Promoting cross-border knowledge transfer for new product development in MNCs: a process view
Promoting cross-border knowledge transfer for new product development in MNCs: a process view
Yang Liu 0
0 Management School, Queen's University Belfast , Riddel Hall, 185 Stranmillis Road, Belfast BT9 5EE , UK
Cross-border knowledge transfer plays an important role in the competitive advantage of multinational corporations (MNCs). However, it can be quite challenging due to cultural differences and lack of trust between organizational units located in different countries. Prior studies have not explored the knowledge transfer process (and its key nodes) in new product development in MNCs. This research aims to understand this process focusing on how knowledge transfer can be promoted through trust and understanding of cultural traits. A qualitative single-case study of an automotive MNC was conducted. I found that for the key nodes of the process, the company leveraged different mechanisms to promote knowledge transfer. These mechanisms facilitated trust and understanding of cultural traits. Headquarters provided key administrative support for these mechanisms. This study contributes to the literature through proposing a process view showing how knowledge transfer can be promoted by different mechanisms in different nodes of the process. In addition, insights were drawn on how to manage trust and the cultural difference across countries.
Knowledge transfer; New product development corporations; Trust; Cultural traits
JEL Classification F23
Cross-border knowledge transfer (i.e. movement of knowledge from one country to
another) is the key to competitive advantage for multinational corporations (MNCs)
Kasperet al. 2013
Kotabeet al. 2007
Monteiroet al. 2008
Schlegelmilch and Chini
). However, lack of trust and cultural differences are believed to be key barriers to
effective knowledge transfer across borders
(Ghoshal and Bartlett 1988; Subramaniam
2006; Tavcaret al. 2005)
. Trust and understanding of cultural traits affect the motivational
disposition to share knowledge (Sarala and Vaara 2010), which is the key to effective
(Gupta and Govindarajan 2000)
. MNCs have the subsidiaries dispersed
(Bartlett and Ghoshal 2000)
. Research has shown that geographical distance
between organizational units could negatively affect trust between members
Castellanoet al. 2017
Haas and Cummings 2015
). Cultural differences have a
similar effect as barriers of mutual understanding.
This study explores knowledge transfer in the new product development (NPD) context.
The NPD context is quite relevant to knowledge transfer due to its nature of
crossfunctional collaboration involving, for example, R&D, marketing, and production
and Eppinger 2012)
. For MNCs, there are bigger challenges in NPD projects. They need to
leverage globally dispersed knowledge, such as technical knowledge and market
knowledge, produced by different functions to develop products with better quality and lower
costs while appealing to local customers in different countries (
Monplaisiret al. 2009
Subramaniamet al. 1998
). Therefore, managing cross-border knowledge transfer
effectively is critical for high NPD performance in MNCs.
Prior studies on knowledge transfer have been predominantly static identifying and
testing the factors affecting knowledge transfer
(Cavaliereet al. 2015; Gupta and
Govindarajan 2000; Li 2005)
. Research in this area has called for more studies adopting a process
view (Michailova and Bernhard Nielsen 2006). A process view can offer insights on how
certain mechanisms for promoting knowledge transfer unfold. In the NPD context,
knowledge transfer is constantly needed throughout NPD projects
(Ulrich and Eppinger
, which forms a knowledge transfer process. As the activities differ across NPD
phases, the mechanism for promoting knowledge transfer may need to be altered.
Exploring cross-border knowledge transfer as a process in NPD in MNCs could be
especially rewarding due to the global dispersion of different functions. However, it has
not been well addressed in prior studies. Hence, I propose the research questions as below.
RQs: How can MNCs promote knowledge transfer across borders in NPD through
enhancing trust and understanding of cultural traits? How can the mechanisms differ
across nodes of the knowledge transfer process?
To answer the research questions, I conducted a qualitative single-case study of CarInc.
Through analyzing the knowledge transfer process in NPD in CarInc, I found that the firm
leveraged different mechanisms to promote knowledge transfer, namely, inclusive
thinking, internal competition, technical capability, and standardization. Headquarters offered
critical administrative support to realize these mechanisms. This study contributes to
knowledge transfer research by revealing the alternating nature of mechanisms along the
key nodes of the knowledge transfer process in MNCs.
The remainder of the paper is structured as follows. Section 2 presents the theoretical
background on cross-border knowledge transfer, trust and cultural differences in MNCs,
and the NPD context. Section 3 presents the methods for the qualitative single-case study
to analyze the knowledge transfer process in NPD of CarInc. Section 4 presents the
research findings. Section 5 discusses the theoretical contributions and managerial
implications of the study.
2 Theoretical background
2.1 Cross-border knowledge transfer in MNCs
MNCs can leverage talents and knowledge in the worldwide scope. Such cross-border
knowledge transfer is the key to the competitive advantage of MNCs (
Kasperet al. 2013
; Michailova and Bernhard Nielsen 2006;
Scaleraet al. 2014
MNCs, local knowledge is transferred through cross-border cooperation and
communication. However, a lot of challenges remain, such as tacitness of overseas knowledge
Bjorkmanet al. 2004
; Subramaniam and Venkatraman 2001) and communication barrier
in global teams (
Sosaet al. 2002
). Communication barrier can be caused by lack of trust
and cultural differences across organizational units globally.
Priors studies have indicated factors that can affect the effectiveness of cross-border
knowledge transfer in MNCs. One important factor is organizational culture
1997; Cavaliere and Lombardi 2015; Hong and Nguyen 2013)
. In a context of greater
cooperation climate, global team members are more willing to listen to others and
compromise, thus conflicts are avoided (Subramaniam 2006). Team co-location can also affect
knowledge transfer, because some knowledge is tacit, deep-rooted in people’s head, and
can be more easily leveraged through face-to-face communication
Harzing 2009; Subramaniam and Venkatraman 2001)
. However, large-scale co-location is
difficult to implement in practice because it is time-consuming and costly
McDonough 1997; Rafii 1995)
. Therefore, MNCs often need to use information
technology (IT) tools such as teleconferencing and management information systems for global
knowledge transfer. It is shown that the IT infrastructure can enhance the firms’ capability
to leverage globally dispersed knowledge, therefore, leads to higher NPD performances
Kleinschmidtet al. 2010
). To leverage tacit overseas knowledge, increasing the frequency
of communication would be helpful
(Subramaniam and Venkatraman 2001)
(Bierly et al. 2009)
, but too much communication can reduce
Tavcaret al. 2005
2.2 Trust and cultural difference in MNCs
Among numerous factors affecting cross-border knowledge transfer, two critical ones are
trust and cultural differences across organizational units globally. They can affect
organizational members’ motivational disposition to share knowledge with others
. Prior studies have found that trust can explain the level and quality of
(van Dijket al. 2016)
. More studies have been conducted to understand
the trust between organizational members.
Buckleyet al. (2006
) argue that trust comprises
technical trust and personal trust. Technical trust denotes confidence in the technical
capability of other organizational members/units. Personal trust is a belief by one party that
the other party will not pursue its interests at the cost of this party
(Reagans and McEvily
Dhanarajet al. (2004
) indicate that trust signifies a commitment by organizational
members which leads to better collaboration results, as it functions as a social control
mechanism. They also argue that reputation can facilitate trust.
Organizational members in different countries show different cultural traits (e.g.
different work habits). Trust and cultural traits are interrelated, according to prior studies.
Cultural differences could prevent effective communication and mutual understanding,
thus undermining trust.
Sarala and Vaara (2010)
argue that people tend to view
organizational members in a different culture as out-group members who are less
trustworthy. To overcome the challenge, MNCs made efforts as revealed by studies.
Javidanet al. (2005
) indicate that understanding of common cultural traits and common goals
across organizational members contribute to trust. Related,
suggests that trust
can facilitate fully committed coordination and collaboration, which enhances
understanding of cultural traits between organizational members.
Research in human resource management (HRM) has shed some light on knowledge
transfer in MNCs.
focuses on knowledge receivers and argues that HRM
practices of staffing, performance appraisal, reward systems, and career management can
enhance absorptive capacity, and thus knowledge transfer. These HRM practices could
affect intrinsic and extrinsic motivation of knowledge receivers
Bjorkmanet al. (2004
) focus on knowledge senders and show that MNC headquarters could
promote knowledge transfer through performance evaluation criteria, subsidiary
management compensation, and expatriate managers. Both senders and receivers should commit to
knowledge transfer in order for it to be effective
(Taschler and Chappelow 1997)
However, while many studies have focused on absorptive capacity
Minbaevaet al. 2003)
, much less research has focused on trust and understanding of cultural traits.
Therefore, it is still not quite clear how HRM practices can enhance trust and
understanding of cultural traits for knowledge transfer in MNCs. This study covers this issue, as I
will show how MNC headquarters provide administrative support through HRM practices.
2.3 The new product development context
The NPD context is highly relevant to knowledge transfer. Studies show the
cross-functional nature of the NPD activities (
Hollandet al. 2000
Salomoet al. 2010
). NPD activities
involve not only the R&D department, but also marketing, production, purchasing, and
(Eppinger and Chitkara 2006; Ulrich and Eppinger 2012)
. It is suggested
that cross-functional collaboration which facilitates knowledge transfer is the key to
successful NPD (Hollandet al. 2000). However, there are challenges of knowledge transfer in
NPD. For example, research in R&D-marketing integration reveals the difficulties of
integration including miscommunication, lack of trust, and different thinking perspectives
Shermanet al. 2005
Songet al. 1996
). These difficulties are largely due to the
specialization of functions, different functional objectives, and different knowledge structures
(Carlile 2002; Moenaert and Souder 1990; Souder 1988)
MNCs would face even bigger challenges on cross-national cooperation in NPD in that
each subsidiary (with a certain function) has a different local context
(McDonough et al.
. Geographical distance leads to difficulty of communication and lack of trust of team
members in different countries
(Barczak and McDonough 2003; McDonough et al. 2001)
besides barriers caused by different functions.
2.4 Cross-border knowledge transfer as a process in NPD
New product development is composed of a sequence of activities that start from
identifying market opportunities to production, sale, and delivery of a product
. Although with variations, prior studies largely support that there are five
phases of NPD: planning, concept development, product engineering, testing, and trial
production and market launch
(Clark and Fujimoto 1991; Cooper and Kleinschmidt 1986;
Eppinger and Chitkara 2006; Karagozoglu and Brown 1993; Schilling and Hill 1998; Song
and Parry 1997)
. Across these phases, it starts from abstract product ideas to concrete and
reliable products on the market.
As knowledge transfer happens throughout NPD, it can be regarded as a process.
Because there are different activities in different phases of NPD, knowledge transfer
activities and promoting mechanisms are likely to differ along the process. These phases of
NPD, therefore, denote key nodes of the knowledge transfer process. Based on the
literature in NPD
(Clark and Fujimoto 1991; Cooper and Kleinschmidt 1986; Ulrich and
, Table 1 shows NPD activities, types of knowledge, and functions
involved in each node of the process.
There are abundant studies identifying the factors affecting knowledge transfer, but
mainly with a static view. Very few studies have adopted a process view to reveal the
dynamics of knowledge transfer focusing on the key nodes of the process. This study aims
to fill this gap through studying the cross-border knowledge transfer process in NPD in
This study adopts a qualitative method as few studies have been conducted to explore the
knowledge transfer process. Through the qualitative study, I was able to track knowledge
transfer activities and mechanisms across phases of NPD. A single-case study of CarInc
was conducted. A single case can be particularly revealing with theoretical sampling to
make theoretical contributions
(Eisenhardt and Graebner 2007)
. In the automotive industry,
due to product complexity and fierce market competition, effective cross-border
knowledge transfer in NPD is essential for firms’ competitive advantage. The company, CarInc,
was chosen due to its effective knowledge transfer practices and high NPD performance.
3.1 Research setting
CarInc is a multinational automaker headquartered in the U.S. It sells products in North
America, Europe, South America, and Asia Pacific. Its product lines include passenger cars
(from small to large) and commercial vehicles. This study focuses on small and medium
passenger cars, as this is an important product category in all national markets.
CarInc has a global R&D organization. Its R&D facilities are dispersed globally
including the U.S., Germany, U.K., Brazil, and Australia. For small and medium cars, the
German R&D center was the lead center. The lead center was designated by the company
headquarters based on its expertise. The lead center has the control over other R&D
centers. It has the global responsibility of NPD projects and coordinates NPD activities
globally. Marketing and production departments are present in each region (North
America, Europe, South America, and Asia Pacific). They are involved in NPD as well.
CarInc conducts globally coordinated NPD. It develops global cars for the global
market (with some local modifications). Its NPD projects are a global effort with
significant involvement of organizational units dispersed globally. Therefore, it provides an ideal
context to study cross-border knowledge transfer.
CarInc is successful in cross-border knowledge transfer. This is evidenced by quality
cars it has developed through global collaboration. These cars are among best-selling cars
in most countries satisfying local market requirements. Therefore, studying CarInc is likely
to generate interesting insights.
3.2 Data collection
The main data source is the semi-structured interviews with R&D managers in CarInc.
Data was collected in the 2013–2015 period. Overall, I conducted 21 interviews averaging
one hour each. The interviews were conducted in the lead R&D center and by telephone.
During data collection, I focused on one recent past NPD project, the CD-Car project
happened in 2010–2013. Meanwhile, I cross-checked other NPD projects and found that
findings were consistent.
The main interview questions include: What is the NPD process? How was the CD-Car
project conducted? What were the activities in each phase of NPD? How did organizational
units collaborate globally? How was knowledge sharing facilitated across units? What is
the role of the lead R&D center? What is the role of headquarters? Interviews were
recorded and transcribed for analysis. For each question, I interviewed multiple informants
to reduce the bias, allowing data triangulation
(Eisenhardt 1989; Yin 2009)
participants also shared some internal documents to help my understanding of the phenomenon.
Also, I collected secondary data such as annual reports and news releases to help
understand the company background and strategies. To mitigate the misinterpretation, at the end
of the study I wrote the report and sent back to the company for review and feedback
(Naget al. 2007).
3.3 Data analysis
Data were analyzed with the staged approach
(Easterby-Smithet al. 2012)
. First, based on
the NPD process phases (Table 1) mentioned above, I identified key activities within each
phase in NPD of CarInc. This is also to familiarize with the data. Secondly, I analyzed how
the globally distributed knowledge was transferred through these NPD activities in each
phase. For example, for the concept development activities, the knowledge was transferred
from local design centers to the lead R&D center. At this stage, different knowledge flow
patterns were identified across phases. Next, I analyzed how trust and understanding of
cultural traits were facilitated in each phase of NPD. Several mechanisms were found.
Finally, I analyzed the role of headquarters in facilitating trust. The HRM practices
leveraged by headquarters contributed to effective cross-border knowledge transfer.
4 The cross-border knowledge transfer process in NPD
In this study, I found the mechanisms CarInc leveraged to promote cross-border knowledge
transfer through trust and understanding of cultural traits in NPD activities. The main
mechanism varied across the nodes of the process. The variance was caused by different
NPD activities in different phases, each of which had a distinct knowledge flow pattern.
Below I elaborate the knowledge transfer process in CarInc, focusing on the CD-Car
project (but cross-checked with other projects as mentioned in Sect. 3.2). For each phase, I
first describe the knowledge flow pattern as the background, and then explain how
knowledge transfer was promoted (the mechanism) as main findings. The findings are
summarized in Table 2.
4.1 Product planning
4.1.1 Knowledge flow pattern
In the product planning phase of NPD, the lead R&D center organized the collection of
local market requirements and new product ideas from marketing departments in all
regions. Therefore, the knowledge flow was mainly from local marketing departments to
the lead R&D center (inflows).
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With operations experience, local marketing departments had accumulated abundant
knowledge of local market requirements. For example, it was well known to local
marketing that in America, a car should be powerful to appeal to customers while in Europe
fuel-efficiency was deemed more important. In addition, for the NPD project, local
marketing departments conducted market research for the targeted customer groups to be
informed of local market trends. An R&D manager explained:
Each region will look at the annual volumes and variants that will be sold, and
develop the business plan for that vehicle … The local team would start looking at
designs, looking at demographics of whom they are going to sell the vehicle to …
The lead region [R&D center] would start pulling together the information and then
they would develop it.
Local marketing also provided new product ideas to the lead R&D center. Product ideas
are abstract product descriptions, often covering the most important features of products.
An R&D manager in the lead R&D center offered an example of the product idea received
from American marketing:
Target customer was the 20th to 30th year old single person, that had income of
60,000 to 70,000 dollars … a car to a younger, more educated group.
Based on the new product ideas and local market requirements received, the lead R&D
center generated a detailed product plan and initiated the NPD project with clear
objectives. One important task in this process was business case analysis (an analysis on whether
the proposed product would be profitable). The lead center conducted business case
analysis with market knowledge (e.g. expected sales volumes and market prices) provided
by local marketing departments.
4.1.2 Mechanism promoting knowledge transfer
In this phase, inclusive thinking was the most important mechanism facilitating trust and
understanding of cultural traits between the lead R&D center and local marketing
departments. As a result, cross-border knowledge transfer was promoted. Inclusive
thinking means that organizational members fully consider conditions and opinions from
all organizational units regardless of the geographic locations. It denotes the mindset of
taking all members as one group with the same objective—success of the whole company.
In the NPD project, numerous local market requirements were collected including cost,
handling, and fuel efficiency of the new car. The members in the lead R&D center
demonstrated inclusive thinking as they aimed at accommodating all these requirements
(instead of only some of the requirements) when making the NPD project proposal, so as to
make sure that the developed products would appeal to customers worldwide. They pushed
themselves to overcome some trade-offs (such as powerfulness vs. fuel-efficiency) to some
extent to serve the global market. An R&D manager stated the mindset:
If it’s a global project, it has to get input from all the market, that includes customer
input … ‘cause they have, now meet the market conditions, or several global
Similarly, the business case analysis was conducted in the lead R&D center with all
markets (instead of only some markets) in mind. The target market of the new product was
defined as global from the beginning, which was another sign of inclusive thinking.
Such inclusive thinking facilitated trust. With inclusive thinking, local marketing
departments felt that they were part of the same group (even with different cultural traits)
as their opinions were carefully considered by the lead R&D center. In addition, they felt
that the local markets would benefit from the new products developed by the lead R&D
center. An American marketing manager expressed the trust as a result of inclusive
thinking and benefit for local markets:
I think the customers will appreciate that when they receive this as a good quality
car. The design is globalized very much … They tried to adjust things like
suspension and seating and stuff like that to make Americans happy.
Therefore, local marketing departments actively communicated with the lead R&D
center to support the NPD project, and they understood each other’s cultural traits (e.g.
understanding of market requirements and work habits) in this process, which further
4.2 Concept development
4.2.1 Knowledge flow pattern
In the concept development phase of NPD, product concepts (detailed drawing of the new
product) were designed by several industrial design centers in different countries taking
into account the local requirements. The lead R&D center collected the design proposals
from these design centers. Therefore, the knowledge flow was mainly from design centers
to the lead R&D center (inflows).
An R&D manager explained the process:
Early phase … it’s relying on the design team, they are relying on the design team to
understand and appreciate what the customer in that region is looking for, so they
basically put together the themes [concepts].
After the lead R&D center received product concepts from design centers, it selected the
best one to focus on in the project. However, it also assimilated advantages of other
concepts and merged with the selected concept. Such action ensured that the products
would be suitable for sale in different regions.
4.2.2 Mechanism promoting knowledge transfer
To motivate knowledge sharing behaviors of design centers, the lead R&D center
organized an internal competition for product concepts. In this phase, internal competition was
the main mechanism that promoted knowledge transfer. It contributed to trust and
understanding of cultural traits in the process. An R&D manager described the internal
There is a design competition that’s a really styling competition … They would let
each of the markets, major markets of their customer that they have a design center to
make the design, styling proposal, and then they have competition that way and they
choose the best styling from that.
The internal competition attracted design centers to participate, as winning the
competition was regarded as an honor in the company. Financial reward was in place as well.
The lead R&D center did not simply select the best concept. Rather, it also used good
elements of other concepts when making the final product design. This further motivated
design centers to participate as they could see how they influenced the final design of the
In the NPD project of CD-Car, the American design center won the competition, but the
design proposals from other regions (Europe and Asia) were merged into the American
design. The result was that the car had a muscular feeling (preferred Americans), but not
too muscular to be accepted globally.
As design centers were motivated to participate in the competition, they had more
intense communication with the lead R&D center. Such intense communication and the
proactive attitude contributed to the mutual understanding of cultural traits (e.g. preference
of car design). With more common understanding, trust was enhanced between
4.3 Product engineering
4.3.1 Knowledge flow pattern
In the phase of product engineering in NPD, knowledge flow mainly happened between
different R&D centers located in different countries. There were evident inflows to and
outflows from the lead R&D center, as shown by CarInc.
In CarInc, each R&D center had technical advantages in certain fields, often certain
parts of the product related to local requirements. For example, the Brazilian R&D center
had the best knowledge of flex-fuel engines due to local popularity of such engines; the
British engine development center had the expertise of small, fuel-efficient engines
suitable for European customers; the American R&D center was good at powerful engines
required in the U.S.; the German R&D center was good at developing car bodies with high
safety standards. Components were therefore developed in a specialized way. When
developing specific components, these R&D centers needed to constantly exchange
component design knowledge with each other to ensure that the components were
compatible with each other.
With the product functions and appearances largely determined in early phases of NPD,
in the product engineering phase, the lead (German) R&D center defined the sub-systems
to realize the proposed product functions and appearances. It then assigned development
tasks of subsystems (or components) to other R&D centers according to their expertise,
which reflects specialization. The CD-Car project reflected wide collaboration across R&D
centers for product engineering, although the German lead center developed the majority
of the car. For example, the Brazilian R&D center worked on the flex-fuel engines, the
British R&D center worked on fuel-efficient engines, while the American R&D center
worked on powerful engines and automatic transmission systems. Also, the audio heads
were developed in different centers. An R&D manager mentioned:
Each vehicle has one lead product engineering setting … Engine development is
centralized according to the engine [types]. Region-specific systems are developed in
the region and are generally released through one common point. The Audio head
would be one example. They will vary by region since broadcast frequencies differ
by region as well as customer preferences.
4.3.2 Mechanism promoting knowledge transfer
In the product engineering phase of NPD, the technical capability of the lead R&D center
was the main mechanism promoting knowledge transfer. Technical capability of the lead
R&D center brought trust of other R&D centers.
In this phase, the lead (German) R&D center defined system-level design and assigned
some components to be developed by other R&D centers, based on local expertise. It is
widely recognized in the company that the German R&D center had the best expertise in
developing small cars, therefore, other R&D centers felt that it could be trusted and relied
on. These R&D centers also wished to learn from the German center. An R&D manager in
the U.S. confirmed this through comparing a German car with an American car developed
in the past:
I totally agree with that, that the European car, was better than the U.S. one [small
car] … The quality level of the U.S. car was not as good … It wasn’t a high
performance for the solid engine.
Such technical trust enhanced communication and collaboration with the German R&D
center. Engineers actively contacted the German center to discuss components design to
ensure compatibility. For instance, the engine development teams discussed with the
German center about the space in the engine compartment of the car body and the power of
the engine. The NPD teams in different R&D centers leveraged both IT tools and site visits
for communication. An R&D manager in the U.S. recalled his experience: ‘‘When I was
working on the CD-car program, you know, with the conference calls and trips back and
forth between Europe and North America.’’ Through intense communications of technical
issues, they enhanced mutual understanding of cultural traits (e.g. work habits), thus
building personal trust. It is technical trust that led to personal trust in this phase.
4.4 Product testing
4.4.1 Knowledge flow pattern
The lead R&D center determined the functions and system design of the products, and
possessed the whole product design drawings. It needed to share some technical details to
the local test centers in order for them to conduct testing activities. Therefore, the
knowledge flow was mainly outflow, but can have inflows depending on the situation at
In this phase, the product engineering work was largely finished, and the lead R&D
center produced the prototypes and shipped them to the local testing centers. This is
because regulations and local environment (e.g. road condition and temperature) are
different from country to country. Local test centers are more knowledgeable for these. An
R&D manager noted:
Each region is responsible for its own validation. The U.S. uses FMVSS and Europe
uses ECE … Prototype builds could occur in the lead region and then the samples
shipped to the various regions to save tooling.
To perform the testing, the lead center needed to explain the functions and specifications
of products to the local testing teams. There are numerous testing such as crash test,
durability test, and emission test. If issues were identified, more technical details needed to
be provided to find out the reason. There would be more knowledge inflows from local test
centers regarding how to modify the design to pass the tests.
4.4.2 Mechanism promoting knowledge transfer
Technical capability of local test centers played a major role in shaping the trust so that the
lead R&D center was willing to share knowledge. Similarly, technical trust led to personal
trust in this phase. An R&D manager expressed the influence of technical capability:
The overall project has to deal with the different regulatory requirements for each of
the markets … There is gonna be validation and testing in all those places, because
they are most capable of doing it.
With the positive attitude of the lead center, organizational members in different
locations had a better understanding of cultural traits. As a result, when issues were
identified from testing, engineers in test centers were willing to share knowledge with the
lead R&D center as well.
4.5 Trial production and market launch
4.5.1 Knowledge flow pattern
In the trial production and market launch phase, the local units (production and marketing)
needed the support from the lead R&D center to perform their tasks. For example, in trial
production, the lead R&D center engineers helped to train local workers to familiarize the
component design details and solve problems in production. Engineers from the lead R&D
center also explained product functions to local marketing teams. This phase of NPD was
completed as the region-by-region basis, the so-called staggered launch. Therefore, in this
phase, the knowledge flow was mainly outward from the lead R&D center. An R&D
manager explained this process very clearly:
For trial production and market launch, [they were] handled individually by each
market, however, with a staggered launch. The second market has the advantage of a
smoother launch due to the lead market bearing the brunt of the launch issues, and so
on for additional markets. So the overall global launch is a lot longer duration than a
single local launch. Typically some key team members from the platform team move
from market to market to support each local factory and market launch.
However, if there were issues identified in the trial production, there could be
knowledge inflows to the lead R&D center from local production departments. The knowledge
would help the lead R&D center to resolve production issues.
4.5.2 Mechanism promoting knowledge transfer
In this phase, standardization of production and marketing practices was the key
mechanism to enhance trust and thus promoting knowledge transfer. It means that practices were
changed to be more similar globally, while not exactly the same. With globally coordinated
R&D, the lead R&D center pushed for standardized products (one global car with minor
modifications for different countries) for high efficiency. It expected to see standardized
production and marketing practices, because these could affect product design. An R&D
equipment could lower
The lifter was used to form part of the upper door. Theoretically, if you had to have
the lifter 7 mm thicker, the door surface would have to move 7 mm to accommodate
… There were a number of issues that drove changes to the vehicle and tooling was
one of them.
Production equipment was standardized in CarInc. The R&D manager explained the
reason: ‘‘A lot of tools are made in China now, versus 20 years ago we were using Italian
tools here, and American tools in the U.S.’’ The lead R&D center regarded this as having
the common goal (of standardization). Therefore, they had the trust to share knowledge
with local production, and they understood cultural traits through the intense
The situation was similar for marketing practices. With standardized marketing plan
conveying the same message of a high-quality car globally, the lead R&D center felt that
its strategy was supported, therefore, it showed the trust in collaboration.
5 The role of headquarters in cross-border knowledge transfer
Additional findings are that the headquarters of CarInc played a critical role in supporting
knowledge transfer in NPD. It leveraged HRM practices as administrative support to
realize the key mechanisms identified above. These HRM practices are elaborated next.
In the product planning phase, the performance evaluation criteria set by headquarters
contributed to the lead R&D center’s inclusive thinking. The performance evaluation
criteria were set as global—the lead R&D center (and its employees) was evaluated based
on the global performance instead of the local performance. An executive noted: ‘‘They are
responsible for the global applications of a globally developed plan.’’ To achieve a high
global performance in terms of sales volume, profit, and customer satisfaction, the lead
R&D center had to be supported by local marketing departments which understood local
customers the most. It needed to earn the support through inclusive thinking.
In the concept development phase, headquarters allocated resources and rewards to
support the internal competition. Costs were incurred in the competition in terms of, for
example, traveling, setting competition criteria, organizing the committee. An R&D
manager commented: ‘‘It added a lot of cost to the development as well.’’ These costs were
covered by the headquarters as a means of support. Moreover, headquarters rewarded the
design center which won the competition to motivate design centers to participate.
In the product engineering phase, the technical capability of the lead R&D center was
actually determined by evaluation and selection practices done by headquarters in advance.
Headquarters evaluated the technical capability of each R&D center (and its employees),
and selected one with the best expertise as the lead center. In this way, headquarters were
playing a role in ensuring technical trust was in place. An executive noted: ‘‘To take a
leadership role, an R&D center must be superior to other centers in engineering.’’
Similarly, in the product testing phase, the technical capability of test centers was
determined by regular performance evaluation practices by headquarters. Headquarters
evaluated technical capability based on market feedback (whether customers’ complaints
on quality issues are linked to testing). Training was provided to enhance technical
capability if necessary.
In the trial production and market launch phase, standardization of production and
marketing practices were actually a result of a company-wide global standardization
strategy initiated by headquarters to enhance company’s efficiency. An executive
explained: ‘‘The standardization approach is applied throughout the entire company,
including the cycle planning process, the manufacturing processes, the product
development design guidelines that are used in order to develop new products.’’ Headquarters also
monitored all functions through performance evaluation (standardization as criteria) to
ensure that the standardization strategy was well implemented.
6.1 Theoretical implications
6.1.1 Knowledge transfer
In this study, through a process view, I discovered the dynamic pattern of knowledge
transfer and the alternating nature of mechanisms, which have not been revealed in prior
studies. In CarInc’s NPD project, the firm first leveraged inclusive thinking, switched to
internal competition, then leveraged technical capability, and finally changed to
standardization. The alternating mechanisms facilitated trust and understanding of cultural
Change of mechanisms was due to a number of factors: NPD activities, knowledge flow
patterns, and involved functions (types of knowledge). In product planning and concept
development phases, it was mainly knowledge inflows to the lead R&D center, therefore,
the motivation of local marketing departments and design centers to share was the key.
Due to different nature of tasks, the technical capability would not be effective in
facilitating trust of marketing departments and design centers. Inclusive thinking (satisfying
local markets) and internal competition (choosing the best concept but merging other
concepts) fit with tasks in marketing departments (dealing with market issues) and design
centers (dealing with both market and technical issues), thus bringing motivation to share.
For product engineering and product testing, R&D centers and test centers were doing
similar tasks handling technical issues, thus technical capability could significantly affect
trust. For trial production and market launch, production and marketing departments were
doing tasks different in nature from ones in R&D centers, so technical capability would not
be effective. As it was mainly knowledge outflow from the lead R&D center, the
motivation of the lead R&D center was the key. Standardization of practices in production and
marketing departments could motivate the lead R&D to share. Therefore, this study shows
the contingent nature of the mechanisms, and certain contingent factors (NPD activities,
knowledge flow patterns, and involved functions) are identified, which is another
contribution to the literature.
Gupta and Govindarajan (1991)
analyzed different roles of subsidiaries in MNCs based
on knowledge flows. In this study, I found the role variation across functions. More
importantly, I reveal the dynamic nature of the roles due to changed knowledge flows. For
the lead R&D center, it changed from inflow to outflow (from implementer to innovator),
whereas marketing departments changed from outflow to inflow (from innovator to
implementer). This is because NPD can be regarded as a knowledge processing task.
Market knowledge can be deemed as raw material, while technical knowledge (and
developed products) can be considered as goods. MNCs transform new product ideas based
on market requirements into developed products through NPD. The implication drawn here
is that the interaction between organizational units and its influence on the flow of
knowledge should be taken into account in MNCs research.
6.1.2 HRM practices
This study emphasizes the importance of performance evaluation and reward in facilitating
trust between organizational units. Although performance evaluation and reward can help
to realize different mechanisms, they need to be leveraged differently (e.g. different criteria
for evaluation). For example, to have inclusive thinking, the evaluation criteria should be
global performance; to have standardization practices, the evaluation criteria of
standardization need to be added.
shows that HRM practices of staffing, performance appraisal, reward
system, and career management can contribute to knowledge transfer. This study indicates
that while these practices may all contribute to employees’ absorptive capacity, it is
performance evaluation and reward that mainly contribute to trust. In other words, staffing
and career management would have less effect on trust. Performance evaluation and
reward can shape employees’ motivation to actively communicate and collaborate across
borders (as shown in this study) more than staffing and career management can do. This is
partly because performance evaluation can be very flexible including certain criteria to fit
with the context (activity) as mentioned above.
Bjorkmanet al. (2004
) through analyzing headquarters’ role found that performance
evaluation and reward contribute to outward knowledge transfer. This study suggests that
performance evaluation and reward can affect both inward and outward knowledge
transfer, as knowledge transfer (and trust) denotes interaction between organizational units.
The evaluation criteria may vary for inward and outward knowledge transfer.
6.1.3 Global NPD in MNCs
Relatively fewer studies have explored challenges of knowledge transfer in NPD in the
global context. These studies mainly focused on tacitness of knowledge (
; Subramaniam and Venkatraman 2001), and more studies are needed focusing on
trust. In this study, I found that the global context can complicate knowledge transfer, as
MNCs face the challenge of both cross-functional collaboration and geographic distance.
MNCs need to have mechanisms in place to facilitate trust overcoming the negative effect
of geographic distance. Functions involved in a phase determine which mechanism to
leverage. The cross-functional nature of NPD causes the variety of mechanisms leveraged.
In other words, the mechanisms discovered in this study are a result of both geographic
distance and cross-functional collaboration in NPD.
6.2 Managerial implications
This study can draw implications for practices in several ways. First, firms should leverage
the mechanisms to promote knowledge transfer discovered in a flexible way, because it is
not likely that one mechanism can work in all conditions. For example, in an NPD project,
different mechanisms should be adopted due to different activities across NPD phases.
Therefore, firms should identify different operational activities, and design mechanisms
accordingly. Firms should evaluate and monitor the effects of the implemented
mechanisms, as this can be a trial-and-error process over time. Once firms find effective
mechanisms (e.g. internal competition) promoting knowledge transfer for certain
operational activities (e.g. concept development), firms should institutionalize them (e.g.
changing policies or evaluation criteria accordingly) to make sure they can be implemented
at the right time.
In addition, trust is a critical factor for knowledge transfer, and it is linked to an
understanding of cultural traits. Training is often used in firms to enhance understanding of
different cultures. However, training could not facilitate trust directly. The proactive
attitude for communication and collaboration is the key to both trust and understanding of
cultural traits. Headquarters could facilitate the proactive attitude through certain HRM
practices as shown in this study. Performance evaluation is the most important HRM
practice in this regard, as it can affect employees’ motivations. As headquarters are not
familiar with specific operational activities, it should not intervene subsidiaries’ activities
directly. Setting performance evaluation criteria is the best way to impact subsidiaries in
This study explores the cross-border knowledge transfer process in NPD activities in
MNCs. Through the case study of CarInc, I found different mechanisms promoting
crossborder knowledge transfer: inclusive thinking, internal competition, technical capability,
and standardization. I reveal the alternating nature of the mechanisms along NPD phases.
The headquarters played an important role in facilitating cross-border knowledge transfer
through HRM practices. Performance evaluation as an important practice was leveraged
differently across NPD phases to realize these mechanisms.
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