ABSTRACT
Japanese multinational corporations (MNCs) continue to engage in foreign direct
investment through offshoring and outsourcing to low-cost countries, in order to enhance
cost effectiveness and improve operational flexibility (Buckley 2009). Their attempts to
shift the locus of knowledge work away from the home country to developing countries
epitomize a general trend among MNCs (Gammeltoft, Barnard, and Madhok 2010; Jensen
and Pedersen 2011). However, once regarded as formidable challengers to the dominance
of western MNCs, Japanese MNCs have declined in stature over the past two decades
(Buckley 2009; Horn and Cross 2009). We shall analyse the source of their difficulties in
transferring their core organizational capabilities abroad (Leonard-Barton 1992) and
identify opportunities for them to augment and enhance their capabilities with locally
captured knowledge (Beechler and Bird 1999; Hong, Easterby-Smith, and Snell 2006a).
