ABSTRACT
Until the 1990s, multinational corporations (MNCs) from developed countries were considered by researchers and policy makers to be the most effective vehicles for the transfer of organizational and technological knowledge to developing and emerging countries. This perception was particularly evident in the literature on international technology transfer.1 In their exhaustive review of the literature, Reddy and Zhao (1990: 286) reported that “[t]here is little debate in the literature that the primary agent of technology transfer from the home country is the multinational corporations.” Their article did not even address the role of small and medium-sized firms (SMEs) in technology transfer, possibly because their involvement was still negligible, or because smaller organizations were perceived as less effective than MNEs in enabling recipient firms to learn new organizational and technological skills. The literature on international business has reinforced this notion of the primacy of large organizations in the cross-border transfer of knowledge. Thus, Dunning referred to the total stock of knowledge in MNCs as the “knowledge capital ingredient of direct investment” (1970: 147). In his approach, knowledge is considered to be at the root of international activities, and is seen as part of the firm’s capital, on the same level as more tangible assets or resources. More recently, that “knowledge ingredient” was integrated into his extended version of the eclectic paradigm of international production (Dunning, 1993: 98-101). Both forms of knowledge identified by Polanyi (1966) – the codified and tacit forms – were part of the ownership-specific advantages that Dunning attributed to large international firms. The tacit dimension of organizational knowledge has particularly attracted the attention of researchers in international business. Thus, Kogut and Zander (1993) hypothesized that large organizations exist because they specialize and capitalize on their competitive advantage in transferring tacit knowledge. Unlike codified knowledge, which can be recorded in symbolic forms such as blueprints and drawings, tacit knowledge is made of the unique expertise and skills that have been acquired by organizations over the years and have not been recorded in documents. This form of knowledge is specific and in some way “personal” to each firm: it is made of very specific expertise that has
been learned and shared more or less consciously by the management and employees and that cannot be transferred purely via codified instructions. The members of the supplier firms have to teach their personal knowledge and skills to their counterparts in the receiving firms, making the process more personalized, complex and costly. Because of the “sticky,” hard-to-transfer nature of tacit knowledge (Von Hippel, 1994), the organizational and contextual differences between the knowledge suppliers and knowledge receivers constitute important determinants of the transfer effectiveness. In the case of suppliers from developed economies and receivers from developing and emerging countries, the most frequent factors that seem to impact the transfer process are the cultural differences, the institutional ambiguity and the gap in managerial and technological skills (Marcotte and Niosi, 2000). Considerable human and financial resources must then be devoted by the partners to the transfer process if it is to be effective. That being so, large MNCs would then be at an advantage in transfers involving institutionally and culturally distant partners. Their considerable tangible and intangible resources – for example, the number of international managers, the amount of financial capital and the breadth of tacit knowledge – would give them an advantage over their smaller competitors. Are large organizations actually more effective than smaller ones in dealing with the complex transfer issues originating from institutional and cultural distance, as the literature on international knowledge transfer and international business suggests? Of course, no definite answer to that question can be provided. However, some recent developments in international entrepreneurship and SME internationalization may qualify the views generally held in international business. Somewhat paradoxically, these developments have brought out the predominance and advantages of tacit knowledge and localized learning in smaller organizations (Audretsch and Thurik, 2001; Acs et al., 2009). In these theoretical formulations, globalization and the dominance of MNCs are not considered as prime factors of international competitiveness. Thus, Audretsch and Thurik (2001) argued that “the so-called death of distance resulting from globalization has shifted the comparative advantage of high-cost locations towards economic activity that cannot be easily and costlessly diffused across geographical space.” Local and regional characteristics, with their rich source of tacit knowledge, constitute better opportunities for the creation and diffusion of innovations, and are better exploited by SMEs. In this context, SMEs, being characterized by personalized and mostly tacit knowledge and skills, might be in a better position to perceive and correctly interpret the informal and tacit institutional norms in less developed countries. This would facilitate the transfer of knowledge to these countries. For some other researchers, on the contrary, SMEs’ reliance on tacit knowledge and the institutional barriers to the international diffusion of that type of knowledge play a constraining role on smaller firms’ capacity to transfer their expertise abroad, especially when the recipient firms are located in less developed countries. Is the constraining effect more important than opportunity creation for smaller
organizations? A nuanced answer to that question requires more conceptual and empirical research in institutional theory and entrepreneurship. In comparison with the international business literature focused on large organizations’ involvement and effectiveness in international knowledge transfer, the research on the role of SMEs in this area of activity has been much less abundant. The objective of this chapter is to review the literature on the specificities of knowledge transfer to developing and emerging countries by Western SMEs, and to illustrate some of the conceptual positions with case results. The chapter proceeds as follows. First, I present the arguments in the literature that explain why smaller organizations might be less effective than MNCs in transferring their knowledge abroad. Some of these arguments are based on the institutional approach. Second, I analyze the counterarguments based on the potential entrepreneurial opportunities for Western SMEs in developing and emerging countries. To put these counterarguments into perspective, a brief review of the literature on the international dimensions of entrepreneurship and knowledge transfer is presented. The case of knowledge transfer to China is used to illustrate the opportunity-based view. In the last section we draw on these considerations of constraints and opportunities for SMEs in international technology transfer to examine the concept of “micromultinationals,” recently created to designate the more globalized SMEs.
