Formal mechanisms of repatriate knowledge transfer and assimilation

Transcription

1 Department of Business Studies Master Thesis Supervisor: Martin Johansson June 4th, 2009 Formal mechanisms of repatriate knowledge transfer and assimilation A study of knowledge management in MNCs Author: Ulrika Kilnes

2 Abstract This paper investigates formal mechanisms of knowledge transfer and assimilation in Large Cap companies listed on the Nordic Exchange, as well as potential reasons to why formal mechanisms are not used or implemented. The findings, that are consistent with previous research on the subject, indicate that formal mechanisms like reports, seminars, meetings, workshops, IT based systems, and rewards to motivate and stimulate knowledge transfer and assimilation, are in general not used. Investigated potential explanations to why formal mechanisms are not implemented or used are related to the tacit nature of knowledge, the organizational culture and structure, as well as the absence of interest, initiatives and structures. Key words: repatriates, formal mechanisms, knowledge management, knowledge transfer, organizational learning. 2

3 Table of contents 1 INTRODUCTION PROBLEM DISCUSSION PURPOSE DISPOSITION KNOWLEDGE AND KNOWLEDGE MANAGEMENT IN THE MNC THE IMPORTANCE OF KNOWLEDGE WITHIN THE MNC Definition of knowledge EXPATRIATES AS TRANSPORTERS AND CARRIERS OF KNOWLEDGE ORGANIZATIONAL LEARNING IN MNCS THE MANAGEMENT OF REPATRIATES KNOWLEDGE Transmission channels, motivation channels and socialization channels Evaluation and information channels Barriers to the transfer and assimilation of knowledge through formal mechanisms CONCEPTUAL FRAMEWORK OF REPATRIATE KNOWLEDGE TRANSFER AND ASSIMILATION Model 1: formal mechanism to assimilate knowledge and barriers to the use and implementation of these Formal mechanisms Barriers to the implementation and use of formal transfer mechanisms METHODOLOGY EXPATRIATE DATA Collection of expatriate data Sample selection Limitations MANAGER DATA Collection of manager data Sample selection Limitations FINDINGS KNOWLEDGE TRANSFER AND ASSIMILATION THROUGH FORMAL MECHANISMS Reports, meetings, seminars and workshops IT systems Rewards BARRIERS RELATED TO THE USE AND IMPLEMENTATION OF FORMAL MECHANISMS Tacit nature of knowledge Organizational culture and structure Absence of interest, initiatives and structures ANALYSIS FORMAL MECHANISMS OF REPATRIATE KNOWLEDGE TRANSFER AND ASSIMILATION BARRIERS RELATED TO THE USE AND IMPLEMENTATION OF FORMAL MECHANISMS CONCLUSION AND IMPLICATIONS IMPLICATIONS REFERENCES...37 APPENDIX 1: CONTACTED COMPANIES FOR EXPATRIATE SURVEY...41 APPENDIX 2: QUESTIONNAIRE FOR EXPATRIATES...43 APPENDIX 3: LETTER TO HR MANAGERS FOR THE EXPATRIATE SURVEY...45 APPENDIX 4: LETTER TO EXPATRIATES...46 APPENDIX 5: QUESTIONNAIRE FOR HR MANAGERS

4 APPENDIX 6: LARGE CAP COMPANIES...49 APPENDIX 7: LETTER TO HR MANAGERS...50 APPENDIX 8: RESPONSE RATES FROM PARTICIPATING COMPANIES

5 1 Introduction Globalization has affected they way of doing business in several ways. One effect is the increasing number of managers and other employees that are relocated on assignments abroad, the so-called expatriates (Bolino, 2007). Another effect is the increased importance of knowledge and knowledge related processes in MNCs 1. The possibility for MNCs to learn from several different markets and transfer this local market knowledge to other units within the organization and therefore enhance the knowledgebase of the MNC is what constitutes the MNCs competitive edge over national firms. The use of expatriates is one of the key methods used to transfer knowledge (Nonaka and Takeushi, 1995). The expatriates are both the importers and exporters of local market knowledge (Inkson, Arthur, Pringle and Barry, 1997). Expatriates are a key resource to new organizational knowledge since they are able to gain tacit knowledge 2 about new markets, cultures and ways of doing business. Expatriates are also able to transfer knowledge based on experience to other parts of the MNC (Lazarova and Cerdin 2007). 1.1 Problem discussion If repatriate knowledge gained during the international assignment is transferred and shared with the rest of the organization, the knowledgebase of the MNC as a whole can be enhanced (Downes and Thomas, 1999). However, the transfer of knowledge is not as straightforward as it first might seem. Previous studies indicate that companies both fail to take advantage of the knowledge that expatriates gain abroad, as well as, run into problems when trying to transfer the knowledge. Downs and Thomas (1999) as well as Kamouche (1997) highlight the importance of formal transfer mechanisms 3 when exploiting expatriates knowledge. Therefore, the following research question will be investigated: To what degree do MNCs use formal mechanisms to transfer and assimilate the knowledge expatriates have gained from their assignments abroad? If they use formal mechanisms, what formal mechanism do they apply? If formal mechanisms are not implemented or used, what are the most common reasons for this? 1 Multinational corporations 2 The type that is based on individual experiences that is hard to codify and teach. 3 Formal mechanisms are here defined as ways of assimilating knowledge that can more effortlessly be standardized within the MNC. 5

6 1.2 Purpose The purpose of this study is to investigate if the repatriates knowledge in MNCs is transferred and assimilated and more specifically to what degree they use formal methods or mechanisms to transfer and assimilate this knowledge. If they use formal mechanisms, which mechanisms they apply will be investigated. If formal mechanisms are not implemented or used, the most common reasons for this will be further investigated. Data will be collected from both managers and repatriates, to get a holistic picture of knowledge management in the companies investigated. Most of the previous research concerning expatriates has focused on the selection and training before departure and the adjustment upon repatriation, but little attention has been given to the issue concerning knowledge transfer and knowledge transfer mechanisms. The issue of repatriate knowledge transfer and exploitation is important to investigate since being able to transfer and assimilate knowledge through formal mechanisms is one of the most important competitive tools of the MNCs today. Since earlier studies have indicated that the knowledge gained by expatriates is not fully exploited, research on formal transfer mechanisms, as well as reasons for why they are not used in certain MNCs can be of great value for firms that aim to improve their knowledge management and transfer procedures. 1.3 Disposition The following section will give a brief overview on the literature written in the area of knowledge and knowledge transfer and assimilation. Section three will highlight the arguments for the choices made and the limitations of the study. In section four the results will be presented and in section five those results will be analyzed by using the presented theory. The thesis then ends with conclusions, the managerial implications of the study and suggestions for further research. 2 Knowledge and knowledge management in the MNC There is not much research done on the issue of managing repatriates knowledge and assimilating it through formal mechanisms in MNCs. This literature review will therefore focus on the relatively few articles written on this subject. The literature review will also focus on the importance of knowledge, the importance of expatriates as transporters and 6

7 carriers of knowledge and different formal mechanisms used to transfer and assimilate knowledge. Finally, the literature will also discuss potential reasons to why formal mechanisms are not implemented or used. This section will then be concluded with a presentation of the conceptual framework that will guide the empirical data collection on formal transfer mechanisms of repatriate knowledge. Since this thesis does not investigate informal transfer mechanisms, these will not be discussed in the literature review. 2.1 The importance of knowledge within the MNC Globalization has affected the way of doing business in several ways. Two of the effects of this are the increasing number of managers and other employees that are relocated on assignments abroad, the so-called expatriates (Bolino, 2007), and an increased importance of knowledge (Grant, 1996a) and knowledge related processes in MNCs. According to Grant (1991) a sustainable competitive advantage requires a resource that is idiosyncratic, and not easily transferable or replicable. Knowledge, and tacit path-dependent knowledge in particular that is difficult to adopt by competitors, fits into the criteria and is therefore one of the most strategically significant resource for the MNCs (Argote and Ingham, 2000; Grant, 1996b; Spender, 1996). The possibility for MNCs to learn from several different markets and transfer this local market knowledge to other units within the organization and therefore enhance the knowledgebase of the MNC is what constitutes the MNCs competitive edge over national firms (Argote and Ingham, 2000; Grant, 1996b; Spender, 1996). According to Lank (1997) knowledge in the form of expertise of employees, constitutes the firm s greatest asset for value creation in the organization. Organizations that enable individuals to share knowledge and experience with others in the organization, and share knowledge through transfer of skills, will emerge as smarter and therefore also more competitive (Downes and Thomas, 2000). According to Sveiby (2001) knowledge shared is knowledge doubled since knowledge that someone learns from another adds to that person s knowledge without leaving the other Definition of knowledge To be able to analyze the transfer and assimilation of knowledge, there is a need for a discussion and definition of the concept of knowledge. As discussed by Andersson and Hermansson (2009), different definitions of knowledge can help to break down the concept of knowledge when analyzing empirical findings to gain a better understanding of how and why these different types of knowledge can have different effect on the 7

8 assimilation of knowledge. When it comes to the transferability of knowledge two different types of knowledge are often highlighted in the literature, tacit and explicit knowledge. Tacit knowledge is the type of knowledge that is hard to observe, codify or teach. Tacit knowledge is obtained through practical experience and observations, and not through formal learning (Riusala and Suutari, 2004), and is acquired and stored within individuals (Grant, 1996a). Explicit knowledge is the type of knowledge that can be shared and formally transmitted through a formal systematic language, for example through blueprints, manuals and documents (Nonaka, 1991, 1994; Riusala and Suutari, 2004). It is discrete or digital and can be captured and stored in libraries, archives and databases (Nonaka, 1994). Kogut and Zander (1992) discuss similar concepts but use different terms. They use the term know-what for relatively articulable knowledge (explicit knowledge or information) and know-how for practical skill or expertise (tacit knowledge). According to Sveiby (1997) none of the definitions available are universally appropriate, since they all depend on the context in which they are used. Bender and Fish (2000) define knowledge as information that is interpreted by the individual and applied for the purpose for which it is needed. Somebody uses the information to create meaning and sense in a new situation (von Krough et al, 2000; Sveiby, 2001). The information is enriched by personal experience, values and beliefs. Knowledge is ideas, facts, concepts, data and techniques stored in the memory of the individual (Bender and Fish, 2000). Expertise on the other hand is defined as specialized knowledge and understanding of a specific field that is enriched through experience, training and education (Bender and Fish, 2000; Starbuck, 1992; Sveiby, 1997). A person with expertise in a certain field is able to create new knowledge and solutions (Bender and Fish, 2000). The unique knowledge base and expertise of an individual is not easily transferred to another individual (Fahey and Prusak, 1998). Together, these definitions contribute to an understanding of the broad concept of knowledge. When expatriates knowledge is discussed in the following section, it can be information, knowledge or expertise, as well as tacit or explicit to its nature. 8

9 2.2 Expatriates as transporters and carriers of knowledge The previous section highlighted the importance of knowledge in the MNCs today. The following section will focus on the importance of expatriates in terms of transporters as well as carriers of this important knowledge between headquarters and subsidiaries in the MNCs. As a result of globalization, it is now common that companies are operating in more than one country. This development has made it important for organizations to not only manage the knowledge that they have within the entire organization and to transfer knowledge, skills and expertise within national markets but also to be able to do this across borders (Lank 1997). Previous studies have highlighted the importance of being able to transfer knowledge from headquarters to subsidiaries (Dunning, 1958; Vernon, 1966), but an increasing amount of studies are now also focusing on the importance of reverse knowledge transfer from subsidiaries to headquarters as a contributor to the sustainable competitive advantage of the firm (Frost, 1998; Hakanson and Nobel, 2000; Zhou and Frost, 2003). The processes of knowledge transfer and organizational learning are what constitute the foundation for building organizational competiveness in a global knowledge economy (Berthoin Antal, 2001; Bonache and Brewster, 2001; Lazarova and Cerdin, 2007). Since knowledge, skills and expertise are often tacit in their nature, and tacit knowledge is difficult to codify and write down and only observable through its application, a company must assign employees to the foreign operations when they want to transfer tacit knowledge between different units. The expatriates are the basic mechanism used to transfer tacit knowledge (Bonache and Brewster, 2001; Riusala and Suutari, 2004). Expatriate managers, when seen as primary vehicles for disseminating knowledge and creating economies of skills across borders, are one of the most vital resources for MNCs today (Downes and Thomas, 2000). Expatriates can be seen as both agents of knowledge transfer when routines of headquarters are transferred to overseas affiliates, as well as agents of learning when transferring international experiences from overseas affiliates back to headquarters (Tsang, 1999). According to Oddou et al (2009) an expatriate post is not just another assignment to be able to acquire better positions within the company, but an opportunity for the expatriate to acquire, create and transfer knowledge that is valuable to the firm, 9

10 both upon expatriation and repatriation. Expatriates can function as a key resource to new knowledge since they are able to gain first-hand experiential knowledge about new markets, cultures, networks, how the company is perceived in the region where they are operating, ways of doing business and establish social connections. They can then transfer this to other parts of the MNC (Collings, Scullion and Morley, 2007; Downes and Thomas, 2000; Lazarova and Cerdin, 2007). If expatriate knowledge gained during the international assignment is transferred and shared it with the rest of the organization, the knowledgebase of the MNC as a whole can be enhanced (Prusak, 1996). Downes and Thomas (2000) describe two main types of knowledge flows that are important in the expatriate mission. The first flow concerns organizational knowledge (corporate policies, philosophies and procedures), transferred by the expatriate from headquarters to the subsidiary. The second flow of knowledge concerns market specific knowledge that is gained by the expatriate and then transferred back to the parent company (Downes and Thomas, 2000). 2.3 Organizational learning in MNCs According to Downes and Thomas (2000) organizational learning occurs when an individual shares his or her tacit knowledge acquired through experience with other individuals in the organization. However, previous studies indicate that there is a gap between what the expatriates learns and what the companies that they are employed by learn (Downes and Thomas, 1999; Forster, 1994; Harzing, 2001; Hermansson and Kilnes, 2008). Many companies do not view repatriate knowledge as a valuable resource or a source of sustainable competitive advantage (Downes and Thomas, 1999; Forster, 1994; Harzing, 2001). Studies have also indicated that companies often fail to assimilate the repatriates knowledge and that it is up to the repatriate to initiate the transfer and sharing of knowledge gained during their international assignment (Berthoin and Walker, 2005; Hermansson and Kilnes, 2008). Berthoin (2001) found evidence in his study suggesting that repatriates felt that too little value was placed on their knowledge gained during their international assignment. Research has even shown that companies, in some cases, do not care about the exploitation of the repatriates skills and knowledge (Fish and Wood, 1997). 10

11 2.4 The management of repatriates knowledge As the previous section illustrated, organizations do not always value and take advantage of repatriates knowledge. To manage these flows of knowledge is of high importance if a company wants to gain something from the expatriates international expertise (Larazova and Cerdin, 2007). Bonache and Brewster (2001) investigate the repatriate phenomenon from an organizational learning perspective to see if and how the MNC utilizes the knowledge. According to them it is important for the MNC to understand what kind of mechanism that potentially exists within the organization that can facilitate the assimilation of knowledge to headquarters as well as to other units of the organization (Bonache and Brewster, 2001). However, Bonache and Brewster do not present any concrete examples of these mechanisms or how these mechanisms could work. However, as mentioned in the previous section, companies often fail to assimilate the repatriates knowledge and it is often up to the repatriate to initiate the transfer and sharing knowledge gained during and after their international assignment (Berthoin and Walker, 2005; Hermansson and Kilnes, 2008) Transmission channels, motivation channels and socialization channels Gooderham (2007) present three sets of mechanisms that may be applied by management to facilitate knowledge transfer within MNCs. These are transmission channels, socialization mechanisms and motivational mechanisms. Transmission channels are formal integrative mechanisms such as permanent international committees, intranet systems, telephone conferences, global forums and workshops. The benefits from IT-based systems have also been acknowledged by Ciabusci (2007). According to Ciabusci (2007), IT systems can function as both a trigger for direct interaction between units with complementary capabilities as well as knowledge duplication between units with similar capabilities. Sveiby (2001) also acknowledges the importance of IT systems and other data handling systems as well as workshops. The second mechanism, socialization mechanisms, refer to mentoring programs and other activities that promote shared values, a mutual understanding, a common language and a corporate culture that gets accepted by employees regardless of their background, culture or ethnicity within the MNC to enhance the internal knowledge transfer (Gooderham, 11

12 2007). MNCs should foster learning communities with for example workshops where employees are able to come together and discuss best practices, issues or skills (Martiny, 1998). The third and last mechanism, motivational mechanisms, refers to the rewarding of behavioral outcomes that enhances knowledge transfer or sharing, whether it is the transfer or integration of knowledge (Gooderham, 2007). Bender and Fish (2002) as well as Downes and Thomas (1999) argue that support and reward can create a knowledgesharing environment where employees know that their knowledge is valued and appreciated by their company Evaluation and information channels Kamoche (1997) argues that if a company wants to benefit from the expatriates knowledge the organization needs to evaluate the expatriates experiences and create information channels (such as manuals, news letters and databases). Kamouche (1997), Downes and Thomas (1999) as well as Sveiby (2001) also argue that MNCs must establish the necessary infrastructure of information channels such as databases, newsletters and manuals that are easily accessible for all units in the MNC, as well as written reports on financial matters, production, personnel, local market situations that enables knowledge transfer (Tsang, 1999; Starbuck, 1992). These channels are especially efficient when transferring explicit knowledge that is relatively easy to communicate and write down (Nonaka, 1994; Bonache and Cervino, 1997; Suutari and Brewster, 2003). Nonaka (1994) and Tsang (1999) argue that explicit knowledge can be transferred through telephone calls, meetings and seminars. However, in order for tacit knowledge to be turned into explicit knowledge, there is a need for interaction and sharing between individuals that enables imitation, observation and practice (Nonaka, 1994). This is possible when repatriates are able to articulate their knowledge (from tacit into explicit) and the receiver is able to internalize it (from explicit to tacit) (Nonaka, 1994). Value creation lies in other words in the conversion of knowledge from one type to another (Nonaka and Takeushi, 1995). This could for example happen in workshops where employees interact with repatriates. 12

13 2.4.3 Barriers to the transfer and assimilation of knowledge through formal mechanisms Transfer of repatriate knowledge within the MNC is not an easy task and a study done by Riusala and Suutari (2004) supports this fact. Riusala and Suutari highlight different sets of factors, also referred to as stickiness factors, that influence the difficulty of international knowledge transfer. One of these factors is relevant to this thesis. The type of knowledge that is transferred, and more specifically if the knowledge is tacit or explicit in its nature, is one of the factors that according to Riusala and Suutari (2004) influences the knowledge transfer. Riusala and Suutari (2004) found in their study that many expatriates perceived that the knowledge they transferred included tacit elements. According to Polyani (1966) we know more than we can tell, meaning that this type of knowledge is hard to write down and pass on (Tsang 1999). One of the problems related to the transfer and management of repatriate knowledge and expertise is that it is something that is created and located within the person s mind, and therefore remains person-bound (Bender and Fish, 2000). Since tacit knowledge is rooted in action and has a personal quality, it is hard to formalize and communicate (Nonaka, 1994). If tacit knowledge cannot be codified and can only be observed when someone performs the skill and acquired through practice, the transfer of knowledge will be slow, costly and uncertain (Kogut and Zander, 1992). Therefore, in order to make the expatriate knowledge useful for the entire organization, the tacit knowledge that is placed in the mind of the individual must be transformed to explicit knowledge that can be shared in the whole MNC. However, since much of what the expatriate acquires is tacit knowledge it is possible that even the repatriates are not fully aware of the knowledge they have acquired, creating additional challenges to knowledge transfer. (Oddou et al, 2009). Similar to Riusala and Suutari (2004), Berthoin (2001) has also highlighted the difficulties connected to knowledge transfers. However, Berthoin s research focuses on the exploitation of expatriate knowledge when the expatriates have returned home. According to Berthoin (2001) there are three main barriers, where two barriers relevant to this thesis, when it comes to turning expatriates knowledge into organizational knowledge. 13

14 The first barrier is connected to the process of organizational learning. Berthoin s study indicates that difficulties related to the distribution of knowledge are linked to the absence of interest, initiatives and structures for the communication of knowledge. As a result the expatriates in the German companies had to develop their own way of distributing their newly gained knowledge. The second type of barrier Berthoin acknowledges is the cultural and structural barrier. Berthoin s study (2001) indicates that the factors needed to motivate and support learning processes were often missing in the organizational/national culture or held back by the firm s structure. The interest in assimilating the repatriates knowledge was not part of the company culture. A result of this could be that the company does not spend enough time or money to develop the necessary mechanisms needed to enable knowledge transfer. 2.5 Conceptual framework of repatriate knowledge transfer and assimilation Downs and Thomas (1999) as well as Kamouche (1997) highlight the importance of formal transfer mechanisms when exploiting expatriates knowledge. However, previous studies indicate that the formal mechanisms are the ones that are most difficult to implement (Berthoin, 2001). Formal mechanisms are here defined as ways of assimilating knowledge that more easily can be standardized within the MNC, as opposed to informal mechanisms that may be initiated by management but are more difficult to standardize and control. A formal transfer mechanism is for example a written report that can be stored and easily accessed by others that seek the same information. A study by Berthoin (2001) showed that one of the factors that made knowledge transfer from repatriates difficult was the lack of formal transfer mechanisms. The literature review has highlighted several different formal transfer mechanisms that are used for the transfer and exploitation of knowledge within an MNC. The conceptual framework developed by Andersson and Hermansson (2009) highlights seven potential mechanisms to assimilate repatriate knowledge; manuals & reports, seminars, meetings & workshops, IT systems, rewards, informal networks & mentoring, strategic vision and career development. However, this thesis will only focus on the first five of these, the formal mechanisms. Since the study is limited to the mechanisms used during the repatriation 14

15 process, ways to assimilate knowledge while the expatriates are abroad will not be taken into consideration. If formal mechanisms are not implemented or used, the potential reasons for this will be investigated. The different formal mechanisms used to manage knowledge that repatriates have gained abroad, as well as potential reasons to why formal mechanisms are not used are summarized in model Model 1: formal mechanism to assimilate knowledge and barriers to the use and implementation of these Formal mechanisms As described in the literature review studies have indicated that writing reports about the repatriates experiences overseas can function as a way of assimilating the repatriates knowledge. Formal manuals and written as well as oral reports are used as means of transferring and storing explicit knowledge within the MNC (Kamoche, 1997; Bonache and Cervino, 1997; Suutari and Brewster, 2003; Starbuck, 1992). Giving the expatriate the opportunity to hold meetings and/or seminars represent another way of assimilating repatriate knowledge (Martiny, 1998; Nonaka, 1994). Studies have also found that workshops are an efficient way of assimilating the type of knowledge that needs to be 4 EQ expatriate questionnaire. For example EQ4.5.6 refers to part 4 question 5.6 in the expatriate questionnaire. MQ manager questionnaire. For expatriate questions see appendix 2 and for manager questions see appendix 5. 15

16 transferred through imitation, observation and practice (Nonaka, 1994). Studies have also indicated that IT systems such as an intranet can function as a mechanism of assimilating repatriates knowledge (Ciabuschi, 2007; Sveiby, 2001). According to Ciabusci, IT systems can function both as a mechanism of knowledge duplication and as a trigger for direct interaction between employees. According to Sveiby (2001) and Gooderham (2007), intranets can function as a mechanism of knowledge assimilation since it enables information to be spread throughout the organization. The use of reward can also function as a mechanism of knowledge assimilation since it can encourage knowledge sharing within the MNC and promote the establishment of a knowledge-sharing environment. (Bender and Fish, 2007) Barriers to the implementation and use of formal transfer mechanisms As previously mentioned, there are different barriers related to the transfer and assimilation of knowledge through formal mechanisms. These barriers will in turn create barriers to the implementation and use of formal transfer mechanisms. The type of knowledge that is transferred, and more specifically if the knowledge is tacit or explicit in its nature, influences the transfer of knowledge (Riusala and Suutari, 2004). In order to make expatriate knowledge useful for the organization, the tacit knowledge that is placed in the mind of the individual must be transformed to explicit knowledge that can be shared in the whole MNC (Bender and Fish, 2000). Since this is a difficult process, the tacit nature of the knowledge might prevent the use of transfer through formal mechanisms. Similar to Riusala and Suutari, Berthoin (2001) has also highlighted the difficulties connected to knowledge transfers. According to Berthoin, difficulties related to the distribution of knowledge are linked to the absence of interest, initiatives and structures for the communication of knowledge. Berthoin also acknowledged the cultural and structural barrier. Berthoin s study (2001) indicates that the factors needed to motivate and support learning processes were often missing in the organizational/national culture or held back by the firm s structure. The interest in assimilating the repatriates knowledge was not part of the company culture. A result of this could be that the company does not spend enough time or money to develop the necessary mechanisms needed to enable knowledge transfer. 3 Methodology In this section the design of the studies and how the data was collected will be presented. 16

17 The choices made and the consequences of these will be argued for. The limitations of the study will also be presented. 3.1 Expatriate data A web survey was conducted during the spring semester of 2008 together with Frida Hermansson and the results were first used in the bachelor thesis Knowledge transfer from expatriated: a study of MNCs exploitation of expatriates knowledge. The first investigation on knowledge transfer and exploitation was conducted from the expatriates point of view Collection of expatriate data Data was collected through an online questionnaire since that would make it possible to collect information from a large sample of expatriates, as opposed to interviews where it would only be possible to reach a few due to time constraints. As a result it was possible to draw more general conclusions based on the results of the study. The questionnaire was designed on the website SurveyMonkey.com. The website was chosen because of the easiness to collect and analyze the results from the respondents. The questionnaire was divided into four different parts; general information, the international assignment, the repatriation, and knowledge and exploitation (see appendix 2). The respondents were asked to answer 27 questions, where four consisted of statements where the respondents were asked to rank their answers on a seven point Likert scale. After some preliminary testing of the questionnaire two questions in the survey were slightly changed in order to avert misunderstanding. These adjustments did, however, not change the contents of the questions Sample selection Since the study concerned knowledge exploitation of expatriates, large international firms were contacted. The sample selection of companies was based on the OMX Stockholm 30 Index of The OMX Stockholm 30 (OMXS30) consists of the 30 most traded stocks on the Swedish Stock Exchange (Den Nordiska Börsen 2008). The OMX Stockholm 30 was chosen since it was the knowledge exploitation of expatriates in companies traded in SEK that were under investigation. The companies quoted on the exchange can also be assumed to have a high degree of transparency when it comes to 17

18 accounting as well as the willingness to answer questions from people outside of the company since those people might be future investors. Large Cap companies have a market cap or market value exceeding 1 billion euro (Den Nordiska Börsen 2008). The assumption that Large Cap companies are more likely than small companies (companies with market values below 1 billon euro) to have the possibility to send expatriates to subsidiaries abroad resulted in the choice of contacting the companies on OMX Stockholm 30, which are all Large Cap companies. There is however a possibility that these Large Cap companies differ in their handling of expatriate repatriation from how Mid Cap or Small Cap companies handle expatriate repatriation. Companies on the Stockholm Stock Exchange are also divided into different industries. However, a specific industry was not selected for the sample. Instead, all the companies on the OMX Stockholm 30 were contacted, which meant that 29 companies were contacted (see appendix 1). The collection of data started out with a sample of 29 companies that are the companies behind the 30 most traded stocks on the OMX Stock Exchange in Stockholm. To collect data from this sample s were sent out to the HR managers, IR managers or communication managers in these companies. The purpose of this was to get hold of names and addresses of expatriates that had returned home from their assignment abroad but were still working within the company. Ericsson offered to send the survey to 10 expatriates. Scania sent it to 18 employees. Only 13 of the companies that we contacted answered, two agreed to participate. Since this only generated 15 survey answers by expatriates, a second round of telephone calls was initiated to all the companies that did not respond to the first or the reminder (the reminder e- mail was sent out ten days after the first ). The result was that Teliasonera, Sandvik, Electrolux, SSAB and Volvo also agreed to participate in the survey. Teliasonera sent the letter to six expatriates and Sandvik to nine. The contact with Volvo, SSAB and Electrolux only generated one response from each firm. Since this still was not enough of respondents for the study, a friend at Ericsson was contacted. This friend offered to help and as a result 97 expatriates from Ericsson were contacted. 18

19 Since time was running out and more answers were still needed, all the other large cap companies on the OMX Nordic Stock Exchange were contacted (see appendix 1). Five of these companies only had operations in one country and as a result an was sent to 91 additional companies. The outcome of this was that four companies agreed to participate in the study. Kesko Food LTD sent the letter to four expatriates, Konecranes Oyj to six, Danske Bank to 21 and Swedbank Group to four expatriates. For response rates from participating companies, see appendix Limitations Only a few of the 120 companies that were contacted agreed to participate in the study. There is a risk that the ones that agreed to participate were the ones that focus on and prioritize their expatriates. This might lead to answers from expatriates that are more positive than the average expatriate would give. This might in turn have affected the results that were found. All Large Cap companies on the Nordic OMX exchange were contacted, a specific sector for the sample was not selected. A limitation of the sample selection could therefore be that the study does not take into account potential industry-related differences. Of the expatriates that agreed to participate in the study, 50,55 percent were employed by Ericsson. That expatriates from Ericsson represented such a large amount of the total respondents could be seen as a limitation. However, their average answers did not deviate from the answers the other respondents from other companies gave. Furthermore, this study did not have a company focus. The aim with the study was to analyze knowledge transfers and knowledge exploitation from the expatriates point of view regardless of the employing company. The employee s point of view was chosen. This choice represents a limitation since it is not possible to tell something about the repatriation policies that actually exist, or does not exist, within the participating companies. It is only possible to analyze how the expatriates experience the knowledge transfer and exploitation. Only the expatriates that are still employed within the company were contacted, not the expatriates that left the company after they returned from their international assignments. Different results might have been reached if the ex-employees were surveyed. They might have been less content with the way they were treated when they came back than the ones 19

20 that stayed within the company. This study highlights the factors that can effect knowledge exploitation within MNCs. Many different external factors could affect how an expatriate believes that his/her knowledge is exploited by the MNC. Age, sex, amount of years within the company, the amount of missions abroad, the expatriates position within the company, location of the assignment, financial bonuses and the success/failure of the mission are all examples of factors that potentially could influence the exploitation of knowledge within a MNC. You could for example assume that an expatriate that has completed many missions abroad would be more likely to transfer knowledge than an expatriate that is doing his/her first assignment (the opposite is of course also possible). A limitation to the study could be that there might be a bias towards the successful or the unsuccessful answers in our survey. For example, expatriates that succeeded with their expatriate assignment might be more willing to talk about their time abroad than the ones that failed. The opposite is of course also in this case possible. 3.2 Manager data The data was collected by Richard Andersson and Frida Hermansson during the autumn semester of During this investigation, the company s point of view on knowledge assimilation and the failure to transfer expatriate knowledge was chosen. A web-survey was conducted Collection of manager data A questionnaire (see appendix 5) was sent out to HR managers in 94 Large Cap companies registered on the Nordic Stock Exchange (see appendix 6). The purpose of this questionnaire was to obtain a broad overview of how companies on the Nordic Stock Exchange assimilate the knowledge that their expatriates have gained abroad. This questionnaire was executed on the website surveymonkey.com. An online questionnaire was chosen for the same reason as the expatriate questionnaire was; due to time constraints. The survey was divided into three parts; general information, the expatriation process, and the repatriation process (see appendix 5). Similar to the expatriate survey, managers were 20

21 asked to answer questions as well as rank different statements on a seven point Likert scale. After some preliminary testing of the questionnaire a few questions in the survey were slightly changed in order to avert misunderstanding. However, these modifications did not change the contents of the questions Sample selection Since the study focuses on expatriates and repatriation, the selection of companies that were to be included in the study was limited to large multinational firms. Since not enough answers were generated from the OMX Stockholm 30 during the expatriate survey and the sample therefore later included all Large Cap companies, all Large Cap companies traded on the Nordic Stock Exchange were contacted for the manager survey. Of the 106 Large Cap companies listed on the Nordic stock exchange the survey was sent to 94 of these companies HR departments. The 16 companies that were excluded from the sample were companies that could not be regarded as MNCs, had gone bankrupt at the time of the survey or did not have any expatriates. Of the 94 addressed companies, 46 completed surveys were received from 39 different companies. The reason why multiple answers from the same company were received could be explained by the fact that many of Large Cap companies have different HR departments for different divisions. For a complete table of response rates from participating companies in this study, see appendix 8. Multiple answers were received from HR departments of the same MNC (ABB x2, Ericsson x3, SCA x2, Scania x3, TeliaSonera x2). Each of the answers collected are chosen to be included. This choice is made since the purpose is not to investigate what different mechanisms that are used within an MNC, but rather what different mechanisms that are utilized. Since different units in an MNC might be utilizing different mechanisms since they are assimilating different types of knowledge, it would be beneficial for the study to include all answers from different divisions in the research Limitations As responses were only collected from 41,5 percent of the addressed companies in the sample for the survey, there is a risk that many of the companies that agreed to participate are the ones that focus on and prioritize repatriate knowledge assimilation. This might lead to answers from the HR managers that deviate from the average. 21

22 As 80 percent of the respondents to the survey were Swedish based companies, the result of this study will tell little about repatriation management in other countries. Moreover, since it was only HR managers that were interviewed at headquarters regarding how they manage repatriation, this will not constitute a complete picture on the whole MNC per se. Similar to the expatriate study, almost all Large Cap companies on the Nordic OMX exchange were contacted and as a result a specific industry was not selected. The limitation of the sample selection could therefore be that the study is not looking for potential industry-related differences. Since it was only large MNCs that were contacted it will not be possible to draw any conclusions regarding repatriate management in smaller MNCs. Since various divisions often constitute an MNC, the possibility that other divisions from the same MNC apply different approaches in their repatriation management is acknowledged. It is almost impossible to investigate knowledge assimilation mechanisms at the repatriation stage of the assignment without taking the assimilation carried out between the expatriate and the organization as the employee is posted abroad into consideration. This kind of knowledge assimilation will however only be treated in the periphery. With this said, the significance of the knowledge assimilation taking place during the assignment is by no means downplayed, but the focus towards the repatriation phase is emphasized. 4 Findings In this section the results from the questionnaires are presented. These results are based on answers from HR-managers and people responsible for international assignments in 39 different Nordic companies as well as 93 expatriates from 11 companies. This section will begin with information about the findings about formal mechanisms used and then continue with potential explanations to why formal mechanisms were not implemented or used in some companies. 4.1 Knowledge transfer and assimilation through formal mechanisms 64,7 percent of the repatriates answered that they transferred knowledge to their coworkers when they came back from their assignment. When the managers were asked to answer if their company learns from the knowledge repatriates have gained abroad and 22

23 grade their answer on a scale from one to seven, where one represented not at all and seven very much, the following answers were collected: As the table shows, the mean score was 4,27, indicating that companies do learn from the knowledge that the repatriates have gained abroad. 96,4 percent of the repatriates answered no to the question Are there formal mechanisms of knowledge transfer related to the return of expatriates in your company?. 70,7 percent of the managers said that their company did not apply formal mechanisms to assimilate the knowledge repatriates have gained abroad. 26,8 percent answered that they to some extent applied formal mechanisms, but only 2,4 percent answered Yes, very much to the statement Would you say that your company applies formal mechanisms to assimilate the knowledge repatriates have gained on their assignment abroad. When the repatriates were asked if their company encouraged and inspired them to share their international knowledge in their everyday work, the following answers were collected: As the table shows, the answers are spread out between all of the seven alternatives, presenting somewhat mixed results. Some of the repatriates answered that their company did encourage and inspire them to communicate their international knowledge in their everyday work, while others disagreed Reports, meetings, seminars and workshops Both managers and repatriates were asked to evaluate the following questions and statements about knowledge transfer through reports, meetings, seminars and workshops. They were asked to evaluate the statements on a scale from one to seven, where one 23

24 represented not at all and seven very much. When asked about formal reports, the following answers were collected from repatriates: As the table shows, the majority of the respondents answered that they did not write a formal report concerning their mission abroad. When managers were asked about formal reports, the following answers were collected: The majority of the managers answered that the repatriates from their company did not write any formal reports about their mission abroad. Managers and repatriates were also asked about opportunities for repatriates to hold seminars and/or workshops concerning their mission abroad. The following answers were collected from the repatriates: The table reveals that most of the repatriates did not agree with the statement that they were given the opportunity to hold seminars and/or workshops concerning their missions abroad. When managers were asked about seminars and/or workshops, the following answers were collected: Similar to the repatriates answers, most of the managers answered that their company did not give the repatriates the opportunity to hold seminars and/or workshops concerning their mission abroad. 24

25 4.1.2 IT systems When the managers were asked to evaluate the question Does your company have any IT-based system (intra-net or likewise) where the repatriates can share their knowledge with co-workers? on a scale from one to seven, where one represented not at all and seven very much, the following answers were collected: A majority of the respondents, 59,5 percent answered that their company does not have any it-based systems where repatriates can share their knowledge with co-workers Rewards 78,2 percent of the repatriates had a financial bonus collected to their assignment, however this bonus was not specifically connected to the transfer of knowledge. When managers were asked to evaluate the question Does your company reward repatriates that communicate their knowledge? on a scale from one to seven, where one represented not at all and seven very much, the following answers were collected: As illustrated in the table, a majority of the respondents answered that their company did not reward repatriates that communicated their knowledge. 4.2 Barriers related to the use and implementation of formal mechanisms After answering the question Would you say that your company applies formal mechanisms to assimilate the knowledge repatriates have gained on their assignment abroad, the 70,7 percent of the managers that answered no were also asked to identify the main reason to why the company did not use formal mechanisms. The following answers were collected: 25

26 As illustrated in the table, a majority of the respondents answered that formal mechanisms were not used because the knowledge was difficult to codify and communicate. 23,1 percent answered that the reason was that their company did not have time and/or money. The remaining 23,1 percent of the respondents answered that their company had not been interested in assimilating their repatriates knowledge. When asked to specify other reasons to why formal mechanisms were not used one respondent wrote that there were not enough HR resources to build the practices needed for establishing formal systems. Another respondent said that This has not been a focus area before and we have been bad at taking care of this information. A definite development area for us. 26 respondents out of 46 answered this question. The reason why this question had so few respondents was that it was a follow-up question. The ones that in the previous question said that formal mechanisms were not used continued to answer this particular question, while the other respondents continued to another section of questions Tacit nature of knowledge As the previous table showed, the main reason according to managers to why formal mechanisms were not used was that the knowledge the repatriates gained abroad was difficult to codify and communicate. When asked what kind of knowledge they gained abroad, 68,6 percent of the repatriates said that they mostly gained specific knowledge about the market. 27,9 percent said that they mostly gained specific knowledge about the unit they were working in, and 3,5 percent answered that they gained specific knowledge about technology and products. When the repatriates were asked if the transfer of 26

27 knowledge was difficult because the repatriate had difficulties in communicating the knowledge, the following answers were collected: As the table shows, the repatriates did not believe that a difficulty in communicating their knowledge was a reason to why the transfer of knowledge was difficult. As the following table shows, the majority of the repatriates also believed that they were aware of the outcome of their mission abroad Organizational culture and structure When repatriates were asked to evaluate statements about the influence of organizational culture and structure on the transfer of knowledge on a scale from one to seven where one is not at all and seven is very much, the following answers were collected: As the table shows, the majority of the respondents did not believe that the organizational culture and structure, as defined in these statements, created barriers to the transfer of knowledge Absence of interest, initiatives and structures When the managers were asked to answer why formal mechanisms were not used in their company, 23,1 percent answered that their company has not been interested in assimilating the repatriates knowledge. When managers were asked if they had been 27

28 encouraged and inspired to share and communicate their international knowledge, the following answers were collected: As the table shows, the results are somewhat mixed, but with a mean score of 3,32 the majority of the respondents disagree with the statement. However, as the following table shows, the majority of the managers that were asked to evaluate the same statement believed that their company did encourage and inspire the repatriates to communicate and share their knowledge. 23,1 percent of the managers answered that formal mechanisms were not used because the company did not have the time or money to develop these kinds of mechanisms. The majority of the repatriates believed that the lack of formal procedures was a reason to why the transfer of knowledge was difficult. When managers were asked if their company had a specific person, group or division responsible for knowledge management concerning repatriates, the following answers were collected: As the table shows, the majority of the respondents answered that their company did not have a person, group or division responsible for knowledge management concerning repatriates. 28

29 5 Analysis In general, the findings from the study indicate that most companies do not utilize formal mechanisms to assimilate the repatriates knowledge. In accordance with the findings from previous studies there is a gap between what the expatriates learns and what the companies that they are employed by learn (Downes and Thomas, 1999; Forster, 1994; Harzing, 2001; Hermansson and Kilnes, 2008). The following section will analyze the findings from the two different studies presented in section four using the theory presented in section two. 5.1 Formal mechanisms of repatriate knowledge transfer and assimilation Downes and Thomas (1999), Forster (1994) as well as Harzing (2001) found that many companies do not view repatriate knowledge as a valuable resource or a source of sustainable competitive advantage for the company. The repatriates in Berthoin s (2001) study felt that too little value was placed on their knowledge gained during their international assignment. However, answers collected in this study suggest that companies actually do listen and learn from expatriates. When the managers were asked if their company learns from the knowledge repatriates have gained abroad, the majority answered that they did. Berthoin and Walker (2005) found that companies often fail to assimilate the repatriates knowledge. However, the majority of the repatriates in this study answered that they transferred knowledge to their co-workers when they returned from their international assignment. Since both managers and repatriates agree that transfer of knowledge occurs and that the company is able to learn from the knowledge repatriates gained abroad, the question is how this transfer and assimilation occurs. Downs and Thomas (1999) as well as Kamouche (1997) highlight the importance of formal transfer mechanism when exploiting expatriates knowledge. However, a study by Berthoin (2001) showed that one of the factors that made knowledge transfer from repatriate difficult was the lack of formal transfer mechanisms. Therefore, different formal mechanisms of knowledge transfer and assimilation were investigated to see if they actually were implemented and used within the different MNCs. Bonache and Cervino (1997) as well as Suutari and Brewster (2003) suggest in their studies that formal reports could function as a method to transfer and store knowledge 29

30 within the MNC. However, when managers were asked if they gave their employees the opportunity to write formal reports about their mission abroad, the majority said that they did not. The majority of the repatriates agreed that they were not given the opportunity to write a formal report. This is troubling since written reports on financial matters, production, personnel, local market situations are easily accessible for all units in the MNC, and therefore enables a cost-effective and efficient transfer of knowledge (Tsang, 1999; Starbuck, 1992). Even though some of the knowledge gathered abroad includes tacit elements that are hard to codify and communicate, market specific knowledge such as knowledge about cultural conventions and specific information about suppliers could relatively easily be collected and stored through formal reports. These reports could become useful for other employees travelling to the same destination on similar assignments in the future. Gooderham (2007), Nonaka (1994) and Tsang (1999) suggest in their studies that meetings and seminars can function as ways of transferring and storing explicit knowledge within the MNC. The meetings and seminars as well as other team activities can help the organization to promote shared values, a mutual understanding, a common language and a corporate culture (Gooderham, 2007; Sveiby, 2001) This could in turn improve the communication between employees and therefore make knowledge transfer less difficult. Workshops could be used as a means of sharing tacit knowledge since workshops enable employees and repatriates to come together and discuss experiences, best practices, issues or skills (Nonaka and Takeushi, 1995; Gooderham, 2007; Martiny, 1998). Managers and repatriates were asked about opportunities for repatriates to hold seminars and/or workshops concerning their mission abroad. Most of the repatriates answered that they were not given this opportunity, and similar to the repatriates answers the majority of the managers answered that their company did not offer the repatriates the opportunity to hold seminars and/or workshops concerning their mission abroad. Since workshops represent one of the few mechanisms available for transferring tacit knowledge within MNCs since the transfer of tacit knowledge takes place when people are able to interact, it is especially unfortunate that workshops are not used as means of transferring knowledge within the studied MNCs. Ciabusci (2007), Sveiby (2001) as well as Gooderham (2007) suggest that IT-systems could function as a way to transfer and store knowledge within the MNCs. IT-based 30

31 intranet systems could enable employees to share knowledge with co-workers, as well as trigger direct contact and meetings where they can transfer tacit knowledge (Ciabusci, 2007). However, the majority of the managers in the survey answered that their company did not have any it-based system where repatriates could share their knowledge with coworkers. Even though a lot of the knowledge that repatriates gain abroad includes tacit elements and therefore is hard to store in databases and share via intranet systems, some of the knowledge is explicit to its nature like for example knowledge about technology and products. Companies could therefore benefit from IT systems if they were used to a greater extent than what seems to be the case in the investigated companies in this study. Gooderham (2007) suggests that motivational mechanisms such as rewarding behavioral outcomes that enhances knowledge transfer or sharing should function as a useful tool when trying to transfer and assimilate knowledge. Bender and Fish (2002) as well as Downes and Thomas (1999) suggest support mechanisms and rewards as important tools when trying to create a knowledge-sharing environment. However, when managers in the survey were asked if they reward repatriates that communicate their knowledge, the majority said that they did not. It seems like even though several studies find support for rewards as something that enhances the knowledge sharing within companies, few companies have implemented a system of rewards. The majority of the repatriates stated that they had a financial bonus collected to their assignment, however this bonus was not specifically connected to the transfer of knowledge. When asked if their company applies formal mechanisms to assimilate the knowledge that repatriates have gained abroad, 96,4 percent of the repatriates and 70,7 percent of the managers answered no. This is also what can be concluded from the results derived from the different specific mechanisms that have been investigated in this section. The potential explanations to why formal mechanisms were not implemented or used will now be investigated. 5.2 Barriers related to the use and implementation of formal mechanisms As the findings from the two different studies show, formal mechanisms are generally not implemented or used. When managers were asked why formal mechanisms were not 31

32 used, managers offered three different explanations; that the knowledge was difficult to codify and communicate (the type of knowledge), that the company did not have the time or money to develop these mechanisms (the organizational culture and structure), or that the company had not been interested in accumulating the knowledge (an absence of interest, initiatives and structures). An organizational culture or structure that does not promote the communication and sharing of knowledge, and the absence of interest, initiatives and structures, are closely related to each other. These will therefore be investigated in connection to each other. The type of knowledge that is transferred, and more specifically if the knowledge is tacit or explicit in its nature, is one of the factors that according to Riusala and Suutari (2004) influence the knowledge transfer. When managers were asked why formal mechanisms were not used to assimilate repatriates knowledge, 53,8 percent answered that the reason was that it is difficult to codify and communicate the knowledge in general, and repatriate knowledge in particular. In accordance with what Riusala and Suutari (2004) found in their study, 68,6 percent of the repatriates said that they mostly gained specific knowledge about the market and 27,9 percent said that they mostly gained specific knowledge about the unit they were working in. Both these types of knowledge generally include tacit elements. However, repatriates disagreed with the statement that the reason to why they did not transfer knowledge was because they had difficulties in the communication of their knowledge. However, it could be that they were able to transfer knowledge, but just not through formal mechanisms. Reasons to why the tacit nature of the knowledge makes knowledge more difficult to transfer through formal mechanisms is that it is created and located within the person s mind, and as a result of this remains person-bound (Bender and Fish, 2000). Therefore it could for example be necessary and more appropriate to transfer knowledge through other mechanisms where employees and repatriates are able to interact (Nonaka, 1994). Another potential explanation is that since much of what the knowledge that the expatriate acquires is tacit knowledge it is possible that even the repatriates themselves are not fully aware of the knowledge they have acquired. This in turn would create additional challenges to the transfer of knowledge (Oddou et al, 2009). When repatriates were asked if they are aware of the outcome of their mission abroad the majority of the respondents answered that they are. However, to be able to draw the conclusion that this therefore is not a challenge influencing the transfer of knowledge, one would have to be able to measure what the expatriate actually did accomplish and 32

33 compare this with what the repatriate believes that he or she accomplished. This was not possible to do in this study. Therefore, it is not possible to say with certainty that Oddou et al s (2009) explanation is or is not supported in this study. Even though the repatriates believe that they are aware of the outcome of their mission abroad, it does not necessarily mean that they are. According to Berthoin (2001), a barrier connected to the process of organizational learning is the absence of interest, initiatives and structures for the communication of knowledge. When managers were asked why formal mechanisms were not used in their company, 23,1 percent answered that their company has not been interested in assimilating the repatriates knowledge. When repatriates were asked if they had been encouraged and inspired to share and communicate their international knowledge, the answers presented somewhat mixed results. Some of the repatriates answered that their company did encourage and inspire them to communicate their international knowledge in their everyday work, while others disagreed. When the managers were asked if their company encourages and/or inspires repatriates to share and communicate their international knowledge in their everyday work, their answers did, similar to the answers from the repatriates, present mixed results. Some agreed that their company did, while others disagreed. However, an absence of interest or initiatives could also be a reflection of the organizational culture and/or structure in the company. When managers were asked why formal mechanisms were not used to assimilate repatriates knowledge, 32,1 percent answered that it was because they did not have the time or money to do this. This could support the cultural and structural barrier to knowledge transfer that Berthoin highlighted in his research. According to Berthoin, certain factors needed to motivate and support learning processes might be missing in the organizational culture or held back by the structure of the firm. Transferring knowledge might not be a prioritized matter in the organization. This is of course closely related to the previously mentioned barrier concerning the absence of interest, initiatives and structures. If the organizational culture does not emphasize the importance of knowledge a result of this could be that not enough time, effort or money will be spent to be able to develop the necessary mechanisms needed to enable knowledge transfer. This might be the case in the companies investigated in this study. Consistent with the findings from Berthoin s (2001) study, the repatriates believed that the lack of formal procedures was 33

34 one of the reasons to why the transfer of knowledge was difficult. According to Tsang (1999) expatriates can be seen as both agents of knowledge transfer when routines of headquarters are transferred to overseas affiliates, as well as agents of learning when transferring international experiences from overseas affiliates back to headquarters. Expatriates are a key resource when creating new knowledge since they are able to gain first-hand experiential knowledge about new markets, cultures, networks, ways of doing business as well as establish social connections, and transfer this to other parts of the MNC (Collings, Scullion and Morley, 2007; Downes and Thomas, 2000; Lazarova and Cerdin, 2007). However, with an organizational culture or structure that prevents the development of necessary formal mechanisms, the company will never be able to extract the true value of expatriation from the repatriates. According to Prusak (1996), the knowledgebase of the MNC as a whole can be enhanced if expatriate knowledge gained during the international assignment is transferred and shared it with the rest of the organization. To manage these flows of knowledge is therefore of high importance if a company wants to gain something from the expatriates international expertise (Larazova and Cerdin, 2007). However, when managers were asked if their company has a specific person, group or division responsible for knowledge management concerning repatriates, the majority answered that they did not. The knowledge that repatriates bring back home is a valuable resource, and to not transfer and exploit this knowledge, and instead let it go to waste, is an ineffective way to manage company resources. 6 Conclusion and implications Repatriates believe that they do share knowledge gained during their international assignment with co-workers, and managers believe that their company does learn from expatriates. However, the first conclusion that can be drawn from the research in this thesis is that the participating MNCs do not use formal mechanisms of knowledge transfer and assimilation in any wider sense. Formal mechanisms of knowledge sharing through reports, meetings, seminars, workshops and IT systems were not commonly used in the studied MNCs. Rewards that were specifically designed to promote and stimulate the communication and sharing of knowledge were not used. Therefore, the findings from this study indicate that most companies do not implement or utilize any formal mechanisms to assimilate and transfer knowledge from repatriates. 34

35 When investigating potential explanations to why formal mechanisms of knowledge transfer and assimilation were not implemented or used, the three investigated factors (type of knowledge, organizational culture and structure, absence of interest, initiatives and structures) could all offer possible explanations. A second conclusion that can be drawn from this study is that the findings are in line with earlier research in this area. The tacitness of knowledge makes it harder to use formal mechanisms since this type of knowledge is hard to codify and communicate. An organizational culture and structure that does not value and prioritize knowledge and knowledge transfer mechanisms, as well as the absence of interest, initiatives and structures, results in a lack of use of formal mechanisms, or that formal mechanisms simple are not implemented in the company in the first place. Similar to previous research, there is often a lack of interest and priority when it comes to the management of repatriate knowledge. However, it is important to note that these conclusions might be dependent on the sample selection. As previously acknowledged in the limitations section, the companies that agree to participate in this study might be the ones that actually focus on knowledge and repatriate knowledge in particular. The opposite is of course also possible. 6.1 Implications This study illustrates that few of the studied MNCs used formal mechanisms to transfer and assimilate knowledge. When asked why, a majority of the managers answered that the main reason to why formal mechanisms were not used was the difficulties related to the communication and codification of repatriate knowledge. Therefore, management 35

36 would benefit from implementing and using other types of mechanisms instead that might be more suitable when trying to transfer knowledge of this kind. Managers also answered that formal mechanisms were not implemented or used as a result of time and money constraints or as a result of a lack of interest in acquiring this knowledge from the company s perspective. Considering the importance of knowledge and the value of repatriate knowledge when shared in the organization, it would make sense for management in MNCs to devote more time, interest and resources to the area of knowledge management. This is important since the possibility for MNCs to learn from several different markets and transfer this local market knowledge to other units within the organization and therefore enhance the knowledgebase of the MNC is what constitutes the MNCs competitive edge over national firms. The results and conclusions from this study are based on answers from Nordic Large Cap companies. An implication for future research would therefore be to investigate formal transfer mechanisms in small companies and/or companies from other parts of the world. Other countries or cultures might for example be better at assimilating repatriates knowledge. Since this thesis only investigates formal mechanisms, another implication for future research would be to investigate the use of informal mechanisms of knowledge transfer and assimilation. 36

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39 Lazarova, M. and Cerdin, J. (2007) Revising repatriation concerns: organizational support versus career and contextual influences, Journal of International Business Studies, Volume 38, Issue 3, Martiny, M. (1998), Knowledge management at HP Consulting Organizational Dynamics, Autumn, Volume 27, No. 2. Nonaka, I. (1991) The Knowledge Creating Company Harvard Business Review Volume 69, Nonaka, I. (1994) A dynamic theory of organizational knowledge creation Organization Science, Volume 5, Issue 1, Nonaka, I. and Takeushi, H. The knowledge-creating company, Oxford University Press, New York (1995) Oddou, G., Osland, J.S. and Blakeney, R.N. (2009) Repatriate knowledge: variables influencing the transfer process Journal of International Business Studies, Volume 40, Polanyi, M. (1966), The tacit dimension, London: Routledge & Kegan Paul. Prusak, L. (1996) The knowledge advantage Planning Review, Volume 24, No. 2, 6-8. Riusala, K. and Suutari, V. (2004) International knowledge transfer and expatriates Thunderbird International Business Review, Volume 46, Spender, J.C. (1996) Making knowledge the basis of a dynamic theory of the firm Strategic Management Journal, Volume 17 (Winter Special Issue), Starbuck, W.H. (1992) Learning by knowledge-intensive firms Journal of Management Studies, Volume 29, Issue 6, Suutari, V. and Brewster,C. (2003) Repatriation: empirical evidence from a longitudinal study of careers and expectations among Finnish expatriates International Journal of Human Resource Management, Volume 14, Issue 7, Sveiby, K-E. (1997), The New Organizational Wealth: Managing and Measuring Knowledge-based Assets, Berrett-Koehler Publishers, San Francisco, CA. Sveiby, K-E. (2001) A knowledge -based theory of the firm to guide in strategy formulation Journal of intellectual capital, Volume 2, Issue 4, Tsang, E.W.K. (1999) The knowledge transfer and learning aspects of international HRM: an empirical study of Singapore MNC s International Business Review, Volume8, Von Krough, G., Ichijo, K. and Nonaka, I. (2000) Enabling Knowledge Creation. How to Unlock the Mystery of Tacit Knowledge and Release the Power of Innovation, Oxford Press, Oxford. 39

40 Vernon, R. (1966) International investment and international trade in the product cycle Quarterly Journal of Economics, LXXX, Zhou, C. and Frost, T. (2003) Centrifugal forces, R&D co-practices, and reverse knowledge flows in multinational firms. Paper presented in AIB annual meeting, 5th -8th July, Monterey, California. 40

41 Appendix 1: Contacted companies for expatriate survey 41

42 42

43 Appendix 2: Questionnaire for expatriates 1. GENERAL INFORMATION 1. Age 2. Sex 3. Nationality 4. Which company are you currently employed in? 5. For how many years have you been employed by the company that you currently work in? 6. What is your current position within the company? 7. Where are you located right now? Corporate HQ, Divisional HQ, Swedish unit, Foreign unit 2. THE INTERNATIONAL ASSIGNMENT 1. When did you complete your last assignment abroad? Year: 2. Where were you located on your last assignment abroad? Country: 3. How many international assignments have you done in your career? 4. How many of these assignments did you do for the company that you currently work in? 5. How long was your last assignment abroad? 6. What position did you have as expatriate on your last assignment abroad? 7. Was any financial bonus connected to your expatriated mission? 8. Was your family with you during your last assignment abroad? 9. If yes, did your family have any problems to to accommodate to local conditions? 3. THE REPATRIATION 1. Did you return home earlier than planned from your assignment abroad? 2. If yes, what was the reason for your early return? I requested and received a transfer back prematurely due to personal reasons. I requested and received a transfer back prematurely due to work related reasons The assignment was completed earlier than the contracted time. The company requested me to return early. 3. What position did you return to after your last international assignment abroad? I returned to my old position. I returned to a similar position. I returned to a different position with higher status. I returned to a different position with lower status. 4. Please evaluate the following statement about career opportunities: After your time abroad, your opportunity to career advancement has: Decreased same increased Please evaluate the following question about expectations: Did your repatriation process meet your expectations?: 43

44 1 not at all 7 very much 4. KNOWLEDGE TRANSFER AND LEARNING 1. Did you transfer any knowledge to co-workers when you came back from your assignment? 2. Are there formal mechanisms of knowledge transfer related to expatriates in your company? 3. Please describe the mechanisms applied by your company to transfer the competence accumulated during your mission abroad: 4. What type of knowledge do you feel that you mostly have gained from your assignment abroad? Specific knowledge about the market Specific knowledge about the unit I was working in Specific knowledge about technology and products 5. Please evaluate the following statements about knowledge exploitation: Scale 1-7 where (1) is not at all and (7) is very much The company evaluated my experience abroad when I returned home. I have been given the opportunity to hold seminars and/or workshops concerning my assignment abroad. I have been assigned to a position within the company that takes advantage of my specific international knowledge. I have been encouraged and inspired by my company to share and communicate my international knowledge in my everyday work. My co-workers have been able to take advantage of and use the knowledge that I gained abroad in their own context. I wrote a formal report on my mission abroad I am aware of the outcome of my mission abroad Collegues are aware of the outcome of my mission abroad 6. Please evaluate the following statements about knowledge transfer: 1 strongly disagree 7 strongly agree Transfer of knowledge was difficult because my co-workers at home interpreted the knowledge differently. Transfer of knowledge was difficult because the organizational culture (tradition, conservatism, power relations, fear of sharing ideas etc.) created barriers for knowledge transfer Transfer of knowledge was difficult because the structure (e.g. hierarchical, bureaucratic) of the company created barriers for knowledge transfer Transfer of knowledge was difficult because of the differences between the home and the host country (legislation, taxation, public authorities, culture) created barriers for knowledge transfer Transfer of knowledge was difficult because the whole expatriation process did not work well in my company Transfer of knowledge was difficult because there were no formal procedures Transfer of knowledge was difficult because I had difficulties communicating my knowledge 44

45 Appendix 3: Letter to HR managers for the expatriate survey Uppsala University Department of Business Studies May 14, 2008 We are two business students from Uppsala University and we are currently writing our Bachelor thesis in International Business. We are writing to you because we believe that your company can contribute with important information needed for our thesis. Our thesis concern international expatriate assignments and we are interested in investigating how companies exploit expatriates knowledge accumulated in international assignments. We would like to send out a questionnaire to employees within your company that have returned from an international assignment. This questionnaire includes 27 questions such as: Did you transfer any knowledge to co-workers when you came back from your assignment? and What type of knowledge do you feel that you have gained on your assignment abroad? The questionnaire will take approximately five minutes to answer. We kindly ask you to provide us with the addresses to the expatriates within your company that have been assigned abroad but have returned home. If you prefer you could alternatively forward the questionnaire yourself to the expatriates. We are sending this to several Nordic companies that all have operations abroad. The collected answers will not be connected to any specific person. When our study is completed we will provide you with a brief report of our findings concerning this hot topic. If you want to have a look at the questionnaire please click on the following link If you have any questions please do not hesitate to contact us. Thanking you in advance for your cooperation! Yours sincerely Frida Hermansson & Ulrika Kilnes frida.hermansson.7528@student.uu.se or ulrika.kilnes.1976@student.uu.se Mobile: Frida or Ulrika

46 Appendix 4: Letter to expatriates Department of Business Studies May 14, 2008 Dear sir / madam, We are two business students from Uppsala University and we are currently writing our Bachelor thesis in International Business. We are writing to you because we believe that you have important information needed for our thesis. Our thesis concern international expatriate assignments and we are interested in investigating how companies exploit expatriates knowledge accumulated in international assignments. Since you have been assigned for a mission abroad we believe that you have valuable information related to this issue. We therefore kindly ask you to help us by answering a questionnaire consisting of 27 questions. We have sent this questionnaire to several Nordic companies that all have operations abroad. The collected answers will not be connected to any specific person. The questionnaire will take approximately five minutes to answer. The questionnaire will take approximately five minutes to answer. To participate please click on the following link: If you have any questions please do not hesitate to contact us. Thanking you in advance for your cooperation! Yours sincerely Frida Hermansson & Ulrika Kilnes frida.hermansson.7528@student.uu.se or ulrika.kilnes.1976@student.uu.se Mobile: Frida or Ulrika

47 Appendix 5: Questionnaire for HR managers 1. GENERAL INFORMATION 1. Nationality 2. Which company are you currently employed in? 3. What is your position within the company? 4. How many years have you been employed by your company? 0-2 years 3-5 years 6-10 years years 20 years or more 5. Where are you located right know? Corporate HQ Divisional HQ Other (please specify) 6. In which country are you located right now? 2. THE EXPATRIATION PROCESS 1. Approximately how many employees does your division send to work abroad each year? or more 2. What positions does your internationally assigned employee normally hold? Managers Engineers Analysts Accountants Other (please specify) 3. Does your company have a specific person/group/division that is responsible for expatriates and the expatriation process? Yes No 4. Does your company have contact with the expatriates during their assignment abroad? Yes, we have a regular contact with all of our repatriates. Yes, but the contact is unsystematic and/or varies between different expatriates. No, only if necessary /if something happens No, the expatriates have to contact us if they have any questions, comments or suggestions. 47

48 3. THE REPATRIATION PROCESS 1. Please evaluate the following statements about repatriation (1= not at all, 7= very much): Does your company evaluate how the repatriates experienced their time abroad? Do the repatriates from your company write any formal reports about their assignment abroad? Does your company give the repatriates an opportunity to hold seminars and/or workshops concerning their mission abroad? 2. Please evaluate the following statements about knowledge sharing and learning (1= not at all, 7= very much): Does your company (in general) assign the repatriates to a position within the company that takes advantage of their specific international knowledge after they return? Does your company have any it based systems (intranets or likewise) where the repatriates can share their knowledge with co-workers? Does your company encourage and/or inspire the repatriates to share and communicate their international knowledge in their everyday work? Does your company reward repatriates that communicate their knowledge? Does your company have a strategic vision concerning knowledge management? Does your company have a specific person/group/division responsible for knowledge management concerning repatriates? Does your company learn from the knowledge repatriates have gained on assignments abroad? 3. Would you say that your company applies formal mechanisms to assimilate the knowledge repatriates have gained on their assignment abroad? Yes, very much. Yes, to some extent. No 4. If you answered yes to the former question, could you please give an example of these formal mechanisms? 5. If you answered no to the former question, what is the main reason to why your company does not use formal mechanisms to assimilate the repatriates knowledge? Because it is difficult to codify and communicate the knowledge in general and repatriate knowledge in particular. Because the company does not have the time and/or money to develop these kind of mechanisms. Because, the repatriates have not been interested in transferring or communicating their knowledge. Because, the company have not been interested in assimilating this knowledge. Other (please specify) 48

49 Appendix 6: Large Cap Companies 49

50 Appendix 7: Letter to HR managers Uppsala University Department of Business studies Nov 25, 2008 Dear sir/madam, We are two business students from Uppsala University and we are currently writing our Master thesis in International Business. We are writing to you because we believe that your company can contribute with important information needed for our thesis. We intend to investigate the interesting and important subject of repatriation and more specifically the assimilation of repatriates knowledge. In a prior study conducted by one of the authors behind this research it was concluded that multinational corporation often fail to exploit the knowledge gained by the expatriates. We would now like to keep building on this string of thoughts, and investigate exactly how a multinational corporation handles the issue of assimilating expatriates knowledge accumulated in international assignments. We strongly believe that the findings of an investigation of this nature could contribute with valuable information on how multinationals can leverage on the knowledge created throughout the corporation. Therefore, we would be of great gratitude if you could to help us by answering a questionnaire consisting of 22 questions. The questionnaire will take approximately five to ten minutes to answer. The collected answers will not be connected to any specific company. When our study is completed we will of course provide you with a brief report of our findings concerning this hot topic. To participate please click on the following link: Thanking you in advance for your cooperation! If you have any questions please do not hesitate to contact us. Yours sincerely Frida Hermansson & Rikard Andersson frida.hermansson.7528@student.uu.se or rikard.andersson.5381@student.uu.se Mobile: Frida or Rikard

51 Appendix 8: Response rates from participating companies Expatriate questionnaire Manager questionnaire The companies that responded and thereby are included in this study are: Company Number of responses ABB 2 Alfa Laval 1 Atlas Copco 1 Autoliv 1 Boliden Mineral AB 1 Cargotech Corporation 1 Coloplast A/S 1 Datametrix 1 Electrolux AB 1 Elekta 1 Elisa 1 Ericsson AB 3 Fabege AB 1 FLSmidth A/S 1 Fortum 1 Handelsbanken 1 Husqvarna 1 KONE Corporation 1 Lundin Petroleum SA 1 Millicom 1 NCC 1 Norden A/S 1 Oriflame Cosmetics 1 Outotec 1 51