Organizational learning from the parent’s perspective in the parent-subsidiary relationship : the airline within an airline case

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MASTER THESIS INTERNATIONAL MANAGEMENT

Organizational learning from the parent’s perspective in the parent-subsidiary relationship: The airline within an airline case

Malou Kok

Student Number: 11111070

MSc Business Administration - International Management 2016-2017 Final version

Date: 27-01-2017

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Statement of Orgininality

This document is written by Student Malou Kok, 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 references have been used in creating it. 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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List of Tables and Figures

Table 1- Participant information sheet ... 35

Table 2- Documentary analysis ... 40

Table 3- Working propositions results ... 70

Table 4- Codebook ... 89

Table 5- Supportive quotes value chain one: leadership and institutionalizing ... 90

Table 6- Supportive quotes value chain one: coordination and integration ... 91

Table 7- Supportive quotes value chain one: control and measurement ... 93

Table 8- Supportive quotes value chain one: ability ... 94

Table 9- Supportive quotes value chain one: motivation ... 95

Table 10- Supportive quotes value chain two: leadership and institutionalizing ... 96

Table 11- Supportive quotes value chain two: coordination and integration ... 97

Table 12- Supportive quotes value chain two: control and measurement ... 98

Table 13- Supportive quotes value chain two: ability ... 99

Table 14- Supportive quotes value chain two: motivation ... 102

Table 15- Supportive quotes value chain three: leadership and institutionalizing ... 103

Table 16- Supportive quotes value chain three: coordination and integration ... 104

Table 17- Supportive quotes value chain three: control and measurement ... 105

Table 18- Supportive quotes value chain three: ability ... 106

Table 19- Supportive quotes value chain three: motivation ... 107

Table 20- Supportive quotes value chain four: leadership and institutionalizing ... 108

Table 21- Supportive quotes value chain four: coordination and integration ... 110

Table 22- Supportive quotes value chain four: control and measurement ... 112

Table 23- Supportive quotes value chain four: ability ... 113

Table 24- Supportive quotes value chain four: motivation ... 116

Table 25- Supportive quotes value chain five: leadership and institutionalizing ... 117

Table 26- Supportive quotes value chain five: coordination and integration ... 117

Table 27- Supportive quotes value chain five: control and measurement ... 118

Table 28- Supportive quotes value chain five: ability ... 119

Table 29- Supportive quotes value chain five: motivation ... 120

Figure 1- The value chain of the airline ... 28

Figure 2- The knowledge chain ... 28

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Acknowledgement

I would like to take this opportunity to thank my supervisor Dr. Paukku for keeping me focussed, especially during the critical begin phase of the thesis, and for his help and guidance. Furthermore, I would like to thank my fellow students as it has been very helpful to discuss and support each other. Moreover, I wish to express my gratitude to my participants, for making time available for me and for their contributions. Lastly, I would like to thank my friends and family for their help and support.

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Abstract

Changing business environments enforce changes in the parent-subsidiary relationship, increasingly making the subsidiary both more autonomous and more important for the group’s overall performance (Kostova, Marano, & Tallman, 2016). Furthermore, the dynamic business environment also enforces the importance of organizational learning (Slater & Narver, 1995). How does this increasing autonomy and importance of the subsidiary influence organizational learning? The current thesis addresses this gap by investigating how the parent company learns from activities from its autonomous subsidiary. The five primary activities of Porter’s (1985) value chain were used as a tool to compare the activities between the parent and the subsidiary. A qualitative case study has been conducted in the empirical setting between the parent company KLM with its subsidiary Transavia. Ten semi-structured interviews were conducted. The interview results were further complemented by documentary analysis and observations. Three repeating themes were found throughout four of the five value chain activities. KLM can learn from Transavia’s business model being faster and more agile. Moreover, sharing resources and activities can enhance the learning between the companies. In light of the current reorganization it could be interesting to make learning through sharing part of their strategy and organisational design. This could done in a formal and structure way, including rewards in perfromance eveluations. Lastly, informal and voluntary integration and interaction could lead to learning opportunities for KLM. The fifth value chain activity only supported the first theme, leading to the interesting observation that it appears that being closer to the customer leads to less interaction and learning between the two companies.

Keywords: Organizational learning, parent- subsidiary relationship, KLM, Transavia, airline within an airline, Full-Service Carrier, Low-Cost Carrier, value chain, reverse organizational learning.

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1. Introduction

“The study of headquarters–subsidiary (HQS) relationships, or how multinational corporations (MNCs) coordinate and control their geographically dispersed value-adding subunits, is central to the field of international management (IM)” (Kostova et al., 2016, p. 176). An MNC, also known as a multinational enterprise (MNE) is defined as “a firm with value-added activities in at least two countries” (Rugman & Verbeke, 2001, p. 237). The multinational subsidiary is described as a “semi-autonomous entity with entrepreneurial potential, within a complex competitive arena, consisting of an internal environment of other subsidiaries, internal customers, and suppliers, and an external environment comprised of customers, suppliers, and competitors” (Birkinshaw, Hood, & Young, 2005,p.227). The headquarter will be referred to as the ‘parent company’ in the current thesis.

Kostova et al. (2016) reviewed 50 years of contributions to research on the parent- subsidiary relationship published in the Journal of World Business. In essence, these contributions showed a shift in the parent -subsidiary relationship from more formal and bureaucratic mechanisms to more informal and networked mechanisms with the role of the subsidiary in the parent-subsidiary relationship increasingly becoming more important for the performance of the firm. Furthermore, the review of Kostova et al. (2016) mentioned that the subsidiary is increasingly becoming more autonomous. Moreover, Kostova et al. (2016) stressed that the evolvement in parent- subsidiary relationships literature can be linked the changing global environment for businesses, with the international market becoming more globalized and consequently, the developing literature in the field of research in International Management.

Another concept that can be related to the dynamic (or changing) global environment is the concept of organizational learning, where Marquardt (2011) also stressed that several forces, such as globalization and technology, change the business environment. The dynamic business

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7 environment enforces the importance of organizational learning and can lead to variations in the behavior of organizations (Slater & Narver, 1995) as organizations need to adapt to the

dynamic business environment (Marquardt, 2011).

The traditional formal bureaucratic relationship between the parent and the subsidiary is changing, with the subsidiary increasingly becoming more autonomous and more important for the performance of the entire organization (Kostova et al., 2016). Nevertheless, organizational learning is important for organizations (e.g., Chiva, Alegre, & Lapiedra, 2007; Marquardt, 2011). How does this increasing importance and autonomy of the subsidiary influence organizational learning in the parent-subsidiary relationship, from a parent perspective? This gap will be further narrowed down in the current literature review, after which the research question will be provided.

The empirical setting in which the current thesis’ research has been conducted is the parent-subsidiary relationship of an airline within an airline strategy. Liberalization led to changes in the competitive environment in the airline industry (Cento, 2009; O’Connell & Williams, 2005). In the deregulated airline industry “firms must be driven by market opportunities and financial needs, and not by regulatory considerations. Prices need to be based on cost, operations must be efficient” (Gillen & Gados, 2008, p.26). The airline industry now a days is a very dynamic industry, due to (tough) competition, in which both of the two dominant business models, namely Low- Cost Carriers (LCC) and Full- Service Carriers (FSC) (Lordan, Sallan, Escorihuela, & Gonzalez-Prieto, 2016) are adapting their business strategies as a result (Klophaus, Conrady, & Fichert, 2012). One possible way for the FSC model to adapt its business strategy as a result of the dynamic industry involves the FSC setting up their own LCC (Graham & Vowles, 2006; Morrell, 2005). The FSC creating their own LCC has been the empirical setting of the parent-subsidiary relation in the current thesis. It was believed that this empirical setting was a suitable choice to investigate, as the parent-subsidiary relationship,

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8 organizational learning, and the airline industry are linked to the changing global environment. The changing and dynamic (global) environment changes the parent-subsidiary relationship (Kostova et al., 2016), enforces the importance of organizational learning (Slater & Narver, 1995) and changes business strategies within the airline industry (Klophaus et al., 2012). The FSC with an LCC was chosen as it could be considered as a direct response to the changing environment and possibly as a way to fight the competition in the changing environment (Graham & Vowles, 2006). Furthermore, assumptions have been made that both the parent and subsidiary had the same core business and activities. Instead of performing different tasks and activities, it involved two airlines, where both support activities (such as procurement) as primary activities (such as operations) (Porter, 1989), were considered alike while having enough differences to explain variation in the current thesis. Consequently, it allowed for comparison of the same activities when investigating organization learning and the parent-subsidiary relationship in the current’s thesis research. The empirical setting of the research was the Koninklijke Luchtvaart Maatschappij N.V. hereafter mentioned as KLM, as the parent and FSC with Transavia Airlines C.V., hereafter mentioned as Transavia, as the subsidiary and LCC.

The current thesis contributes to the literature in several ways. The thesis provides more insight in the airline within an airline strategy, a strategy in which not much research has been conducted yet (Homsombat, Lei, & Fu, 2014) and how learning from airline activities is conducted. Furthermore, the current thesis results were in line with expectations but also extended the few articles investigating the parent learning from the subsidiary in the parent-subsidiary relationship and applied the literature into the context of a real-life setting. Moreover, several related topics such as learning and knowledge management were combined to create a better insight on the how of learning in the parent-subsidiary relationships. Lastly, the current

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9 thesis provides additional insights into the dynamic airline industry regarding its changing strategies and business models and its forecast for the future.

The current thesis will first provide a literature review of the topics of parent-subsidiary relationships and organizational learning. After the literature review, the research gap will be presented. The competitive environment and current business models in the airline industry will be highlighted before concluding with the research question and a framework. The current thesis will then continue with the research design to provide insights on how the research has been conducted before presenting the results. Thereafter, the discussion, conclusion, implications limitations and suggestions found in the thesis will be presented. The complete reference list with the sources used in the current thesis will be shown before ending with several appendices such as the codebook and interview transcripts.

2. Literature Review

In this section, an overview of the literature on three topics will be provided: the parent-subsidiary relationship, organizational learning and business models in the airline industry. The literature on the parent-subsidiary relationship will be discussed followed by a literature review on organizational learning. The parent-subsidiary relationship literature connected with the literature on organizational learning will be translated into a research gap. As the business models in the airline industry were the empirical setting for the research, literature regarding the several business models in the airline industry will be highlighted, and additionally, insights in the competitive environment of the airline industry will be given. Lastly, the research question will be presented together with a framework.

2.1 Parent- subsidiary relationship

The parent-subsidiary relation has been explored previously in the international business literature. As mentioned in the introduction, Kostova et al. (2016) used articles published in the

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10 Journal of World Business to review 50 years of contributions to research on the parent- subsidiary relationship. The authors found a shift in the parent -subsidiary relationship from more formal bureaucratic mechanisms to more informal and networked mechanisms with the role of the subsidiary in the parent-subsidiary relationship increasingly becoming more important for the performance of the firm. The globalization of the market gave MNCs access to ever more skilled personnel, relaxing formal internal control to increase the effectiveness, innovativeness, and motivation in the organization and gave MNCs the opportunity to make us of developments in information and communication methods (Kostova et al., 2016). According to Birkinshaw, Hood and Jonsson (1998) subsidiaries were traditionally controlled by the parent via a structural context where the subsidiary’s management was induced to behave as desired by the parent. Furthermore, the review of Kostova et al. (2016) found that the view of a subsidiary as a geographically dispersed agent of the firm changed into a perspective in which the subsidiary is differentiated from the MNC, has its own goals, and its own network of stakeholders. Birkinshaw and Pederson (2009) stated that subsidiaries often operate with more freedom than thought, which makes decentralized and informal mechanisms of coordination between the parent and the subsidiary more important. Birkinshaw and Pederson (2009) also stressed that the subsidiary following its own interest or goals instead of the parent’s interest came from an increased focus on key knowledge developed in the subsidiary. Mudambi and Navarra (2004) looked into the knowledge flows creation in the subsidiary and described three other knowledge flows besides the traditional flow of the parent to the subsidiary. These knowledge flows will be further described in Chapter 2.2. Moreover, subsidiaries enlarged their traditional role involving mainly downstream activities (such as service and assembly), to more upstream activities (such as research and development). The enlarged responsibility of the subsidiaries and the dispersal of knowledge creating activities within the MNC have relaxed the traditional hierarchical structure in the MNC (Mudambi & Navarra, 2004). Hedlund (1986)

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11 even stated that the parent driven organization would give rise to a network driven organizational form. The change in the hierarchy of the parent-subsidiary relationship could also be seen in the change of definition by the same author over time. Birkinshaw defined a subsidiary as “any operational unit controlled by the MNC and situated outside of the home country”(1997, p. 207). The definition of a multinational subsidiary, multinational as in subsidiary from a multinational company, from Birkinshaw et al. (2005) provided in the introduction, clearly had a different set of words chosen suitable with the changing relationship between the parent and the subsidiary. The definition did not use words such as “controlled” but instead used words as “semi-autonomous” and as having “potential for entrepreneurship.” Lastly, Roth and Nigh (1992) took the above discussion a step further by looking at the effectiveness of the parent-subsidiary relationship. Bureaucratic integrating mechanisms do not increase the effectiveness of the relationship while personal integrating mechanism and coordination do increase the effectiveness of the relationship. The bureaucratic integrating mechanisms are described as constraints imposed by the parent on the subsidiary in directing or managing the activities of the subsidiary (Roth & Nigh, 1992) and could suit the pre-shift “more formal bureaucratic mechanism” as mentioned by Kostova et al. (2016). Personal integrating mechanisms use socialization to control the interdependency in the parent-subsidiary according to Roth and Nigh (1992), and coordination could suit the post-shift “more informal and networked mechanisms” as mentioned by Kostova et al. (2016). This might validate the usefulness of the shift of mechanisms in the parent-subsidiary relationship. Besides changes in the hierarchy and structure of the parent-subsidiary relationship, Kostova et al. (2016) found that the emphasis on certain themes and approaches in the parent- subsidiary relationship varied over time. In the 1960s and 1970s, the focus of the parent-subsidiary literature was primarily on the design of the organization, and on coordination and control systems for subsidiaries, with the perspective of the parent being the most important. The

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12 subsidiaries was seen as contributing less to strategic opportunities of the organization than the parent. In the 1980s, the focus of the parent-subsidiary literature from a parent perspective continued. However, more consideration was given to the characteristics of the foreign countries (‘host countries’) where the subsidiaries were located, and to the impact of the host country’s characteristics on the performance of the firm. The acknowledgment of the importance of the subsidiaries host countries characteristics led to a stronger focus on the importance of subsidiaries for the performance of the firm in the 1990s. The trend of growing importance of the subsidiary continued in the 2000s, in which eventually the subsidiary perspective in the literature on parent-subsidiary relationships was accepted (Kostova et al., 2016). Furthermore, Kostova et al. (2016) found that the relationship between the parent and subsidiary has been studied from several perspectives (role of knowledge, people, and the home and host country context) with the subsidiary gaining more importance over time. Emerging themes after the 1990s in the review of Kostova et al.(2016) when the role of the subsidiary increasingly became more important include: subsidiary initiative, subsidiary autonomy, and knowledge transfer in the parent-subsidiary relationship. These themes will be highlighted in the literature review below. Please note that the topic of knowledge transfer will be discussed in Chapter 2.2

Before continuing with exploring the increasing influence of the role of the subsidiary in the parent-subsidiary relationship, the current thesis will highlight that there is not one perfect structure for organizational design in the parent-subsidiary relationship. Ghoshal and Nohria (1989) stated there are four types of ‘fit’ structures (or designs) in the parent-subsidiary relation that can improve the performance of the subsidiary, dependent on the combination of the subsidiary’s local resources and the subsidiary’s environment. The combination of the subsidiary’s local resources and the subsidiary’s environment influences the interdependency and dependency in the parent-subsidiary relationship. The parent is more dependent on the

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13 subsidiary if the subsidiary is in possession of a lot of local resources, and the other way around. High external complexity increases the interdependency of the parent and subsidiary, while low external complexity make the parent and subsidiary less interdependent. The interdependency and dependency between the parent and the subsidiary influence the amount of centralization (more power of the parent), formalization (routines), and normative integration (shared norms and values) in the relationship between the headquarter and subsidiary. For example, if the subsidiary is in possession of a lot of local resources but faces a difficult environment, an integrative structure in the parent-subsidiary relationships would be suitable. In the integrative structure, the interdependency in the parent-subsidiary relationship is high, and the parent is more dependent on the subsidiary. The dependency of the parent on the subsidiary results in low centralization, thus giving the parent less power over the subsidiary in the integrative structure. The three other types of ‘fit’ structures are hierarchical (relatively less local resources and a stable environment), clan (relatively less local resources and a complex environment) and federative (relatively many resources and a stable environment) (Ghoshal & Nohria, 1989). As mentioned above, the subsidiary increasingly gained more attention as contributing to the performance of the firm in the parent-subsidiary relationship (Kostova et al., 2016). Furthermore, there is not one ‘perfect’ structure for the parent-subsidiary relationship. Instead of the subsidiary always being dependent on the parent, it could be the case that the parent is dependent on the subsidiary. The parent is more dependent on the subsidiary when the subsidiary is in possession of a lot of local resources (Ghoshal & Nohria, 1989). Birkinshaw (1997) went a step further in recognizing the importance of the subsidiary in the parent-subsidiary relationship by implicating that entrepreneurship in the parent-subsidiary, besides having potential to run the local responsiveness of the organization, could run the organization’s global integration and global learning capabilities. The focal construct for corporate entrepreneurship is subsidiary initiative, wherein initiative is defined as “essentially an entrepreneurial process,

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14 beginning with the identification of an opportunity and culminating in the commitment of resources to that opportunity” (Birkinshaw, 1997, p.207). Four types of subsidiary initiative are identified: global, local, internal and hybrid. Internal initiatives can be on existing activities or new activities. Lastly, Birkinshaw (1997) stated that the role of the subsidiary can be bigger than was thought, which is in accordance with the increased focus on the importance of the subsidiary for the performance of the organization as mentioned in the literature review on the parent-subsidiary relationship of Kostova et al. (2016).

Birkinshaw et al. (1998) continued with investigating the importance of the role of the subsidiary in the parent-subsidiary relationship and also stated that “the evolution of subsidiary roles can be taken one step further than previously realized” (Birkinshaw et al., 1998, p.222). An MNC can gain a competitive advantage via firm-specific advantages (FSAs), country-specific advantages (CSAs), or via both. Examples where CSAs can arise from include labor and cultural factors (Rugman, Oh, & Lim, 2012). Birkinshaw et al.(1998) examined how subsidiaries can add to the creation of FSAs in a multinational organization and provisionally concluded that subsidiaries are not only able to contribute to the creation of FSA’s but also are able to run the process of FSA creation. The impact of subsidiary management, the parent-subsidiary relationship, and the environment on the contributory role of the parent-subsidiary were taken into account. Additionally, subsidiary initiative and subsidiary resources were taken into account. The authors found that the subsidiary’s specialized resources combined with the subsidiary’s initiative can positively impact the contributory role of the subsidiary in the process of the organization’s FSA creation. Furthermore, Birkinshaw et al.(1998) stressed that the relationship between the parent and the subsidiary also matters, as the subsidiary’s autonomy has a (positive) impact on both subsidiary’s initiative and the contributory role of the subsidiary in the process of the organization’s FSA creation. Communication between the subsidiary and parent only has a small (positive) impact on the initiative and contributory role of the subsidiary

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15 in the process of the organization’s FSA creation. Lastly, the authors stated that there is a strong link between a culture of entrepreneurship and leadership, and the initiative of the subsidiary. In sum, whereas the role of the subsidiary was seen as less contributing to the strategic opportunities of the organization in the 1960s and 1970s, it was shown that the role of the subsidiary in the parent-subsidiary relationship increasingly has become more important for the performance of the firm (Kostova et al., 2016). There is not one ‘perfect’ structure or design for the parent-subsidiary relationship. High external complexity increases the interdependency of the parent and the subsidiary in the parent-subsidiary relationship, and the parent can even be dependent on the subsidiary when the subsidiary is in possession of many local resources (Ghoshal & Nohria, 1989). The parent could be dependent on the subsidiary. Furthermore, the subsidiary could also be of greater importance in the relationship as entrepreneurship in the subsidiary has the potential to run the organization’s local responsiveness, global integration, and global learning capabilities (Birkinshaw, 1997). Lastly, the importance of the subsidiary in the parent-subsidiary could also increase as the subsidiary not only can contribute to the creation of FSA’s in a multinational company, but also can run the process of FSA creation. Subsidiary autonomy has a (positive) impact on both subsidiary initiative and contributory role of the subsidiary in the process of the organization’s FSA creation (Birkinshaw et al.,1998).

2.2 Organizational learning

Organizational learning is the second topic that will be described in the current literature review. There are several levels of learning: individual, group or team, and organizational learning (Marquardt, 2011). These levels of learning also interact with each other (Crossan, Lane, & White, 1999). As the current thesis focuses on organizations (the parent and the subsidiary), and learning across these organizations, the focus will primarily be on organizational learning. Building on to Huber (1991), Slater and Narver (1995) described organizational learning as “development of new knowledge or insights that have potential to

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16 influence behaviour” (p. 63) and continued that “all businesses competing in dynamic and turbulent environments must pursue the processes of learning” (pp. 63- 64). Furthermore, Chiva, Alegre, and Lapiedra (2007) described organizational learning as “the process by which organizations learn”(p. 224) which “has been considered by academics and practitioners as essential for organizations mainly due to fast changing environment” ( pp. 224 -225). Marquardt (2011) also continued to build on the importance of organizational learning due to a changing environment by stating that several forces (such as technological forces) have changed the business market and therefore enforce learning in the twenty-first century. These (external) changes and forces in the business market push organizations either towards the adaption of the organization to the changing environment or towards the destruction of the organization. Furthermore, Marquardt (2011) stressed that (strategic) advantages can be reached by organizations that are able to respond quickly to the (changing) business environment via their ability to learn fast. March (1991) addressed the importance of organizational learning by stating that organizational learning has a dominant part when an organization tries to improve the organization’s performance and the organization’s competitive advantage. Lastly, according to Dodgson (1993), the need for learning is higher when there are more uncertainties. The need to learn is often explained by demands for higher efficiency and adaption in times of change. Learning has taken place when organizations behave in different and improved ways (Dodgson, 1993).

The above articles showed that organizational learning can influence behavior by gaining new insights or knowledge (Slater & Narver, 1995), and that changing business environments enforce organizational learning, and push organizations toward adaption to the changing business environment. If the organization does not adapt correspondingly with the environment, it will not survive (Marquardt, 2011). The latter could also be seen as influencing the behavior of the organization by pushing organizations towards adaption. March (1991) looked into the

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17 adaptive process by investigating exploration and exploitation options in organizational learning. Exploration involves looking into new options, e.g., by innovating, experimenting, and taking risk, while exploitation is more focused on refining old options such as increasing efficiency. When trying to improve the performance of the organization and the organization’s competitive advantages, adaption and a trade-off between exploration and exploitation in organizational learning are involved (March, 1991). Crossan et al. (1999) mentioned a similar trade-off by stating that the process of organizational learning creates a pressure between new learning and using what already has been learned. Furthermore, Crossan et al. (1999) stated that the process of organizational learning is dynamic. Learning takes place across levels and over time, and new information goes up from the individual level to organizational level while feedback from previous learning goes back the other way around (Crossan et al., 1999). In the definition of organizational learning by Slater and Narver (1995), as provided above, the construct ‘knowledge’ is used. Organizational knowledge can be described as “capacity to apprehend and use relationships among critical factors in such a way as to achieve intended ends. Organizational learning, we define as the process of assimilating new knowledge into the organization’s knowledge base” (Autio, Sapienza, & Almeida, 2000, p.911). Knowledge, according to March (1991), can enhance the trustworthiness of the performance of the organization as more knowledge often reduces the variations in the firm’s performance. Kostova et al. (2016) also mentioned the role of knowledge as a construct through which the subsidiary relationship has been studied in their literature review on the parent-subsidiary relationship. Several journals investigated knowledge in combination with the parent- subsidiary relationship such as Mudambi and Navarri (2004) and Monteiro, Arvidsson, and Birkinshaw (2008). Mudambi and Navarri (2004) investigated the bargaining power of the subsidiary in the parent-subsidiary relationship in combination with knowledge flows. The parent-subsidiary relationship is described as a principal-agent relationship, in which the

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18 subsidiary is concerned with its own interest, and bargains with the parent to maximize the possession of the organization’s rent. Four knowledge flows are described, of which the traditional flow is described as knowledge going from the parent to the subsidiary. Another knowledge flow involves the subsidiary learning from its location, and there is a knowledge flow where the subsidiary’s location learns from the subsidiary. The last knowledge flow goes from the subsidiary to the parent, of which “high levels of these flows enable MNC headquarter to exploit local competencies” (Mudambi & Navarra, 2004, p. 389). Ambos, Ambos, and Schlegelmilch (2006) found that reverse knowledge transfers (from the subsidiary to the parent) are beneficial for the parent, but how beneficial the transfer could be depends on different factors including the absorptive capacity of the parent and the strategic mission of the subsidiary. McGuinness, Demirbag, and Bandara (2013) stressed that limited work on reverse knowledge transfer has been conducted but did develop a multi-perspective model based on their detailed review of existing relevant reverse knowledge transfer literature. The multi-perspective model groups elements from different researchers on knowledge transfers in four constructs: the knowledge creation potential, relevance of the knowledge created, the reverse knowledge transfer abilities, and the reverse knowledge transfer motivations. Under these four constructs, 18 variables such as the degree of formal integration of the subsidiary and intensity of parent-subsidiary communication, can be found that define the concept of reverse knowledge transfer (McGuinness et al., 2013). Monteiro et al. (2008) indicated that it is possible that subsidiaries are isolated from knowledge flows within the network of the parent and that this isolation can lead to negative performance of both the isolated subsidiary as the entire organization.

Instead of the isolation of knowledge flows in certain parts of organizations, another option for organizations would be sharing activities and transferring know-how and skills between comparable value chains according to Porter (1989). The value chain distinguishes five primary

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19 activities (such as operations), from four support activities (such as procurement) of the organization and is described as a “systematic means of displaying and categorizing activities.” (Porter, 1986, p.13). The ability to share activities in a value chain ,and the ability to transfer know-how or skills in comparable value chains may create synergy in relationships between businesses, and can lead to competitive advantages if the activities are similar enough. Sharing activities can, for example, lead to cost reduction through economies of scale, increased efficiency or improve the speed of a learning curve (Porter, 1989). Porter and Millar (1985) stated that information penetrates the value chain, as it is rooted in every part of the value chain and the linkages in it, transforming how the activities are executed. Differences in information and the way the information is handled within and across all the activities in the value chain can provide variations in competitive positions of firms (Porter & Millar, 1985). Holsapple and Singh (2001) continued that the importance of information for competitiveness, as mentioned by Porter and Miller (1985), is consistent with the emerging attention for the importance of knowledge management for competitiveness. However, knowledge management is broader than information only according to Holsapple and Singh (2001). A knowledge value chain is developed by Holsapple and Singh (2000) as mentioned in Holsapple and Singh (2001), to utilize the competitive possibilities of knowledge management more. The chain is analogous to Porter’s (1985) value chain, as it also consists of primary activities (such as knowledge acquisition and knowledge selection), and secondary activities (such as knowledge leadership and knowledge coordination) but focuses on knowledge. The five primary knowledge chain activities are acquisition, selection, generation, internalization, and externalization. The four secondary knowledge chain activities are leadership, coordination, control, and measurement. The secondary activities guide and support the performance of the primary activities. The knowledge chain activities produce organizational projections and organizational learning (Holsapple & Singh, 2001). Three factors are influencing the success of knowledge

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20 management initiatives: managerial (leadership, control, coordination, and measurement), resource (human, financial, material and knowledge), and environmental (such as time, technology and competitors) factors (Holsapple & Joshi, 2000). The knowledge chain model by Holsapple and Singh (2000) is updated by Holsapple and Jones (2004; 2003) to include both these resource and environmental factors. The managerial factors are the same as the support activities in the knowledge value chain as described by Holsapple and Singh (2001).

In sum, the dynamic business environment enforces the importance of organizational learning and can lead to changes in the behavior of organizations (Slater & Narver, 1995), as organizations need to adapt to the changing (or dynamic) business environment (Marquardt, 2011). Adaption in organizational learning can be performed in two ways: by exploiting activities or by exploring activities (March, 1991). By being able to adapt fast to the changing business environment, strategic advantages can be reached for the organization (Marquardt, 2011). Organizational learning could also improve both the performance of the organization and competitive advantage of the organization (March, 1991). Organizational learning is dynamic, pressures that what already has been learned, and new learnings can exist (Crossan et al., 1999). The construct of ‘knowledge’ is also related to organizational learning (Autio et al., 2000; Slater & Narver, 1995). Within organizations, four types of knowledge flows can be found, of which one is from the parent to the subsidiary and one from the subsidiary to the parent. The knowledge flow from the parent to the subsidiary is described at the traditional knowledge flow and there also is a knowledge flow from the subsidiary to the parent (Mudambi & Navarra, 2004). These flows from the subsidiary to the parent, the reverse knowledge transfers, can be beneficial for the parent firm (Ambos et al., 2006). Excluding a subsidiary from the organization’s knowledge flows can have negative consequences for the performance of both the subsidiary as the entire organization (Monteiro et al., 2008). Instead of excluding or isolating parts of the organization, sharing activities, and transferring skills and know-how

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21 between comparable value chains could benefit the organization (Porter, 1989). Information penetrates the value chain and differences in dealing with information within and across the organization can lead to different competitive positions (Porter & Millar, 1985). Holsapple and Singh (2001) recognized this importance of information in the value chain and stated that is in line with the increasing attention to knowledge management. However, Holsapple and Singh (2001) stressed that knowledge management is more than information only. Moreover, a knowledge chain model is developed by Holsapple and Singh (2000) as mentioned in Holsapple and Singh (2001), which produces organizational projections and organizational learning. The support activities of this knowledge value chain are in line with the managerial factors influencing the success of knowledge management initiatives mentioned by Holsapple and Joshi (2000). Two other factors influencing the success of knowledge management initiatives are resource factors and environmental factors (Holsapple & Joshi, 2000).

2.3 Research gap

As described in the current thesis’ literature review provided above, on the one hand, the subsidiary increasingly has gained a bigger role in contributing to the performance of the firm(Kostova et al., 2016) in which the autonomy of the subsidiary in the parent-subsidiary relationship can have a positive impact (Birkinshaw et al.,1998). The subsidiary could even be concerned with its own interest instead of the interest of the parent (Mudambi & Navarra, 2004). On the other hand, organizational learning could also improve both the performance of the organization and competitive advantage of the organization (March, 1991). The construct of ‘knowledge’ is also related to organizational learning (Autio et al., 2000; Slater & Narver, 1995). Excluding a subsidiary from the organization’s knowledge flows can have negative consequences for the performance of both the subsidiary as the entire organization (Monteiro et al., 2008). Sharing activities, and transferring skills and know-how can have a positive impact on the organization (Porter, 1989). Furthermore, the dynamic business environment enforces

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22 the importance of organizational learning and can lead to changes in the behavior of organizations (Slater & Narver, 1995) as organizations need to adapt to the changing (or

dynamic) business environment (Marquardt, 2011).

There appears to be a gap or contradiction between the increasingly more important role of the subsidiary in the parent-subsidiary relationship, and the positive effect of subsidiary autonomy on the firm’s performance versus the importance of organizational learning in combination with adaption to the changing business environment and the negative effect for the entire firm when excluding subsidiaries from knowledge flows in the parent-subsidiary relationship. How does the parent adapts to the changing environment via organizational learning when parts of the organization, such as subsidiaries, work autonomously? Does the parent exploits or explores activities from its autonomous subsidiary or are activities between the parent and the subsidiary not aligned? The above questions stemming from the literature review led to the following research question: How does the parent learn from activities from its autonomous subsidiary? The current thesis will address the gap and corresponding research question in the empirical setting of the airline industry by investigating organizational learning in the parent-subsidiary relationship from a parent perspective. A literature review on the current competitive environment in the airline industry, and accordingly the current business models in the airline industry will be provided before providing additional explanation for the choice of the final research question and going more in-depth regarding the structuring method and framework for the research.

2.4 The airline industry

The airline industry is a very dynamic industry, filled with (tough) competition (Lordan et al., 2016). The link between a dynamic industry and organizational learning has been addressed in the previous sections. Liberalization led to changes in the competitive environment in the airline industry (Cento, 2009; O’Connell & Williams, 2005). According to Lordan et al. (2016),

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23 Full-Service Carriers (FSCs) and Low- Cost Carriers (LCCs) currently are the dominant business models in the airline industry. There are several names in the literature for FSCs such as Network Carrier or Legacy Carrier (Homsombat et al., 2014; Morrell, 2005) or Full-Service Network Carrier (Fageda, Suau-Sanchez, & Mason, 2015; Graf, 2005; O’Connell & Williams,

2005).

Definitions of FSC include various components including previously state-owned (Cento, 2009), hub- and- spoke (HS) network, code-sharing and alliances (Cento, 2009; Lordan et al., 2016; O’Connell & Williams, 2005), providing loyalty programs or frequent flyer programs (Cento, 2009) and the use of primary airports (Graf, 2005; O’Connell & Williams, 2005). Furthermore, the FSC has two distinct seat classes in the airplane with seat allocation, the aircraft use is relatively low and turnaround times are slow (O’Connell & Williams, 2005). Examples of an FSC include KLM and Lufthansa (Cento, 2009; Fageda et al., 2015; Graf,

2005).

Definitions of LCCs include various components including cost advantage design (Cento, 2009), focusing on simplicity (2005), point-to-point network (Lordan et al., 2016; O’Connell & Williams, 2005), use of secondary airports, single (seat) class in the airplane without seat allocation (O’Connell & Williams, 2005), quick turnaround and high aircraft use (Morrell, 2005; O’Connell & Williams, 2005), and single type aircraft use (Cento, 2009; Graham & Vowles, 2006; O’Connell & Williams, 2005). Lastly, LCCs use no or little cargo, relatively less catering (Morrell, 2005), and have a no frill service by for example not participating in loyalty programs (Cento, 2009). Examples include Ryanair and Wizz Air (Graham & Vowles, 2006; Klophaus et al., 2012).

The world’s domestic passenger market used to be dominated by FSCs, but the situation has changed with the arrival of LCCs (O’Connell & Williams, 2005). LCCs first appeared in the United States in the 1970s, developed in Europe in the 1990s and later on, LCCs appeared in

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24 Asia as a fast-growing business model (Gillen & Gados, 2008). Looking at the situation in Europe, Klophaus et al. (2012) stressed that LCCs grew quick after appearing in Europe in the 1990s, forcing FSCs to examine and (possibly) adjust their market strategies. Morrel (2005) and Graham and Vowles (2006) found that FSCs respond to LCCs in two ways (or sometimes even a combination of the two): trying to reduce costs in the FSC itself or set up their own LCC. Furthermore, Klophaus et al. (2012) stated that in Europe, LCCs account for over one-third of passenger traffic and in some parts account for even more than half of the market share. However, the authors also stated that the European market faces a stalling in passenger growth as the “LCCs market appears to mature” (Klophaus et al., 2012, p. 54). That the market is maturing is supported by de Wit and Zuidberg (2012), who present evidence for saturation in the market of the LCC, pushing LCCs in the direction of other business strategies. Further support for both the adaption of FSC as LCCs in Europe is provided by Klophaus et al. (2012), who conclude that LCCs should adjust their business models, as a result of FSCs strategies to fight back to the strategies of LCCs, which most LCCs do by changing into hybrid models. If both the business model of an LCC as an FSC are changing, what about the situation where the LCC is a subsidiary of the parent FSC? Gillen and Gados (2008) described an LCC within an FSC organization as an ‘airline within an airline’, Homsombat et al. (2014) shortened it to ‘AinA’, and Graham and Vowles (2006) named it a ‘carrier within a carrier’. The current research will refer to ‘airline within an airline’ strategy. To the current author’s knowledge, not much research has been conducted regarding airlines within airlines or carrier within carrier strategies, and especially not related to the parent-subsidiary relationship and organizational learning. Homsombat et al. (2014) also stated that there are not many studies investigating the airline within an airline strategy.

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2.5 Research question and framework

Before presenting the research question, the empirical setting of the parent-subsidiary relationship in the airline within an airline strategy will be further integrated into the research gap. The choice for the empirical setting has been explained in the introduction already; the airline industry, parent-subsidiary relationship, and organizational learning can all be linked to the changing global environment. The changing and dynamic (global) environment changes the parent-subsidiary relationship (Kostova et al., 2016), enforces the importance of organizational learning (Slater & Narver, 1995), and changes business strategies within the airline industry (Klophaus et al., 2012). The FSC with its own LCC was chosen as it is a direct result of the changing environment, possibly a way to fight the changing environment, but also because both the parent and subsidiary have the same core business and activities. Having the same core business and activities allowed for comparison of the same activities in the current thesis’ research.

Subsidiaries operate with more freedom than thought in the parent-subsidiary relationship (Birkinshaw & Pedersen, 2009), and subsidiary autonomy has a (positive) impact on both the subsidiary’s initiative as the contributory role of the subsidiary in the process of the organization’s FSA creation (Birkinshaw et al., 1998). However, excluding the subsidiary from knowledge flows can have a negative impact on the firm performance (Monteiro et al., 2008), while transferring know-how and skills in relationships could lead to competitive advantages if the activities are similar enough (Porter, 1989). “The implication is that the MNC that is able to harness the full entrepreneurial capabilities of its subsidiaries stands to gain competitive advantage” (Birkinshaw, 1997, p.225). Organizational learning is also linked to competitive advantages by March (1991). Porter(1986) mentioned low (relative) costs and differentiation as the two types of competitive advantages. These two types of competitive advantage- low cost or differentiation – describe how firms can execute activities in the value chain, namely

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26 performing the activities at efficiently at lower cost or in a unique way (differentiation). The two types of competitive advantages – low (relative) cost and differentiation are in line with the two main types of airline strategies (LCC versus FSC) mentioned by Lordan et al. (2016). When looking at the several components of each strategy as provided in the literature, the LCC follows the low (relative) cost approach and the FSC is more focused on the differentiated approach. Sharing activities in the value chain could lead to competitive advantages if the activities are similar enough and could, for example, lead to an improve in the speed of a learning curve (Porter, 1989). It could be assumed that when having the same core business, the activities will be more similar than when having different core businesses. Furthermore, according to Roth and Nigh (1992), coordination of primary activities has a more positive influence on the effectiveness of the parent-subsidiary relationship than secondary (or support) activities. Primary activities could be assumed to be less alike if the parent and subsidiary are not involved in the same core business.

As Graham and Vowles (2006) found that FSCs respond to LCCs in two ways (or sometimes even a combination of the two): trying to reduce costs in the FSC itself or set up their own LCC, the current author assumed that the LCC of the airline within an airline strategy is a reaction of the FSC to the dynamic and competitive environment in the airline industry. For this reason, it was decided to look at the research gap from the perspective of the parent (the FSC), instead of the perspective of the subsidiary (the LCC), as it is the parent that is reacting. The organization’s adaption in response to the dynamic environment has been related to organizational learning by Marquardt (2011). Furthermore, to the current author’s knowledge, the perspective of the parent learning from the subsidiary also has been researched less extensively than the perspective of a subsidiary learning from the parent. Another concept related to organizational learning is the management of knowledge (e.g., Slater & Narver, 1995). Several types of knowledge flows exist (Mudambi & Navarra, 2004),

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27 in which the current thesis was interested in the knowledge flow going from the subsidiary to the parent. As explained above, the thesis was interested in the parent learning from the subsidiary, which is the most suitable with the knowledge flow going from the subsidiary to the parent.

Combining the research gap with the empirical setting of the airline industry led to the following research question: How does the parent learn from activities from its autonomous subsidiary? - The airline within an airline case.

Porter’s (1985) value chain, as introduced in Chapter 2.2, was used as a tool to compare the activities from the parent and the subsidiary. As according to Roth and Nigh (1992) coordination of primary activities has a more positive influence on the effectiveness of the parent-subsidiary relationship than secondary (or support) activities, the current thesis focused on the primary activities. To better align the value chain with organizational learning, the knowledge value chain developed by Holsapple and Singh (2000) as mentioned in Holsapple and Singh (2001), also introduced in Chapter 2.2, has been incorporated as well. The model is supported by anecdotes and surveys (Holsapple & Jones, 2004). Managerial, resource and environmental factors influence the success of knowledge management initiatives (Holsapple & Joshi, 2000). The managerial factors are the same as the support activities in the knowledge value chain as described by Holsapple and Singh (2001). The current thesis was concerned with how the parent can learn from activities from its autonomous subsidiary. Therefore, the current author believed this was more concerned with secondary knowledge activities such as knowledge control and coordination, than primary knowledge activities such as knowledge generation (Holsapple & Singh, 2001). For this reason, focus was being placed on the secondary activities of the knowledge value chain developed by Holsapple and Singh (2000) as mentioned in Holsapple and Singh (2001).

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28 In Figure 1- The value chain of the airline, the value chain of the airline is provided.

In Figure 2- The knowledge chain, the adapted knowledge value chain is displayed.

Figure 2- The knowledge chain – From “Exploring primary activities of the knowledge chain. “by C.W. Holsapple and K. Jones (2004), Knowledge and Process Management 11(3), p. 144-174 as adapted from “The Knowledge Chain” by C.W. Holsapple and M. Singh (2000), Proceedings of the Annual Conference of the Southern Associated on Information Systems, Atlanta, Georgia, 31 March – 2 April

The framework of the current thesis is provided in Figure 3- Framework below.

Figure 1- The value chain of the airline - From: “Strategic alliances between airlines and airports- theoretical assessment and practical evidence “by S. Albers, B. Koch and C. Ruff (2005), Journal of Air Transport Management, 11(2), p.50.

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Figure 3- Framework. Source: Author

Working propositions:

As a result of the changing and competitive environment which enlarges subsidiary autonomy and initiative;

1. KLM learns from the inbound logistics activities of Transavia. 2. KLM learns from the operational activities of Transavia. 3. KLM learns from the outbound logistics activities of Transavia. 4. KLM learns from the marketing and sales activities of Transavia. 5. KLM learns from the service activities of Transavia.

3. Research Design

This paragraph will provide an overview on how the research has been conducted to provide a transparent view, increasing the generalizability of the research (Saunders, Lewis, & Thornhill, 2016). First, the research philosophy and assumptions will be discussed before continuing with how the research was approached, which methodology was used and with which aim the research was conducted. This will then be reflected in the research strategy and data collection methodology. In addition, the selection method of participants will be discussed. Lastly, an overview of how the analysis of data was conducted will be provided.

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3.1 Research philosophy and assumptions

According to Saunders et al. (2016) and Saunders and Lewis (2014), it is important to first decide on the research philosophy underlying the research, as this can impact the way how the research is conducted and involves assumptions that can be made by the researcher. Grix (2002) also underlined the importance of understanding the research philosophies before conducting the research. According to Saunders et al. (2016), it is possible to distinguish between research philosophies by looking at the assumptions underlying them. Ontological assumptions, or the researchers believe on what could be investigated (Grix, 2002), involve either an objective or subjective view of the nature of reality, wherein an objective view there is only one true reality while in the subjective view multiple realities are possible (Saunders et al., 2016). As the current thesis was concerned with the relationships and behavior of the organization and activities, and resources and managerial factors were taken into account, a subjective perspective was taken over an objective perspective. Different outcomes or realities could be possible in a different industry, different firms, across the several activities in the same firm, and between individuals. Thus, context dependency needed to be taken into account, again in line with the subjective perspective.

Epistemological assumptions, or what there is possible to know about the phenomenon to be researched (Grix, 2002), involve the concept of knowledge where an objective view would prefer observable phenomena and numbers and facts as types of knowledge while the subjective view prefers opinions and attributed meanings (Saunders et al., 2016). The research philosophy of interpretivism takes a subjective perspective, and one of its goals is to construct broader, or even newer, interpretations of social worlds and contexts (Saunders et al., 2016). Furthermore, interpretivism studies situations in their natural context, for example by studying the social actors of a company to get a better interpretation of what is going on in the company (Saunders et al., 2016). The contrasting view of interpretivism is positivism, where the emphasis is placed

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31 on researching phenomena objectively with a fact-based reality while not taking individual differences or context into account (Grix, 2002). As the current thesis’ research was concerned with how a parent learns from activities from its subsidiary, it was concerned with getting a better understanding of what is going on between the parent and subsidiary. Furthermore, the current thesis wanted to have a broader, or possible create a newer, understanding of the topic in its natural context and within a specific industry. Combining the information previously presented, the research philosophy of interpretivism was seen as the most suitable research philosophy for the current thesis.

3.2 Research approach, research purpose, and research methodology

According to Saunders et al. (2016), an inductive approach is concerned with generating and building theory instead of verification of theory, in which the latter is in line with a deductive approach. Furthermore, the deductive approach is criticized by advocates of the indicative approach as not allowing for alternative explanations of what is happening (Saunders et al., 2016). As the study was concerned with getting a better understanding of what is going on between the parent and the subsidiary, related to the concept of organizational learning, and aimed to enrich consisting theory, the study overall had several aspects suitable with an inductive approach. However, there were also aspects of the deductive approach involved, as there was a theoretical basis underlying the study. According to Eisenhardt and Graebner (2007) case studies are considered to be excellent bridges between inductive and deductive research. The inductive aspects of the current thesis’ research were in line with the research aim being primarily exploratory. To the current author’s knowledge, the parent learning from a subsidiary, instead of the other way around, is a relatively unexplored area, which is also believed for the empirical setting of the airline within an airline case. The current thesis’ research therefore primarily focused on seeking new insights and assessing the parent-subsidiary relationship in a

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32 The above choices and assumptions leading to a subjective, interpretive philosophy and combined inductive and deductive approach are suitable with a qualitative research design, which is focused on more numerical data (Saunders et al., 2016). The choice for this non-numeric data over non-numeric data, in which the latter usually suits a quantitative approach (Saunders et al., 2016), can again be explained by the desire to know what is going on between the parent and the subsidiary and the exploratory aim of the thesis.

3.3 Research strategy, collection methods, and selection of cases and participants To address the research question of the thesis, a case study method was preferred. A case study is defined as “a research strategy which involves the investigation of a particular

contemporary topic within its real-life context, using multiple sources of evidence” (Saunders & Lewis, 2014, p. 116). The choice for the case study is consistent with the description of Yin (2009) as a ‘how’ question is being asked, there is no control of behavioral events, and it focuses on a contemporary event. Furthermore, Eisenhardt (1989) described the research strategy of case studies as one where the interpretation of the dynamics in a context is the most important, which is in line with Saunders and Lewis (2014) and is in agreement with the aim of the current thesis. Yin (2009) described four types of case studies: case studies can include single or multiple cases, and these options can either contain one unit to be analyzed (holistic case) or multiple units (embedded case) to be analyzed. Due to the time restrictions and the location being in the Netherlands, the thesis focused on one single case. Therefore, the current thesis was focused on a so-called single embedded case study (Yin, 2009). KLM, the Royal Dutch Airline, was chosen as the FSC, with Transavia as its own LCC for the current single embedded case study. The KLM consists of more than just KLM and Transavia only. However, focusing on an airline within an airline narrowed the options down to KLM Cityhopper and Transavia of which only the latter is considered as an LCC (Koninklijke Luchtvaart Maatschappij N.V., 2015). Transavia is a wholly owned subsidiary of KLM,

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33 operates independently and is 40 % owner of Transavia France, which operates in the French

market (Transavia Airlines C.V., 2016a). For more information, please see Appendix 5. Furthermore, when using several data collection methods, triangulation is possible

(Eisenhardt, 1989). Triangulation could enhance the credibility (Saunders & Lewis, 2014) and the construct validity of the research (Yin, 2009). The current thesis’ research made use of three different types of data methods, namely interviews, observation and documentary analysis. Due to the time restrictions involved, interviewees were only interviewed once, and the observations were also conducted once, making it a cross-sectional study. However, the documentary analysis allowed for an additional, more longitudinal perspective (Saunders & Lewis, 2014).

Semi-structured interviews were chosen as the main research method as the current author believed that learning is a complex topic that required more in-depth and detailed analysis to establish causal links. These links would have been difficult to establish with documentary analysis only. Without the interviews, it would have been less clear wether learning point for KLM came from Transavia or other sources, thus increasing internal validity (Yin, 2009). Moreover, interviews are mentioned as a common way to conduct exploratory research (Saunders & Lewis, 2014). Semi-structured interviews were preferred in the current thesis over structured interviews due to the exploratory aim of the research, and were preferred over unstructured interviews to provide some overall themes and direction (Saunders & Lewis, 2014). Furthermore, semi-structured interviews allowed for flexibility while still being able to compare the five different parts of primary activities from Porter’s (1985) value chain. Within in each primary activity, semi- structured interviews have been conducted. Both the use of Porter’s (1985) the value chain as a tool, and the use of semi-structured interviews (keeping the exploratory research aim in mind), increased the reliability

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34 of the research as it allowed for more structure, thereby improving focus and transparency for other researchers, and reducing bias (Saunders & Lewis, 2014).

Selection of participants was based on the primary activities of the value chain in relation to the function of the KLM and Transavia employees. The possibility that a complete

employee list would have been available for the current thesis author, with the list being divided per value chain activity was very limited, as it required negotiated access. For this reason, a list of all possible participants in the research population was not obtained, making a probability sample impossible (Saunders et al., 2016). According to Saunders et al. (2016), there is no clear format or standard for the number of participants for non-probability sampling, and the number of participants depends on the purpose of the research and the research question. Possible participants were therefore approached until data saturation was reached, which is when new data would not provide much useful and new information (Saunders et al., 2016). As there was overlap between value chain activities per function, the tactic for the non-probability sampling was to keep track of which activities were

underrepresented after each confirmation of a new participant, and then approach new possible participants to allow for the various activities to be represented. The tactic was most in line with the non-probability sampling of heterogeneous sampling which tries to select different participants to encourage variation (Saunders et al., 2016). The current author’s network within KLM and Transavia was first considered based on job function. However, only four possible participants from the current author’s network were selected based on job function, as the current author preferred approaching the best possible participants based on job function instead of the most easily accessible participants. This led to the selection of six other participants, who were approached via e-mail, telephone or both. Most participants approached were very enthusiastic and interested in the thesis topic, thus gaining access to the participants went relatively easy. Employees from both KLM as Transavia were interviewed,