Knowledge based view of Multi-national Corporation (MNC)

Introduction

Fransson et al (2015) stated that globalisation has offered opportunities to companies to expand across borders and this has helped the companies to develop and widen their knowledge base. Companies achieve competitive advantage based on knowledge utilisation and therefore, knowledge dissemination is an important factor for companies.

According to Pedersen (2013 p.428), knowledge is useful to enhance the capacity of the company for effective action. Knowledge involves both data and information. The data is based on the discrete facts as well as events whereas knowledge is a fluid framework which is based on the expertise insight, value along with contextual information which offers opportunities to incorporate and evaluate the new information and experiences (Pedersen, 2014).

Minbaeva et al (2014) reflect that the role of knowledge in an organisation is that it is not only enclosed in the documents, but it is embedded in the norms, routines as well as practices of the companies. In today’s competitive world, Knowledge is influencing factors in terms of growth and competitiveness of the multinational corporation (MNC).

Andersson et al (2012) evaluated that the knowledge based view emphasis on the flow of information within MNC and its affiliate operations. Therefore, MNCs are unique knowledge creating entities based on their structural position which is based on the diverse institution context as well as the ability to share the knowledge.

Knowledge based view (KBV) and MNC

Fang et al (2013) accessed that ‘Multinational Corporation’ (MNC) is a firm which have substantial foreign direct investment. MNC actively manage the foreign investments as well as key player in international business and global economies. The knowledge-based view is based on the resource-based theory which assume that services delivered by the companies are based on how it combine the tangible resources and in return it function as firm know how knowledge.

Hart & Dowell (2011) defined that the knowledge is embedded in the identity, culture, systems and practices of the companies. Moreover, as resource-based view stated that the resources are difficult to imitate and i.e. KBV is a source of the competitive advantage for the organisation.

Verbeke & Merchant (2012 p.294) suggested that knowledge plays an important role in the growth of the companies. The ability of the company to create and deploy the existing and new knowledge is a source of knowledge based assets for the company and consequently source of competitive advantage.

Hislop (2013) acknowledged that MNCs are recognised as international knowledge network which develop, share, integrate and transfer knowledge in multiple locations. There are two dimensions of the knowledge in an organisation which is known as tacit and explicit. The tacit perspective of knowledge involves experience and involvement of the organisation in a specific context and is based on both cognitive (belief and paradigms) and technical perspective (application and know-how in a specific context) [P. 238].

Furthermore, O’Sullivan (2007) devised that the example of the tacit knowledge includes how to approach a customer. On the other hand, explicit knowledge involves the codified and articulated data and information communicated in a natural way. The example of the explicit knowledge is the operation manuals accompanying the products.

Lupton & Beamish (2014) stated the tacit and explicit knowledge is mutually dependent because tacit knowledge is useful source to develop and widen the explicit knowledge based on the structure and interpretation offered by the tacit knowledge.

The knowledge based view and Value creation by MNC

Michailova & Mustaffa (2012) proposed that the knowledge-based resources of the companies are key interpreters in terms of the internationalization of the companies and i.e. knowledge is critical component based on the process theory for internationalization.

The ability of the firm to create, manage and deployment of the knowledge is a fundamental source of competitive advantage and impact upon the internationalization process of the company. The knowledge of the firm is a basis to make commitment and decision during the internationalization.

Tasavori et al (2015) explained that the performance of the MNC is based on the ability to create and store knowledge as well as the capability to hold transfer and process such knowledge. The knowledge-based of the organisation focus on the organisational factors which recognise that organisation made of complex process and multiple individuals.

Lytras (2009) encompasses that the knowledge-based view is based on the constructionist view which assumes that knowledge cannot complete controlled but rather managed through creating a condition which develop and facilitate the utilisation of the knowledge (p.298).

Colakoglu et al., (2014) generalized the Knowledge based theory for MNC views an organisation as social community which create and focus on the internal transfer of the knowledge. Moreover, MNC has better efficiency to transfer the knowledge across borders compare to external market.

Regner & Zander (2014) added that MNC have distinct advantage and capabilities to transfer the knowledge compare to institutions in terms of creating and sharing knowledge. MNC access the stock of knowledge to develop capabilities and use asset as intellectual resources. Internationalization of the MNC is unique process and strategy, as well as the experience of the MNC, has a significant effect on speed and mode of the international business.

Internationalization adds a new layer of complexity to operation and process of the MNC in terms of creating, transferring and exploitation the knowledge. For example, the difference in the organisational and national culture affects the process of knowledge sharing in MNC (Taras, 2014).

Nieves & Osorio (2013) suggested that the transfer of knowledge inside the MNC is difficult based on the characteristic of the knowledge as well as information need of the sender and receiver. Therefore, knowledge transfer in MNC has significant barriers as the knowledge is embed in the social capital. The barriers to knowledge sharing are a lack of trust and communication as well as the new hindrances of the internationalization includes workforce diversity and language problem.

Najafi-Tavani et al (2014) classify that knowledge-based view helps the organisation to overcome the barriers and hindrances through knowledge sharing. It is widely accepted that knowledge is an important tool for competitive advantage through the creation of economic value as well as it generates revenue as it is viewed as a distinct form of the capital.

Kumar (2013) constructed that the critical element is that knowledge is an important explanatory factor and it has a significant effect on decision making and behaviour of MNC. The knowledge based perspective access that firms rather operating in the local economies, the MNC is sub-economy in its own systems and right and knowledge support the internal sub-economy of the firm.

Barner-Rasmussen et al (2014) highlighted that the knowledge of the organisation has some distinct capabilities which separate it from resources. For example, knowledge offers the economies of scale explicit knowledge is easy to reproduce with the help of technology. Moreover, knowledge also offers the economies of scope which mean knowledge create, stored and the process by the company can be used for various output.

Krogh, (2013, p.283) emphasis that Knowledge offers a better return to the organisation when compared with physical assets as more knowledge is generated and used, it become more valuable for the company. Therefore, resources based view analyses and evaluate the existence and boundaries of the companies.

Andreeva & Kianto (2012) revealed that knowledge is the primary source of value and profit and ability to create and recognise the external information is an important source for the innovative capabilities. The knowledge-based view considers the knowledge as intellectual capital and in order to get maximum benefit from the knowledge a company needs a strategic approach. Knowledge creation and transfer is an important perspective for MNC.

Holm et al., (2015) specifiy that MNC as knowledge based entity is important perspective which highlights that competitive advantage which is based on the transfer of knowledge across abroad as well as the integration of the knowledge dispersion in the international operations. The knowledge-based view highlights that the management and flow of the knowledge from the internal and external environment are the critical capabilities of the MNC (p.346).

Stensaker & Gooderham (2015) extrapolated that Knowledge base perspective emphasises that MNC are no just efficient structures but is the learning institutions which are useful to exploit, generate as well as transfer the knowledge. The knowledge-based view has been analysed from a number of perspectives such as knowledge as a source of competitive advantage and explanatory knowledge define the direction for the knowledge flows in the MNC.

Forsgren (2013, p. 71) attributed that the knowledge generation, absorption, diffusion and deployment have long-term potential for the value creation in an MNC. MNC are a repository of the knowledge and each subsidiary is viewed as a vital source of knowledge and capabilities. Therefore, knowledge base perspective defines the knowledge of the MNC as intellectual capital and useful to explore the unique opportunities and provide distinct products and services.

Tippmann et al (2014) believed that the value of the knowledge in MNC would be limited if it is not shared by all members. The differences between the knowledge sharing and learning require the interaction at both subunit level as well as the local environment.

De Marchi et al., (2014) informed that the knowledge in an organisation defines the marketing function, technology deployment as well as explains how to deal with the competitors, government agencies as well as suppliers. The differences between the internal and external knowledge are that external knowledge deal with market, products and technology whereas internal knowledge deals with system and structure of the organisation.

Lundan (2014) indicated that the flow of the knowledge at the subunit level involves external knowledge (competitors, suppliers and sourcing new knowledge) as well as internal knowledge (develop, generate and combine resources for competitive advantage) in the MNC. The knowledge-based perspective help to effectively manage the internal mechanism of the MNC such as communication channel, Procedures and process as well as an incentive for competitive advantage in the market (p. 307).

Gooderham et al (2011) argue that the role of the MNC to generate the new knowledge as well as exploit the existing knowledge is crucial as MNC acts as bridge and architecture to develop and generate the knowledge stock and maintain the flow of the information across the network of subsidiaries.

Makela et al (2012) interpreted that knowledge-based perspective stated that the knowledge generation and transfer help the management to become informed and more knowledge about the activities of the affiliate, become globally informed about activities in various parts of the organisation as well as leverage the knowledge through utilising the information in a productive manner.

Collinson & Morgan (2009, p.53) advocated that  The knowledge base view has made the organisation less hierarchical and changes the earlier perspective which state that advantage is rooted in the home country. The globalisation has resulted in increased recognition that subsidiary specific advantage (multinational system). (Collinson & Morgan, 2009)

At last, not least, Nieves & Osorio (2013) hypthesized that Knowledge-based view argues that MNC perspective has changed from the head office ownership and competitive advantage is embedded in the internal system and processes. The network relation and location helps plays an important in terms of acquisition, exploitation and leverage of the organisation capabilities.

Conclusion

The knowledge base perspective of the MNC has view the firm with integrated network approach. The traditional perspective of the value creation which was based on the local environment has changed over time and competitive advantages exist in the generation and deployment of the knowledge in global context.

MNCs are recognised as international knowledge network which develop, share, integrate and transfer knowledge in multiple locations. The roles and responsibilities are determined based on the various factors such as local environment as well as the capacity of the organisation.

Knowledge-based perspective highlight that knowledge is a source of the competitive advantage for the organisation and plays an important role in the growth of the firm. MNC are unique knowledge creating entities based on their structural position which is based on the diverse institution context as well as the ability to share the knowledge.

MNC is knowledge based system would spur innovation in an organisation, re-configure the resources and help to deploy the global network (subsidiaries) for competitive and value creation.

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