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The underdetermined knowledge-based theory of the MNC

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Abstract

In this note we revisit two core propositions of the knowledge-based view of the firm found in the seminal work of Kogut and Zander: (1) that multinational corporations (MNCs) exist because transfers and re-combinations of knowledge occur more efficiently inside MNCs than between MNCs and third parties; and (2) that the threat of opportunism is not necessary, although it may be sufficient, to explain the existence of the MNC. Their knowledge-based view shifted the conceptualization of the firm from an institution arising from market failure and transaction costs economizing to a progeny of superior knowledge governance. We question these conclusions, arguing that firms are but one of the many types of “epistemic communities” possessing and nurturing procedural norms, identity, and the cognitive, linguistic and reflexive attributes conducive to efficient exchange and re-combination of knowledge among their members. Important insights may be gained by applying the concept of epistemic communities implicit in the knowledge-based perspective beyond firm-level hierarchies.

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Notes

  1. This finding is clearly difficult to reconcile with Kogut and Zander's (1993) main thesis, which was empirically supported by the same sample of manufacturing technologies and the same questionnaire data. In apparent recognition of this, Kogut and Zander (1995: 419) wrote: “On reflection, the research design [in the 1995 article in Organization Science] was too simple. The capabilities of the firm are more than just manufacturing competencies, and extend to the full array of capabilities, from innovation to product delivery. Rival firms might easily imitate manufacturing, but still not be able to compete effectively due to deficiencies in other areas.” It is not clear why the same methodological caveat would not apply to the transfer of manufacturing technologies to wholly owned subsidiaries or foreign licensees analyzed in the earlier papers.

  2. Such imitation need not imply a one-to-one correspondence in capabilities. As Zander (1991: 22) notes, “… imitation does not require the exact copying of existing know-how … innovations can be introduced and manufactured in different ways.”

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Acknowledgements

Anders Fransson would like to thank Associate Professor Bernard McKenna of UQ Business School for his input at the formative stages of this paper, particularly with respect to social identity theory and discourse theory.

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Authors and Affiliations

  1. UQ Business School, University of Queensland, Brisbane, Australia

    Anders Fransson, Lars Håkanson & Peter W Liesch

  2. Department of International Economics and Management, Copenhagen Business School, Copenhagen, Denmark

    Lars Håkanson

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  1. Anders Fransson
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  2. Lars Håkanson
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  3. Peter W Liesch
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Accepted by Alain Verbeke, Area Editor, 20 December 2010. This paper has been with the authors for two revisions.

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Fransson, A., Håkanson, L. & Liesch, P. The underdetermined knowledge-based theory of the MNC. J Int Bus Stud 42, 427–435 (2011). https://doi.org/10.1057/jibs.2011.6

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