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The process of external

knowledge transfer to

developing countries

An empirical research about its main influencing

factors & barriers

Authors:

Christian Fauss

Adrian Schwenke

Tutors:

Philippe Daudi

Mikael Lundgren

Program:

Master’s Program in

Leadership and Management

in International Context

Subject:

Leading knowledge transfer

and organizational learning

Level and semester: Masterlevel Spring 2008

Baltic Business School

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i ABSTRACT

In the purest sense of the term, the transfer of knowledge deals with certain activities that attempt to pass on knowledge to another unit. In the course of globalization, companies seek nowadays the collaboration with other companies or organizations in developing countries, in order to benefit from several advantages like reduced labor costs. Next to that, a myriad of companies or organizations carry out projects with partners that are situated in developing countries, only with the attempt to fill the gap of knowledge between developed and developing world – knowledge that is particularly needed in those countries in order for them to reach certain standards of living and to keep up with the rapid development that takes place in other parts of the world.

This paper investigates with the help of five selected cases the impact of the main influencing factors and barriers on the success of this type of knowledge transfer, as they are perceived by companies from developed countries. Thereby, this paper aims at providing information about their importance in the corresponding contexts and at giving inspiration on the ways these factors can be dealt with. The exploratory results suggest that by covering specific aspects from the beginning, the companies or organizations involved can overcome the majority of the factors and barriers. Furthermore, it is pointed out that the importance of each factor varies heavily depending on the context: the process of internal knowledge transfer requires the companies to concentrate their attention on different aspects than in the context of external knowledge transfer.

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ii ACKNOWLEDGEMENTS

“Learning for life and not for work” Are commonly known as wisdom words, But describing what we’ve learned these weeks,

Is inestimable knowledge We’ll forever keep.

Provided us a look inside

In their knowledge processes global wide, We’d like to thank the following, Companies, organizations, women and men:

Swedfund, Arne Georgzén, Kalmar Kommun, Anders Engström,

Tetra Pak, Gert Ekdahl, Borlänge Energi, Ronny Arnberg,

Nutek, Nadja Berger,

Without whom the work would not look the same.

Expressing our gratitude To our tutors For their supporting attitude. Philippe Daudi and Mikael Lundgren, With giving feedback, critique and ideas.

In times of desperation,

They gave relieving thoughts of motivation Which kept us from defeat

To make our work complete

Finally, a thankful word,

To family and friends for their support. Endowing us inspiration, time and understanding,

Enabling us to let it splendidly ending.

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iii TABLE OF CONTENTS

LIST OF FIGURES ... v

LIST OF TABLES ...vi

LIST OF ABBREVIATIONS ... vii

1. INTRODUCTION ... 1

1.1 Background ... 1

1.2 Problem discussion ... 5

1.3 Research Question ... 6

1.4 Classification of the research objects ... 7

1.4.1 Knowledge transfer ... 8

1.4.2 Developed countries ... 8

1.4.3 Developing countries and emerging markets ... 9

1.5 Purpose and Objective ... 10

1.6 Scope and Limitations ... 11

1.7 The disposition of this paper ... 12

2. THE KNOWLEDGE BEHIND KNOWLEDGE AND ITS MANAGEMENT ... 13

2.1 Knowledge ... 14

2.1.1 Data, information and knowledge ... 14

2.1.2 Definition of knowledge ... 16

2.1.3 Forms of knowledge ... 17

2.2 Knowledge management ... 24

2.2.1 Definition of knowledge management ... 25

2.2.2 Theoretical approaches towards knowledge management ... 26

2.3 Summary ... 34

3. THE KNOWLEDGE BEHIND KNOWLEDGE TRANSFER ... 36

3.1 Definition of knowledge transfer ... 36

3.2 The process of knowledge transfer ... 37

3.2.1 The communication model ... 37

3.2.2 Spiral model by Nonaka and Takeuchi ... 39

3.3 Stages of knowledge transfer ... 44

3.4 The ten knowledge strategy issues ... 47

3.5 The barriers and influencing factors of knowledge transfer ... 50

3.5.1 The influencing factors and barriers of internal knowledge transfer (Szulanski) ... 52

3.5.2 Additional overview of potential barriers inhibiting internal knowledge transfer ... 55

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iv

3.6 Summary ... 62

4. METHODOLOGY ... 64

4.1 Research philosophy – Positivism and Interpretivism ... 64

4.2 Research approach ... 66

4.3 Data collection ... 67

4.3.1 Primary Data ... 67

4.3.2 Secondary Data ... 67

4.3.3 Quantitative and qualitative research ... 68

4.4 Applied approach: The qualitative interview ... 69

4.4.1 The Interview ... 69

4.4.2 Data analysis ... 80

4.5 Trustworthiness of the research ... 82

5. EMPIRICAL FINDINGS AND RESULTS ... 84

5.1 Case descriptions ... 84 5.1.1 Swedfund ... 85 5.1.2 Kalmar Kommun ... 86 5.1.3 Tetra Pak ... 89 5.1.4 Borlänge Energi ... 90 5.1.5 Nutek ... 91

5.2 The influencing factors and barriers ... 92

5.2.1 Strong ties ... 92

5.2.2 Organizational factors ... 98

5.2.3 Knowledge characteristics ... 103

5.2.4 Knowledge management factors ... 108

5.2.5 Individual factors ... 111

5.2.6 Further findings ... 113

5.3 Summary ... 117

EXHIBIT: Internal vs. external knowledge transfer ... 120

CONCLUSION ... 124

6. FINAL DISCUSSION AND OUTLOOK ... 126

BIBLIOGRAPHY ... 132

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v LIST OF FIGURES

Figure No. 1.1 The connection between the research questions ... 7

Figure No. 1.2 The disposition of the paper ... 12

Figure No. 2.1 Data, Information and Knowledge ... 15

Figure No. 2.2 Continuum of data-information-knowledge ... 16

Figure No. 2.3 The different forms of knowledge ... 18

Figure No. 2.4 Declarative and procedural knowledge ... 21

Figure No. 2.5 Individual, collective and organizational knowledge ... 22

Figure No. 2.6 The knowledge bearers in an organization ... 24

Figure No. 2.7 Building blocks of knowledge management ... 27

Figure No. 2.8 The knowledge management value chain ... 31

Figure No. 2.9 A framework for strategic knowledge management ... 32

Figure No. 2.10 Summary of Chapter 2 ... 35

Figure No. 3.1 The communication model by Shannon ... 38

Figure No. 3.2 The spiral of knowledge ... 41

Figure No. 3.3 Stages of the knowledge transfer process ... 44

Figure No. 3.4 The stages of knowledge transfer ... 46

Figure No. 3.5 The ten knowledge strategy issues ... 48

Figure No. 3.6 The barriers of knowledge transfer ... 55

Figure No. 3.7 Influencing factors and barriers of external knowledge transfer ... 58

Figure No. 3.8 Summary of Chapter 2 +3 ... 63

Figure No. 4.1 The research model derived from the theory ... 78

Figure No. 4.2 The analysis framework ... 81

Figure No. 5.1 Swedfund logo ... 85

Figure No. 5.2 Kalmar Kommun logo ... 86

Figure No. 5.3 Tetra Pak logo ... 89

Figure No. 5.4 Borlänge Energi logo ... 90

Figure No. 5.5 Nutek logo ... 91

Figure No. 5.6 Strong ties ... 92

Figure No. 5.7 Organizational factors ... 98

Figure No. 5.8 Knowledge characteristics ... 103

Figure No. 5.9 Knowledge management factors ... 108

Figure No. 5.10 Individual factors ... 111

Figure No. 5.11 Further findings ... 113

Figure No. 5.12 The connection between the influencing factors ... 118

Figure No. 5.13 The main influencing factors of internal knowledge transfer... 121

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vi LIST OF TABLES

Table No. 2.1 Definitions of knowledge management ... 25 Table No. 2.2 Strategic levers ... 34 Table No. 3.1 Summary of factors affecting knowledge transfer ... 57

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vii LIST OF ABBREVIATIONS

CAGR Compound Annual Growth Rate

CKO Chief Knowledge Officer

e.g. exempli gratia: for example

E-Mail Electronic mail

et al. et alii: and other

FDI Foreign Direct Investment

GDP Gross Domestic Product

HDI Human Development Index

ICT Information and Communication Technology

i.e. id est: that is

IMF International Monetary Fund

LVRLAC Lake Victoria Region Local Authorities Cooperation

MBA Master of Business Administration

No. Number

p. page

R&D Research & Development

SECI Acronym out of Socialization, Externalization, Combination, Internalization

SIDA Swedish International Development Cooperation Agency

SME Small and Middle sized enterprises

UBC Union of Baltic Cities

WTO World Trade Organization

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1. INTRODUCTION

The introduction chapter will provide information about knowledge transfer, its impacts on the development of emerging markets and about the background of the investigation. The aim is to enlighten the reader about the research problems at hand, the corresponding questions under study, its purpose and objectives as well as the scope and limitations of the research area. Finally, the disposition of this paper will be presented.

“All men by nature desire to know” (Aristotle)

1.1 Background

Nowadays, relationships between organizations are getting more important than ever, since the world is getting more circumscribed, negotiated and competitive in tight networks caused by the globalization process (Contractor and Lorange in Reuer, 2004). “In many situations, the international firm is better seen as a coalition of interlocked, quasi-arms-length relationships” (Contractor and Lorange in Reuer, 2004, p. 21). Thereby, companies are working together in various alternatives: Licensing agreements, joint ventures, technology sharing or coproduction were traditionally seen as second-best solutions compared to the alternative of growing bigger all by oneself (Contractor and Lorange in Reuer, 2004), but are common practice in today’s business world when it comes to collaborate with another organizations. Since these types of collaboration presuppose a mutual agreement on working together in order to gain advantages, mergers and acquisitions, especially hostile takeovers, can be seen as a form of “involuntary” collaboration. Yet, the acquired firm has to adapt to the intended strategic orientation of its new parent company and to collaborate with its departments and employees. Another form of connecting business activities with each other can be seen in outsourcing activities as they are carried out by a myriad of small, middle-sized and large companies all over the world. Especially two specific forms of outsourcing stand in the spotlight of this issue, namely outsourcing nearshore and outsourcing offshore. According to Chakrabarty (in Harbhajan, 2006) nearshoring takes place when the service provider’s country is geographically close situated to the client’s country while offshoring, however, deals with contracting service providers that are located far away from the client’s country (Chakrabarty in Harbhajan, 2006).

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While in the context of outsourcing relationships companies often outsource production processes or services where they lack proper knowledge and skills to produce by themselves, most of other cooperative agreements are undertaken to create actual synergies on both sides. The reasons that drive companies to build up relationships with other companies are manifold. Based on Adam Smith’s ideas, in the globalized world and within its international markets, modern companies are interested to use their resources in the most productive way (Brown and Wilson, 2005). They claim that by striving for maximum profit, the firms remain competitive, and the consumer site benefits from this strategy in terms of cheaper goods and services, and higher standard of living at lower costs. The idea of cooperative relationships between organizations emanate from this philosophy as it is seen as a means to reduce operating costs and with it to boost earnings. Further benefits of venture cooperation are, according to Contractor and Lorange (in Reuer, 2004), the reduction of risks through product portfolio diversification, the achievement of economies of scale due to lower costs from larger volume, and the decrease of possible competition by increasing the costs for third-party companies aiming at entering the market. Organizational collaboration in the form of outsourcing also brings with it a multitude of reasons that advocate the establishment of such relationships. Beaumont (in Harbhajan, 2006) stresses that benefits of outsourcing are, among others, the improved quality of service, the reduced production time and the avoidance of risk, while Brown and Wilson (2005) show further reasons like the ability for the outsourcing company to acquire new skills, to focus on their core functions and strategy, to avoid major investments and to save costs.

Due to increased globalization, collaborations are not restricted to a national level anymore. Instead, the establishment and fostering of relationships with other organizations beyond borders are much more facilitated through fast developing technology in form of information- and communication technologies, the liberalization of trade and regulation systems, and decreasing transport and communication costs. In that context, a lot of companies make use of this trend and seek vicinity to especially developing countries, since they attract western companies by offering significant lower costs of labor and better skilled employees to collaborate with. This does not necessarily have to take place within an outsourcing relationship, but can also manifest itself in a western company’s intention to build new plants for its production of certain goods or services, for example, in China. Thereby, in order to take advantage of the more profitable conditions that are provided in developing countries, the western companies have not only to collaborate with local engineering and construction workers, but also have to employ local workers, who then can gain a lot of knowledge and insight about the western production styles and process.

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These types of cooperative arrangements to emerging markets are predicted to grow further in the future, since companies attempt to generate competitive advantages due to restructuring, organizational learning and organizational change in general. Assumed that arrangements between the business partners and the maintenance of the relationships are conducted properly, both sides are going to profit from the arrangements. While the companies from industrialized markets can derive their benefits from reduced costs and higher skilled employees, the organizations and workforce of the developing countries gain, above all, from the relationship to western companies in terms of knowledge.

According to Nonaka and Teece (2001), knowledge is nowadays not only the key to business and corporate success, but also to economic progress. The World Development (World Bank Group, 1998) report argues that knowledge is critical for development, since everything we do depends on knowledge. The report points to the importance of knowledge for developing countries by stating that knowledge has become the perhaps most important factor that determines the standard of living - more important than land, tools or labor. In that connection, western companies and countries play a major role in closing the knowledge gap between developed and developing world by transferring required knowledge.

There are several ways how knowledge can be transferred to developing countries. In the context of outsourcing, for example, the offshore companies draw profit from higher efficiency and productivity, provided by new capital, technology, new business models and management skills that the foreign companies are bringing in when they contract out, for instance, specific business processes. The World Development Report (World Bank Group, 1998) lists additional four channels through which developing countries can acquire new knowledge from the western world:

1.) International trade

Intensive trade relations with international suppliers and customers facilitate the acquisition of knowledge, since imported goods and services embed the knowledge required for their manufacture.

2.) Foreign Direct Investments (FDI)

(Large) Multinational corporations are the largest and most promising source of knowledge. The worldwide dissemination of their knowledge represents important means to pass on knowledge to developing countries. Thereby, the knowledge of the organizations is transferred through learning effects to the employees, the local suppliers, and through the selling of “knowledge products”, e.g. patents. The companies’ trade and investment policies

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as well as the economic frameworks and regulations set up by the government determine the extent to which developing countries benefit from FDI.

3.) Technology licensing

As FDI, the impacts of technology licensing can rather be observed in the long than in the short run. Learning effects created by utilizing advanced technologies can play a key role when it comes to closing knowledge gaps.

4.) Travel and migration

While some developing countries imported knowledge by hiring foreign experts, others experienced a large inflow of skilled immigrants that brought specialized knowledge. Another way through which developing countries may acquire knowledge can be found in the migration of workers that later return with new insights and enhanced capabilities. As indicated, the ongoing trend of organizational arrangements worldwide, together with increasing FDI on part of the multinational companies, does not only limit its impacts on stand-alone businesses, but it also affects the development of an entire economy or market. For instance, with the entrance of companies like Ford Motor, General Motors, and Honda Motor into the Chinese market, the price for passenger cars fell during the years from 1995 until 2001 about 30%. In India, prices for air conditioners, television sets and washing machines decreased by around 10%, while the prices for cars have declined during the 1990s around 10% per year and the availability of different car types increased, leveraging the automobile sector in India to a compound annual growth rate (CAGR) of 15%. (Samulevičius and Samonis in Harbhajan, 2006)

In general, the Chinese and Indian markets serve as excellent illustrations for the economic development of developing countries, which got stimulated by collaboration with and attraction of companies from the western business world. When China, for example, opened up its gates and borders towards companies from western industries, the Chinese government forced them by law to work in close contact with the local companies, so that they learned the technical methods and procedures, so that they might be capable of producing these goods on their own in the future (China9, 2008). Due to this learning process over the years, together with investments that came from companies and organizations all over the world, China is caught up with the global export leaders Germany and USA, and is even expected to overtake them in 2008 to become global export champion (BFAI, 2007). This shows the positive impact of knowledge transfer processes on the development of developing nations.

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“Successful development thus entails more than investing in physical capital, or closing the gap in capital. It also entails acquiring and using knowledge - closing the gaps of knowledge” (World Bank Group,1998, p. 25). In this connection, it is crucial to guarantee that the developing countries are capable of absorbing and properly using the knowledge. This, however, presupposes that knowledge has been successfully, efficiently and effectively transferred from the western companies to the developing and emerging markets.

1.2 Problem discussion

The transfer of knowledge takes time, and incurs costs and uncertainty (Szulanski, 2003). But whenever companies or organizations are supposed to work together, they need to exchange knowledge in order to benefit. There are several reasons why companies choose to collaborate with each other. Nowadays, in these fast changing times, companies need to develop new products with which they have to penetrate new markets constantly, while being under enormous time pressure to remain competitive in the turbulent market environment (Hamel, Doz and Prahalad in De Wit and Meyer, 2004). They stress that this is one of the reasons why companies should seek collaboration with a partner, since it is nearly impossible to survive on the market by going the whole way on their own. To avoid this, companies and organizations can revert to several alternatives to collaborate with another firm. This includes common agreements and joint ventures, but also mergers and acquisitions, and outsourcing. The information and the knowledge that are going to be exchanged with the attempt to create a win-win situation between the two parties have to be managed in a concrete way, because otherwise, the installment of a successful and mutual benefiting relationship is much likely to fail. Unfortunately, the process of knowledge transfer is littered with problems, challenges and barriers that negatively influence the outcome of the transfer.

Taking a closer look at outsourcing, for example, reveals that a critical factor closely connected to a successful and efficient outsourcing relationship can be found in effective knowledge transfer. Lee (as quoted in Angela Lewis, 2006), investigated in the context of an empirical study the connection between knowledge transfer and the success of outsourcing relationships and found a positive correlation, stating that knowledge sharing and transfer is one of the major predictors for outsourcing success.

But not only relationships based on outsourcing are affected by inefficient and ineffective knowledge transfer. If, for instance, a company decides to built up production facilities in another country, but falls short in explaining the local workers how to operate the machines, the transfer

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costs of knowledge will skyrocket and with it, the success of the entire undertaking will be jeopardized. All types of collaboration are facing the challenges and barriers the process of knowledge transfer entails. If both sides are not able to overcome these challenges, the desired values and objectives are not likely to be accomplished. In that regard, momentous mistakes can be made during all the different stages of collaboration. While one party, for instance, may not receive sufficient or incomplete information about the project’s requirements or specifications, the other side may lack the ability to integrate and store the customer’s knowledge. The importance of successful and for both sides rewarding knowledge transfer is observable throughout the whole collaborating process and its supporting activities like the common development of new technology and experience. It is crucial for the two contractors to set up general frameworks that facilitate the exchange of information, data and progress reviews. Through the establishment and persistent use of such communication systems, the promotion and acceleration of transferring knowledge from one partner to another, and with it a successful relationship, can be assured more probably.

It goes without saying that the success of knowledge transfer largely depends on the geographical distance between the sender and recipient of the knowledge. Within the context of an collaboration and the corresponding inevitable transfer of knowledge, frequent and intensive communication as a key factor is exacerbated when both parties are geographically separated and when cultural or linguistic idiosyncrasies team up to raise a huge barrier. Therefore, the successful knowledge transfer from western companies to distant developing countries is particularly fragile. But, as pointed to above, especially these developing countries are in need of knowledge, a situation that calls for effective, efficient and successful knowledge transfer and corresponding countermeasures concerning the key factors and barriers that affect this process and that the companies involved have to anticipate and to ultimately cope with in order to guarantee mutual successful knowledge transfer.

1.3 Research Question

In this connection, the important questions to raise and to be investigated are:

1) To what extent do companies face the main influencing factors and barriers of knowledge transfer in real-life transfer processes between a company or an organization from an advanced economy and from a developing country?

2) In which way do the involved partners deal with these factors and how decisive and important are they for the overall success?

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3) Are there any additional factors that are disregarded in the examined literature?

Following figure should serve to enlighten the connection between these three questions under study and the concluding thoughts concerning the impacts that knowledge transfer can have on developing economies.

1.4 Classification of the research objects

For the purpose of this research, the fundamental terms knowledge transfer, developed countries and developing countries have to be classified and their understanding in the sense of this paper have to be explained in more detail. This will be taken care of in the following paragraphs.

THE PHENOMENON: Knowledge transfer between developed

and developing world in selected cases

Impacts of knowledge transfer on the developing country Factors affecting the

process of knowledge transfer (Theory)

Influencing factors and their treatment between companies

(Practice) Examination

Evaluation

Interpretation

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8 1.4.1 Knowledge transfer

In the most common sense, knowledge transfer can be understood as the process of passing on knowledge from one unit to another. However, for the purpose of this research, the term has to be narrowed down.

Within the scope of this paper, knowledge transfer is perceived as interorganizational and external transmission of knowledge between a preferably developed country (see 1.4.2) or industrial nation and a developing country (see 1.4.3), whereby this process involves a collaboration or business connection for various purposes.

Since there exists only a limited spectrum of corresponding literature regarding the particular issue of external knowledge transfer, use will be mainly made of literature that deals with different aspects, forms and ways of knowledge transfer (e.g. internal/intraorganizational knowledge transfer).

1.4.2 Developed countries

According to the United Nations Statistics Division (2008), there are no established conventions for the designation of developed countries. Generally, the term is used for countries with developed economies in which the tertiary and quaternary sectors of industry dominate. Typical characteristics of developed nations are a high GDP, high income per capita and a high Human Development Index (HDI). Commonly used and heard synonyms are advanced countries/economies, industrialized countries, more developed countries, more economically developed countries, global north countries and post-industrial countries.

The United Nations Statistics Division (2008) generally considers Japan in Asia, Canada and the USA in North America, Australia and New Zealand in Oceania and Europe as being developed economies. Thereby, countries emerging from the former Yugoslavia are treated as developing countries, while countries of Eastern Europe and the former USSR are not included under either developed or developing regions, but are seen as transition economies that started with rearranging their systems towards democracy and free market economy (International Monetary Fund :1, 2008).

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9 1.4.3 Developing countries and emerging markets

As with the term developed countries, there are no common or fixed definitions for developing countries. The World Trade Organization (2008), for instance, remarks that its members announce for themselves whether they are developed or developing. In order to prevent countries from declaring themselves as “developing” in order to receive provisions, other members of the WTO can challenge the declaration.

In contrast to developed countries, a developing country is typically characterized by relatively low standards of living, an undeveloped industrial base, and a moderate low HDI and per capita income. A developing economy usually translates into a high unemployment rate, poor infrastructure and capital resources and very often mass poverty and undernourishment. Yet, it is in a phase of economic development. Developing countries that experienced sustainable economic growth over years and that additionally show promising economic potential are occasionally called emerging markets. According to the Yale University Library (2008), the big ten emerging markets are: Brazil, Russia, India, China, Egypt, Mexico, Poland, South Africa, South Korea, and Turkey. A clear line has to be drawn between developing countries, emerging markets and least developed or failed states. While, as mentioned before, developing countries are experiencing economic growth, least developed or failed states are still suffering from prolonged periods of economic decline.

The International Monetary Fund (2008:2) lists approximately 160 developing and emerging countries, whereby most of them are located in Africa and Asia (including, for instance, India and China). In this connection it is important to mention that the comprehensive list by the IMF also includes countries that are listed as least developed countries elsewhere (see UN-OHRLLS, 2008). The IMF therefore only classifies the world into two major groups: advanced economies, and emerging and developing economies.

It can be seen that there are no standardized definitions and differentiation of developed, developing, less developed, emerging countries and so forth. The lists published by several international organizations very often contradict themselves, since different criteria could have been used for evaluation. In order to avoid confusion concerning this matter, the understanding of developing countries in the context of this study is simply concentrated on the countries and given economic conditions as they can be seen in the countries named on the according list by the IMF. This infers that the terms developing countries, emerging markets and less developed countries will be used synonymously. However, the expression least developed countries will not be used.

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1.5 Purpose and Objective

The main objective of this research paper is to investigate selective cases, where knowledge transfer took place between companies from developed countries and organizations in developing countries. The primary focus is put on examining and sorting out, in which way the collaborating involved firms are dealing with general barriers and influencing factors that affect the outcome and success of knowledge transfer. To achieve that, the most cited and described factors were generated from the used literature in order to practically evaluate and interpret their actual appearance, treatment and importance in the context of the investigated cases. Thereby, the discovered research findings hopefully allow for drawing conclusions and interpretations of their overall importance in today’s business life.

It is important to remark once more that nearly every theoretical paper or book, which has been used for establishing the theoretical framework of this study, exclusively deals with the process of internal knowledge transfer, i.e. within corporations, companies or organizations. The emphasis of this study, however, is put on the external side of knowledge transfer. Due to this reason, the researchers also intend to enrich the theory-based list of influencing factors and barriers by adding further practically relevant factors that are found out in the course of the research and therefore primarily apply to external knowledge transfer to developing countries only.

With the results of the performed analysis of the gathered material, the researchers aim at providing insightful consolidated findings about different practices, approaches and challenges regarding knowledge transfer as they are carried out and dealt with by the corresponding companies in the selected cases. Next to that, the outcome of the analysis can also provide other companies and organizations with a factual overview of main influencing factors that are derived from theory as well as from practice. This helps companies, which maybe intend to engage themselves in external knowledge transfer, and curious readers to develop an understanding and idea of possible barriers and challenges they should anticipate during the process of external knowledge transfer. Additionally, it is intended to demonstrate the main factors for successful external knowledge transfer and with it to point out, especially regarding the inspected cases, how important they are, how to prioritize them, in which way they can be dealt with, what possible mistakes can be made and which problems exist that can appear during the process of external knowledge transfer.

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1.6 Scope and Limitations

Information and knowledge are exchanged through a wide range of channels, e.g. from individual to individual, from department to department or from organization to organization and their various combinations. Therefore, the choice for appropriate examples is huge, which makes it inevitable to narrow down the scope of this study by setting up limitations.

In order to stress it once more, this research will only take into account external knowledge transfer between foreign companies from developed countries and from developing countries, excluding intra-organizational knowledge transfer on national and international level. This also rules out the transfer of knowledge from subsidiaries located in developed countries with those running their operations in developing countries.

Another restriction has to be set up concerning the direction in which the transferred knowledge is headed. As this process undoubtedly necessitates at least two participants, namely one that transfers the knowledge and another one that receives it, it would go beyond the scope of this research to shed light onto both sides of this procedure. Due to this reason, the core investigation will purely center on the knowledge that flows from the developed world directly or indirectly to companies situated in developing countries. Mutual benefits in form of knowledge received by the companies from advanced economies as well will therefore not be elucidated in detail.

Although there is a high number of advanced economies and with it a myriad of different companies suitable to investigate, the research will only consider the examination of cases in companies that are located in Sweden and that are engaged in transferring knowledge to collaborating companies or organizations in the developing world. This is a necessary step with regard to time and budget restrictions the research has to undergo. On the part of the developing country, however, the focus is less on a particular country or region, but rather on building up an interesting portfolio of dissimilar cases that involve different developing countries (see Chapter 4.4.1: Choice of respondents).

The fundament of this paper, constituted by the importance of transferring knowledge to developing countries to stimulate their economic development, also has to endure limitations. The impacts on both developed and developing economies that emerge from a successful knowledge transfer in such a relationship are manifold, but the thesis will only focus on the impact that knowledge transfer can have on the development of developing countries. Caused by time restrictions, this aspect is not going to be discussed in detail, but will serve as a concluding outlook at the end of the thesis.

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12 1.7 The disposition of this paper

.

Figure No. 1.2 The disposition of the paper

Chapter 1: Introduction

Chapter 2: The knowledge behind knowledge and its management

Chapter 3: The knowledge behind knowledge transfer

Part I: Theoretical Framework

Part II: Empirical Research

Chapter 4: Methodology

Chapter 5: Empirical findings and results

Chapter 6: Final discussion and Outlook

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2. THE KNOWLEDGE BEHIND KNOWLEDGE AND ITS MANAGEMENT

Chapter 2 will focus on the terms knowledge, knowledge management and their meanings and importance for today’s organizations. This will be achieved by providing the most commonly used definitions of knowledge and by explaining different models and approaches toward knowledge management and its constituting components. The additional objective is to provide the reader with sufficient information in order to understand the connection between knowledge management and the role the particular process of knowledge transfer plays in this context.

“In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge”

(Ikujiro Nonaka)

Basically, companies need resources to produce goods and services, and to carry out various activities. The resource base of a firm “includes all means at the disposal of the organization for the performance of value-adding activities” (De Wit and Meyer, 2004, p. 242). The emerging knowledge-based view of the firm, firstly articulated by Grant (1996), claims knowledge to be the most strategically important resource a firm can have at its disposal. It is seen as an outgrowth of the resource-based view, which “perceives the firm as a unique bundle of idiosyncratic resources and capabilities where the primary task of management is to maximize value through the optimal deployment of existing resources and capabilities” (Grant, 1996, p. 110). Knowledge as a resource within a firm’s resource base encompasses enlarged experience in the field of market insight, competitive intelligence, technological expertise and the understanding of political and economic developments (De Wit and Meyer, 2004).

Today’s understanding of knowledge does not only perceive knowledge as a competency by itself, like a manufacturing process or human resource practice, but also a potential for achieving competitive advantages (Inkpen and Dinur,1998). Davenport and Prusak (1998) even took one step further by claiming that “in a global economy, knowledge may be a company’s greatest competitive advantage” (p.13). They see a knowledge advantage as a sustainable advantage, since it generates increasing returns and continuing advantages. Competitors are, after some time, always able to imitate the market leader’s product or service in terms of quality and price. By the time this happens, only the company rich in knowledge and corresponding knowledge management can have progressed to the next level of quality and innovation. Furthermore, Davenport and Prusak (1998)

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point to another fact that makes knowledge indispensable and more important than material assets for every company: While the value of material assets decreases with ongoing use, knowledge assets increase in value when used. According to Argote and Ingram (2000), explanations of competitive advantages that rely on the positioning of organizations within an industry or the deployment of organizational assets through competitive interaction with rival firms have been relatively deemphasized.

This stresses the tremendous importance of knowledge and the corresponding effective management of knowledge, since resources can only be productive, if the company has sufficient capabilities to exploit them (Chini, 2004). The result of this knowledge-based view of the firm can be seen in the recent trend of creating new positions within large companies on the management level, namely the position of Chief Knowledge Officer (CKO), who is in charge of the entire knowledge management.

Before getting to the issue addressed in this study - the knowledge transfer from western companies to companies in the developing world - it is vital to define the terms knowledge, knowledge management and knowledge transfer, which will be taken care of in the following chapters.

At the beginning of this journey, the basic term of knowledge will be elaborated on. In the course of this process, not only the issue of defining knowledge as well as its classification from similar terms will be given, but also a comprehensive overview of the several forms of knowledge, which also contains material about the different bearer of knowledge.

2.1 Knowledge

There is no common definition of the term knowledge. In the following it is the aim to distinguish knowledge from data and information and to provide an overview of different definitions and forms of knowledge.

2.1.1 Data, information and knowledge

Researchers dealing with knowledge and related terms are facing various literature and definitions about the terms data, information and knowledge and their strong tie. It is important to mention that these are not interchangeable objects (Davenport and Prusak, 1998). The connection and classifications between the three terms is reflected in Figure No. 2.1.

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Data can be described as a bundle of objective facts or as a sequence of symbols and they do not contain any information of how to make use of them in a given context. Within an organizational context, data can be described as structured records of transition (Davenport and Prusak, 1998). The transition from data to information takes place by enriching the data at hand with a specific context and a meaning, thus making the symbols and facts significant. Davenport and Prusak (1998) refer to that as “adding value in various ways” (p.4).

Knowledge results from combining various pieces of information, interpreting them and giving them a meaning as a whole. This suggests that individuals generate knowledge on the basis of information, which in turn derives from data that is perceived in their surroundings. Since perception differs from individuals to individuals due to their frame of reference – the complex stream of experience and information constituting the way we understand and perceive our surroundings (Weick, 1995) - the process of sensemaking and giving meaning to data or information also varies from person to person. This makes knowledge individually unique.

INFORMATION KNOWLEDGE + Combination SYMBOLS + Syntax DATA + Context

Figure No. 2.1 Data, Information and Knowledge (Chini, 2004), (Werner, 2004)

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Probst and Romhardt (1998) on the other hand do not strictly distinguish between information and knowledge, but speak about a “continuum” between the poles Data and Knowledge (see Figure No. 2.2)

Contrarily, Nonaka and Takeuchi (1995) again stress the differences between information and knowledge by mentioning three differentiating characteristics: “First, knowledge, unlike information, is about beliefs and commitment. Knowledge is a function of a particular stance, perspective, or intention. Second, knowledge, unlike information, is about action. And third, knowledge, like information, is about meaning. It is context-specific and relational” (p. 58). The latter suggests that the existing similarities between knowledge and information lie in their characteristics of being context-specific and relational in that they depend on the situation and are created dynamically in social interaction among people (Nonaka and Takeuchi, 1995).

In conclusion, as Albert Einstein simply put it: “Information is not knowledge”.

2.1.2 Definition of knowledge

The next paragraphs contain some of the most often quoted definitions when it comes to knowledge. This should point to the complexity of this term.

Data………Information………Knowledge

Unstructured……….Structured Isolated………....Embedded Context-independent………..Context-dependent Low behavior control……….…….High behavior control Signs………Cognitive behavioral patterns Distinction………...………Mastery/Capability

Figure No. 2.2 Continuum of data-information-knowledge (Probst and Romhardt, 1999) (Chini, 2004)

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• The Oxford English Dictionary defines knowledge as

1.) expertise, and skills acquired by a person through experience or education; the theoretical or practical understanding of a subject,

2.) what is known in a particular field or in total; facts and information or 3.) awareness or familiarity gained by experience of a fact or situation.

• Davenport and Prusak (1998) understand knowledge as a

“[…]fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories, but also in organizational routines, processes, practices and norms” (p. 5).

• Sveiby (2001) states that

“Knowledge defined as a ‘capacity to act’ is dynamic, personal and distinctly different from data (discrete, unstructured symbols) and information (a medium for explicit communication). Since the dynamic properties of knowledge are in focus, the notion Individual Competence can be used as a fair synonym” (p.345).

• Nonaka and Takeuchi (1995) see knowledge as a

“dynamic human process of justifying personal belief toward the truth” (p.58).

2.1.3 Forms of knowledge

In the literature one can find a multitude of different classifications with regard to knowledge. This chapter unites the most common approaches under one roof to relieve the overview.

Knowledge is saved in two different categories of the long-term memory, which are, in terms of neurophysiology, locatable and distinguishable with regard to their functions: the procedural and declarative memory. Further on, knowledge is generally subcategorized into explicit or articulated, and implicit or tacit knowledge. These two dimensions go back to the philosopher Michael Polanyi (1993), who observed that performers were capable of showing skills without being able to completely account for their cognitive basis. According to Polanyi (1993), all actions include tacit and explicit elements of knowledge, with the tacit part being extremely difficult to articulate and thus

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to transfer. Nowadays, a lot of researchers base their theories on the distinction of tacit and explicit knowledge (Chini, 2004).

Furthermore and with regard to its availability and the bearer of knowledge, knowledge can be ontological differentiated by individual, collective and organizational knowledge.

It is important to enlighten the different forms of knowledge, since the likelihood of successful knowledge acquisition and knowledge transfer depends on the form of knowledge being transferred (Davenport, 1998). For instance, the transfer of tacit/implicit knowledge is by far more complicated than explicit knowledge (Argote and Ingram, 2000).

The connection between the forms of knowledge is highlighted in Figure No. 2.3.

FORMS OF KNOWLEDGE

Procedural Knowledge Procedural Memory Tacit Knowledge Knowing-how Declarative Knowledge Declarative Memory Explicit Knowledge Knowing-about Individual Knowledge Collective Knowledge Organizational Knowledge Episodic Semantic

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19 Tacit and procedural knowledge

According to Polanyi (1983), we know more than we can tell. This form of knowledge is referred to as tacit or implicit knowledge. “Tacit knowledge is that which is understood within a knower’s mind” (Jennex, 2006, p.3). Hedlund (as quoted in Chini, 2004, p. 10) defines tacit knowledge as the non-verbalized, intuitive and unarticulated part of knowledge. The term tacitness of knowledge refers to its characteristic of being very difficult to transfer, since it includes beliefs and emotions and depends on one’s individual experience, subjective insights, intuitions and hunches (Nonaka and Takeuchi, 1995, Nonaka, Toyama and Konno in Nonaka and Teece, 2001). It is deeply rooted in actions, routines, procedures, commitment, values and ideals. Therefore, it cannot easily be shared or communicated (Nonaka and Takeuchi, 1995). Grant (1996) associates tacit knowledge with the expertise in knowing how to do something. Tacit knowledge thus spans a resource of a firm, which is, among others, based on skills, capacities, competences or technology. An often consulted example for the explication of tacit knowledge is the capability of riding a bike. There are not really any instructions or manuals of how to learn to ride the bike, yet nearly every person is capable of doing it and never unlearns doing so.

Within the area of procedural knowledge, a lot of differences in opinion exist. One view of procedural knowledge is that it is knowledge that manifests itself in the doing of something, thereby making it a reflection of motor or manual skills and of cognitive or mental skills. Another common view is that procedural knowledge is knowledge about how to do something, which is in conformity to Grant (1996), as mentioned above. This suggests that procedural knowledge is strongly connected to tacit knowledge. (Nickols, 2000)

In the literature there also seem to exist disagreements concerning the difference between tacit knowledge and implicit knowledge. While, for instance, Chini (2004) notes that tacit knowledge does not gain its value from being impossible to articulate, but from not having been articulated yet, Nickols (2000) draws a straight line between tacit and implicit knowledge by claiming that tacit knowledge cannot be articulated at all and implicit knowledge did not happen to get articulated yet. In many other literatures, the terms implicit and tacit knowledge are used synonymously and interchangeably.

In the following chapters, tacit knowledge is understood as knowledge, which has not been articulated yet – but it is possible to do so - and which is saved within the procedural memory, perceiving procedural knowledge as the skill to know-how and as the knowledge that is reflected in the doing of the knowledge bearer.

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20 Explicit and declarative knowledge

Explicit knowledge, in contrast to tacit knowledge, is codified through words, numbers and codes and can be precisely and formally articulated (Hedlund, as quoted in Chini, 2004, p.9). Nonaka, Toyama and Konno (in Nonaka and Teece, 2001,p.15) state that “explicit knowledge can be expressed in formal and systematic language” and shared in the forms of data, scientific formulas, specifications, manuals and such (Nonaka, Toyama and Konno in Nonaka and Teece, 2001, p. 15). Another definition of explicit knowledge is given by Nonaka and Takeuchi (1995, p. 8): “Explicit knowledge can be expressed in words and numbers, and easily communicated and shared”.

Due to these characteristics it can be captured in form of text, diagrams, tables, product specifications, hard data, scientific formulas, manuals, codified procedures or universal principles (Nickols, 2000) (Nonaka and Takeuchi, 1995) (Nonaka, Toyama and Konno in Nonaka and Teece, 2001), and consequently passed on more easily than tacit knowledge. This suggests that by modern means of information and communication technology explicit knowledge can be saved, transferred and made use of. According to Grant (1996), explicit knowledge can be put on the same level with the capability of knowing about facts and theories.

Declarative knowledge has much in common with explicit knowledge, since the declarative knowledge consists of descriptions of facts and things or of methods and procedures (Nickols, 2000). The declarative or descriptive knowledge is the type of knowledge that is expressed in declarative sentences or indicative propositions, putting it in strong contrast to the procedural knowledge. This suggests that all declarative knowledge is explicit knowledge, since it is knowledge that has been articulated.

Furthermore, declarative knowledge itself is divided into episodic and semantic knowledge (Payne, Nadel, Britton and Jacobs in Reisberg, 2003, pp. 76 – 129):

• Episodic: represents the memory for “episodes” (for instance, the context of an experienced event in terms of where, when, with who, etc…)

• Semantic: represents the memory for knowledge one acquires during events in terms of facts about the world or meaning of words, etc…(for instance, knowing that April is the first month alphabetically, but January the first one

chronologically)

Figure No. 2.4 summarizes the main differences between declarative and procedural knowledge in order to aid in sorting out matters.

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21 Individual, collective and organizational knowledge

“Individual Knowledge reflects individual experience and constitutes the basis for the development of organizational knowledge” (Chini, 2004, p. 10). According to Probst and Romhardt (1999) and Werner (2004), collective knowledge in turn represents more than the sum of the individual knowledge of the members of that collective, since synergy effects may result from combining several extracts of individual knowledge to one entity. This, however, requires that the members of the group are potentially capable of linking their individual knowledge (Werner, 2004). This suggests that collective knowledge is not carried by one single person in charge, but only from the group as a whole.

The organizational knowledge comprises both individual and collective knowledge and is continuously generated from these two forms, with tacit and explicit knowledge being elements of every ontological level of this hierarchy (Smith, 2006). While most explicit knowledge and all tacit knowledge is stored within the individuals, large of part of this knowledge is created within the firm and is therefore firm specific (Grant, 1996).

Facts and Things Tasks and Methods Motor Skills Mental Skills

“Describing“ Declarative Procedural “Doing“

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Demonstrating the relationship between the different types of knowledge that are present within a firm’s resource base is a crucial step to be taken, since the transferability of knowledge tremendously depends on the form of knowledge being transferred. As mentioned above, individual knowledge represents the basis of organizational knowledge. As Simon (as quoted in Grant, 1996, p. 112) put it, an organization only learns in two ways:

1. By the learning of its members

2. By ingesting new members, who have knowledge the organization didn’t previously have. COLLECTIVE KNOWLEDGE

ORGANIZATIONAL KNOWLEDGE

INDIVIDUAL KNOWLEDGE

+ Synergy effects + Synergy effects

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This stands in conformity to Nonaka and Takeuchi (1995), who claim that organizations cannot create knowledge on their own without the initiative of the individual and the interaction taking place within the group. Hence, an organizations’ ability to create new knowledge and to learn is solely based on the initiative and commitment of its employees.

Through synergy effects, the pool of individual knowledge that is constituted by the knowledge of every individual member of a group within an organization, for instance the accounting or marketing department, becomes larger than the sole sum of individual knowledge. The collective knowledge, now coming from within each department of an organization, is then being combined to organizational knowledge. Also here, synergy effects guarantee that the organization-specific knowledge as a whole is larger and more voluminous than the plain sum of every single collective knowledge. At this point it is important to note that the connection explained here does not disapprove of organizational learning deriving from individual knowledge directly, but it is the aim to point to the fact that the learning effect via collective knowledge is more promising.

In the literature, different bearers of knowledge are distinguished. “Organizational knowledge is embedded knowledge and comprises belief systems, collective memories, references and values.” (Chini, 2004, p.10). According to Davenport and Prusak (1998), organizational knowledge is often embedded not only in documents or repositories, but also in organizational routines, processes, practices and norms. With reference to Argote and Ingram (2000), knowledge is embedded within the three basic elements of an organization, namely its members, tools and tasks and the various sub-networks that can be formed by combining or crossing these basic elements. Hedlund (as quoted in Chini, 2004, p.10) in turn distinguishes of the ontological level of the knowledge bearer the levels of individual, group (collective), organizational and inter-organizational domains, while Walsh and Ungson (as quoted in Argote and Ingram, 2000, p.152) speak of five repositories for knowledge in organizations:

a) Individual members

b) Roles and organizational structures

c) The organization’s standard operating procedures and practices d) Its culture

e) Physical structure of the work place

Werner (2004) additionally separates natural and unnatural bearers of knowledge (See Figure No. 2.6)

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2.2 Knowledge management

Referring to the importance of knowledge as a source of a firm’s sustainable competitive advantage, it is necessary to understand and to implement processes through which firms are able to access and utilize the knowledge, which is possessed by their members (Grant, 1996). From a strategic point of view, knowledge furthermore represents an important element for an organization: in order to maintain the important characteristics of a hard-to-imitate and substitutable, and potentially value-generating resource, it has to be led by an effective and efficient knowledge management that aims at accumulating this knowledge and at stimulating its conversion into competitive advantages (Werner, 2004). This suggests the necessity of installments of knowledge management processes through which exploitation and utilization of knowledge is ensured.

The aim of this chapter is to introduce the fundamental approaches towards knowledge management in order to enable the classification and differentiation of knowledge transfer as a subarea of knowledge management.

Knowledge bearers Unnatural Organizational culture Processes Organizational structure Physical structure of the workplace Information storing data mediums Natural Individuals

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25 2.2.1 Definition of knowledge management

A multitude of definitions concerning knowledge management can be found in the literature. Chini (2004) provides an overview of one of the most often cited definitions (see Table No. 2.1).

Source

Definitions

Birkinshaw(2001, p. 12)

Knowledge management can be seen as a set of techniques and practices that facilitates the flow of knowledge into and within the firm.

Buckley and Carter (1999, p. 82)

Knowledge management contains “the internal mechanisms for coordination, that is, for pooling the key information garnered by managers whose task it is to monitor external volatility and discover new opportunities”.

Davenport et al. (2001, p. 117)

Knowledge management is “the capability to aggregate, analyze, and use data to make informed decisions that lead to action and generate real business value”.

Demarest (1997, p.379) “Knowledge management is the systematic underpinning, observation, instrumentalization, and optimization of the firm’s knowledge economies”.

Leonard Barton (1995, p. xiii)

“The primary engine for the creation and growth and of technological capabilities is the development of new products and processes, and it is within this development context that we shall explore knowledge management . . . The management of knowledge, therefore, is a skill, like financial acumen, and managers who understand and develop it will dominate competitively.”

Malhotra (1998, p.59) “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.”

Stewart et al. (2000, p. 42)

“The premise is that knowledge assets, like other corporate assets, have to be managed in order to ensure that enterprises derive value from their investment in knowledge assets.”

Tsoukas and Vladimirou (1996, p. 973)

Knowledge management “is the dynamic process of turning an unreflective practice into a reflective one by elucidating the rules guiding the activity of the practice, by helping give a particular shape to collective understandings, and by facilitating the emergence of heuristic knowledge”.

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“Two approaches towards knowledge management can be found in the human resources-oriented and the technology-oriented approach” (Jacob and Ebrahimpur, as quoted in Chini, 2005, p. 10). However, recent research has applied the integrative-approach, claiming that best results are only achieved by combining human and technological components (Chini, 2004). In that connection, a nice illustration is provided by the conceptualization of knowledge management as it is suggested by Malhotra (see Table No. 2.1), stating that both organizational processes and the creative and innovative capacity of the employees embody the overall process of knowledge management. In this study, the integrative approach towards knowledge management will be used, understanding effective knowledge management as a process of a successful interplay between technological and human concepts that is taking place organization-wide and between collaborating organizations.

2.2.2 Theoretical approaches towards knowledge management

In the following, a short explanation of a few approaches towards knowledge management is given.

The building blocks model by Probst and Romhardt (1999)

A very often quoted theoretical concept is the one developed by Probst and Romhardt (1999), which is characterized by its high practical relevance. Introducing eight related and interconnected building blocks allows for a comprehensive examination of knowledge management. With the help of these blocks, it is the aim to provide the employees with the opportunity to be better able to understand and describe emerging problems concerning knowledge within their organization. The definition of knowledge management, according to the authors, sees knowledge management as pragmatic development of ideas of organizational learning, whereby the focus is put on improving organizational capabilities on all levels of the organization by dealing with the resource knowledge more efficiently.

At this point, the authors of this paper want to stress that the source is originally written in German and it was only available to them as such. Therefore, the following explanations are based on the personal and not professional translation of the German source. However, maximum effort and caution has been used to provide an appropriate and logical translation of the technical terms.

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Knowledge measurement

Knowledge goals Feed

back Knowledge storage Knowledge acquisition Knowledge creation Knowledge sharing Knowledge identification Knowledge exploitation

As highlighted in Figure No. 2.7., the disposition of the building blocks is split into an outer circle and an inner circle. The outer circle comprises the building blocks knowledge measurement and knowledge goals with the managerial tasks to set objectives, to implement them and to measure their success. The inner circle containing knowledge identification, knowledge acquisition, knowledge creation, knowledge sharing, knowledge exploitation and knowledge storage represents the functional part. An important characteristic of this model is the fact that the building blocks are directly connected to each other. Changing one building block will also cause the others to change, meaning that building blocks must not be regarded in isolation from the others. In the following, every single building block will be explained in more detail.

• Knowledge goals

Identifying knowledge goals stands at the beginning of the knowledge management chain and aims at providing a clear vision of what is desired to achieve, which can serve as a basis for control and implementation, and which is setting up a clear line that each activity within the knowledge management has to follow. Thereby, goals can be differentiated in normative, strategic and operative objectives. Normative goals deal with the creation and development of a knowledge-stimulating organizational culture, where sharing and enhancement of one’s own capabilities build the fundament of efficient knowledge management.

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Strategic knowledge goals define organizational core knowledge and describe future needs of the organization for competence and knowledge, while operative knowledge goals are taking charge of actively implementing the knowledge management activities by concretizing the normative and strategic goals.

• Knowledge identification

The authors state that a lot of multinational corporations are facing severe problems in keeping sight of their internal and external data, information and capabilities. Thus, it is the task of an effective knowledge identification to make the internal and external knowledge transparent and accessible. In that way, inefficient decisions can be avoided, and employees are supported in making use of their capabilities by being able to efficiently search for knowledge.

• Knowledge acquisition

Companies are nowadays not capable of creating the knowledge they require to conduct various activities all by themselves. Instead, specific knowledge has very often to be acquired from different sources, which can encompass:

- The knowledge from other companies (e.g. through mergers and acquisitions)

- The knowledge from stakeholders (e.g. acquiring knowledge from customers by integrating key customers in the development process)

- The knowledge from external knowledge bearer (e.g. recruitment of experts) - Purchase of knowledge products (patents, blueprints, software, etc…)

• Knowledge creation

Complementary to knowledge acquisition, companies can also enlarge their knowledge base by creating and developing knowledge by themselves through focusing on manufacturing new capabilities, products, better ideas and more productive processes, which do not exist yet. This can not only be achieved by means of Research & Development, but also through promoting and rewarding creative working as well as the development of innovative ideas, and through corresponding communication among the employees.

The two building blocks knowledge acquisition and knowledge creation span processes which Davenport and Prusak (1998) refer to as knowledge generation.

Figure

Figure No. 1.1     The connection between the research questions
Figure No. 1.2     The disposition of the paper
Figure No. 2.1     Data, Information and Knowledge (Chini, 2004),      (Werner, 2004)
Figure No. 2.2     Continuum of data-information-knowledge (Probst and Romhardt, 1999) (Chini,  2004)
+7

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