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Knowledge Transfer From MNC Parent To China Subsidiary

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Text Preview Journal of World Business 39 (2004) 168–182

An integrated model of knowledge transfer from
MNC parent to China subsidiary
Pien Wanga,*, Tony W. Tongb, Chun Peng Kohc
a

School of Business, National University of Singapore, 1 Business Link, Singapore 117592, Singapore b
Fisher College of Business, The Ohio State University, Newark, OH, USA c
International Enterprise Singapore, Singapore

Abstract
Based on an empirical study of 62 firms, this paper develops a two-stage model describing knowledge transfer from MNCs to their China subsidiaries. In the first stage, the model proposes factors affecting the extent of knowledge contributed by an MNC to its China subsidiary. In the second stage, the model proposes factors affecting the extent of knowledge acquired by the China subsidiary from its MNC parent. Knowledge contributed by the parent to the subsidiary is affected by two groups of factors: parent’s capacity to transfer knowledge and parent’s willingness to transfer knowledge. Holding constant knowledge contributed by the parent, knowledge acquired by the subsidiary from its parent is determined by two groups of factors: subsidiary’s capacity to acquire knowledge and subsidiary’s intent to acquire knowledge. Implications for future research and management practitioners are discussed.

# 2003 Elsevier Inc. All rights reserved.
Keywords: Knowledge transfer; MNC parent; China subsidiary

Among all the resources of a firm, knowledge is the
most strategically important resource (Grant, 1996).
Knowledge provides the capacity for organizational
action and new knowledge provides the capacity for
organizational renewal (Inkpen, 1998). However, the
knowledge base of young subsidiaries established by
multinational corporations (MNCs) in transition
economies is weak (Lyles & Salk, 1996). Thus without
successful knowledge transfer from their MNC parents, it is difficult for these subsidiaries to build up knowledge base, improve capabilities, accelerate
*
Corresponding author. Tel: þ65-6874-6805.
E-mail addresses: bizwangp@nus.edu.sg (P. Wang),
tong.40@osu.edu (T.W. Tong),
koh_chun_peng@iesingapore.gov.sg (C.P. Koh).

management localization, and survive intense competition to generate good returns for their parents. Successful knowledge transfer requires the transferors to be capable and willing to transfer knowledge on the one hand (e.g., Gupta & Govindarajan, 2000; Tsang,

2001), and the recipients to be capable and willing to
acquire knowledge on the other hand (e.g., Cohen &
Levinthal, 1990; Hamel, 1991; Lane, Salk, & Lyles,
2001). Despite the importance of knowledge transfer
for firms involved in foreign direct investment (FDI)
activities, there has been little systematic discussion of
this topic from the perspectives of both the knowledge
transferor (i.e., MNC parent) and the knowledge recipient (i.e., foreign subsidiary). Thus two fundamental issues remain under-explored: (1) factors influencing
the capacity and willingness of a parent to transfer

1090-9516/$ – see front matter # 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2003.08.009

P. Wang et al. / Journal of World Business 39 (2004) 168–182

knowledge to its foreign subsidiary; and (2) factors
affecting the capacity and intent of a foreign subsidiary
to acquire knowledge from its parent.
In this paper, we have attempted to answer these
two questions by conducting an empirical study on
foreign invested enterprises (FIEs) in China. China
adopted the Open Door policy in 1978 to attract
foreign capital and to acquire advanced foreign knowledge to improve its economy. Lured by China’s low cost labor and huge market potential, FDI inflows
reached a cumulative total of US$ 395 billion from
1979 to 2001, representing 20% of FDI in all developing countries (China Hand, 2002). However, despite China’s importance in the global FDI, and the large
amount of advanced foreign knowledge diffused into
the country, little... Show More

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