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  • Expatriate-Subsidiary Relationships and

    Knowledge Transfer in MNCs

    BACHELOR/MASTER Bachelor

    THESIS WITHIN: Business Administration

    NUMBER OF CREDITS: 15 ECTS

    PROGRAMME OF STUDY: International Management

    AUTHOR: Gunnar Löfstedt & Eero Silfver

    TUTOR: Imran Nazir

    JÖNKÖPING May 2016

    A Case Study of a Swedish MNC in Asia

  • i

    Acknowledgements

    We would like to thank the following people who contributed to this study.

    First of all, we would like to express our gratitude towards our Thesis tutor Imran

    Nazir, who throughout the whole process, provided us with invaluable guidance and

    feedback.

    Secondly, we would like to thank our seminar partners Petra Karjalainen & Jonna

    Tyynelä, who in addition to our tutor, gave us important peer-to-peer feedback.

    Last but not least we want to thank our interviewees for providing firsthand knowledge

    on the issue. Without them this study could not have been completed.

  • ii

    Bachelor´s Thesis in Business Administration

    Title: Expatriate-Subsidiary Relationship and Knowledge Transfer in MNCs

    Authors: Gunnar Löfstedt & Eero Silfver

    Tutor: Imran Nazir

    Date: May 23, 2016

    Abstract

    A typical way of transferring knowledge within an organization is to relocate employees

    from one unit to another. In MNCs, the employees are relocated from the headquarters to

    the subsidiary in a foreign country, which brings additional issues. These employees or

    expatriates face several challenges when interacting with other employees from different

    cultures and often experience additional challenges when trying to adapt to the new

    environment. Though the relationship between the expatriate and the local subsidiary has

    great implications on the knowledge transfer there is little research on what these

    relationships consist of, what affects them and the impact the relationship between the

    expatriate and the subsidiary has on the transfer of knowledge.

    Purpose- The purpose of this study is to determine what factors affect the relationship

    between an expatriate and the local subsidiary and how it impacts the overall knowledge

    transfer from the headquarters to the foreign subsidiary.

    Method-This is a qualitative single case study with two interviewees as primary sources.

    One was in a managerial position at the headquarters and one was an expatriate with many

    years of experience within the company and at several foreign subsidiaries. The

    information gathered was compared to the existing literature which served as the

    knowledge base for the study.

    Key findings- One of the key findings was the important role that trust plays when trying

    to establish a network and transfer knowledge. Without the existence of trust the

    expatriate is unlikely to be able to transfer knowledge and thereby successfully complete

    their assignment.

    Conclusion- Expatriates are primarily used to transfer tacit knowledge due to the

    complexities of codifying it. Tacit knowledge typically requires an individual to transfer

    it and to explain it in order for it to be properly understood or assimilated. The research

    conducted indicated that prior knowledge of the counterpart's culture had a positive effect

    on the expatriate’s ability to establish trust which was the main ingredient of the

    relationship between the expatriate and the foreign subsidiary.

  • iii

    Table of Contents

    1. Introduction ................................................................................ 1 1.1 Background ............................................................................................ 1 1.2 Problem .................................................................................................. 2 1.3 Research Gap ........................................................................................ 2 1.4 Purpose .................................................................................................. 2 1.5 Research Question ................................................................................. 3 1.6 Delimitations ........................................................................................... 3

    2. Theoretical Frame of Reference ................................................ 4 2.1 Knowledge .............................................................................................. 4 2.1.1 Properties of Knowledge ........................................................................ 4 2.2 Knowledge Transfer ............................................................................... 4 2.2.1 Knowledge Assimilation ......................................................................... 5 2.2.2 Motivation ............................................................................................... 5 2.2.3 Reliability and Attractiveness of Source ................................................. 6 2.3 Knowledge Transfer in MNCs ................................................................. 6 2.4 Expatriates and Inpatriates as Facilitators of Knowledge

    Transfer .................................................................................................. 7 2.4.1 Expatriates ............................................................................................. 7 2.4.2 Expatraite’s Role in Transferring Tacit Knowledge ................................. 8 2.4.3 Inpatriates .............................................................................................. 9 2.4.4 Inpatriate’s Access to Local Networks .................................................... 9 2.5 Issues With Expatriates and Inpatriates ............................................... 10 2.5.1 The Impact of the New Location on Expatriates and Inpatriates .......... 10 2.5.2 Culture related to expatatriate and inpatriate difficulties ....................... 10 2.5.3 Assignment Length & Impact of Expatriate or Inpatriate’s

    Family. .................................................................................................. 11 2.5.4 Turnover Rate Among Expatriates ....................................................... 12 2.5.5 Turnover Rate Among Inpatriates & Local Managers ........................... 13 2.6 Social Capital ....................................................................................... 14 2.7 The Theory of Strong and Weak Ties ................................................... 15 2.8 Cultural Cognitive Dissonance ............................................................. 16

    3. Method ...................................................................................... 18 3.1 Scientific Philosophy ............................................................................. 18 3.2 Scientific Approach ............................................................................... 18 3.3 Research Method ................................................................................. 19 3.4 Research Strategy ................................................................................ 19 3.5 Data Collection ..................................................................................... 20 3.5.1 Case Selection ..................................................................................... 20 3.5.2 Interview Method .................................................................................. 20 3.5.3 Secondary Data .................................................................................... 21 3.6 Method for Data Analysis ..................................................................... 22 3.7 Research Trustworthiness .................................................................... 22 3.8 Ethical Implications ............................................................................... 23

    4. Findings .................................................................................... 24 4.1 Expatriates ........................................................................................... 24

  • iv

    4.1.2 Inpatriates ............................................................................................. 25 4.2 Integration Policies ............................................................................... 25 4.3 Affecting Factors................................................................................... 26 4.3.1 The Length of the Assignment .............................................................. 26 4.3.2 The Role of the Family ......................................................................... 26 4.3.3 Trust ..................................................................................................... 26 4.3.4 Attitudes Towards the Expatriate .......................................................... 27

    5. Analysis .................................................................................... 28 5.1 The Importance of Knowledge for the MNC ......................................... 28 5.2 Issues Facing Expatriates as Facilitators of Knowledge Transfer ........ 29 5.3 Issues Facing Inpatriates as Facilitators of Knowledge Transfer .......... 29 5.4 Trust as a Fundamental Aspect of Expatriate Relations ....................... 30 5.5 Distrust ..........................................................................

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