowledge will determine the appropriate tool. In some cases, it may be more appropriate to set the context of the value chain with customer loyalty in mind. For many companies the economics of customer loyalty will drive the value chain. By blending the value chain with customer loyalty information, higher value opportunities can be identified.

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Implementing Groupware to support collaboration

Groupware has long been seen as a way to encourage the sharing of ideas in a much freer flowing manner than repositories or codified decision support systems allow. The aim is to create “anytime, anywhere” collaboration spaces. However, despite high levels of interest, implementation efforts often fall victim to a “build it and they will come” approach. All firms rely on the ability to not only represent ideas but also discuss them. Having set parameters by which KM can be defined, a study of the types of software that could be included under this definition can be conducted1. Software can be classified into the five KM categories i.e., gathering, storage, communication, dissemination, and synthesis.

Software can be grouped into five common categories that represent the current software market: document management, information management, searching and indexing, communications and collaboration, and expert systems. A sixth category, systems for managing intellectual property, is added as an adjunct category1. Software that supports the transfer of operational data to the warehouse and warehouse management software is used extensively in support of KM initiatives. In particular, KM imposes the need for extraction of information from unstructured data and the ability to draw conclusions based on its relationship to more unstructured data.

Groupware is part of the overall technological infrastructure, as it supports the collaboration needed for knowledge sharing as well as e-mail and other forms of inter-personal communication required for the efficient, time and location-independent exchange of information. There has been a steady and rapid growth in the adoption of data warehousing tools and techniques and continued advancements in their sophistication. This expansion is the result of an increasing focus on systems that support access and analysis of data rather than on systems designed primarily for capturing transactions as seen in the early and mid-1990s.

1 Fayyad, U.M., " International Business Management ", 1996.

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Document Management Systems

One of the first software opportunities for the use of software in managing knowledge was the collection, storage, and distribution of the artifacts of knowledge contained in an organization. Many of these systems emulated the paper and library systems that preceded computers. Advanced features of document management systems provide version control, authentication, and translation.

Information Management

Software for information management fills many needs within an organization. Information on hardware and software assets and location, analysis of user needs, automated alert systems, and data storage help to provide an infrastructure that is needed for higher level of software systems. Some of the best-selling software has been developed in this category including RS (SAP) and SCS (Baan).

Searching and Indexing

There has been much attention given in recent years to search and indexing techniques with the exponential growth of information. The Internet has accelerated techniques and, as disparate systems become connected to one another, searching and indexing becomes a function more critical than storage. Information that cannot be located easily and with reliability holds little value.

Expert Systems

Another area of software that has been growing rapidly is in the intelligent analysis of information, online processing, and filtering. These expert systems attempt, in part, to simulate human decision making and synthesis information. Often relying on concepts from the field of artificial intelligence, expert systems help make vast quantities of data and information useful.

Communications and Collaboration

Software tools that aid in communications and collaboration are included within KM because of their role in facilitating the flow of tacit information.

1 Leonard-Barton, D., Wellsprings of Knowledge - Building and Sustaining the sources of

Innovation ,1995.

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There are still much greater quantities of knowledge stored within the heads of individuals and within business processes than has been and can be translated into electronic forms. Communications and collaboration software generally help to build relationships between people and reinforce organizational culture and design. An area that was once dominated by e-mail systems software titles has evolved to provide more robust communications features. Older products such as Notes (IBM/Lotus), Exchange (Microsoft), are representative of this category.

Intellectual Assets

Software that helps to track and manage the intellectual assets of an organization range from legal systems to maintenance of trademarks, patents and other intellectual property. Since much of the organizational knowledge and value is contained within those assets it is essential that these tools be included in an overall investigation of KM software.

If one investigates all of the software that supports business decisions, contains knowledge, or facilitates the making turning of raw information into knowledge it becomes apparent that there are many types of software could be included, such as enterprise resource planning (ERP) tools, computer aided manufacturing, etc. Many software products have been designed from a functional, rather than integrated, perspective due to the structuring of traditional organizations. As organizational structures evolve to become more holistic, KM software tools will also change.

Other technology advances include knowledge exchange platforms, knowledge workflow management software, and knowledge profiling technologies. These applications will advance structured and unstructured data access capabilities, enhance information retrieval, and improve subject matter expert identification.

C.6.4 Potential questions for further research

At a time when technology and the global acceleration of technology platforms play a driving force in a need, interest and purpose to form IJVs, the role of KM in Technology Management is an issue which cannot be overlooked. The misconception that Technology Management is KM or at least the major aspect of KM can be very easily solved and settled by the impact of key areas of KM already outlined in the subsections addressed in this chapter. This in no way undermines the role of TM in KM, which does play a key role in an integrated approach to KM. The

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TM issues become more striking when an IJV is formed by technology heavy and strong parent from a developed nation and a technology weak but strong knowledge worker environment of a parent from an emerging market. Key areas of KM in TM such as juxtaposition of the IJV within the TM strategies of the parents, KM tools in the IJV, directional flow of information between the IJV parents and IJV itself and external factors affecting TM in the IJV are under-explored in the literature. In this study an attempt has been made to cover these aspects of KM in TM in IJV case studies. The results of this exploration would give a glimpse of the importance and necessity to augment our knowledge in these areas of integrated KM in IJVs.

C.6.5 Knowledge Management within the IJV Framework: Case Studies

C.6.5.1 DSP Merrill Lynch

At the start of the IJV, the Technology Integration Committee was formed to implement a unified IT system within the IJV and secure smooth information flows between the parents. The committee was an operational partnership between DSP and Merrill Lynch' Technology Department. Its objective was to ensure the smooth and constant flow of information and knowledge within the IJV framework.

DSPML, in concordance with ML global strategy and DSP’s efforts towards institutionalization, plans to make continuous investments in state-of-the-art IT and KM tools. The IJV also has access to all new knowledge tools implemented in ML International. This includes on and off site training and access to global ML technology resources. Thus far, the knowledge management tools have been well accepted by employees at DSP Merrill Lynch. Unlike some other firms, there hasn't been a pronounced generation divide between the younger people at the firm - those less than 30 grew up using technology - and the older people, some of who might be apprehensive about using the new tools. According to the CEO of DSP Merrill Lynch, "What knowledge management needs right now is to be grounded in the pragmatism of doing business." Evidence that the program is working is, as of now largely anecdotal, as with most knowledge management initiatives in the early stages.

The focus in DSP Merrill Lynch is generally on improving processes or creating new ways of working. In general, professionals can spend as much as three quarters of their time looking for sources or information needed to do their jobs, so making processes of learning faster will automatically increase productivity.

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Merrill Lynch' global expansion was marked by strategic acquisitions and supporting the diverse cultures of its business units. In the mid-1990s delays caused by the incompatibility of the different information systems around the globe threatened to impact productivity and responsiveness to clients. In response to this, Merrill Lynch launched an initiative to create an efficient seamless communications infrastructure, the Knowledge Exchange®.

The Knowledge Exchange® initiative was specifically designed to improve information sharing and streamline the flow of knowledge across the organization.

A primary strategic aim of the Knowledge initiative was to create a global support structure for remote offices. The Knowledge Exchange® was rolled out worldwide in a relatively short timeframe, as it was considered as a critical issue.

According to the Merrill Lynch Enterprise Service Delivery1, the Exchange allowed employees worldwide to find information and sources in a significantly shorter timeframe, be it internal or research for clients. In addition, help-desk support staff uses the Exchange directories to identify people and instantly obtain system profile information. Essential information can be found in a single unified source.

C.6.5.2 JM Morgan Stanley

Morgan Stanley Dean Witter has automated paper-mail routing and audiotape retrievals using a sophisticated storage area network. The software called Automated Work Distributor from DST Systems inc., is designed specifically for financial applications, and entirely replaces routing of paper-based mail. A Windows NT LAN runs the imaging workflow management system.

MS has implemented a database for its existing library of voicemail tapes that are used to record all telephone conversations between employees and clients. Under the old filing system, the staff could take up to six hours to manually find a particular tape of a phone call; now, the index of tapes is being linked to the workflow management software so that any tape is immediately available.

The company maintains a worldwide backup data center 15 miles from the company's Jersey City, N.J., technology HQ. Data is copied to the backup facility in real time, and in the event the main data center fails, the backup data center can

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come online within 45 minutes. The data is stored using TimeFinder and EMC's Data Manager software, which allows the company to take a snapshot of the database--a copy of all the information frozen at a particular point in time--and then use the mirror-image copy to make a backup at a remote location.

MSDW also has a Web-based commerce system, which will allow clients to log onto a Web site and retrieve any of the data over a telephone voice-response system, including daily positions and historical performance statements. This requires links from a Web server to the DB2 server on the mainframe to process information requests in real time. All technologies are introduced on a global scale after the pilot phase, but as of yet the necessary infrastructure is not in place.

The key differences between the IJV parents are that MS has a very open and free information flow in its global networks. In JM, key information and knowledge was highly centralized, hierarchical and bureaucratic with only a few top managers having access to it. The IJV provided a significant improvement in information flow from JM Financials. The investment bankers, who were mostly previously with JM, are getting used to having access to information as well as being empowered to make decisions based on this information. On the other hand, information flow from the AP HQ is not as unrestricted as it used to be, as they view the IJV from a different perspective as they would a wholly owned subsidiary.

There is a back office bi-weekly meeting where all managers are free to raise issues that they term relevant. For the first time JM managers realize they were expected to open up and communicate irrespective of the hierarchical pressures. Since the start of the IJV, 90 people have left the company, but the people who remained are getting to know each other through MS open management style, which encourages knowledge flow and sharing. The initiative for more openness came from J. Kampani, one of whose primary goals was to adopt management practices and gain expertise from MS management in order to institutionalize and professionalize his hitherto patriarchal firm. Inter-firm transfers and rotation internships are an integrated part of knowledge sharing, with even the son of the CEO, working for MS in the global Headquarters in New York.

1 Interview, Merrill Lynch Enterprise, New York, 2000.

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C.6.5.3 Max New York Life

The purpose of preliminary KM initiatives within the IJV network was to get to know the partner. Within the IJV and the parents there is a circulation of a newsletter and MI and NYL have access to both parents' intranet. It must be noted that Max Group Intranet was, at this point, at a very early developmental stage, and basically still in the design phase.

C.6.5.4 Birla AT&T

Birla AT&T does not yet have access to AT&T global intranet. The IJV has restricted access to the AT&T Intranet as it is a non-consolidated JV, which has already constructed its own website. All communications are still on paper, gaining connectivity to the parent's KM tools is still a work in progress.

One IJV manager cites the lack of transparency as major symptom of the two sides of Birla AT&T and he calls it a „non-collaborative“ environment. As HRM practices are aligned to the Birla Management style a 360º evaluation cannot as yet be implemented or that other HR KM tools and channels have to be significantly adapted to the local environment. He feels that the Indian bureaucracy mentality is still at work here with a high resistance to change in certain parts of the organization. Knowledge Flow within the IJV

The quality of service is extremely important at Birla AT&T, and when potential candidates were chosen for sales and marketing in customer departments the levels were consistently kept up.

AT&T's KM effort began as a result of the company's concerns about its aging workforce, its large number of work centers with many people in them, whose jobs had become very specialized, and the fact that the organization was "very product-silo based" according to AT&T1, the officer in charge of internet implementation strategy at AT&T.

1. http://www.cio.com/archive/enterprise/091599_ic_content.htm

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The AT&T brand and its reputation are extremely important to AT&T Global and so it assigns a brand manager who is a branding specialist to each of its global operations. The brand manager at Birla AT&T is an AT&T employee, a NRI expatriate, directly assigned from HQ. The brand manager’s role is to prevent the misuse of the AT&T brand name and to ensure that branding and marketing knowledge are passed on correctly to the IJV. The brand manager feels that only the CEO should make key strategic decisions, as they are the only one capable of making the decisions without creating further divisions in the department.

The brand manager also implements and passes on global strategic directors regarding advertising, training programs, ethical codes and customer interaction. The brand manager is a member of the board on the AT&T side and has a separate contract and a veto right for all IJV activities. He prefers to function on persuasion and acknowledges the need to understand local market knowledge. There is no conflict of interest as he considers a „win/win“ situation being in the best interests of the IJV. The reporting structure of AT&T is performance and target driven on a monthly and quarterly rolling basis.

The Birla AT&T Customer care is also in charge of billing operations for customers. The accounting guidelines are according to AT&T global guidelines. Special adaptations have been made to billing systems in India with regards to delivery systems, credit culture in India and different bill formats and adjusted to a format that the Indian customer is used to.

The parameters of quality and service are quantity, response time and complaints. The call center concept is a new one in India and most of the work is done through the training of call-center employees1. There is no technological fall back and the whole customer care process can only be monitored through quantitative measures. The problems that arise in intensive customer care in India are the night shift, and the lack of service culture in India. All call-center employees are students and graduates and there is an extremely high annual staff turnover of 40%. The reason

1 The Indian customer is very demanding and rude sometimes and do not feel themselves at the

level of the call-center employees plus are not accustomed to asking help though telephone. The Indian website was constructed here specifically for the Indian market. There are no performance incentives for call-center employees. AT&T admits that the quality of call-center employees is definitely higher in India. For this reason AT&T is considering moving several back office processes to the IJV.

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why, contrary to the other countries, students are employed at the call-center operations is the fact that they have to have a good command of English and the local language and have to be at least semi-computer literate.

The basic training functions on the buddy system, where people are hired in small groups. All information and technical support is on the Webpage/Intranet and high value is placed on KM tools such as e-learning. Service quality is the highest at the beginning of employment but the initial euphoria lets off afterwards with routine activity. Problems and Best Practices

AT&T uses a total quality approach to guide the management of all parts of its business and because they believe that quality happens through people, they work to create an environment that encourages everyone to give their best.

AT&T in India is a strategic market for AT&T because of the country's size and future growth potential. India currently ranks in AT&T's top 20 bilateral streams - by the year 2005, it will be among the company's top 10.

"We could see that as we went on, not only did we need to lower our unit expense, but also we had to find better ways to train our people and deliver service to our customers.1" AT&T decided that KM was the strategy for capturing and disseminating information about how people did their jobs and, in the process, for accelerating employee training and improving customer service.

The first target was the call center for customer service. "We started to analyze what employees were really doing. We chose high-performers, captured the way they did their jobs, and created templates of those processes." As a result of this effort, by the end of 1995, AT&T launched a web-based KM program to make information and services available to 4'000 employees. Today, through the intranets inside AT&T, every employee has access to the websites and KM tools. The savings in manpower, training and time has amounted to hundreds of millions of dollars, according to Scites AT&T is also saving by being able to use an intranet and the same tools to assimilate, educate and serve the new employees2.

1 http://www.cio.com/archive/enterprise/091599_ic_content.htm 2 op.cit

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At AT&T, most specific groups such as R&D, customer care and consumer products, have their own websites in the manner of communities of practice. Each website has a feedback capability and a mechanism for responding to suggestions or queries. There are chat rooms for exchanging ideas and posing problems, inter-conferencing for global virtual meetings over the internet, and collaborative websites for projects, containing virtual file cabinets about the project and the information about team members.

IKE, the Information and Knowledge Exchange, which is AT&T’s Global Services' sales support intranet, bridges the gap between the headquarters staff and global sales associates. With new competitors, technology changes, and market share erosion, AT&T's leadership team realized the need for a new business direction. This need for a direction was becoming more obvious with technology changes and the globalization of the world's telecommunications markets. AT&T also needed to ensure that a uniform message was being delivered to all associates effectively in the rapidly changing business environment and that key knowledge in all areas was studied effectively throughout the corporation.

If AT&T were to remain a global market leader, it needed to arm its sales force with all the information they need quickly and efficiently, especially as the trend shifted towards new products, such as wireless services, convergent technologies and new global markets.

Knowledge Management and Organizational Learning quickly became the buzzwords throughout AT&T. Executive support and intervention led to the creation of IKE; the Information and Knowledge Exchange sales support intranet. Today, IKE handles 14000 regular users throughout the company. It provides the sales team and staff with up-to-date information regarding product, customer, and industry news. IKE is one of the five largest sales support intranet sites in the world.

The AT&T traditional training methods were insufficient. Sales-person feedback questionnaires indicated the need for specialty courses surrounding each new product and service line. Global sales associates are geographically dispersed throughout the world and additionally, many of the AT&T product and service subject matter experts were centrally located at the firm's HQ in New Jersey. AT&T

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realized that it needs to capture the expertise that existed and leverage it for shared learning.

IKE was initially rolled out in 1997. The effort of identifying all the required data sources to be added to IKE was led by the Global services marketing team. The Global Services Marketing was exploring new territory. They learned about technology enhancements and knew the sales teams were beginning to use the internet and intranet back in 1997.

The first phase of the KM initiative was the Knowledge Community Symposia, to lay the foundations of 'communities' surrounding the sales expertise. In order to lay the foundation of a culture of knowledge sharing, AT&T aimed to invoke a feeling of the 'knowledge community', and drive the sales transformation. After this first step, sales associates now knew the leadership team, as well as the communication channel into headquarters.

Today, a Client Relationship Manager heads up each knowledge community. Each knowledge community has an area of expertise and is linked to other knowledge communities of similar sales titles. IKE implemented Q&A Boards for each knowledge community that was monitored regularly. The CRM's duty was to make sure that all questions were answered within a 24-hour timeframe. The Knowledge Community leaders know that their job is to support the members of their knowledge community.

In 1997 and 1998, the 'sense' of communities grew stronger, and the need for marketing to be the driving force behind the KM and OL initiative subsided. The actions designed to help AT&T attains the goals in their business plan were the following: a framework was developed to facilitate a functioning community, so that all community members could completely understand the sales processes. Linkages could thus be established to reinforce the communication channels.

Content management is to this day one of the most critical aspects. The primary criterion for IKE was that the information had to be accurate. If information were inaccurate or outdated, the user would be discouraged from returning to the site. A fast download time is essential. The IKE team formed templates and style guidelines for web sites to ensure that the marketing team followed the guidelines, so that the sales teams enjoyed faster access to sites. The site had to be intuitive and

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easy to navigate. The design scheme for IKS had a similar template for each community. Finally, implementing IKE had to be a cost-effective measure.

Executive engagement was critical to the success of IKE and the transition to knowledge management. The knowledge community (KC) facilitator role was another critical element, as the 'glue' that holds the community together. Obtaining feedback for improvement is also a must.

Managing content and ensuring accuracy of content is the single, most important factor in IKE. With newer technology available today, and with many businesses shifting to portal technology to manage communication, meta-tagging content, the assigning of properties to a document, is another important factor. This in concordance with the shift in IT strategy to portal technology.

The marketing team expected process improvements by moving to IKE and knowledge communities. Surveyed sales executives have reported a 30% increase in

productivity1. Sales associates claim that proposal development time has been cut by 50% as a result of having template proposals that can be then customized.

IKE has created demand and expectation to receive information much faster and with context. Global Sales Associates share valuable information, including learning and best practices, virtually around the country. On monthly Community calls, KC facilitators will showcase these best practices. Incentives for knowledge sharing include sales recognition programs, such as the "Rising Stars" and other programs.

C.6.5.5 Sprint RPG

KM used to be a delegated function within the RPG group but now it is a group initiative headed by the CIO of the RPG group. Sprint RPG makes use of the readily availability of IT and business management skills available in India. In addition to this they have gained technical and industrial experience from Sprint (Global One).

According to Sprint RPG Managers2: "Sprint could have exported the hardware, licensed the software, and made a service or maintenance agreement. But which Indian company could have successfully launched an e-mail business in 1994? You

1 AT&T KM survey, article with Microsoft. 2 http://www.cbi.gsia.cmu.edu/newweb/workingpapers/brewer

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have to know how to manage the business. Could an Indian company have paid the start up costs and sustained early losses? It takes deep pockets […] back in 1994 we saw liberalization of Indian government policies ahead, a big market in the future. Several lines of products and services we could add year by year, and a chance to become a turnkey telecom provider for business customers in India. To so this we have to operate in India and make an investment. The "whole business" concept was our rationale. For a small investment of 5 Million US$ we find a partner, make a business plan, and open an office. We lose a few million dollars for a few years, but we have our flag on the map"

Sprint transferred technology to its Indian joint venture in the form of software for running the e-mail service. Initially, Sprint did not transfer the source code that is required to understand how the software works. Later some of the source code was transferred to enable local engineers to adapt the software to the needs of Indian customers. The software, however, was not state of the art as in the HQ.

Sprint is closing the use of the software in the U.S. and therefore will stop maintenance support of it. This change raises questions about how the software can be supported and maintained in India in the future. Knowledge Flow within the IJV Network

Sprint RPG managers reinforced this point1: "The risk of loss of proprietary technology when employees leave is less than imagined because it is unlikely that one employee can possess enough overall knowledge to become a competitive threat outside the company. Sprint RPG possesses organizational knowledge - the combination of high-end tandem hardware, proprietary software, and the know-how to set up the system and run the business - that is difficult to replicate".

A Global One manager said: "Ten years ago, Sprint would not have transferred this source code, when the software was new. There is a technology time lag from the West to India". However, a Sprint RPG manager had a different view: "Since we aren't allowed by the government of India to be an internet service provider, we have no use for Sprint's latest technology. That's why it is not transferred."

1 op.cit

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For manufacturing group companies the transfer of technology agreements are specified in contractual agreement and embedded in the manufacturing processes. For their service group companies and IJVs, such as Sprint RPG, transfer of knowledge comes in the form of the skill sets of employees, benchmarking, operational and organizational levers and industry experience. The knowledge integration program of RPG has the following characteristics: • 5-6 formal sessions per year where specific KM agenda is set. At these forums

best practices are shared and external benchmarks set. • 35 CEOs and management committee members participate in the knowledge

integration forums. Within each group company internal knowledge integration coordinators are responsible for raising awareness on key issues and keeping abreast of the knowledge initiatives in the other group companies.

• In addition to these external experts, consultants and IT experts are brought in to implement knowledge integration initiatives and training.

The IJV has access to the RPG Intranet, which among other things showcases best practices within the RPG group. RPG Intranet is being built up at the moment to accommodate all employees in RPG enterprises. The knowledge integration coordinators are viewed as knowledge champions whose mission is to build up trust and acceptance of core knowledge initiatives.

C.6.5.6 Ogilvy & Mather

From O&M worldwide O&M India receives global expertise and technology e.g., various interactive technologies. O&M (US) is the largest media buyer in the USA. Knowledge Flow within the IJV Network

Most of the input comes from the Asia Pacific Region. There is a codified database Sunflowers to which O&M India has access to the best practice database on the company Intranet, which consists of case studies. Every year there is an AP regional meeting where the 200 senior employees in the whole of Asia attend. Here best practices are discussed in work sessions and dissemination of knowledge takes place. The US managers attend development projects and seminars. There is a definitive thrust at O&M to codify knowledge due to high staff turnover and increasing communication needs.

Within O&M the thought processes can be speeded up through intuitiveness i.e., tacit knowledge of longer term O&M employees and experts. But in the case of

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newer employee’s the thrust to externalize this tacit knowledge through codified databases has not yet reached the desired implementation in India i.e., the employees are not using it enough. Knowledge sharing in O&M India is still linked to the individual, the new knowledge management strategy is looking for individuals who can become „ circles of influence“ and building them through mentorship and coaching1.

Each office is assigned a database head who is a knowledge based individual, identified as „knowledge friendly“ and looking for material, references etc., on his own and at the directive of the department head who has been integrating the database / Intranet and its influence on creativity into the organizational culture within O&M. Local employees suffer from the „not invented here“ syndrome and referring to an analogous case studies and best practice must be incorporated into their minds.

O&M worldwide has an Intranet to which all global affiliates and IJV have full access. The codification of knowledge for shorter jobs in order to quicken the process of client advertising is practiced. The new ideas presented in the organizational meetings are also available throughout the network. „Knowledge from elsewhere can stretch one's own creativity“.

The importance of a personal network that cannot be codified and personal connections „ knowing who“ is rated very high in O&M India, in adaptation to the local business environment and needs. The pace of implementation of the KM tools is much slower in India due to lack of infrastructure, even though many of the tools were created there.

O&M Indian managers confer with O&M US and AP managers on a need basis but there is a lot of knowledge sharing and expertise transfer in the O&M worldwide network. The idea of OC as a specific consulting division was born in India at a „ special world wide consulting summit“. O&M worldwide are considering whether this consulting unit can be incorporated on a worldwide basis. Knowledge sharing takes place in these collective meetings and extensively through personal

1 e.g., Mattel was introduced in India (hotwheels). Past case studies of market entry worldwide were

readily available in the sunflower database but creative group made first proposal without referring to the best practices and knowledge resources of O&M and had to return to the drawing board.

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networking such as „ friends“ that can be referred to. As far as client access is concerned Indian clients prefer personal treatment to formal solutions.

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7

IJV

H

ow

the

IJV

is

in

tegr

ated

w

ithin

th

e te

chno

logy

stra

tegi

es o

f the

par

ents

? W

hat

KM

tec

hnol

ogy

tool

s ar

e in

pla

ce i

n th

e IJ

V fr

amew

ork?

H

ow i

s th

e in

form

atio

n flo

w b

etw

een

the

IJV

and

the

pare

nt c

ompa

ny se

tup?

W

hat

dom

inan

t ex

tern

al

fact

ors

affe

ct

tech

nolo

gy

man

agem

ent

with

in

the

IJV

fr

amew

ork?

DSP

Mer

rill

Lyn

ch

• Th

e IJ

V is

fully

inte

grat

ed w

ithin

the

Tech

nolo

gy e

nviro

nmen

t of M

L w

orld

wid

e at

the

mos

t cur

rent

leve

l. (S

imul

tane

ous w

orld

wid

e im

plem

enta

tion)

• D

SP fo

rmer

ly h

ad n

o te

chno

logy

st

rate

gy

• G

loba

l Res

earc

h D

atab

ase

• M

L In

trane

t with

IJV

hom

e si

te

• B

est P

ract

ice

Dat

abas

e

• C

ompu

ter B

ased

Tra

inin

g m

odul

es

• R

epor

ting

stru

ctur

e M

S A

P H

Q

• B

oard

mee

tings

• R

egio

nal c

onfe

renc

es

JM M

orga

n St

anle

y

• Th

e IJ

V h

as re

stric

ted

acce

ss to

the

MS

tech

nolo

gy e

nviro

nmen

t (I

ntra

net)

thro

ugh

MS

AP

HQ

in

Hon

g K

ong.

• JM

Fin

anci

als f

orm

erly

had

no

tech

nolo

gy st

rate

gy.

• G

loba

l Res

earc

h da

taba

se (r

estri

cted

)

• M

L In

tern

et (r

estri

cted

)

• Pr

oduc

t and

mar

ket i

nfor

mat

ion

is

rele

gate

d th

roug

h th

e A

sia

Paci

fic

HQ

. Thi

s is d

ue to

the

uniq

ue IJ

V

stat

us o

f JM

MS.

• R

epor

ting

stru

ctur

e M

S A

P H

Q

• A

cces

s to

tech

nolo

gy e

nviro

nmen

t is

rest

ricte

d du

e to

the

IJV

stat

us.

• In

form

atio

n flo

ws a

re h

ampe

red

by

diff

eren

ce in

stat

us o

f sub

sidi

ary

and

IJV

Max

New

Y

ork

Life

• Th

e IJ

V h

as p

artia

l acc

ess t

o th

e N

YL

Intra

net a

nd fu

ll ac

cess

to a

ll pr

oduc

t-spe

cific

com

pute

r-ba

sed

train

ing.

• Th

e IJ

V h

as fu

ll ac

cess

to th

e M

AX

In

dia

Intra

net a

nd b

est p

ract

ice

data

base

s, as

wel

l as e

lect

roni

c fo

rum

s and

whi

tebo

ards

.

• N

YL

Intra

net w

ith IJ

V h

ome

site

• M

ax In

trane

t with

link

• C

ompu

ter B

ased

Tra

inin

g m

odul

es

(NY

L)

• B

est P

ract

ice

data

base

• El

ectro

nic

foru

m

• W

hite

boar

ds

• B

oard

mee

tings

• M

ax In

dia

best

pra

ctic

e co

nfer

ence

s

• R

epor

ting

stru

ctur

e to

NY

L U

.S>

pare

nt

• Te

chno

logy

env

ironm

ent i

n th

e pr

oces

s of

bei

ng se

t up.

• Im

plem

enta

tion

of n

ewes

t tec

hnol

ogy

in

the

IJV

• B

ut la

ckin

g ba

ndw

idth

to e

nsur

e fu

ll co

nnec

tivity

.

Bir

la A

T&

T

• Th

e IJ

V h

as a

cces

s the

AT&

T te

chno

logy

env

ironm

ent t

hrou

gh th

e U

.S. k

now

ledg

e lia

ison

off

ice

(mos

tly re

stric

tions

for i

n-de

pth

prod

uct s

peci

fics)

• A

T&T

Intra

net (

as a

pplic

able

)

• C

ompu

ter B

ased

Tra

inin

g m

odul

es

(AT&

T)

• Pr

oduc

t and

firm

-spe

cific

in

form

atio

n ca

n ac

cess

ed th

roug

h th

e K

now

ledg

e lia

ison

off

ice

• M

arke

ting

info

rmat

ion

flow

s fro

m

• La

ckin

g ba

ndw

idth

to e

nsur

e fu

ll co

nnec

tivity

• R

estri

cted

acc

ess t

hrou

gh k

now

ledg

e lia

ison

off

ice

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8

• Th

e IJ

V h

as fu

ll ac

cess

to th

e B

irla

Gro

up In

trane

t

• B

est P

ract

ice

data

base

• G

loba

l Cas

e st

udy

data

base

• El

ectro

nic

foru

m

• Q

ualit

y co

ntro

l dat

abas

e

AT&

T di

rect

ly to

the

IJV

AT&

T B

rand

man

ager

.

• B

oard

mee

tings

• D

ual r

epor

ting

stru

ctur

e (A

P H

Q A

T&T/

RPG

)

Spri

nt R

PG

• Li

mite

d ac

cess

to S

prin

t Int

rane

t

• R

PG is

still

in th

e bu

ildin

g ph

ase

of

its te

chno

logy

env

ironm

ent

• Sp

rint I

ntra

net (

rest

ricte

d)

• Te

chno

logy

info

rmat

ion

thou

gh o

n si

te in

stal

latio

n by

Spr

int e

ngin

eers

• R

PG b

est p

ract

ice

conf

eren

ces

Ogi

lvy

&

Mat

her

• Fu

ll ac

cess

to th

e O

&M

wor

ldw

ide

tech

nolo

gy e

nviro

nmen

t

• O

&M

Indi

a ha

s als

o pl

ayed

a a

ctiv

e ro

le in

the

intro

duct

ion

of n

ew

wor

ldw

ide

know

ledg

e to

ols a

nd

func

tions

(pio

neer

)

• SG

Ben

son

had

no te

chno

logy

st

rate

gy p

revi

ousl

y

• Fu

ll ac

cess

to O

&M

net

cam

e on

ly

afte

r per

cent

age

of o

wne

rshi

p of

O

&M

was

rais

ed.

• O

&M

Intra

net

• B

est P

ract

ice

data

base

• C

ase

stud

y da

taba

se

• El

ectro

nic

proj

ect f

orum

• C

lient

dat

abas

e

• Te

chno

logy

flow

s thr

ough

loca

l, re

gion

al a

nd g

loba

l mee

tings

and

in

tera

ctio

n.

• In

form

atio

n is

read

ily a

cces

sibl

e to

al

l on

the

glob

al O

&M

tech

nolo

gy

envi

ronm

ent

Fig

ure

C.3

5 K

now

ledg

e M

anag

emen

t – T

echn

olog

y M

anag

emen

t in

IJV

s

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309

C.7 Comparison of the Case Studies with respect to Key Research Questions

Information gathered and outlined in the previous sections on the individual IJVs constituted the basis for the cross comparison of the cases with respect to the key research questions. The following table outlines a brief perception of how the cases compared or differed in providing answers to the key research questions posed.

The case studies were analyzed for the evidence of the presence or absence of an integrated knowledge management approach in the IJV. The salient points were then compared with regard to the research questions posed at the beginning of the study.

Indo-U.S. IJV

Integrated KM Strategy

DSP Merrill Lynch

Yes

JM Morgan Stanley

No

Max New York Life

Partially Yes (early stages)

Birla AT&T

Yes

Sprint RPG

No

Ogilvy & Mather

Yes

Figure C 36. Integrated KM Strategies in Case Studies Indo-U.S. IJVs

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31

0

IJV

PR

Q1

Wha

t ar

e th

e st

rate

gic

and

orga

niza

tiona

l pr

oces

ses

that

co

nstit

ute

KM

w

ithin

th

e fr

amew

ork

of th

e IJ

V?

PRQ

2a

Wha

t are

the

dom

inan

t int

erna

l and

ex

tern

al

fact

ors

in

the

IJV

en

viro

nmen

t?

PRQ

2b

Wha

t ar

e th

e m

ain

barr

iers

to

effe

ctiv

e K

M

and

inhe

rent

w

eakn

esse

s w

ithin

th

ese

proc

esse

s?

PRQ

3

Doe

s an

in

tegr

ated

K

M

stra

tegy

w

ithin

the

IJV

faci

litat

e ef

fect

ive

KM

an

d ho

w c

an i

t be

dev

elop

ed a

nd

impl

emen

ted

with

in

the

IJV

fr

amew

ork?

DSP

Mer

rill

Lyn

ch

Focu

s on

peop

le

Man

agem

ent s

truct

ure

3 ye

ar st

rate

gic

plan

with

US

pare

nt

Proc

esse

s for

com

plet

e in

tegr

atio

n pu

t int

o pl

ace

at th

e be

ginn

ing

US

pare

nt’s

inst

itutio

naliz

ed H

R

guid

elin

es, a

dapt

ed to

loca

l ci

rcum

stan

ces

Tech

nolo

gy in

tegr

atio

n co

mm

ittee

– in

tegr

atio

n of

D

SP k

now

ledg

e w

ith M

L kn

owle

dge

infr

astru

ctur

e

Inac

cess

ible

Indi

an fi

nanc

ial m

arke

t

DSP

’s In

dian

Cul

ture

and

kn

owle

dge

of In

dian

fina

ncia

l en

viro

nmen

t

Wea

k Te

chno

logy

KM

of D

SP

HR

– In

dian

circ

umst

ance

s

Bus

ines

s bef

ore

know

ledg

e tra

nsfe

r and

cre

atio

n

Impr

ovin

g pr

oces

ses

Cre

atin

g ne

w w

ays o

f wor

king

Con

tinuo

us in

nova

tion

Aw

aren

ess o

f com

petit

ive

surr

ound

ing

and

full

inte

grat

ion

into

ML

glob

al k

now

ledg

e ne

twor

k

KM

is a

dapt

ed w

ithin

the

stra

tegi

c pl

anni

ng o

f DSP

ML

Hig

h le

vel o

f kno

wle

dge

trans

fer

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31

1

JM

Mor

gan

Stan

ley

Exec

utiv

e co

mm

ittee

fo

r op

erat

iona

l an

d st

rate

gic

deci

sion

s

No

clea

r de

finiti

on o

f st

rate

gic

plan

ning

Lim

ited

acce

ss

to

MS

glob

al

know

ledg

e ne

twor

k

Cor

pora

te c

ultu

re in

IJV

Bus

ines

s ex

perti

se o

f M

S an

d lo

cal

know

-how

of

th

e JM

Fi

nanc

ials

KM

stre

ngth

of M

S

Lack

of a

llian

ce e

xper

ienc

e in

MS

Diff

eren

ces

in U

S pa

rent

and

IJ

V

acce

ss

to

com

mun

icat

ion

flow

Focu

s on

busi

ness

bef

ore

KM

Issu

e of

KM

nev

er a

ddre

ssed

du

ring

the

form

atio

n of

IJV

Com

plia

nce

and

finan

cial

cr

edib

ility

gi

ven

mor

e im

porta

nce

• Tr

ansf

orm

atio

n of

IJ

V

cultu

re is

diff

icul

t

• D

iffic

ulty

of

inte

grat

ion

of

the

IJV

in

to

corp

orat

e ne

twor

k

• N

o ev

iden

ce

of

an

inte

grat

ed

appr

oach

to K

M

Max

N

ew

Yor

k L

ife

• M

ax’s

vi

sion

to

ex

cel

in

peop

le

orie

nted

, kn

owle

dge

base

d se

rvic

e bu

sine

ss

• N

YL’

s st

reng

th i

n bu

sine

ss

mod

els

ands

in

dust

ry

expe

rtise

• N

eed

for

a st

rong

“l

ocal

” se

rvic

e in

in

sura

nce

rela

ted

busi

ness

• N

YLs

for

ay i

nto

a pr

omis

ing

emer

ging

mar

ket

• In

trodu

ctio

n of

ID

RA

bi

ll –

faci

litat

ion

of m

arke

t ent

ry

• To

o ea

rly

to

know

th

e ou

tcom

es

• V

ery

new

bu

sine

ss

segm

ent,

hith

erto

und

er –

expo

sed

in In

dia

• K

M r

efer

s to

und

erst

andi

ng a

nd

enha

ncin

g in

form

atio

n flo

w a

nd

deci

sion

m

akin

g in

th

e or

gani

zatio

n w

ithin

the

NY

L gl

obal

net

wor

k

• IJ

V

guid

elin

es

follo

w

abov

e pr

oces

s

• To

o ea

rly

to

perc

eive

an

in

tegr

ated

app

roac

h to

KM

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2

Bir

la A

T&

T

• Th

e st

reng

th

of

the

IJV

pa

rtner

s

• O

peni

ng

of

a br

and

new

se

rvic

e se

ctor

(tel

ecom

)

• Te

chni

cal e

xper

tise

of A

T&T

• Lo

cal

cons

umer

and

mar

ket

know

ledg

e of

Birl

a

• Po

tent

ial o

f tel

ecom

ser

vice

s in

In

dia

• Pr

otec

tion

of

bran

d na

me

AT&

T

• A

bsol

ute

focu

s on

qual

ity -

IJV

• cu

ltura

l spl

it in

the

IJV

• M

anag

emen

t m

odel

s fr

om

AT&

T bu

t IJ

V p

rinci

ples

ar

e lo

cal

• B

irla

is n

ot y

et a

t pa

r w

ith

AT&

T K

M

• La

ck

of

trans

pare

ncy

betw

een

partn

ers

• N

o 36

0º e

valu

atio

n in

IJV

• Pr

oble

ms

in tr

ansf

er o

f bes

t pr

actic

es

• La

ck

of

band

wid

th

i.e.,

tech

nolo

gica

l inf

rast

ruct

ure

• Ev

iden

ce

of

inte

grat

ed

KM

st

rate

gy e

xist

s in

the

ory

but

not

in p

ract

ice

• Im

prov

ing

due

to IK

E co

ncep

t of

AT&

T

Spri

nt R

PG

• Th

e st

reng

th

of

the

IJV

pa

rtner

s

• En

try

into

a

fast

gr

owin

g se

rvic

e se

ctor

(tel

ecom

)

• Te

chni

cal

expe

rtise

of

Sprin

t G

loba

l One

• Lo

cal

field

an

d m

arke

t kn

owle

dge

of R

PG

• A

ver

y fa

st g

row

ing

tele

com

se

ctor

in In

dia

• Fo

cus o

n ne

w te

chno

logy

• Pr

otec

tion

of b

rand

nam

es o

f pa

rent

s

• Fo

cus

on

trans

fer

of

tech

nolo

gy

• St

rong

ly

“loc

al”

man

agem

ent p

rinci

ples

• Ev

er c

hang

ing

moo

d of

the

indu

stry

(s

ever

al

mer

gers

an

d de

mer

gers

)

• Fo

cus

on

trust

be

twee

n pa

rtner

s

• D

iffer

ent g

oals

bet

wee

n th

e pa

rtner

s

• So

me

evid

ence

of i

nteg

rate

d K

M

stra

tegy

• Th

e te

chno

logy

tran

sfer

from

US

pare

nt t

o th

e IJ

V i

s ba

sed

on

“man

age

your

ow

n bu

sine

ss”

mod

el

• St

reng

th

of

loca

l K

M

mod

els

from

RPG

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3

• Lo

cal H

R g

uide

lines

• Tr

ansf

er

of

outd

ated

te

chno

logy

Ogi

lvy

&

Mat

her

• O

ppor

tuni

stic

• Fo

otho

ld o

f a

glob

al b

rand

m

anag

emen

t pa

rtner

int

o an

em

ergi

ng m

arke

t

• St

reng

th o

f the

US

pare

nt

• B

rand

m

anag

emen

t an

d pr

otec

tion

of n

ame

O&

M

• Fo

cus o

n “l

ocal

” bu

sine

ss

• IJ

V is

mor

e “l

ocal

” or

ient

ed

• B

usin

ess

mod

els

base

d on

pa

rent

but

man

aged

loca

lly

• A

bsol

ute

stre

ngth

of

K

M

proc

esse

s of t

he U

S pa

rent

• A

cces

s an

d ac

tive

parti

cipa

tion

in O

&M

glo

bal K

M n

etw

ork

• In

trodu

ctio

n of

kn

owle

dge

cham

pion

s

Fig

ure

C.3

7 C

ompa

riso

n of

cas

e st

udie

s for

the

evid

ence

of t

he p

rese

nce

or a

bsen

ce o

f

inte

grat

ed k

now

ledg

e m

anag

emen

t str

ateg

y

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C.8 Salient Points from Other Interviews (vide Annex)

In addition to the above structured case studies the key outcome of all the interviews conducted with the companies listed in Annex E.5 are described below:

• Although the need for effective and integrated KM has been widely recognized, both by parent companies and the IJV itself, at the present time integration of all aspects of the KMS is not common place.

• Many of the firms in the study are, however, making first steps in this direction. This is implied by the definite shift of the source of KM away from operative functions, such as IT, towards an understanding of strategic needs for KM.

• KM initiatives, while often focussed on technological tools, tend to be more people oriented in IJVs than in other forms of organizations. Reasons stated include the higher level of tacit knowledge in IJVs and the more complex demands of interface management.

• The importance of cross-cultural management (CCM) is evident, in theory, to most firms in the study. However, few firms actually have put this into practice. Furthermore the implications of effective CCM on knowledge transfer and learning within the IJV network do not seem to be clearly defined.

• The complexity of implementing global KM tools becomes clear within the framework of the IJV. Infrastructure gaps between the parent companies, technical incompatibilities of the systems and differing technological mindsets of the employees are important factors when assessing the impact of global KM tools.

• The importance on informal channels for knowledge acquisition, transfer and creation were underlined by a large portion of the researched companies. A complex business environment, tacit knowledge and the lack of transparency of knowledge structures within the IJV network have led to this dependence on informal knowledge channels, such as a personal network.

• US parent firms tend not to view learning from their Indian partner as a primary goal for entering into an IJV. The knowledge flow from the parent to the IJV, which is usually fully integrated in the US parent's knowledge network, is often

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considered to be one way, with firm-specific knowledge being transferred to the IJV. Processes to filter back any knowledge created within the IJV were rarely institutionalized.

• Indian parent firms, more often, tend to think of the IJV as a mode for acquiring knowledge from the parent company. This knowledge did not mainly consist of firm specific or product knowledge, but often was in regard to expertise, management skills and strategic and operative processes as well as professionalism.

• The Asia Pacific HQ of the U.S. firm was, in almost all cases, responsible for the operative directives for the Indo-U.S. IJV, which fell under its jurisdiction. Often the IJV was subject to dual reporting structures. The Asia Pacific HQ added to the bureaucracy of the knowledge structures within the IJV framework. This demonstrated the problem in separating the strategic and operative aspects of KM, when a 'top down' approach to KM was not taken. The APHQ proved supporting of knowledge structures as far as informal relationships and geographic proximity was concerned, but did not intensify passed on knowledge from the parent firm.

A cross comparison of the case studies suggests that no unified conclusions can be drawn for an integrated approach to KM strategy in Indo-U.S IJVs. A summary of the research findings is presented in the following chapter.

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D Conclusion This section presents the conclusion of the study, which outlines the contributions of this dissertation to existing research from a theoretical and empirical perspective. A cost/benefit analysis of an integrated Knowledge Management Strategy will be presented, combined with a critical reflection of the barriers to effective knowledge management. In a final step, the potential for further research in the relatively unexplored field of knowledge management in IJVs will be determined.

D.1 Key Findings

In the conceptual framework the primary research questions were defined. These were the analysis of the direct and indirect knowledge flows between the critical actors were identified, the environmental analysis of the IJV framework and the subsequent determination of the dominant internal and external factors affecting the KM processes. In the final stage, the measures and steps towards an integrated KM strategy within the IJV framework and its influence on effective knowledge management were outlined.

In a structured manner inter-organizational relationships between the different actors and examination of the flow of knowledge between the parent companies and the IJV was analyzed where the IJV framework and environment of the Indo-U.S. IJV framework was defined.

Based on the conceptual framework outlined in Section A, the core knowledge management processes within the IJV framework were defined as: • Strategic Planning (SM): Developing a global knowledge strategy • Alliance Management (AM): Inter-organizational knowledge transfer • International Human Resource Management (IHRM): Managing knowledge

workers in the IJV • Technology Management (TM): Implementing global knowledge management

tools within the IJV framework

As a first step, the author examined the knowledge management activities and approach within the IJV framework. Based on this preliminary analysis, the core knowledge management processes were crystallized. The existing theoretical literature on knowledge management (KM) in International Joint Ventures (IJVs) is presented in detail. The aim here is to provide a foundation against which the empirical findings that are presented in section C could be examined. An assessment

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of the theoretical considerations for the core knowledge management process and the status of knowledge management in the knowledge-based Indo-US JVs completed the research.

In line with the focus of the thesis the IJVs in the case studies with Indo-US JV firms focussing on professional service sectors (IT, advertising, telecommunication, insurance, banking and financial services), following standard methodology, formed the basis of the analysis of the KM processes within the Indo-US JVs. Whilst this provided valuable and rich information on various aspects of knowledge management in information-based Indo-US IJV's and gave ground for theory building it was appropriate to focus on selected case studies to give a realistic picture of core KM processes in Indo-US JVs.

At the end of each subsection, each of which focussed on a specific core knowledge management process, the relevant empirical findings were presented. Finally, the case studies were analyzed for the evidence of the presence or absence of an integrated knowledge management approach in the IJV. The salient points were then compared with regard to the research questions posed at the beginning of the study. In three cases there was a clear evidence of an integrated KM strategy, in one case a partial approach was detected and two cases there was absolutely no evidence of an integrated KM strategy. This was examined in detail as a cross comparison of the Indo-U.S. IJVs on an evidence for an integrated KM strategy was assessed based on answers to the primary research questions posed at the beginning of this study.

The case studies in Part C illustrated how information-based IJVs and their parent firms deal with KM and knowledge channels within the IJV framework. The IJV case studies represent joint ventures with a diverse mix of factors. These included industry leadership and sector knowledge, business models, technology infrastructure and approach, and the differences between the HR practices of the US parent and the Indian partner. These include the strength of the latter in terms of profound “local” market and customer knowledge, and HR practices that are tailored to local environment and culture and effective networking in the local business environment. Despite all these factors there is a clear necessity and intent on the side of both the parent companies, driven by mutual interest in a successful venture.

While the study showed that knowledge-based IJVs in a complex business environment realized the need to manage effectively the knowledge within and between the organizations for maximum benefit, and that most IJVs had knowledge

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activities in place, few organizations took an integrated approach to KM. The lack of an integrated approach starting with the strategic planning of the IJV, the day-to-day management of the knowledge within the alliance, HR policies and TM led to a haphazard collection of KM initiatives, inconclusive knowledge structures, incompatible tools, and failed implementation. When management support was not there, attempts were bound to falter.

This is evident from a cross comparison of the case studies with respect to KM practices. Though the findings from the research questions raised at the outset suggest that there is no universal approach to KM within the case studies.

The chasm between KM in theory and practice led to the development of a conceptual framework for an integrated KM strategy. Within this framework all aspects of KM can be addressed for full complementarity and with a structured approach, problems can be anticipated and barriers overcome.

Even if this is a qualitative study, and quantifiable measures for integrated knowledge management are only discussed en passant, the study does aim to stress that taking an integrated approach to KM in the IJV will lead to a higher knowledge transfer and creation within the IJV framework. This in turn will lead to cost savings by minimizing friction, knowledge wastage, conflicts, misunderstanding and lack of trust between the partners thereby influencing the overall performance and perceived success of the IJV.

In addition to the key findings from the case studies there were important findings from the number of interviews conducted with other companies, as well as with experts, both from academic and the practical field, as outlined in the annex. These experts included professors and consultants as well as managers from transnational operating within the Indian business environment. Typical of the nature of the Indian subcontinent KM initiatives were more people oriented stressing the major role of cross-cultural management. The importance of informal channels for knowledge acquisition, transfer and creation were underlined by many companies. Infrastructure gaps between the Indian and U.S. partners and the technical incompatibility of the systems, as well as the mindset of the people are key factors in deciding on major aspects for a suitable integrated knowledge management. A major aspect that emerged out of the research was that U.S. parents do not tend to view learning from their Indian partner as a primary goal for entering the IJV, while the Indian parents tend to think the IJV as a mode of acquiring knowledge from the parent company.

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D.2 Contributions to KM literature

The literature on KM in IJV's is sporadic at best and spread over the various aspects mentioned. The in-depth literature survey on the knowledge management in IJVs and the core knowledge management process in IJV in this thesis provides an extensive and resourceful review on the subject.

The literature on strategic processes in IJVs has been collated with research on KM in organizations to provide a current and complete overview of KM in IJVs. The state of research on organizational learning within and between organizations is described at length as the conceptual primer of knowledge management within organizations. Organizational learning is understood as a primary goal to be achieved with en effective knowledge management.

Research on strategic process and operative alliance management has been examined from a knowledge perspective, and the literature on human resource practices in IJVs has been examined in depth from theoretical and empirical perspectives in combination with more recent research on knowledge workers and learning within organizations. Finally the technological aspect of knowledge management within IJVs was presented.

D.2.1 Implications for further Research

The first and second order findings of this study provide preliminary insights into the knowledge structures in the IJV and the core knowledge management processes. Furthermore, the linkages between the processes and organizational interfaces are described. However, these aspects have to be elaborated individually and from a holistic perspective.

The mutual dependency of the KM processes should be placed on the research agenda. Here, the following research questions should be addressed. • What is the impact of KM processes and the linkages between them? • How can an integrated KM intensify the effectiveness of individual knowledge

initiatives?

The underlying barriers and enablers for the core KM processes have to be examined in further detail. Related questions are: • How can barriers and enablers be anticipated from the start of an IJV? • How can these be realistically dealt with?

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• What are other approaches to analyze the key KM processes and the factors that affect them?

Finally, a major challenge will lie on the measurement, not of knowledge assets per se, but of the successful knowledge flow within the IJV network in order to increase the controllability of the process.

Further research needs to be done on the crucial task of KM in IJVs, including the dependencies between IJV network and its environment-(s). The direct and indirect integration of cross-cultural issues into research on KM can pose a challenge for future research in this area. A structured analysis of knowledge and learning related values, as well as the more mundane reflection of the business environment and factors affecting it would certainly precede such a question.

D.2.2 Implications for IJV Management

The necessity for a well-defined approach to knowledge management was evident in all of the case studies examined. That this was often not implemented within the organizations gave rise to the attempt to create a concept for integrated knowledge management within the IJV framework.

The findings of this study can, to a certain degree, be generally relevant for management theory within the situation of an IJV. However, the complexity and interaction of the KM processes outlined in this study indicate that any sort of "how to" guide for KM in IJVs, as a panaceas for every situation is not likely to be of much help.

The key factor for management of all actors of the IJV is the understanding of the interconnections of all KM processes and structures and the realization of the need for an integrated approach to KM. The context specificity of KM could lead to the conclusion that each firm in an IJV has to concur with its partners and find its own way for attaining optimal effectiveness of the KM processes within the IJV framework.

Evident in the research is the fact that managers need to focus more attention on the organization(s) of KMS as a whole, and from there go on to analyze the individual KM processes. Launching initiatives is the last step in this chain of events.

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It is critical to examine and address barriers to effective KM openly and in a structured manner, if necessary with external assistance, after determining the core KM processes within.

The advent of the “information economy” at the beginning of the last decade, followed by immense growth of the “information-based” sectors, those industries that value knowledge and intellectual capital as their primary assets and source of wealth, substantiated the IJVs in these sectors. A focus on an integrated KM strategy also has consequences on the managerial tools developed and implemented in these organizations.

The first generation of knowledge management initiatives focussed on implementing technology tools aimed at capturing the knowledge within the firm and increasing the efficiency and speed at which knowledge is retrieved by those who seek it. The second generation already realized the need for managerial tools to create a knowledge friendly environment, and to instill a knowledge mindset in its employees. The term knowledge worker arose, and along with it the need to create an optimal working environment for them.

A plethora of people-centered initiatives were launched to enhance knowledge transfer and creation within the organization, and to encourage knowledge workers to do so. Organizations also found that providing people with the incentives to share knowledge and enabling them to work in an environment that encourages knowledge creation was a key driver for business performance. This approach also increased the effectiveness in the use of the knowledge management tools of the first generation, by increasing levels of education and acceptance at all levels of the organization.

The next generation of information-based IJVs and their parent firms must realize the need for an integrated approach to knowledge management at all levels of the IJV framework in order to guarantee the best conditions for a successful and prosperous partnership.

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E Annex

E.1 List of Abbreviations AAR After Action Reviews

AM Alliance Management

APHQ Asia Pacific Head Quarters

BS Business Strategy

BU Business Unit

CCM Cross Cultural Management

CCT Cross Cultural Training

CEO Corporate Executive Officer

CIO Corporate Information Officer

CKO Corporate Knowledge Officer

COO Corporate Operating Officer

CP Communities of Practice

DSPML DSP Merrill Lynch

HCW Host Country Workforce

HQ Head Quarters

HR Human Resource

HRM Human Resource Management

IBV Information Behavior and Values

IHRM International Human Resource Management

IJV International Joint Venture

IMP Information Management Practice

IO Information Orientation

IP Intellectual Property

IS Information Systems

ISF Information-based Service Firm

IT Information Technology

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ITP Information Technology Practice

JMMS JM Morgan Stanley

JV Joint Venture

KM Knowledge Management

KMS Knowledge Management Systems

KO Knowledge Officer

KMP Knowledge Management Process

NYL New York Life

MI Max India

MNYL Max New York Life

MIS Management Information Systems

MNC Multinational Corporation

ML Merrill Lynch

MS Morgan Stanley

OM Organizational Memory

O&M Ogilvy and Mather

OS Organizational Structure

PA Performance Appraisal

PR Public Relation

PRQ Primary Research Question

PS Professional Service

PSF Professional Service Firm

PSJV Professional Service Joint Venture

R&D Research and Development

SBU Strategic Business Unit

SM Strategic Management

SP Strategic Planning

TBP Transfer of Best Practices

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TM Technology Management

TQM Total Quality Management

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E.2 Annex on Govt. of India Policies and Rules1 Government Policy on Foreign Direct Investment

The role of foreign direct investment (FDI) was recognized in India in its Industrial Policy Resolutions of 1948 and 1956 but not in key industries, which were reserved for exclusive growth in the public sector till recently. The Foreign Exchange Regulation Act (FERA), 1973, put, barring certain exceptions, a ceiling of 40 percent on foreign equity participation in India. Multinational corporations, which did not want to dilute their stake, were asked to leave the country. FERA was a major deterrent to FDI in India till the New Industrial Policy) NIP) or 1991 (see Box 1 for major elements of government policy on FDI and MNCs. As seen from Box 1, the guidelines for foreign investment rules still vary depending on the area/sectors of investment shown in column 1.

Specific high technology and priority industries are now given automatic approval to conclude foreign technology agreements within certain guidelines. Permission is no longer necessary for the hiring of foreign technicians and the testing of locally developed technologies outside India. The newly created Foreign Investment Promotion Board (FIPB) negotiates with a number of large international firms to promote substantial investment, improved access to advanced technology and world markets. As discussed late, bulk of the investment in the 1991 liberalization era came through the FIPB route (Table 1). Eighty-two percent (US$ 4,608 million out of US$ 5,601 million) of direct investment or 22 % (US$ 4,608 million out of US$ 20,7042 million) of foreign investment flows during 1991-97 came through the FIPB. Over 50% of the portfolio are by FIIs.

Till 1991 FDI accounted for a marginal share in total foreign capital in India. Though the FDI approvals increased substantially during 1991-96 to a total of US$ 29,608 million, the actual inflows at US# 5,690 million accounted for only one-fifth of the approved amount (Table 2). There is huge gap between FDI approvals and actual flow of FDI during 1991-96. While public policy consistency was an issue in view of political instability, the major worrisome factor is the poor infrastructure.

1 Venkata Ratnam, C.S. (1998): The International Journal of Human Resource Management, 9 (4

August), 567-589 and Tables appended to represent latest available figures.

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Box 1: Extent of permissible foreign equity by NRIs/OCBs/PIOs/FIIs

Areas of investment NRIs/OCBs/PIOs FIs/FIIs 1. a) 35 priority industries

announced in July 1991 b) 9 high priority industries

in metallurgical and infrastructure sector announced in Dec. 1996

c) 13 priority industries announced in Dec. 1996

d) Export/trading/star trading house

2. 100% EOUs and units in

FTZ and EPZ, software and hardware technology parks

3. Sick industries 4. Mining 5. Telecommunication 6. Entertainment electronics 7. Power 8. Medical clinics, hospitals,

shipping, oil exploration, deep sea fishing, ind. with license

9. Industries reserved for SSI

10. Housing, real estate,

business centers, infrastructure facilities

11. Domestic air taxi

operations 12. Banking services

100% equity, repatriable, automatic approval by RBI 74% equity, repatriable, automatic approval by RBI 51% equity, repatriable, automatic approval by RBI Investment up to 100% 100% equity, automatic approval by SIA/DC (EPZ) 100% private placement prior approval by RBI 50% automatic approval by SIA/FIPB up to 49% with approval in basic, cellular mobile and paging, VSAT and other wireless services and up to 51% with approval in other value added services (not to be offset against the FDI in the investment company with Indian ownership) 51% equity automatic approval up to 100% with approval up to 100% equity, repatriable, prior approval by SIA up to 24% repatriable, prior approval by SIA, export obligations 100% equity on repatriation basis, automatic approval up to 100% with approval up to 40% with approval

51% equity, repatriable, automatic approval by RBI 74% equity, repatriable, automatic approval by RBI 51% equity, repatriable, automatic approval by RBI 51% equity, repatriable, automatic approval by SIA/DZ (EPZ) 100% equity, automatic approval by SIA/DC (EPZ) 50% automatic approval by SIA/FIPB up to 49% with approval in basic, cellular mobile and paging, VSAT and other wireless services and up to 51% with approval in other value added services (not to be offset against the FDI in the investment company with Indian ownership) 51% equity automatic approval 100% equity automatic approval up to 51% equity, case by case approval by SIA up to 24% repatriable, prior approval by SIA, export obligations No foreign investment is allowed except for company property P to 40% with approval Up to 20% with approval

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13. Non Banking Financial Companies

14. a ) Disinvested share of

PSEs b) Units in UTI c) Public sector mutual

funds d) Private sector mutual

funds 15. Portfolio investment

(investment in shares & debentures)

up to 51% with no conditions, up to 100% with conditions NRIs/OCBs are permitted to invest on these shares/units/funds on a repatriable basis through both primary and secondary markets Individual ceiling 1%, collective ceiling 5%, relaxable to 24% by General Body Resolution only in listed company stock share. Permitted to invest in unlisted companies

up to 51% with no conditions, up to 100% with conditions Only FIIs are permitted to invest in these shares/units/funds on a repatriable basis through both primary and secondary markets. FIIs are also allowed to invest on dated govt securities under certain conditions Only FIIs are permitted to invest subject to individual ceiling of 10% and collective ceiling of 24% in both listed and unlisted companies. 100% investment in debt securities of companies are registered FII debt funds are also allowed

Source: Economic Survey, 1996-7, Ministry of Finance, GOI, p. 112. NRIs = non resident indians PIOs = persons of indian origin; EOU = export oriented unit; OCBs = overseas corporate bodies; Fis - foreign investors; EPZ = export processing zone; FIIS = foreign institutional investors; SIA = sect for industrial approvals; FIZ = free trade zone; VSAT = very small aperture terminal; DC(EPZ) = development commissioner, export processing zone

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Table 1. Foreign investment flows by category1 (US$ million)

April-Nov

1992-3

1993-4

1994--5

1995-6

1996-7

1997-8

1998-9 Apr-Dec2

1998-9 Apr-Dec2

1999-002

A. Direct Investment a. RBI automatic

route b. SIA/FIPB

route c. NRIs (40%&

100%) d. Acquisition of

Shares $3 B. Portfolio

Investment a. FIIs4 b. Euro-equities5 c. Offshore

funds and others

Total (A+B)

315 42

222

51 -

244 1

240 3

559

586 89

280

217 -

3567 1665 1520 382

4153

1314 171

701

442

-

3824 1503 2082 239

5138

2144 169

1249

715

11

2748 2009 683 56

4892

2821 135

1922

639

125

3312 1926 1366 20

6133

3557 202

2754

241

360

1828 979 645 204

5385

2462 179

1821

62

400

-61 -390 270 59

2401

1610 109

1252

48

201

-722 -791 15 54

888

1330 120

867

48

295

1341 831 401 109

2671

Source: Reserve Bank of India, Economic Survey, 1999-2000, Prepared by Economic Division of Ministry of Finance, Govt. of India.

Notes 1. Figures shown in this table are based on actual inflows. 2. Provisional. 3. Relates to acquisition of shares by Indian companies by non-residents under Section 29 of

FERA 4. Represents fresh inflow/outflow of funds by FIIs. 5. Represents GDR amounts raised abroad by Indian Corporates

Over 50 % of the FDI approvals in the post-1991 period are in high-priority sectors where government even conceded guaranteed return on investment, allowed the option of 100% equity, joint ventures with state governments/public or private sector firms, etc.

The share of FDI inflows in India in the total FDI inflows to all developing countries has improved from 0.34 % in the 1991 to 1.76 % in 1995 (Table 3). This can be

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attributed to the foreign-investor-friendly policies of the NIP of the Government of India.

Gopinath1 classified the period from 1948 to date into four phases in terms of the foreign investment policy regime in India as following:

1. from independence to the emergence of internal economic crisis in the late 1960s (1948-66), which was marked by a cautious approach to foreign capital;

2. from 1967 till the second oil shock in 1979, characterized by a highly regulated regime;

3. from 1979 to 1990 with progressive attenuation of regulations, and ;

4. The reform period from 1991 onwards, signifying a liberal foreign investment environment.

Table 2. Direct foreign investment: actual inflows vs. approvals

1991 1992 1993 1994 1995 1996

1997 1998 Total (1991-98)

Approvals Rs. Crore US$ million Actual Inflows Rs. Crore US$ million Actual as % of approvals

739 325

351 155 477

5256 1781

675 233 13.1

11189 3559

1786 574 16.1

13590 4332

3009 958 22.1

37489 11245

6720 2100 19

39453 11142

8431 2383 21.4

57149 15752

12085 3330 21.1

28783 6975

9116 2230 32

193648 55111

42173 11963 21.7

Source: Reserve Bank of India, Economic Survey, 1999-2000, prepared by Economic Division of Ministry of Finance, Govt. of India

The approval and actual figures include NRI Direct Investment approved by RBI but exclude flows under acquisition of shares of Indian Companies by non-residents.

1 Gopinath, T. (1997): Foreign Investment in India: Policy Issues, Trends and Prospects. Reserve

Bank of India Occasional Papers, 8(2&3), 435-470.

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Table3. FDI inflows, by host region (US$ million)

Country 1992 1993 1994 1995 1996 1997 1998E

China India Indonesia Korea, Republic of Malaysia Philippines Thailand All developing countries (including China) Share of India in all Developing countries (%)

11156 233 1777 727 5183 228 2114 51108 0.4

27515

550 2004 588

5006 1238 1805

78813

0.7

33787 973 2109 809 4342 1591 1364

101196

1.0

35849 2114 4346 1776 4178 1478 2068

106223

2.0

40800 2426 6194 2325 5078 1517 2336

135343

1.8

44236 3351 4673 2844 5106 1222 3733

172533

1.9

45460 2258 -356 5143 3727 1713 6969

165936

1.4

Source: Taken from World Investment Report 1999, United Nations, in Economic Survey, 1996-2000 by the Economic Division of Ministry of Finance, Govt. of India. Figures for India in this table may differ from those in other tables because of the differences in coverage and source of information. E = Estimate

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E.3 Interview Formats

E.3.1 Parent Company Employees

General questions about the IJV • History • Ownership • Organization Structure ; Which organization structure does it resemble • Strategic Business Planning • Personnel structure – Are there any expatriates? • Role of the parent in the IJV • Interaction of JV employees with the parent company

Knowledge Management • Define the KM strategy in the parent firm • Define the technology strategy in the parent firm • How was KM implemented in the IJV • What was the importance placed on KM in the IJV? • What are the knowledge channels to the IJV? • How is the reporting structure to the IJV defined? • Does the parent company support knowledge transfer incentives? Knowledge Management in the parent firm • Does the firm know about the KM strategy of the partner firm? • Was this a factor in the IJV negotiations?

E.3.2 CEOs of the Indo-U.S. IJVs Knowledge Management in the IJV • Is there a liaison office? • How do you learn (and teach) in this company? • Have you learned enough from the parent companies? • Have they learned from you? • Whom does the JV top management consist of? • Are there any expatriates / consultants here? • Define initiated KM processes. How is knowledge stored and passed on? • Who has access to knowledge within the firm?

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KMP Processes • Is there Technology sharing? • Is there a JV parent interaction? • Is there personnel movement? • Is there a strategic integration? • Are there any strategic linkages between the JV and the parent? • How often do you meet / confer with the parent? • Describe the interaction / reporting channels with the parent firm (AP HQ) • How much of the knowledge is stored with the people and how much is left in

the company? • Value of knowledge

E.3.3 HR Heads of the Indo-U.S. IJVs Basic Questions • How many employees are in the IJV? • How many employees are employed in the parent company (A) and Parent

Company (B)? Reporting Channels • How is the reporting structure built up between the IJV and the parent

companies? • How often do the IJV Hr head and the Parent company head meet? • Which parent’s HR policies does the IJV follow? • Which policies were applied to the IJV? • How were these policies adapted to the local environment? • Who does the HR Head report to in the parent companies? HR Policies • How are the HR policies adapted to the local situations • What training programs of the parent company can the IJV employees avail of? • What training programs must they avail of? • How is the compensation structure set up? • Is there the possibility of job rotation between the IJV and the parent companies? Expatriate Management • How many expatriates are currently employed/ were employed in the IJV? • U.S. parent firm: What programs for expatriate acculturation are available? • What cross-cultural diversity programs are available within the firm? • What experience has the parent company had with expatriates so far?

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Compensation • How are compensation guidelines adapted to the local circumstances? • Which parent company (U.S. / India) are the compensation guidelines accorded

to? Performance Appraisal • How is the performance appraisal system set up in the IJV/ parent company? • How often do performance appraisals take place?

E.3.4 CIOs / CTOs of Indo-U.S. IJV Technology Strategy: • Which IT guidelines does the IJV follow? • Who does the CIO of the IJV report to? • How is the technology flow from the parents to the IJV • Who delivers the technical infrastructure for the IJV? • How was the technical infrastructure set up? • What infrastructure/ technical problems arose during the setup phase? • Does the IJV have access to the parent companies' intranets? • What firewalls are in place? • Are any B2E portals in place/ and if so how and when were they set up? Parent-IJV Relationship: • How was the technical infrastructure implemented in Asia? • In which order (countrywise?) • What adaptations have been made to the parent company knowledge

management strategy? • In how far do these adaptations differ from subsidiary to IJV? Information Management: • How are the information flows between the parent companies and the IJV set up? • How is the information flow between the IJV and U.S. company AP

Headquarters? Knowledge Management Strategy • How was the new Technology accepted in the beginning? • Where was the most resistance to be found? • How was this resistance countered? • Where were the technology champions to be found?

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• How were these supported and encouraged? • How was new technology communicated to the employees? • Was this strategy any different than in other IJVs/ subsidiaries? • What was the biggest hurdle to implementing knowledge management tools in

the Indo-U.S. IJV? • What lessons can be learned from this experience for future IJVs?

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E.4 Interview Partners from diverse Indian IJVs The following is a list, sorted alphabetically, of Companies Interviewed. The selection of the companies followed the criteria outlined in section A. On an average 2-3 executives from each company were interviewed in line with the conceptual framework of the study (Section A) and questionnaire based on the previous section, for 1-2 hrs during the period September 1999 - October 2000. Company Business Sector Location AIG Insurance New York

AMSOFT Information Services

IT Bangalore

Avnet Max IT New Delhi

AT & T Telecommunications Pune, New Jersey and Seattle

Bharti BT Satellite Communication Services

Telecommunications Bangalore

Birla AT & T Telecommunications Pune

BT Telecommunications Mumbai

Business Consulting Group Management Consultants

Mumbai

Comsat Max Telecommunications New Delhi

DeLoitte Touche Tohmatsu Mumbai Mumbai

DSP Merrill Lynch Investment Banking

Business Services / Finance

Mumbai

Equifax Venture Infotech IT Services Mumbai

Equifax Financial Services Atlanta

Ernst & Young Knowledge Management Services

Management Consultants

Mumbai

Fisher Rosemount Mumbai Mumbai

GE Capital Business Services / Finance

Gurgaon, Haryana

GE Capitals Financial Services Hartford, CT, USA

Georg Fischer DISA Bangalore Bangalore

Global One Telecommunications Madison, N.Y. Hindusthan Thompson Associates

Advertising Mumbai and Bangalore

IBM India IT Bangalore

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India Lease Development Business Services / Finance

New Delhi

JM Financials Mumbai Mumbai

KPMG Corporate Finance Management Consultants

Bangalore and New Delhi

KPMG Corporate Finance Management Consultants

New Delhi

Lucent Telecom service platforms

Mumbai and New Jersey

Lucent Technologies Finolex Telecom service platforms

Pune

Mahindra British Telecom Telecommunications Pune

Max Atotec Technology New Delhi

Max India Group Broad spectrum of

Services

New Delhi

Merril Lynch Financial Services New York and Singapore

MGF Group Delhi New Delhi

Modi Xerox Technology New Delhi

Modicorp Group Broad Spectrum of

Services

New Delhi

Modicorp Learning Institute

J.P. Morgan Stanley Securities

Business Services / Asset Management

Mumbai

Morgan Stanley Financial Services New York and Hong Kong

Ogilvy Consulting Management Consultants

Mumbai

Ogilvy & Mather Advertising

Management Consultants, Advertising

New Delhi

Ogilvy & Mather worldwide Advertising New York

Pricewaterhouse Coopers Management Consultants

Bangalore and Mumbai

Prudential ICICI Asset Management

Asset Management Mumbai

Rediffusion Dyer Brand Communications

Business Services Mumbai

RPG Enterprises (Head Quarters)

Broad spectrum of business

Mumbai

Sprint RPG India Telecommunications New Delhi

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TATA AIG Risk Management Services

Insurance Mumbai

TATA BP Solar Technology Bangalore

TATA Group Broad spectrum of business

Mumbai

TATA Honeywell IT / Technology Mumbai

TATA Liebert Technology Thane

TATA Lucent Technologies Telecom Service platforms

Bangalore

TATA Lucent Technologies Telecom Service platforms

New Delhi

TATA Itochu Nelito Systems

Technology Thane

The Associates Management Consultants

New Delhi

J. Walter Thompson Advertising Bangalore

WIPRO GE Medical Systems

IT / Technology Bangalore

Young and Rubicam Advertising New York

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E.5 Case Study Companies

1. DSP Merrill Lynch

Tulsiani Chambers, WestWing, 11th Floor

212 Backbay Reclamation, Mumbai 400 021

India.

Tel : +91 22 285 3793

Fax: +91 22 204 8518

2. JM Morgan Stanley Securities Ltd

Forbes Building, Charanjit Rai Marg

Mumbai 400 001, India

Tel: +91 22 204 6600

Fax: +91 22 204 6607

3. Max New York Life Insurance Company Ltd.,

Max House, 1 Dr. Jha Marg

Okhla, New Delhi 100 020, India

Tel: +91 11 693 3619

Fax +91 11 693 2754

4. Birla AT & T Communications Ltd.,

Sharda Complex, 11/1 Erandwane

Off Karve Road, Pune 411 004, India

Tel: +91 212 332 001

Fax: +91 212 337 710

5. Sprint RPG India Ltd.,

Gulmohar House, 161/B-4 Gautam Nagar

Yusuf Sarai, New Delhi 110 049, India

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Tel: +91 11 669 669 ; Fax: +91 22 6858308

6. Ogilvy Consulting

Trade Center, Senapati Bapat Marg, Lower Parel

Mumbai 400 013, India

Tel: +91 22 491 3877 ; Fax: +91 22 491 3989

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CURRICULUM VITAE

Curriculum Vitae

Anita Subramanian

Date of Birth: 06 May 1975 in Amsterdam, The Netherlands

Education

1998 – 2002 Doctoral studies and completion of doctoral thesis, University of St. Gallen, Switzerland.

1999-2000 Field research in India. 2000 Visiting scholar at Temple University, Philadelphia, USA. 1993 – 1998 Studies in Business Administration / Economics

(Lic.Oec.HSG), University of St. Gallen, Switzerland. 1992 Studies at Vesalius College, Vrije Universiteit, Brussels,

Belgium. 1992 Swiss Matura at Gymnasium Baumlihof, Riehen, Basel-Stadt,

Switzerland. Professional Experience Since 2002 JKP Program, UBS AG, Zurich, Switzerland 2001 Experienced Analyst, Accenture AG, Zurich, Switzerland 1998 – 1999 Assistant to Prof. Li-Choy Chong at the University of St.

Gallen, Research Institute for International Management, FIM, Asia Research Centre

1993 - 1995 Summer Associate (Praktikum) with Ciba AG, Basel,

Switzerland

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Gedruckt bei Salinas Press AG, Walisellen www.salinaspress.com Auflage 10 Ex., Februar 2003