Organizational learning in the context of international inter-firm relations : a single case study of a franchising business model in Portugal : PepsiCo and Sumol+Compal

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Organizational Learning in the context of

international inter-firm relations

A single case study of a franchising business model in Portugal:

PepsiCo and Sumol+Compal

University of Amsterdam

Amsterdam Business School

MSc. Business Administration

- International Management -

Vasco Rodrigues Oliveira

25-03-2016

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Abstract

This paper is an effort to understand the relationship between absorptive capacity and inter-organizational learning in a context of international inter-firm relations. Key papers of absorptive capacity literature and inter-organizational learning were analyzed in order to spot the main contributions of the authors up to date in this field. Based on the theory, at an initial stage some scenarios are expected to be observed, which will be confirmed or refuted. To address this, a single case study is conducted based on a real-life situation with two major companies operating in the Portuguese beverages market. Based on semi-structured interviews, the members of both teams will be assessed on what and how routines and behaviors they are adopting are leveraging the absorptive capacity of the companies. The results suggest that routines are a positive leverage of absorptive capacity but behaviors might be either a positive or negative leverage for absorptive capacity.

Keywords: Routines, Behaviors, Absorptive Capacity, Inter-Organizational Learning, Knowledge

Student: Vasco Rodrigues Oliveira Student ID: 10828257

Supervisor: Lori DiVito

Second supervisor: Niccolò Pisani Words count: 13.802

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Statement of Originality

This document is written by student Vasco Rodrigues Oliveira who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its reference have been used in

creating.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Introduction

The general topic of research is focused on Organizational Learning in the context of

international inter-firm relations. However, due to the broad concept of study about knowledge

exchange in inter-firm relations is important to narrow as much as possible the field of study. There has been a focus of knowledge exchange studies on types of knowledge, organizational structure, organizational scope, inter-organizational learning, organizational learning, innovation and operationalization of absorptive capacity (Lane, Koka and Pathak, 2006). But regarding how external knowledge is assimilated and used, there is a lack of studies (Lane and Lubatkin, 1998; Lane et al., 2001). Thus, considering the gap in the literature regarding the assimilation and exploitation of knowledge (Lane, Koka and Pathak, 2006) would be interesting to conduct a study focused in real situations where organizations absorb and use the knowledge in inter-organizational interactions. For that, considering Dyer and Singh’s theory (1998) arguing that absorptive capacity is based on “social interactions”, this single case study will focus on how individuals of two different multinational organizations behave and interact between them in order to absorb and use the knowledge that firms exchange.

The collected data tries to figure out how routines and behaviors may enhance the absorptive capacity of these two organizations in order to improve the inter-organizational learning. By understanding the routines and behaviors that managers from both organizations are following, the study will explain how these two organizations are enhancing its absorptive capacity in order to learn from its partner. The interviewees provided an exhaustive description of routines and behaviors they use to share knowledge and therefore the “right” and “wrong” procedures will be identified in order to maximize the inter-organizational learning.

At an initial stage the data will be collected from the main literature about absorptive capacity, inter-organizational learning, knowledge exchange and inter-firm relations and posteriorly six in depth interviews will be conducted. This qualitative study will be based in semi-structured

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6 interviews with all managers who are running the business – PepsiCo beverages brands that are sold in Portugal. This method seems to be the best one to get in depth data since as mentioned before is a matter of “social interactions” and therefore an open ended questions interview provides more deep understanding regarding what is happening regarding the mater of study: routines and behaviors that leverage absorptive capacity and in the end have effect in inter-organizational learning.

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Literature Review

Organizational learning in the context of inter-firm relations gains particular importance when considering the pace of competition among firms. Thus, it is critical for firms to develop the ability to learn from others in order to follow the competitors’ capacities (Easterby-Smith, Lyles and Tsang, 2008). This ability to learn and get innovative capabilities can be leveraged by absorbing competitors’ skills both within and across firms’ processes (Easterby-Smith, Lyles and Tsang, 2008).

Researchers have studied this ability over the past years and identified it as “absorptive capacity,” but according to some authors it may include several dimensions besides the simple capacity of absorption. Early on, Cohen and Levinthal, in their 1989 paper, defined absorptive capacity as a firm’s ability to identify, assimilate and exploit knowledge from the environment.

As referenced in the introductory section, knowledge exchange is a complex scenario due to the nature of boundaries, cultures and processes involved, since nowadays firms can be partners, competitors, suppliers and customers at the same time (Easterby-Smith, Lyles and Tsang, 2008). Despite this complex scenario, there has been a general assumption that the simple absorption of knowledge improves performance (Lane, Koka and Pathak, 2006), and therefore most firms pursue it. But as Grant mentioned (1996), for this knowledge exchange happening in inter-firm relations, three sets of factors must be considered: the resources and capabilities of both the donor and recipient firms, the nature of the knowledge that is being exchanged and inter-organizational dynamics (Easterby-Smith, Lyles and Tsang, 2008). Additionally, the knowledge swap between firms is dependent on power relations, trust and risk, structures and mechanisms, and social ties (Easterby-Smith, Lyles and Tsang, 2008). Moreover, the more similar the knowledge-processing system is between firms, the easier the internalization process for the newly acquired knowledge will be (Lane and Lubatkin, 1998).

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8 Alliances and knowledge sharing process

Considering the market situation, many firms venture outside the home market and face cost barriers as liability of foreignness or liability of newness. In order to overcome these barriers, it is important to set up a partnership with a local actor, which can provide some knowledge about the new market. According to some research, firms tend to build alliances with those who have “overlapping technological capabilities” (Mowery, Oxley and Silverman, 1996). Consequently, it can be argued that partnerships may play a role in gathering “a special

mechanism for pooling complementary assets” (Balakrishnan and Koza, 1993), which can help

in adapting to a new environment. This theory can partially be explained by the shift from alliances based on traditional resources or risk-sharing to learning alliances, which are based on learning from partners (Hamel, 1991; Huber, 1991), since firms may lack the capacity and knowledge to deal with new problems.

In order to mitigate the barriers in the learning process, Simonin (1999) indicatedthat the main points in the alliances are knowledge-specific, partner-specific and context-specific. Despite the barriers to sharing knowledge, equity joint ventures (EJV) have been the preferred type of partnership for exchanging tacit and embedded knowledge, since an EJV is the best way for organizational replication and therefore the best method to gain this sort of knowledge (Kogut, 1988). An EJV “allows for prolonged cohabitation of managerial and technical

personal and facilities the replication of organizational routines” (Kogut 1988; Teece 1981).

Nevertheless, from an analytical perspective, three types of component knowledge that firms seek when setting up partners can be identified: knowledge related to products or services, knowledge related to production processes and knowledge related to markets. All three may consist of explicit and tacit knowledge (Van den Bosch, Volberda and de Boer, 1999). In order for partnerships to succeed, it is extremely important that firms absorb different sorts of

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9 component knowledge and master this skill in order to use it towards a commercial end (Van den Bosch, Volberda and de Boer, 1999).

Due to the complexity of transferring tacit knowledge, “learning alliances” can be a means to surpass and minimize the exposure of firms to technological uncertainties by acquiring knowledge from a more expert and experienced actor (Grant and Baden Fuller, 1995). However, there is a lack of knowledge on how to choose the partner, i.e. the donor firm. Nevertheless, Lane and Lubatkin (1998) noted that whomever the firm chooses, the learning capacity depends greatly on both sides, not only on the recipient firm.

Intra-firm knowledge exchange

After the knowledge transference takes place effectively, if the sight is narrowed to internal knowledge transference, this phenomenon may be influenced by different types of issues, such as printed and electronic documents, e-mails, telephone or in-person conversations, team meetings or task forces, mentorship activities, and temporary or permanent exchange personnel across divisions (Lord and Ranft, 2000). However, Szulanski (1996) argues that this is also a hard procedure. These issues gain special force when assessing an MNE, in which foreign investors and worldwide activities are a reality (Bartlett and Ghoshal, 1992; Hedlund, 1994). Moreover, as discussed previously, the structure of firms may also influence this knowledge exchange. For instance, the multidivisional form (M-form), a tool to release the top managers to core activities by giving more strategic, operating and financial responsibilities to lower-level managers, may influence this knowledge flow (Hill, 1988; Hill et al., 1992). The problem with this strategy mainly concerns the distance between departments (Hedlund, 1994); each department has its own manager and therefore there is a gap between them (divisions), which restrains the knowledge flows. Due to this phenomenon many authors argue that the M-form structure should be modified (Bartlett and Ghoshal, 1992; Hedlund, 1994), since

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10 organizational structure is a key point for intra-firm knowledge diffusion (Lord and Ranft, 2000).

Tacit knowledge as hard knowledge content to transfer

Some authors suggest that after the knowledge acquisition happens, it is difficult to transfer the knowledge through an organization’s departments, since this knowledge acquisition happens mainly by direct experience gained by acting in the host country (Eriksson et al., 1997). The same phenomenon can be seen with tacit knowledge, which is a result of experience and not from knowledge flows between and within firms. Tacit knowledge can be defined as the know-how and skills about something that is difficult to transfer, since it is impossible verbalize and materialize it. This sort of knowledge tends to be much harder to gain (Barkema et al., 1996; Johanson and Vahlne, 1977) but much more important when entering a host country. Thus, besides setting up a good and valuable partnership and having access to market research statistics and published country reports, it is imperative for a firm to enrich its knowledge through genuinely experiencing the language, culture, politics and society of the host country (Lord and Ranft, 2000), which might be the root of the tacit knowledge.

In the same paper, Lord and Ranft (2000) mention that Zander and Kogut (1995) argued that the higher the complexity and difficulty of codifying the knowledge, the higher the level of tacitness is, and consequently the harder it is to transfer between and within firms. Thus, the degree of tacit knowledge exchange varies on the same scale of variation as absorptive capacity, and therefore, considering Grant (1996), depends on three dimensions: efficiency (how firms identify, assimilate and exploit the acquired knowledge from costs and economies of scale perspectives), scope (the coverage of knowledge) and flexibility (the extent to which a firm can access new knowledge and shape that which it already has) (Van den Bosch, Volberda and de Boer, 1999). Efficiency is associated with exploitation adaptation of a firm’s knowledge

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11 configuration, whereas the scope and flexibility are associated with exploration adaptations of a firm’s knowledge configuration (Van den Bosch, Volberda and de Boer, 1999). However, the requirements concerning the three dimensions of knowledge absorption will depend on the company’s structure as well as its presence in mature or turbulent industries (Van den Bosch, Volberda and de Boer, 1999).

Absorptive capacity as a key role

The absorptive capacity of both sides (donor and recipient) also plays an important role throughout the knowledge exchange process (Cohen and Levinthal, 1990), because it is the ability of a firm to integrate and use the knowledge (Lord and Ranft, 2000). This capacity is the process of identifying, assimilating and exploiting knowledge from the environment related to the firm’s product and processes, but also includes exploring non-customer knowledge such as scientific research (Lane, Koka and Pathak, 2006). Cohen and Levinthal (1989) also argue that this absorptive capacity is highly dependent on prior knowledge, and therefore is a result of the gathered knowledge as well as the organizational form and combinative capabilities (Van den Bosch, Volberda and de Boer, 1999). In order to keep long-term operations on track, it is critical for a firm to maintain its absorptive capacity, because it allows the firm to reinforce, complement or refocus its knowledge base (Lane, Koka and Pathak, 2006) and therefore retain its competitiveness.

The e level of absorptive capacity also depends on the type of knowledge, the level of similarity between firms and the degree of familiarity between firms regarding organizational problems. It also depends on the investment in improving absorptive capacity that may be triggered by industry levels, such as demand, appropriability and technological opportunity (Lane and Lubatkin, 1998As for technological knowledge, a few authors suggest that it is a public good, since it can be accessed by everyone. Lane, Koka and Pathak (2006) illustrated

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12 this with the example of radio broadcast, which everyone with a radio can enjoy because the “service” is available for everybody with no costs.

Thus the argument is that, since the knowledge is available in the environment, firms have only to invest in their absorptive capacity in order to collect the knowledge. Cohen and Levinthal (1989) go further and argue that if the costs of acquiring new knowledge are low, this is a result of previous investments in absorptive capacity, which in other words means to

“identify, assimilate and exploit knowledge from the environment.” Considering the key role of

this external knowledge, the absorptive capacity is an important trigger to enable firms to acquire new knowledge (Cohen and Levinthal, 1989), unlike the “learning-by-doing” that enables a firm to improve its capacity in something it is already doing (Lane, Koka an Pathak, 2006).

Organizations might have different reasons to invest in their absorptive capacity in order to acquire external knowledge. The predisposition for firms to invest in absorptive capacity is influenced by knowledge stimuli in the environment (Cohen and Levinthal, 1989). These stimuli include the scope of technological opportunities, ease of learning external knowledge, propensity for knowledge spillovers in the industry, competitiveness and industry demand (Lane, Koa and Pathak, 2006). Additionally, in the environment surrounding firms, “the more

knowledge available and the greater the knowledge’s potential to improve the performance of existing technologies, the greater the firms’ incentive to invest in R&D” (Lane, Koka and

Pathal, 2006).

Knowledge appropriability is also an important feature of the market and works conversely with the propensity of firms to protect their knowledge base – essentially, the weaker the protection of knowledge base, the greater the R&D spending (Lane, Koka and Pathak, 2006). The environment is a complex web that includes several features, which may act as incentives or restrictions to invest in absorptive capacity and to gain external knowledge in

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13 an easier or harder way. In many instances, the absorptive capacity is mentioned as R&D, since most of the literature on absorptive capacity during the past years has been restricted to knowledge content. Only recently have authors started to broaden the view to other fields such as routines, structures and processes as part of the subject of absorptive capacity.

Considering the results of previous research from Bower and Hilgard (1981), Ellis (1965) and Estes (1970) and Cohen and Levinthal (1990), the capacity to assimilate knowledge is greater when the new knowledge is related to something that “individuals already know”. Spreading this insight to the firm level, Cohen and Levinthal’s (1990) study argues that absorptive capacity is an outcome of “prior innovation and problem solving and is itself dependent on the individual absorptive capacities of the organization’s members”. In summary it can be stated that the absorptive capacity of a firm is the sum of all firm members’ absorptive capacity. The development of a firm’s absorptive capacity depends on previous investments in individuals’ absorptive capacity, is cumulative and path-dependent, and needs to be diffused across the firm’s individuals (Lane, Koka and Pathak, 2006). In addition, the capacity to share knowledge across the organization is a key skill, since the knowledge may be acquired by a specific department but could be applied even more profitably by another. This leads to the conclusion that the absorptive capacity also includes the ability to understand which knowledge the firm already has and where and how to use it (Lane, Koka and Pathak, 2006).

Throughout the development of the literature on absorptive capacity, several processes and capabilities have been added to the concept. Cohen and Levinthal (1994) have changed their own definition of absorptive capacity and adapted it: the “firm’s absorptive capacity

depicted as the capability that not only enables the firm to exploit new external knowledge but also allows it to predict more accurately the nature of future technological advances”. After

this adaptation they also argued that the investment in absorptive capacity provides the firm with the capacity to better predict technological trends and to identify opportunities before

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14 competitors and therefore take advantage of them. As mentioned before, most of the literature focuses on the relationship to R&D when assessing absorptive capacity, but in the recent years some authors have focused on different perspectives. Cohen and Levinthal’s papers from 1990 and 1994 argue that over time, firms have developed a “modus operandi” (which includes processes, policies and procedures), and all these different mode of operation enable organizations to predict technological trends and create new products and markets, and even new ways to use the new knowledge. To summarize, the absorptive capacity includes the capability to “identify and value external knowledge, assimilate it and commercially apply it” (Lane, Koka and Pathak, 2006).

Knowledge characteristics and absorptive capacity

Besides the main focus of absorptive capacity research on R&D and types of knowledge, studies have also focused on the characteristics of external knowledge and on identifying knowledge characteristics inside organizations that are the basis for absorptive capacity (Lane, Koka, and Pathak, 2006). The first knowledge characteristic is the knowledge content, which includes skills, strategy, knowledge bases, similar cultures and the similarity of structures among firms. The second characteristic is the tacitness of knowledge (Lane, Koka and Pathak, 2006), which was previously explained. The last knowledge characteristic is complexity, which essentially is the number of “interdependent technologies, routines, individuals, and resources” related to a specific activity (Simonin, 1999). Keeping in mind that over time the complexity of knowledge rises, it is important to soak up knowledge from more and different areas and be able to set up a connection between them (Garud and Nayyar, 1994). Therefore, the simpler the knowledge is (the less complex), the easier it will be to absorb it. However, some authors have suggested a contradicting point of view. They argue that the higher the tacitness, complexity and similarity of the knowledge base are, the stronger the absorptive capacity will be, such as

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15 when developing processes with a higher complexity of knowledge and combining different resources (Galunic and Rodan, 1998; Van den Bosch et al., 1999). In a simple way, studies have focused on characteristics of knowledge, assessed the features of this knowledge and, in accordance with this, evaluated firms’ capacity to absorb this knowledge. Besides the absence of empirical studies, there is also a lack of research on how the type of knowledge may change the capacity of a firm to use it (Lane, Koka and Pathak, 2006).

Organizational structure and absorptive capacity

As discussed previously, the structure of organizations is an important factor that influences knowledge exchange. In addition, some authors suggest that strong ties and equity joint ventures may be a means to facilitate the acquisition of tacit knowledge (Dyer and Nobeoka, 2000; Shenkar and Li, 1999). However, only a limited number of studies focus on the role of organizational structures and processes. The structures that some firms adopt with their alliances may be a means to expand their knowledge base. There are defenders who say that this knowledge expansion should concentrate on areas of knowledge that are related to a firm’s current knowledge (Ahuja and Katila, 2001; Barkema and Vermeulen, 1998; Isobe, Markino and Montgomery, 2000; Kim and Kogut, 1996). This “theory” may provide an explanation for some acquisitions or alliances (equity and non-equity). But geographic diversity may improve absorptive capacity regarding foreign investments (Denison, Dutton, Kahn and Hart, 1996), which may explain why some authors defend the idea that investing in unfamiliar markets and diversifying the technological base may lead to a better absorptive capacity.

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16 Relationship between learning process in inter-firm relations and absorptive capacity

The relationship between organizational learning and absorptive capacity is perpetual (Lane, Koka and Pathak, 2006). The more wisdom about a specific area a firm gains, the bigger the absorptive capacity of that firm within that area will be (Autio, Sapienza and Almeida, 2000; Barkema and Vermeulen, 1998). Nevertheless, the relationship between these two themes – organizational learning and absorptive capacity – suffers from a lack of studies (Lane, Koka and Pathak, 2006). There is also a perpetual relationship between inter-organizational learning and absorptive capacity (Lane, Koka and Pathak, 2006). The more knowledge is exchanged between two or more firms in an alliance, the better the absorptive capacity regarding the area to which the knowledge is related: the firm’s capacity to absorb, exploit, assimilate, apply and adapt the structures, and also to identify the importance of knowledge for the firm’s proposes, will increase. In order for inter-organizational learning to happen, it is critical to establish alliances among organizations, because this allows for exchanging important knowledge that is sufficiently similar to facilitate absorption but also sufficiently different to add something new (Lane and Lubatkin, 1998).

It is also important to consider the similarity between firms as a way to mitigate the barriers to inter-organizational knowledge exchange. If both firms have similar organizational structures, compensation systems and cultures (Gupta and Govindarajan, 2000; Lane and Lubatkin, 1998; Lane et al., 2001), it may provide a higher level of absorptive capacity. However, in the past, a few authors have suggested that inter-organizational learning might reduce or soften the absorptive capacity, such as when firms over-rely on external technology, as mentioned by Lei and Hitt (1995). Due to the complexity and expansion of knowledge in the environment around organizations, it has become even harder for firms to gather all the necessary knowledge (Lane, Koka and Pathak, 2006), and therefore establishing alliances may be an easy way to collect more and different knowledge. Different firms can concentrate on

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17 different sorts of knowledge and afterwards share it among their partners, providing time and costs savings. It can be concluded that the broader the knowledge base of a firm, the larger the number of possible partners with similar knowledge, and therefore to strengthen the knowledge base.

Limitations of absorptive capacity theme

Despite all the literature that uses Cohen and Levinthal’s findings, it is still unclear what the literature about absorptive capacity has accomplished (Lane, Koka and Pathak, 2006). Absorptive capacity is often identified in the literature as the length of prior knowledge possessed by a firm (Ahuja and Katila, 2001; Kim 1998; Mowery, Oxley and Silverman, 1996). However, there are some inconsistencies in the literature because there has been limited exploration regarding themes related to absorptive capacity, which negatively influences the external validity.

Considering the limited view regarding absorptive capacity, which is primarily focused on knowledge content, a few authors have tried to broaden the scope outside of the knowledge focus, also considering organization routines and processes (Lane, Koka and Pathak, 2006). Among others, Zahra and George (2002) argue that the absorptive capacity is a “set of

organizational routines and processes”. For Rao and Drazin (2002) and Sorensen and Stuart

(2000), the age, and for Mowery et al. (1996) the size of firms, have been an important mediator for absorptive capacity in the sense that the older or larger the firms are, the more absorptive capacity they enjoy, since they have developed routines and processes that better or more easily absorb new information. However, the evidence is inconclusive because limited studies have addressed topics other than knowledge content or R&D, and even fewer have studied the phenomenon empirically. There may be a lack of understanding of how aspects such as structure, routines, competencies and procedures are applied by firms in order to

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18 improve the absorptive capacity in their inter-organization learning. Dyer and Singh (1998) deviated from the mainstream view of absorptive capacity and argued that it is about

“sociological interactions” and the way in which individuals interact and share their

knowledge. Absorptive capacity as an “iterative process of exchange” was mentioned by Lane, Koka and Pathak (2006). From one side, there is Dyer and Singh’s (1998) vision that defends the iterative learning process as based on two partners, and from the other side Van den bosh et al. (1999) defend their proposition that the process is not only based on partners but also on all external sources (Lane, Koka and Pathak, 2006). From a broader perspective, the research developed so far can be split into two groups: the first focuses on knowledge content and similarities between partners (Ahuja and Katila, 2001; Mowery et al., 1996), and the second focuses on broader perspectives such as strategy, culture and compensation systems (Lane and Lubatkin, 1998; Szulanski, 1996).

The inter-organizational learning has been studied in-depth and mainly empirically (Lane and Lubatkin, 1998; Lane et al., 2001; Lyles and Salk, 1996; Meeus et al., 2001) and, until this point, the literature on absorptive capacity includes: types of knowledge, organizational structure, organizational scope, inter-organizational learning, organizational learning, innovation and operationalization of absorptive capacity (Lane, Koka and Pathak, 2006). However, a few papers have tried to analyze the assimilation and application of external knowledge (Lane and Lubatkin, 1998; Lane et al., 2001). This may be an interesting point to understand how firms apply the knowledge gathered throughout inter-firm relations. Despite the well-documented research about recognition and acquisition of knowledge, there is a gap in the research regarding assimilation and exploitation (Lane, Koka and Pathak, 2006), i.e. researchers know a limited amount about how absorptive capacity can be developed, managed and exploited. This gap can be understood as a lack of understanding about structures, routines and policies inside the firm that drive and lead to improved absorptive capacity.

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19 Research question

§ How routines and behaviors may enhance the absorptive capacity in order to improve the

inter-organizational learning?

Theoretical Framework

Due to the lack of a broad view regarding absorptive capacity in the literature, the current study proposes focusing on a non-knowledge-content (R&D) point of view when assessing absorptive capacity. The current empirical research will study the processes, routines and behaviors of managers of two different companies that act as partners. Since absorptive capacity is also a “sociological interactive” process, as mentioned by Dyer and Singh (1998), it will be interesting to study the relationships that individuals maintain when leading a business together with a partner. Although absorptive capacity also has origins in external sources, this study focuses on how the partner organizations’ individuals interact with each other in order to adopt behaviors and routines that are acceptable for both organizations, which leads to a better absorptive capacity. Thus, this study will try to analyze how firms assimilate and internalize new knowledge that is exchanged between them. After the knowledge swap, it is important to understand how organizations manage the knowledge and in which ways they act in order to maximize the potential of the exchanged knowledge, which is what the on-going research tries to understand. Thus, to understand the field of research, it will be useful to define inter-organizational relationships as all the procedures, routines, structures, behaviors, rules or value chains that must be followed by individuals in firms in order for a knowledge transfer to take place in a specific context.

In order to progress successfully with this study, it is important to consider a few assumptions and hypotheses that have been developed regarding the absorptive capacity

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20 literature. Most of these studies consider absorptive capacity as an important trigger for performance, and therefore most firms pursue it in order to succeed. In addition, the similarity between firms is an important factor to consider, and Lane and Lubatkin (1998) hypothesize that “the similarity of the student (recipient) firm’s and teacher (donor) firm’s organizational

structures will be positively associated with inter organizational learning”. The success of

inter-firm relations, when assessed in terms of tacit knowledge transference, depends greatly on the level of absorptive capacity of both sides. But absorptive capacity is dependent on prior knowledge, the capabilities of firms and their organizational form, as well as the market circumstances, which play an important role in firms’ ties and performance, which may influence the acquisition of new knowledge. Additionally, the higher the tacitness of knowledge is, the higher the difficulty of transferring it within organizations (Lord and Ranft, 2000) and between firms will be. Therefore, is important to understand which sort of information organizations exchange.

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21 The scheme above (figure 1) tries to explain how inter-organizational relationships work. Both organizations possess an absorptive capacity that is influenced by prior knowledge and organizational form. This absorptive capacity is based on routines, behaviors, processes and structures followed by firms. Thus, if both organizations follow similar routines, behaviors, processes and structures, the absorptive capacity will be higher and therefore provide better outcomes. These include learning more from the partner, providing more inter-organizational learning and, in the end, better performance, such as bigger market shares or higher retail prices.

The purpose of this study is to understand what the similar routines, behaviors and processes that companies are adopting are in order to obtain the best outcomes from these partnerships. On the one hand, it is expected that the higher the absorptive capacity is, the higher the inter-organizational learning will be, which means more exchanged knowledge leading to better performance. On the other hand, it is expected that the lower the absorptive capacity is, the lower the inter-organizational learning will be, which means less exchanged knowledge, resulting in worse performance. With a high absorptive capacity, a firm easily assimilates from others new knowledge and capacities that it is missing, and which otherwise it would not be able to develop. Thus, the transference of knowledge depends on the capacity of a firm to absorb it. The characteristics of the market that is being analyzed are also important to consider, since they will shape the firm’s focus regarding its new knowledge. In mature industries with a stable knowledge environment, firms are concerned with exploiting their current knowledge base (Cohen and Levinthal, 1990). In contrast, in a turbulent knowledge environment, firms try to increase their absorptive capacity, i.e. they try to explore and consequently focus on the scope and flexibility dimensions of knowledge absorption (Van den Bosch, Volberda and de Boer, 1999). This means that for a stable knowledge environment (mature industries), the requirement regarding efficiency is high but regarding scope and

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22 flexibility is low. In contrast, for turbulent knowledge environments, high levels of scope and flexibility and a low level of efficiency are strongly recommended (Van den Bosch, Volberda and de Boer, 1999).

To summarize, in order to assess the knowledge exchange in inter-firm relations it is important to consider: first, the absorptive capacity of both firms; second, prior knowledge, organizational form and combinative capacities; and third, the industry environment. In this way, the success of a given partnership can be better explained.

Method

This work is a qualitative and explanatory study, which seeks to gain knowledge about how organization learning happens in inter-firm context. As mentioned by Strauss and Corbin (1990), conducting a case study provide more in depth knowledge, and in this case, regarding the specific situation of PepsiCo and Sumol+Compal in Portugal for the soft drinks business. Starting with a prior analysis of the literature mainly regarding inter-organizational learning, exchange knowledge and absorptive capacity provided the starting point to understand the field of study. Afterwards the script of interviews were elaborated and in order to have questions objective enough but also with room for more open and detailed questions.

Semi-structured interviews are the best option to give more rich information about managers’ behaviors and moreover this method is more flexible since questions may be formulated straight to the point of the study but also open-ended question give the freedom to interviewees express their thoughts. The interviews were audio recorded and afterwards analyzed according the topic of study. The results from the interviews were crossed with literature previously studied in order to elaborate the analysis section and find conclusions.

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23 Sample

The individuals who are studied on the research were selected based on a purposive sampling method, which is a nonprobability sampling method. This method of sampling was chosen because the research seeks to study a specific phenomenon that requires participants with predetermined position inside the company and with a direct relation (dyadic relationship). Therefore the participants were selected and not picked randomly. They are middle managers at PepsiCo Portugal and at Sumol+Compal (S+C) and are responsible for managing the business of national/international brands operating in a franchising business model. Operating in this business model may provide an excellent example of organizational learning in inter-firm relations and understand how the structures, behaviors and routines may enhance the absorptive capacity of both firms. They also relate closely since both companies are partners and therefore provide perfect situation to study and understand how the inter-organizational learning works in context of inter-firm relations. The individuals also need to have the same hierarchy on the business because is important that both of them see from the same perspective the situations. Otherwise they could have different goals and different importance on the decision making process. Thus, the sample is stratified purposed because focus on a group of individuals with specific characteristics (Patton, 2001). According to the specific features mentioned above, the sample will be 6 person-size. Thus, the managers with dyadic relationships have similar hierarchical relationship.

Analyzing different point of views with the same level of involvement enables to understand what drives the individuals from each company regarding the business issues but also regarding the pitfalls of manage the same brands but with different goals from each side. This happens because although both organizations pursue better results and S+C as the main producer and carrier of beverages in Portugal, needs to balance the interests of PepsiCo brands

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24 with its own brands in the market I happens because the Portuguese company also want to keep the market share of its own brands in the soft drinks market.

The study is focused on beverages department, which is present in Portugal by PepsiCo only with a Marketing team. The rest of the business is operationalized by S+C, which has more capabilities and know-how in the Portuguese territory. Considering the reality of the company, currently three people from PepsiCo and three people from S+C are operating the business. Therefore the research will study three dyadic relationships considering that is assessing 3 persons from each side with similar hierarchical positions: From PepsiCo the Marketing Manager Franchise Iberia, the Brand Manager of Pepsi and Junior Brand Manager of 7Up; and from S+C the Marketing Manager of PepsiCo Brands, the Trade Marketing Manager and the Brand Manager of PepsiCo brands.

I am looking for the point of view from both sides, keeping in mind that both have the same hierarchical position and therefore the same influence. In order to understand how firms operate, the figure 2 provides a better overview:

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Figure 2: Portuguese PepsiCo subsidiary’s structure

Thus, this is an explanatory study because I will try to construct relationships between the variables. For this single case study, the sources were based on interviews, observation and even documents for a snapshot time space gap.

Data Collection

The meetings were based on audio-recorded personal semi-structured interviews and therefore looking for open-ended answers. In this way it was possible to get basic information in order to understand the initial points covered by the topic of organizational learning in context of inter-firms relations, but also get some extra insights out of the first sight, as a result

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26 of manager’s personal opinion. The questions were based on how managers from PepsiCo and S+C relate in order to exchange knowledge between them and if this relationship has been suffering any sort of changes throughout the time. Also was asked if they exchange knowledge during meetings, by phone calls, e-mails or videoconferences and also the frequency of these contacts. The interviews also tried to assess the type of knowledge that is exchanged and if they follow any kind of formal codes to share informations and ideas. It was requested to participants to answer questions not strictly related with the topic like, if they would change anything in this relationship or regarding the decision process. In this way would be possible to understand better their feelings regarding the success of this partnership. During the interviews they have provided several examples of how they interact and exchange knowledge and what type of knowledge is exchanged, which allow us to have better perspective about what they are talking about (appendix 1). Asking the same questions to both managers and try to follow the same order of questions provided a way to identify patterns, which is the means to build conclusions. The type of business model, i.e. the regulations that both parts must follow to take decisions and share knowledge, explains these patterns.

Before the interviews was asked the consent of the participants to record it. Afterwards the interviews were transcribed in order to identify patterns and repetitive or contradictive information. The information was coded and divided in categories in order to classify the information and segregate the answers into themes and more easily identify patterns. Also the frequency of repetitive answers is a criterion of analysis once it may means the importance of an idea. Table 1 provides an overview of the individuals that were studied. By analyzing the table can also be seen that the companies have 3 dyadic relationships in total for this business. Therefore with the three dyadic relationships we can have a full picture of the PepsiCo beverages brands Portugal business. Although there are more people working with PepsiCo brands, they do not have direct contact with PepsiCo Managers because they are mostly trade

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27 marketing related. They have intra-firm contact, it means just inside S+C, and therefore they are not considered as dyadic relationships.

Organization Description Job Title

PepsiCo Manages the beverages business for Portugal and Canary Islands

Marketing Manager Franchise Iberia PepsiCo Support Marketing Manager Franchise Iberia

- Pepsi

Brand Manager PepsiCo Support Marketing Manager Franchise Iberia

– 7Up, Gatorade and Guaranaa

Junior Brand Manager Sumol+Compal Manages all the issues regarding PepsiCo

brands

Marketing Manager PepsiCo Brands Sumol+Compal Manages all the issues related with Trade

Marketing PepsiCo brands (single Trade Marketing department for PepsiCo brands)

Trade Marketing Manager

Sumol+Compal Support Marketing Manager PepsiCo Brands – 7Up, Gatorade and Guaranaa

Brand Manager Table 1: Dyadic relationships at PepsiCo beverages Portugal business

As a deductive approach, this single case study starts from existing theory. Afterwards this theory is tested in order to confirm or reject the expected scenarios. In order to confirm or reject, the analysis of the observation is based on coding the responses of the interviewees. The collected data was examined based on codes that were created in order to identify the subjects that are being studied in this research. The table 2 provides an explanation of the codes and its definition.

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Code Sub-Code Definition

Routines Norms Acceptable procedures by both parties Rules and Regulations Formal and mandatory agreements about

how companies must split costs and responsibilities

Behaviors Values Behaviors that individuals adopt that are not formal agreements but still acceptable Absorptive

Capacity

Routines Routines and processes that

organizations/individuals follow in order to absorb and share information

Behaviors Behaviors and ways to solve problems that organizations/individuals follow in order to absorb and share information

Inter-Organizational Learning

Adaptation Processes, routines and behaviors that were adopted as a result of the partnership Improvement Results that come form the changes

implemented by the partnership

Table 2: Codes and Sub-Codes

As mentioned by Lane, Koka and Pathak (2006) new features of absorptive capacity have had special attention in the most recent literature. In the same paper Lane, Koka and Pathak mention that new knowledge characteristics must have attention when assessing absorptive capacity of organizations, such as routines and behaviors. Therefore the selected codes are a result of research made in the previous sections and also an attempt to make the perfect match with the research question, i.e. the purpose of this study. In the upcoming section will be presented the results of the interviews and also an exhaustive and in depth explanation of those results.

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Results

The following section presents the data gathered from the interviews and provides an in-depth analysis of the results. The first part presents the outcomes from the six interviews regarding the different agreements the organizations follow in order to make the partnership succeed. In this part the responsibilities of each organization and their managers’ roles will also be explained. The last part of this first section will provide a picture of what each company brings to the business. The second section portrays each company and its individuals, conducts an analysis and discusses similarities and differences between organizations, which leads to the identification of the strengths and weaknesses of this partnership. The last section provides a discussion, matching the findings with the theory previously discussed.

Overview

As mentioned in the previous section, there are three major conclusions that can be drawn from the interviews as a starting point. The first is that the business plan for PepsiCo brands in Portugal is based on three types of agreements: the Exclusive Bottling Appointment (EBA), the Business Development Agreement (BDA) and the Annual Operating Plan (AOP). The second is that the responsibilities of each organization are strictly separated: PepsiCo with ATL and S+C with BTL. Third, S+C, as the local partner, should apply the local market knowledge and PepsiCo should apply global guidelines for strong campaigns in order to build powerful brands aligned with the different markets in which they are operating.

These three major points can be identified as the routines that organizations must follow in order to exchange knowledge and let inter-organizational learning happen. The three different agreements (EBA, BDA and AOP) define the rules, what kind of information organizations exchange and seek from each other and how they do so. While the EBA is a

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30 PepsiCo and the local partner, the BDA is a strategic plan for the mid/short term and is focused on operational issues. Lastly there is the AOP, which is the yearly plan. The last two

agreements are more concerned with knowledge exchange, since they set up the goals for the short and mid-term and therefore influence what companies are looking for and expect from each other. The BDA sets up targets like market shares, sales and strategic initiatives, among other things, and also defines new plans like “new routes to visit clients, hire more people, buy

new production facilities to launch new products or marketing investment to reach specific goals”. It is therefore an important moderator of what kind of information organizations seek

from each other. The operational plan, the AOP, is an in action plan and is more concentrated on daily issues and what companies should bring to the partnership in order to solve those daily problems. As the head of PepsiCo team said, it “is a journey through a long road that comes

from long term (EBA) to something more strategic (BDA for 3 years) and then to an AOP that is an operational plan for one year.” Besides the macro perspective there is a micro

perspective, and here the organizations have quarterly reviews, monthly reviews and weekly reviews. During these more frequent meetings, the managers discuss strategic decisions considering the constant market changes and daily issues. Here is when the behaviors are brought into the equation; the focus is the behaviors here because during these frequent meeting there are no official rules to guide the organizations. Therefore, there is more room for conflicts and tension, and this happens mostly when sales and market shares are not going as expected, as mentioned by all the six interviewees. Thus, as mentioned by one of the PepsiCo managers,

“the most important thing is to define from the beginning the responsibilities of each one”.

This process is a whole cycle, and the quarterly, monthly and weekly reviews are steps to ensure that both sides are aligned and everyone knows what they should be doing and if everything is going according to plan.

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31 The following section will analyze routines and behaviors and how organizations interact in order to assimilate and internalize the exchanged knowledge, as well as the absorptive capacity and inter-organizational learning of each firm as a result of routines and behaviors adopted by managers.

Cross Analysis of codes

Routines: PepsiCo and Sumol+Compal

During the interviews with PepsiCo Portugal beverages managers, one point arose in all of them: the franchising business model is becoming more important in PepsiCo’s structure. At this point, “more than 50% of the business works as a franchising business model”, as

mentioned by the head of the PepsiCo Portuguese team. On the other side, the major point that arose from the interviews with S+C managers is that the alliance with PepsiCo is friendly and successful despite some periods of tension.

This business model provides many advantages, such as costs savings and risk reduction, but has also several restrictions. The restrictions can be identified as rules and regulations that must be followed, but for the ambit of this study this will be called routines. Therefore, when it comes to exchanging knowledge there are routines and procedures that must be followed. There are different contracts that define the rules for this alliance and how, how often and what

information managers exchange. In order to facilitate and filter the information that flows between companies, it is important to flush the information, because otherwise it would be impossible for managers to manage the amount of information at once.

The EBA, BDA and AOP are macro scenarios meetings with longer-term visions in which “market shares, sales, strategic initiatives, new routes to visit clients, hire more people,

buy new production materials or more marketing investment” are discussed. These agreements

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32 both sides and must be followed by organizations in order to exchange knowledge in a long-term vision. These three macro scenarios meetings are the stage to plan and forecast, while the quarterly, monthly and weekly meetings are reviews and “steps to ensure that both parts are

aligned and everybody knows what should do and if is according the plan” as described by a

manager from PepsiCo. Although it is a mandatory step, for S+C it is an informal guideline based on “documents, which are a sort of support for the activities, like the EBA which is a

guideline for our plans (…) but in the real life this is a sort of just guidelines and we are working together quite well”. With this alignment both teams can make decisions in real time

and “define limits”, because is always easy “to start conflicts”, as mentioned by one of the PepsiCo managers. Therefore, it can be stated that the mandatory routines stipulated in the agreements are a means to avoid conflicts and to facilitate the absorption of knowledge. As a result, there are inputs that are shared on a regular basis with no need to ask for them.

The sales and distribution figures are a cost that S+C is paying but providing to PepsiCo free of charge. But for S+C, the reason that routines are strictly followed and agreed on between managers is because the person who is intermediating the process adopts a flexible attitude. The head of the team from S+C stated, “the intermediaries have a key point in this

relationship. They can create the feeling of better or worst relationship between people and therefore facilitate or restrain the knowledge exchange in this partnership”. The success of

implementation of routines depends on the person who is leading the team being flexible and linking both points of view. For one of the managers from S+C, the key factor for the success of the adoption of routines is the fact that in this alliance there is a “friendly relationship. Not

only in terms of business level but the people know each other for quite a long time ago. Namely the top board members of S+C who have a close relationship with top managers of PepsiCo”. The best example given by the head of S+C team is that:

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“Some situations were solved in a easier and faster way because inside here at S+C the people like Tiago (head of PepsiCo Portugal team). Once he is a cherished person, everybody tries to facilitate to solve the problems instead of restrict it”. Also added “the personality traits, and namely if you are a friendly person, is a key point in this kind of partnerships. In these partnerships is important to keep a flexible approach instead of a “mandatory” attitude. “

But for the head of the S+C team, who has been in the company for twenty years, there is a point that could be improved: get more people. For her, there is a scarcity of human resources and money. Having more people, which would release the top managers to work more on strategic plans instead of operational issues, and more money would mean a greater capacity to invest. But the capacity to invest is a result of the agreement between PepsiCo and S+C, which is a “Euro-Liter agreement. So the money that we have available is a result from how much

liters we sell and therefore not enough when we consider the brands that we are working with”.

So, the companies are victims of their own agreements and rules that in the end are based on the Portuguese market dimension.

Although the agreements are a matter that can hardly be changed, the routines regarding meetings are an issue for managers from S+C. For them, the e-mail communication is

“exhaustive. Sometimes we exchange dozens of emails just to take a simple decision”. The

solution would be having even more face-to-face meetings. Although the managers from PepsiCo did not mention the urgency of having more face-to-face meetings, they did mention that there are issues for which “we cannot wait for a meeting to decide something”. Regarding the face-to-face meetings, there is a point that PepsiCo highlighted quite often as a point to improve: it is important to keep the information as much focused on the core business and “applicable” as possible and pay attention on issues to discuss in those meetings, because otherwise “we might be missing opportunities. If we go to a monthly review without prepare

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anything, this meeting will be only a status meeting, just to report the sales and nothing else more”. This procedure to filter and focus the information before the meetings became more

important considering the current context, because “back in days the situation was different,

the competitiveness was lower, the market was growing”, as mentioned by the head of the

PepsiCo Portuguese team. Therefore, these routines to exchange knowledge are becoming more important and aligned for both companies, as a result of 40 years of alliance and a continuous improvement process.

Despite some occasional tension, the frequency of communication is not an issue in this alliance. However, on the one hand they have sufficient communication (e-mails, calls, video-calls), but on the other there should be face-to-face communication more often, from S+C’s point of view. Therefore, it can be stated that this feature of absorptive capacity (i.e. routine regarding information exchange) is a strength in the PepsiCo and S+C partnership and helps them to maximize inter-organizational learning.

Behaviors: PepsiCo and Sumol+Compal

In spite of strict routines that must be followed, there is always room for “off-record” behaviors that are not stated in the formal agreements but also play an important role in

enhancing absorptive capacity, and in the end smooth inter-organizational learning. One of the sensitive points of this partnership is the fact that although PepsiCo and S+C are partners, they are also competitors in the market, and hence it is extremely important to “align agendas”. The Portuguese company with a large portfolio of brands occupies a big slice of the pie in the Portuguese beverages market. Thus, PepsiCo managers must make an effort to accomplish and follow the guidelines and the brand strategies from their global teams but also not cannibalize the brands from their Portuguese partner. The timing for launching new products, package sizes

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35 and flavors must be aligned 100%, because if both companies use the same timing for their actions, it could have a negative impact on both companies’ performance.

However, when it comes to exchanging information, there are times when it is harder to keep the communication flowing. Sometimes there are obstacles that employees face, but as mentioned by one of PepsiCo managers:

“It is about timings. It is strongly related with the dynamics in the markets (…) If the sales are not going well, S+C has the responsibility to act in order to fix this situation, but as we also have people responsible for the business, we try to figure out what is going on, and later try to provide recommendations in order to help S+C. The problem here is that sometimes we talk about sensitive subjects for them, i.e. agreements with clients and commercial issues that are a responsibility of the bottler, not ours. Each part needs to know what is its own responsibility and keep focus only on that, but sometimes we only try to understand the problem in order to try to offer solutions.”

According to one of the managers from S+C, they used to follow the “job description of

each company but did not work out. It is too complicated. I guess the key point here is the

common sense”. Again, she mentioned that the best solution here would be “personal meetings”

more often in which there are no regulations and routines to follow and in which the behaviors and a flexible stance would help to solve problems more easily. According to her, it is harder to transfer information by e-mail, calls or conference calls, which sometimes means that what could have been decided in a couple minutes in a face-to-face meeting takes days. Because of this, the S+C team is always available for on-site meetings and also provides facilities with a brainstorming room.

However, when there is no time to discuss an idea in real time, the Portuguese company is forced to make a decision on its own, although the agreements state that all decisions must be made together with the American company. When this happens, S+C reports immediately to

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36 PepsiCo because otherwise they would also fail to follow accepted behaviors, which could create an “internal fight”. Since the subject here is about subjective situations, like daily issues that must be solved when there are no strict routines and guidelines to follow, each person always tries to find his/her own solution, and therefore conflict is more likely. But if managers are aligned in their opinions, it might facilitate the decision-making process, since there are no mandatory steps to follow.

Thus, again, from PepsiCo’s perspective, one of the biggest obstacles they face is “when

one part tries to get inside the other’s field/responsibility. It means, when we try to take decisions about S+C’s subjects, which is a naive way to act, because our goal is only to make changes in order to improve something, it is not about blame someone”. Then the problem

becomes that, when one of the sides feels that the other is trying to take its job, information starts to get restrained. According to the head of the PepsiCo Portugal team, the solution to overcoming this obstacle is acting like “I won’t to tell you how you are going to make a client

plan, but I can suggest you how we do in other markets, in order to help you. In the same way, S+C does not tell us how we should invest in 7Up but can tell us that they used to have a brand with the same problems and did something, which brought a specific result”. The head of the

S+C team defends that the best behavior they have adopted is the effort to have an open mind regarding best practices suggested by PepsiCo and not to reject them when they come up with a suggestion or a new idea. One of the S+C managers gave the example of the case of Pepsi Max in point of sale communication (S+C is responsible for BTL communication), where “we opted

for a clean and straight to the point communication”. The most important thing is to have

alignment between companies, which means alignment of agendas and communication. The brands should not target exactly the same customer type or be active in the market exactly at the same time.

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37 Although this attitude of adaptability mentioned by S+C employees, two out of the three managers from PepsiCo stated that the Portuguese company still acts like an “old person” and is too stuck in hierarchical positions. They pointed out that the Portuguese carrier still has no flexibility in terms of exchanging information and requires the same level of hierarchy when it comes to exchanging knowledge in the regular meetings. This restrains the ease of flow of information and knowledge absorption, because they are only concerned with whether the information is transferred to the “right” person, rather than if the information and knowledge is fully absorbed and adopted. Although this is not a regulation in the agreement between both organizations, it is a behavior/requirement from S+C that does not facilitate the knowledge exchange. In addition, the head of S+C, who has worked for the company for over 20 years, mentioned that the fact that S+C is flexible regarding the PepsiCo suggestions is because, at this moment, someone who is flexible and charismatic is managing PepsiCo beverages’

Portugal business. She explained, “Inside the organizations you have 2 or 3 people who are the

bridge between the companies in the partnership. And if those 3 people have a negative feeling about the people from the partner company it creates a chain reaction for the rest of the company. And therefore all the processes and decisions are harder to move forward”. Some

routines with which S+C does not agree completely are adopted and respected just because of the simple fact that someone who has a great relationship with S+C members is managing the PepsiCo Portugal beverages team. For them, this manager’s attitude is a “holy grail” to keep the decision flowing. In contrast, one of the managers from PepsiCo highlighted that often there is the feeling that “they do not share all the information that they might consider confidential

(…) some sort of information they only share if someone from higher hierarchical position at PepsiCo asks for it”. Although there is a visible partnership, there is still a feeling that PepsiCo

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38 team members: “we still need more alignment from their side because we share everything that

we get”.

Thus, the behaviors adopted by people play multiple roles: both enhancing and

weakening the absorptive capacity. The quotations mentioned above demonstrate that in the case of PepsiCo the flexible stance enhances the absorptive capacity, but in the case of S+C the “old school” approach, very attached to hierarchical positions, weakens the absorptive capacity. When there is a lack of guidelines and routines to follow, the adopted behaviors might facilitate problem-solving when managers adopt a flexible stance and are able to make some changes to their initial positions, but there can also be a step back from sharing information and be a limit for inter-organizational learning when there is the feeling that one of the sides is trying to encroach on the other’s part of the business.

Absorptive Capacity: PepsiCo and Sumol+Compal

The routines and behaviors analyzed above are features of the absorptive capacity of each organization, and hence are an important component for inter-organizational learning for this alliance. The relationship between the Portuguese and the North American actors is “good and

friendly”, according one of the S+C managers, because it is an outcome of a “long term

relationship and with well-defined processes”, as one of the PepsiCo managers mentioned. For

this study, we can understand this as a strong absorptive capacity. The behaviors are accepted in a general way – “good, friendly and long relationship” – and the routines are followed and accepted – “well-defined processes”. As a result, from one side, the stronger the absorptive capacity is, the easier and faster it is for PepsiCo to use the global guidelines for its brands in Portugal, while still considering the limitations of managing brands with a company that owns a large range of competitor brands in the market for soft drinks. From the other side, the strong

Organizational learning in the context of international inter-firm relations : a single case study of a franchising business model in Portugal : PepsiCo and Sumol+Compal