The dynamics of the knowledge transfer
process between start-ups and their
international partners
Master Thesis International Management
Diederick Stellingsma (10871225)
25 MARCH 2016
Business Administration; University of Amsterdam
Thesis supervisor:
Dr. Lori Divito
Second reader:
Dr. Johan Lindeque
Statement of originality
This thesis has been written by Diederick Stellingsma. Hereby, I declare to take full responsibility for the content of this thesis. 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.
Abstract
Developing knowledge helps firms to gain competitive advantages. Firms develop their own knowledge, as well as acquire knowledge externally. The knowledge transfer process between international firms has become more important in an increasingly globalizing environment, yet has not been researched extensively. This thesis assesses four factors that impact the knowledge transfer process between firms in an international setting. A sample of start-up firms in the online travel industry is analyzed to factor in the element of age of the recipient firm. This young industry is highly alliance dependent. The framework of Easterby-Smith et al. (2008) is used as a blueprint and also takes into account absorptive capacity, network characteristics, and knowledge types. Qualitative research is conducted through a set of eight semi-structured interviews with managers at the start-up firms. The outcome of this research confirms the complexity of the knowledge transfer process between start-ups and their international partners. It was found that age of the start-up, as an organizational characteristic, influences both the direction of knowledge transfer, as well as the absorptive capacity of the start-up. Furthermore, managerial experience is important in benefiting from external partner knowledge. This research indicates that network characteristics positively influences the absorptive capacity of start-ups. It can not be demonstrated that the network characteristics influence the types of knowledge exchanged between start-ups and their international partners.
Keywords: Knowledge transfer, inter-organizational, absorptive capacity, knowledge
types, network characteristics, organizational characteristics, start-ups
Acknowledgements
This thesis is the final stage in the curriculum Master International Management for Business Administration at Amsterdam Business School. I would like to thank my thesis supervisor dr. Divito for guiding me through this academic journey by giving very helpful feedback on my thesis. Secondly, I wish to thank all the interviewed participants for their time and valuable input. I would also thank my friends and family for their support and input. Finally, I appreciated all the offered help or distractions during this process and could not have finished this thesis without all this backing.
Diederick Stellingsma, March 2016
Table of content
Abstract ... III Acknowledgements ... IV Introduction ... 1 Thesis set-up ... 3 Literature Review ... 6 Importance of knowledge in international business ... 6 Knowledge types ... 6 Knowledge transfer: Introduction ... 7 Knowledge transfer: Routines ... 8 Knowledge transfer in phases: Exploration and exploitation ... 9 Organizational characteristics: Introduction ... 10 Organizational characteristics: Absorptive capacity ... 12 Network characteristics ... 15 Research Gap ... 16 Theoretical Framework ... 19 Organizational characteristics ... 19 Knowledge transfer dynamics ... 20 Knowledge characteristics ... 21 Network characteristics ... 22 Research expectations ... 25 Research Methods ... 27 Ontology and epistemology ... 27 Research approach ... 28 Research context ... 29 Selection criteria sample ... 30 Data collection techniques ... 33 Data analysis ... 35 Results ... 37 International partnerships ... 37 Analytical construct 1: Absorptive Capacity (AC) ... 39 Analytical construct 2: Knowledge Characteristics (KC) ... 42 Analytical construct 3: Network Characteristics (NC) ... 44 Relationship between AC and KT ... 46 Relationship between AC and NC ... 47 Relationship between KT and NC ... 48 Relationship between AC, NC & KT ... 49 Discussion and conclusion ... 50 Findings ... 50 Expectations ... 54 Theoretical implications ... 56 Managerial implications ... 58 Extending theoretical model ... 59 Conclusion ... 62 Limitations ... 63 Future research ... 64 References ... 65 Appendix ... 68 Interview protocol overview ... 68 Selected cases ... 71Introduction
The knowledge-based school has received positive critical acclaim from both researchers and managers in international business (Grant, 1996). This school considers developing knowledge as on of the key elements for firms to gain competitive advantages. Developing organizational learning processes and knowledge helps to improve a firm’s competitive advantages (Easterby-Smith, Lyles, & Tsang, 2008). Firms can develop new knowledge internally or acquire new knowledge externally. The acquisition of external knowledge requires firms to transfer knowledge from other individuals, groups or organizations. The knowledge transfer process has been researched in different contexts, but most of this research was focused on the transfer of intra-organizational knowledge (Easterby-Smith et al., 2008). The knowledge transfer process in the inter-organizational context has been subject for research to a lesser extent. Previous research within the inter-organizational context found that knowledge transfer is more complex due to the multidimensional nature of the boundaries, cultures, and processes involved (Easterby-Smith et al., 2008).
Nowadays, firms are required to manage multiple relationships with customers, suppliers, partners, and competitors. These relationships can be beneficial for the development of a firm’s capabilities, but depends on several characteristics of both the firm and the other participants in the knowledge transfer process. Considering the globalization of international business during the last decades, firms shifted their focus also on international actors for transfer of knowledge. The transfer of knowledge between two international firms brings even more complexities due the higher cultural differences (van Wijk, Jansen, & Lyles, 2008). However, the impact of knowledge
transfer characteristics within the context of firms and their international partners has not been researched as deeply yet.
Grant (1996) and Argote et al. (2003) identified several factors that influence the inter-organizational knowledge transfer process. These factors can be divided in four sets: organizational characteristics, network characteristics, nature of knowledge, and inter-organizational dynamics (Easterby-Smith et al., 2008).
Firstly, the organizational characteristics focus on several characteristics of both the recipient firm and the donor firm for transferring knowledge. According to Cohen & Levinthal (1990) the transferability of knowledge depends on a firm’s ability to learn from others. The authors refer to this as the firm’s absorptive capacity (Cohen & Levinthal, 1990).
The second knowledge transfer factor regards the nature of knowledge. The need for external knowledge implicates the use of partners as a source for valuable knowledge. This knowledge can be found in different forms or types. Therefore the knowledge characteristics are essential determinants in the knowledge transfer process. The third factor in the knowledge transfer process presumes another individual or organization that has relevant knowledge to its avail. In this setting these individuals or organizations will be referred to as their network partner. The partnerships characteristics can be positioned as part of the network characteristics or network ties of the firm.
Easterby-Smith et al. (2008) considered the inter-organizational dynamics as the last factor within the knowledge transfer process. These dynamics are about power relations, trust and risk, structures and mechanisms, and network ties.
Another underexposed area within this context has to do with the position of firms in the business lifecycle. Especially firms in the beginning of their business
lifecycle, further referred to start-ups, have not been the unit of analysis of explorative research about the international inter-organizational knowledge transfer process. As the primary objective of start-ups is to develop into sustainable, competitive organizations, or they will be very likely to fail in the process of achieving this position. Therefore, start-ups are highly motivated to achieve this status and may be expected to exploit external knowledge from international partners.
The four different factors mentioned in the framework of Easterby-Smith et al. (2008) will be used as blueprint to assess the impact of each of these factors in the knowledge transfer process. This research aims to give insights in the impact of these factors for the knowledge transfer process of start-ups with their international partners. The research gap discussed above prompts the following research question: How do network characteristics influence the absorptive capacity and the types of exchanged knowledge between start-ups and their international partners? Thesis set-up Qualitative research is required for analyzing the different characteristics of the knowledge transfer process between start-ups and their international partners. The research context fits a more explorative research design, as knowledge transfer processes are hard to quantify. Especially considering the complexities that might occur in knowledge transfer process of start-ups with international partners. Therefore the choice has been made for qualitative research to explore the level of learning from international partners. Subsequently, a set of semi-structured interviews with start-up managers has been set up. The questions in these interviews will focus on the different
aspects on cooperation with international partners. More particularly: the characteristics of the partnerships, the different knowledge types, and the level of absorptive capacity.
This thesis will try to enrich existing international business literature by analyzing multiple start-ups in the online travel industry. A sample of six cases was compiled, of which five cases are based in the Netherlands, and one case resides in Germany. The criteria for the sample selection are discussed in the research methods section. For the majority of the start-ups only a single manager is responsible international business and international partnerships. One case has grown rapidly in a few years and has multiple country managers for international partnerships. The context of this case provided the opportunity to conduct three interviews with business managers responsible for different countries with multiple international partnerships.
Analyzing multiple cases should identify both the similarities and differences between the six cases. The theoretical framework will lead to several research expectations. After collecting the interview data, this data will be transcribed into multiple pre-coded documents, which subsequently will be analyzed for patterns. The overlapping patterns will be examined and compared with the pre-set expectations. The analysis is aimed at combining the patterns and generalizations to enrich existent literature. This research will explore a set of relevant dimensions of the relationship between start-up with international partners. A model will be proposed to provide additional insights in the knowledge transfer process.
This research will have both theoretical and managerial implications. Theoretical implications might be the result of providing a deeper insight in knowledge-based theory in the international knowledge transfer process. A second implication will be about the importance of learning for start-ups and the complexities of the process in
developing learning in an international business context. Such managerial implications will be more focused on the complexities that occur when doing business with international partners and how different elements that constrict the knowledge transfer process could be handled.
Whereas previous research was centered on technological innovation in the automotive and telecommunications industry, this research will focus on the online travel industry. This thesis commences by researching previous literature, specifically relating to the importance of knowledge in international business. It will continue by describing the different types of knowledge. Following this the importance of learning through alliances will be dealt with, which is necessary to gain external knowledge. The next part is about a firm’s absorptive capacity and how this is related to alliance firms. Centered mainly around the student-teacher relationships between alliances partners for inter-organizational learning and capability development. This will lead to the proposition of the theoretical framework that will encompass and deal with the different elements for knowledge transfer between international firms.
The thesis continues by discussing the chosen research methods which are designed to perform a multiple case study covering eight semi-structured interviews with managers of start-ups in the online travel industry. The case studies will be analyzed as covered in the results section of this thesis. The implications of these results are examined in the discussion section. Finally, the thesis ends with the conclusion, covering the research’s main findings, its limitations, and offers potential suggestions for
Literature Review
Importance of knowledge in international business
The importance of knowledge in international business has received considerable interest from both researchers and managers over the past few decades. Nonaka (1994) and Grant (1996) are acknowledged authors on the importance of knowledge management within firms. Knowledge management had already been identified in the 1960’s as highly relevant, but it was not until the 1990’s before this view became broadly accepted (Grant, 1996). Since then firms tend to recognize the importance of new external knowledge, as knowledge and skills are interrelated to become more efficient and gain competitive advantages over other firms (Grant, 1996). These trends have led to more research on how to gain and maintain new external knowledge both within and across firms and formed one of the bigger challenges for firms in international business.
Knowledge types
Generally three different types of knowledge are distinguished: explicit, tacit and embedded knowledge (Nonaka, 1994). Explicit knowledge is codified knowledge found in documents and databases for example. Tacit knowledge is embodied in people as skills, expertise and capabilities. Embedded knowledge is locked in processes, products, culture, routines, artifacts, and structures (Gamble & Blackwell, 2001). The main differences between tacit and explicit knowledge are the nature of the knowledge, its transferability, and the complexity of knowledge. Tacit knowledge is more difficult to transfer between actors and is more valuable to organizations as it is embedded within people as skills, capabilities, and expertise. Especially due to the difficulty of transferring
challenges for international oriented firms in their search for continuous improvement (Spender, 1993).
Knowledge transfer: Introduction
Over the last three decades, the knowledge transfer process has been identified as critical to improve knowledge and innovative capabilities within and across firms. The literature about knowledge transfer identifies this process as complicated and hard to implement within and across organizations (Easterby-Smith, Lyles, & Tsang, 2008). Multiple factors influence the effectiveness and the outcome of knowledge transfer even for internal knowledge processes among business units within the same organization (Szulanski G. , 1996). Easterby-Smith and Lyles (2008) identify an even higher complexity for the transfer of knowledge between organizations, because of the multidimensional nature of the boundaries, cultures, and processes involved. Van Wijk, Jansen and Lyles (2008) also found through meta-analysis that transferring knowledge across different firms is more complicated than transferring knowledge between units within the same organization. The transfer process amongst firms is more complex due to higher cultural distance, especially for international firms (van Wijk et al., 2008). Grant (1996) proposes that the development of learning capabilities would lead to a competitive advantage. Especially the characteristics of the contributor firm and the receiver firm, the elements of the knowledge and the knowledge transfer process itself are important to improve these learning capabilities (Grant, 1996). The development of these factors also depends on the different properties of knowledge and properties of the interacting units, and the relation between those units in developing knowledge management context (Argote, McEvily, & Reagans, 2003). Easterby-Smith, Lyles & Tsang
(2008) propose a framework combining these two models of Grant (1996) and Argote et al. (2003). This framework is shown below in figure 1. Figure 1 Factors influencing inter-organizational knowledge transfer (Easterby-Smith, Lyles, & Tsang, 2008, p. 679)
This model integrates the factors influencing inter-organizational knowledge transfer. From left to right the model shows a donor firm that transfers knowledge (of different nature, i.e. types) across a network that has its own dynamics (inter-organizational dynamics) to a recipient firm (Easterby-Smith et al., 2008). The arrows in the model of figure 1 represent the routines and phases as will be dealt with below in the respective paragraphs. For the success of the transfer process not only these transfer aspects are important, but also the organizational characteristics and network characteristics. These two will also be discussed in separate paragraphs below.
Knowledge transfer: Routines
For the improvement of a firm’s learning process routines are highly important. Routines are the organization’s forms, rules, procedures, strategies, conventions, and
who execute these routines (Levitt & March, 1988). Routines are mainly found on the level of the firm and as such are the main determinants for the development of a firm’s dynamic capabilities (Teece, Pisano, & Shuen, 1997). These dynamic capabilities are the collective activities a firm undertakes to learn from its actions to generate and if necessary to modify its operational routines to achieve improved effectiveness (Zollo & Winter, 2002). The firm’s learning process is dynamic and co-evolves over time along with the inter-firm routines in the firm’s network (Teece, Pisano, & Shuen, 1997). Especially for firms in a dynamic context, it is required to evolve their business models through inter-firm learning and knowledge transfer. The encountered problems within their network compel firms to develop their knowledge to solve these problems and learn from these experiences through developing them into structuration and routines formation within the firm (Zollo & Winter, 2002).
Mason & Leek (2008) state that inter-firm knowledge transfer can impact the business model through different mechanisms. Hard inter-firm knowledge transfer mechanisms are used to structure how firms in the process might improve their routines in the process. Soft mechanisms are applied to understand what, with whom and why improvements in the knowledge transfer process occurred. Both are required to perform effective knowledge transfers within firms (Mason & Leek, 2008).
Knowledge transfer in phases: Exploration and exploitation
Another aspect in knowledge transfer is the build-up in consecutive phases. Harryson, Dudkowski, & Stern (2008) mention two phases: exploration and exploitation of knowledge. The first phase, exploration, includes the search, discovery and experimentation for generating new knowledge. The second phase, exploitation, encompasses the selection, enhancement and deployment of existing knowledge
(Harryson, Dudkowski, & Stern, 2008). The authors proposed a theory of successful knowledge transfer by having strong or weak ties between external knowledge exchanges and used the Volvo C70 production project as case study to find support for their propositions. The authors found that knowledge transfers and transformations happened in both phases. Exploration occurred in open creativity networks and exploitation in closed process networks (Harryson, Dudkowski, & Stern, 2008). This was dependent on the managerial hierarchy inside the specific partners of the Volvo C70 project and also on the type of network and the size of the organization. Harryson et al. (2008) conclude that their findings can be industry-dependent and highlight this as a possibility for future research.
The two phases have been used more broadly in literature, however, both van Wijk et al. (2008) and Paulraj et al. (2008) refer to the gap in the definition of distinct phases in the knowledge transfer process. Van Wijk et al. (2008) state that more qualitative research is needed to further the understanding why cultural distance is less detrimental to transferring knowledge within firms than between different firms. The authors state the following: “A promising body of research is emerging that examines how organizational antecedents and consequences are differentially associated with the initiation, implementation, ramp-up and integration phases of knowledge transfer (e.g. Jansen et al., 2005; Szulanski, 1996)” (van Wijk, Jansen, & Lyles, 2008). In other words, there is not a clear distinction between phases in the knowledge transfer process within the inter-firm relations, especially not from an international perspective.
Organizational characteristics: Introduction
Previous research analyzed several different organizational characteristics, and used age, size, decentralization and absorptive capacity to assess their impact on
knowledge transfer between organizations (van Wijk, Jansen, & Lyles, 2008). The effect of size was mainly used as a control variable in the knowledge transfer context, and the results regarding size were varied from positive effects (Dhanaraj et al., 2004; Gupta and Govindarajan, 2000; Laursen and Salter, 2006), to non-significant (Tsang, 2002), to negative effects (Makino and Delios, 1996). The varying results of the effect of size on organizational knowledge transfer are potentially interesting determinants for future research.
Age (the number of years the firm is in existence) is a second determinant used to assess organizational knowledge transfer. Prior research has also ended up in mixed results for the effects of age as well. Younger organizations seem to have some advantages for learning over older organizations (Frost et al., 2012). Other findings were less conclusive and found that age had no effect on the impact of organizational knowledge transfer (Gray and Meister, 2004; Yli-Renko et al., 2001). A more narrowed-down scope of incipient organizations will henceforward be referred to as start-ups. Start-ups are firms in the first stage of the business lifecycle. By nature, start-up firms have limited experience and consequently are having more difficulty in processing external information than established firms (Debrulle & Maes, 2014). The processing speed of new external knowledge is an important requirement for organizations to achieve competitive advantages (Zahra & George, 2002). These aspects of knowledge transfer have not been fully researched for start-up firms, leading to inconclusive results in previous research about the differences in knowledge transfer for these younger firms.
Van Wijk et al. (2008) continue with the level of decentralization as a third determinant of organizational knowledge transfer. Decentralization refers to the level of hierarchy, positioning of authorization, and the decision-making process within
organizations (Damanpour, 1991). Although previous studies found mostly positive effects between decentralization and organizational knowledge transfer, the exact impact of decentralization is not widely accepted as determinant for organizational knowledge transfers (van Wijk, Jansen, & Lyles, 2008).
The fourth element for organizational knowledge transfer focused on the effect of a firm’s absorptive capacity. This has been the most widely researched determinant for organizational knowledge transfer and demands a more extensive review.
Organizational characteristics: Absorptive capacity
A substantial part of prior research on inter-organizational learning has been focused on the role of absorptive capacity. Cohen & Levinthal (1990) determined absorptive capacity as a firm-level construct, where a firm develops its ability to identify, absorb and use knowledge over time. Lane & Lubatkin (1998) built on this construct by shifting the unit of analysis from the firm-level to the pairing of ‘student-teacher’ level. The authors refer to this as: ‘the ability of a firm to learn from another firm is jointly determined by the relative characteristics of the student firm and the teacher firm’ (Lane & Lubatkin, 1998).
Lane & Lubatkin (1998) continued and defined relative absorptive capacity as follows: “One firm’s ability to learn from another firm is argued to depend on the similarity of both firms’ knowledge bases, organizational structures and compensation policies, and dominant logics.” (Lane & Lubatkin, 1998). This relates to the relationship between ‘student’ and ‘teacher’ firms. The student firm tends to learn from the teacher firm, but learning is also possible through bi-directionally. The authors found that a similar basic knowledge for both student and teacher firms is positive related to inter-organizational
learning. Lower management formalization, research centralization, and compensation practices also positively impacts this learning (Lane & Lubatkin, 1998).
The relative absorptive capacity measures are also shown to have greater explanatory power than an established measure of absorptive capacity, namely R&D spending. As mentioned before, a firm’s knowledge contains both explicit, i.e. simply transferrable knowledge, and tacit knowledge. The latter is much harder to describe for all processes and shared interactions that a firm practices (Lane & Lubatkin, 1998).
Lane & Lubatkin (1998) continue their work with describing three different methods for learning new external knowledge, specifically passive, active and interactive learning. Especially interactive learning is relevant for the student-teacher relationship (Lane & Lubatkin, 1998). The more tacit the knowledge and capabilities of a firm, the more difficult it is to observe the knowledge and transfer it to a partner firm. Through interactive learning it is possible to recognize both the objective and observable components of the teacher firm’s capabilities. The tacit components make the ‘how and why’ knowledge also understandable for student firms, whereas this knowledge is embedded in the firm’s social context, which makes it more valuable and rare, hard to imitate, and thus more suited to create strategic value (Spender, 1993). This form of learning requires face-to-face interactions between the student and teacher firm and has been referred to as the inter-organizational learning of alliances (Lane & Lubatkin, 1998).
Furthermore, Cohen & Levinthal (1990) make a clear distinction between the external and internal determinants of absorptive capacity. The external determinants are industry wide effects: demand, appropriability, and technological opportunity (Cohen & Levinthal, 1990). Internal determinants are referred as prior experience and prior investments in knowledge assets (Cohen & Levinthal, 1990).
Basic knowledge is required by the student firm to recognize and value new external knowledge. The basic knowledge should be slightly different from the specialized knowledge that a teacher firm possesses (Lane & Lubatkin, 1998). Hamel (1991) refers to the acquisition of new specialized knowledge as the main motivation for engaging in inter-organizational partnerships (Hamel, 1991). As firms tend to gain or sustain their competitive advantage over firms this highlights the importance of inter-organizational learning.
The ability to assimilate new external knowledge depends on the firm’s tacit, firm-specific knowledge considering its existing systems for assimilating knowledge (Cohen & Levinthal, 1990). Specifically the embeddedness of valuable, firm-specific knowledge is important for a firm’s capabilities and is the main source of a sustainable competitive advantage (Spender, 1993). Thus, the ability to assimilate knowledge for student firms depends on the similarity of the knowledge-processing systems compared to the alliance partner (Lane & Lubatkin, 1998). The authors state that similar compensation practices and organizational structures between student firm and teacher firm are beneficial for the absorptive capacity (Lane & Lubatkin, 1998).
The ability to commercialize new external knowledge into achievable organizational objectives is also important for increasing absorptive capacity (Lane & Lubatkin, 1998). Lane & Lubatkin (1998) refer to the importance of similar problems solved by both student and teacher firms as it makes it easier for the student form to be able to find commercial applications for the recently gained knowledge (Lane & Lubatkin, 1998). This dimension is mainly focused on the similarities of student’s and teacher’s commercial goals, the ‘know-why’ portion of their knowledge (Lane & Lubatkin, 1998).
Network characteristics
In the transfer of organizational knowledge van Wijk et al. (2008) found the following three relevant characteristics: knowledge characteristics, organizational characteristics and network characteristics. In preceding paragraphs the former two have already been covered. We will now concentrate on the latter. Network characteristics can be categorized into three different dimensions, each with multiple attributes (Inkpen & Tsang, 2005). The first dimension involves structure and is about the pattern and configuration of partnerships and their links with other firms within the network (Inkpen & Tsang, 2005). The links and relationships with other firms in its network impact the knowledge transfer process. Previous research found support for the fact that a larger number of relations within the network will increase the accessibility of potential useful knowledge. Firms with a centralized position among their network partners can assess the usability of this accessible knowledge (van Wijk et al., 2008). It makes the access to other firms easier and the knowledge in this position is considered to be more diverse for firms (Tsai, 2001). In summary: a centralized position refers to both the diversity and the density of the firm’s network.
The second dimension concerns the relational aspects of the network. These relational network aspects focus on the nature of relationships themselves and the assets that are rooted in them (Tsai & Ghoshal, 1998). The strength of network ties implies the closeness of the relationship between different alliance partners and increases with frequency of contact and communication (Hansen, 1999). The second mentioned aspect for relational dimension of networks is trust. Inkpen (2000) states that: ‘Trust reflects the belief that a partner’s word or promise is reliable and that a partner will fulfill its obligations in the relationship’ (Inkpen, 2000, p. 1027). Trust facilitates the transfer of organizational knowledge, whereas it increases partners’
motivation to compel to helping partner firms comprehend new external knowledge (Lane, Salk, & Lyles, 2001).
The third and last aspect is the cognitive social capital and can be referred to as the resources within partnerships that provide shared representations, interpretations, and systems of meaning (Nahapiet & Ghoshal, 1998; van Wijk et al., 2008). The attributes of this aspect are the shared vision, systems and cultural distance as they characterize the social relations that impact knowledge transfer (Inkpen & Tsang, 2005). The shared vision and systems refer to shared understanding and offer bonding mechanisms that help assimilate knowledge with the firm. The knowledge transfer process is argued to be facilitated by similarities of the organizational structures and compensation practices for both strategic thinking and in businesses (Lane & Lubatkin, 1998; Lane et al., 2001). These shared visions and systems will enhance the organizational knowledge transfer. The cultural distance increases the firm’s entry costs, and hinders the firm’s ability to transfer core competencies to foreign markets (Palich & Gomez-Mejia, 1999). Furthermore, cultural distance between international partners could result into misinterpretations that constrain the exchange of important organizational knowledge (Lyles & Salk, 1996; Szulanski, Capetta, & Jensen, 2004).
Research Gap
As briefly introduced in the thesis outline, the international business literature has hitherto paid little attention to organizational learning in the context of international inter-firm relations. Considering the proposed framework of Easterby-Smith & Lyles (2008) there are several elements of organizational knowledge transfer that have not fully been explored yet. This thesis aims to provide additional insight in some of these aspects. Several factors are marked for deeper research in the adjusted
model displayed in figure 2. The need for exploratory research will be described for each of these factors (marked in green).
Figure 2 Focus on specific factors of the inter-organizational knowledge transfer model (Easterby-Smith, Lyles, & Tsang, 2008, p. 679)
The first element that is covered is the absorptive capacity of the recipient firm. Considering the impact of absorptive capacity in previous research, this determinant of organizational knowledge transfer has not been fully analyzed with an international perspective of start-ups firms. The ability of start-ups to recognize, assimilate and use external knowledge from partner firms abroad might be more or less impactful. Deeper explorative research on the absorptive capacity of the start-up in terms of learning from international partners is required.
For organizational knowledge transfer at least two firms (donor and recipient) are required. The effectiveness of this process depends to some extent on the characteristics of social ties. Characteristics of social ties are for example: informal/formal contacts, the position of both firms in their network and the location of both firms. These might also have an impact on the effectiveness of knowledge transfer.
A third factor is the direction of knowledge transfer. The direction corresponds with the green arrow in figure 2. Knowledge transfer is usually primarily from the donor firm to the recipient firm, which implicates mainly one-way learning. But there might be room for two-way sharing of knowledge between partners. Start-ups might have some valuable knowledge that is useful for their international partners. This might be related to the other inter-organizational dynamics as well. Next to the direction of knowledge transfer, phase of knowledge transfer is taken into consideration. For start-ups it is expected that due to their inexperience of gaining external knowledge from international partners, start-ups will use international partners for exploration purposes of external knowledge only. The point in time from where the interest of start-ups shifts from exploration into exploitation of external knowledge requires further research.
The last factor of the organizational knowledge transfer model that requires deeper exploratory research concerns the different knowledge types. Whereas the different types of knowledge influence the effectiveness of knowledge transfer, the exact impact in the setting for start-ups transferring external knowledge from their international partners has not been a subject of research.
Therefore, the research gap discussed above prompts the following research question: How do network characteristics influence the absorptive capacity and the types of exchanged knowledge between start-ups and their international partners?
Theoretical Framework
Based on the literature review and the proposed research question several elements require a deeper analysis to assess the impact of inter-organizational knowledge transfer. This thesis will focus more deeply on each of these aspects and will be translated into a theoretical model that tries to explore the possible relations between the different elements.
Figure 3 contains a visual representation of the theoretical framework.
Figure 3 Theoretical framework for the factors of inter-organizational knowledge transfer process (Stellingsma, 2016) Organizational characteristics The organizational characteristics of the start-up firm can be described in terms of the start-up’s absorptive capacity, firm position in the business lifecycle, its size and age. For the exchange of knowledge at least two parties are required. These parties can be individuals, business units or different firms. For this research the focus will be on
the exchange of knowledge between the start-ups with their international partners. Grant (1996) identifies both the characteristics of the donating firm and recipient firm as central to developing learning capabilities that will eventually lead to a competitive advantage. Knowledge transfer is a dyadic process and may take place in multiple directions. The process is not purely one-sided, as indicated by the larger arrows going from the donor to the recipient firm and the smaller dotted arrows in the opposite direction (figure 3). This is important to notice, as the role of donor firm or recipient firm can change over time. Another key factor in organizational characteristics are the absorptive capacity of both firms in the knowledge exchange (Easterby-Smith, Lyles, & Tsang, 2008). This is mentioned before as the ability to recognize the value of new knowledge and to assimilate and use that knowledge (Cohen & Levinthal, 1990). The recipient firm’s absorptive capacity is influenced by past experiences, culture and knowledge retention capabilities. This can be described as learning from doing and both good or bad experiences can proof to be useful. Hamel (1991) found that the recipient’s intent to learn is the key determinant of the extent of knowledge transfer, but both the donor firm and recipient firm should be motivated to learn. This can also be measured in past experiences of managers. Knowledge transfer dynamics
The second element of this research can be related to the inter-organizational dynamics that determine the transfer of knowledge (Easterby-Smith, Lyles, & Tsang, 2008). This refers to the social ties between start-ups and their international partners. Other relevant characteristics are cultural and communication complexities. These issues cause several managerial challenges for international oriented star-ups and are directly relevant for the relationship between two firms. Power-asymmetry is a form of
power relationship between two firms and can change over time (Easterby-Smith, Lyles, & Tsang, 2008). Another relevant determinant is the pace of knowledge acquisition by the recipient. This leads to a more powerful position relative to the donor firm, which can result into trust and risk issues (Easterby-Smith, Lyles, & Tsang, 2008). Trust is another important determinant of knowledge transfer and creates a safeguard between partners, namely that exchanged knowledge will not be exploited beyond agreements (Phelps, 2010). Trust is primarily defined as of informal nature, which makes it difficult to evaluate its effects on the knowledge transfer. This element is somewhat similar to network characteristics and will be discussed further under that heading.
The different communication channels can be used to proxy the dynamics of inter-organizational knowledge transfer between start-ups and their international partners. These communication channels involve email, telephone, Internet, personal meetings and other relevant communication tools used in the transfer process. As these communication tools serve as the main mechanism for knowledge transfer, it is likely to assess them through personal experiences of managers, as the geographic distance between respective locations is likely to require them to communicate mainly by email and telephone.
Knowledge characteristics
The third element in the theoretical framework is formed by the different knowledge types transferred between the start-up and their international partner. The characteristics of knowledge determine the inter-organizational knowledge transfer process and influence which types of knowledge can be transferred. The tacitness of knowledge is negatively associated to knowledge transfer. Tacit knowledge is more difficult to transfer than explicit knowledge. The complexity of knowledge is also
negatively associated to knowledge transfer. The degree of complexity of the knowledge will make it harder to transfer the knowledge from donor to recipient firm (Easterby- Smith et al., 2008). The ‘donor-recipient’ relationship shows similarities to the ‘student-teacher’ level relationship for knowledge transfer, referring to the relative absorptive capacity as the main component of inter-organizational learning (Lane & Lubatkin, 1998). Previous academic research found support for the contention that the ambiguity of knowledge is also negatively related to knowledge transfer between firms. Furthermore, the vagueness of knowledge constraints the transfer process (Szulanski G. , 1996). The ambiguity of knowledge will not be included in this research, whereas the other components tacitness, specificity and complexity are more relevant for knowledge transfer between different firms within the chosen industry.
Argote et al. (2003) propound that the properties of knowledge affect the ability to transfer that knowledge, the rate at which it will be assembled, and how much is retained. Knowledge within start-ups should be categorized into the three earlier mentioned categories: explicit knowledge, tacit knowledge and embedded knowledge.
Network characteristics
Network characteristics are the final part of this framework. Network characteristics in the framework have been researched by Phelps (2010) and Easterby-Smith et al. (2008). The composition and the structure of the network are the most relevant characteristics. Phelps (2000) found evidence for the influence of dense and diversity alliance network structures and compositions on firm exploratory innovation. Both the diversity and the density of the alliance network are relevant as outlined below.
The technological diversity in a firm’s alliance network increases exploratory innovation (both individual and in combination with network density). Phelps (2010) describes alliance network technological diversity as followed: “the extent to which the technologies pursued by a firm’s alliance partners are different from one another and from those of the focal firm” (Phelps, 2010). Phelps continues with stating: “Diversity affects the relative novelty of knowledge available in a network and the ease with which a firm can recognize, assimilate, and utilize this knowledge” (Phelps, 2010). Diversified networks are valuable to some extent for exploratory innovation. The network density in a firm’s alliance network increases exploratory innovation (both individual and in combination with network diversity) and might result in a more efficient knowledge transfer process. To measure the impact of diverse partners, the variety of partners of a start-up should be analyzed. This effect can be evaluated by analyzing cross-case differences in terms of partner variety.
Network density improves the trust and reciprocity between network partners as they share different third-party partners (Phelps, 2010). Firms that learn about ‘potential’ new partners from their network partners reduce information asymmetry among firms and improve the trust between these partnerships. The network density also improves trust by increasing the costs of opportunism (Coleman, 1988). In a dense network, a firm’s opportunistic behavior is much more visible for other firms, which would indicate that firms will not cooperate any longer with such opportunistic firms. Reciprocity is also dependent on the network density. The closer the network, the more firms will expect to receive from each other, when providing resources to partners within the alliance network. Alliance partners in dense networks will try to prevent opportunistic behavior of their alliances firms to protect the network (Phelps, 2010). Dense alliance networks can help to solve issues that negatively impact absorptive
capacity. Closer networks will improve social interaction, knowledge exchange, and triangular relation exchange as well. This leads to higher absorptive capacity for firms and will benefit multiple partners in the network. The dense and closed networks promote intensive interaction and detection of tacit and embedded knowledge in partner firms (Phelps, 2010). Intensive interaction between partners will lead to more effective knowledge-transfer process. Both trust and reciprocity are important motivators for the relationship between partners to teach each other (Szulanski, 1996). This is useful for fast growing firms which seek to expand their network diversity.
Exploratory innovation is the creation of new technological knowledge by a firm that is new relative to its current knowledge stock (Benner & Tuschman, 2002; Rosenkopf & Nerkar, 2001). The exploratory innovation within the travel industry can be measured in the number of new international alliance partners since the start of the firm. This can be described as the network size. More international partners could indicate both open and closed networks, and the interviewed managers should provide more detailed information on the status of the relationships. This can be measured in terms of power relations, mutual trust and reciprocity, the structure of the relationship and the social ties between the firm and its international partners. Another variable for network characteristics is the duration of the alliance partnerships. Longer relationships can help inter-firm learning processes. This can be measured in terms of the number of years the relationship has been in existence. The final determinants of network characteristics are based on the relationship characteristics with international partners. These can be related to the social ties, this is a proxy within the level of formalness of a partner relationship and experience with international partners. This construct has a more abstract nature, implicating that measuring this construct might be difficult. Therefore, the focus on this aspect should be
built around the informal contacts with partnership and can be more about issues that impacted the relationship between the start-up and their most important international partners.
Research expectations
In the theoretical framework a model is proposed that assesses the effects of different factors on the organizational knowledge transfer process. This model raises several expectations. The first expected outcome is that start-up firms which search to find new knowledge from experienced alliance partners through exploration, will be able to create a more diverse and dense network, which in turn will lead to overall better learning experiences and eventually will improve the firm’s sales and growth. For these start-ups learning experiences are expected to be better than for start-ups that don’t explore the use of valuable partner knowledge at all. This trend might be seen in the progression of the start-up into a more sustainable firm, further developed in the business lifecycle.
A second expectation concerns absorptive capacity of a start-up and how this relates to different types of knowledge. Higher absorptive capacity of the start-up will increase the ability to recognize, assimilate and use different, more tacit, and more complex knowledge. The opposite might be true: weaker ability of absorptive capacity of a start-up resulting in diminished knowledge transfer. This might be due to low absorptive capacity or to more tacit, complex knowledge.
A third expectation is formulated with regard to the phasing of knowledge transfer. Given the organizational characteristics of start-ups, it is expected that the transfer of organizational knowledge will be more of exploratory than of exploitative nature. An additional element in this expectation is the direction of knowledge transfer.
Given the dynamics of knowledge transfer, it is to be expected that the direction of knowledge transfer will be mainly from donor (international partner) to recipient (start-up).
The last expectation is related to the previous experience of managers, also referred to as human capital of start-ups. Given these organizational characteristics, it is to be expected that start-ups lack awareness of their absorptive capacity due to inexperience in doing business with international partnerships. A second reason for this expectation could be due to the general lack of experience of the start-up in their industry.
Research Methods
This chapter covers the selected research methods. Some of the elements in the theoretical framework require some further explanation in terms of how data will be collected and to what extent this data is relevant for research implications. This chapter will also treat the justification of the chosen research methods. Subsequently the data collection is dealt with: primarily semi-structured interviews are used to collect the data for this research. This chapter concludes with a discussion of the data analysis methods.
Ontology and epistemology
This research is built upon several ontological and epistemological assumptions to understand how theoretical constructs should be interpreted. Ontology focuses on how reality is understood. This can be both from an objectivist or subjectivist approach. The research approach for this thesis will have a subjectivist view (Saunders, Lewis, & Thornhill, 2012). The knowledge transfer process between a start-up and its international partners will regard multiple individuals in this process. Each individual will have his/her subjective view on this process. As this research focuses on the learning process from perspective of the start-up, only one side of the transfer process will be observed and analyzed. This is also due to the set expectation of primarily one-way transfer of knowledge from the international partner to the start-up firm. By choosing a subjectivist view, analyzing the knowledge transfer process can lead to different interpretations among start-ups managers. These varying perceptions will be observed and analyzed for theoretical implications.
Epistemology is about what constitutes knowledge in research and how this knowledge should be interpreted (Saunders et al., 2012). There are several different perspectives on how knowledge should be constructed. Most research that focuses only
on observable phenomena can be defined as the positivism perspective. In this perspective reality can be understood through observation and logical reasoning. For positivists reality has to be measurable. This approach received support for providing knowledge of reality, but lacks support in fields of study where an empirical approach is less insightful (Saunders et al., 2012). Positivism is being criticized for generalizing complexities, which removes the possible other explanations or interpretations. Another view in epistemology is interpretivism. This view focuses on the different views and behaviors of individuals and organizations (Saunders et al., 2012).
To analyze the knowledge transfer process between start-ups and their international partners, the interpretivist research philosophy is viable for this research to understand the different interpretations of actors in the knowledge transfer process.
Research approach
The next step in the determination of the research methodology is determining the research approach. Research can have an inductive or deductive approach. Inductive research focuses on building theory as result of researched observations, whereas deductive research is more about testing composed theory through research (Saunders et al., 2012). This research is based on a deductive research approach. This study builds upon previous research on inter-organizational knowledge transfer and aims to observe whether these research implications also apply to a different setting. In other words, to examine differences in the knowledge transfer process between start-ups and their international partners.
Research literature has two different methods for collection and analysis of data: it can be achieved through quantitative and qualitative research methods (Saunders et al., 2012). Quantitative research is mostly applied to find causal relationships between
different variables. Qualitative research is used to determine the motivations, beliefs, and perceptions of phenomena (Eisenhardt, 1989). Combination of methods can also be used. Qualitative data is advantageous to comprehend the logic or theory underlying relationships discovered from quantitative data and can strengthen these theories (Eisenhardt, 1989).
For this study only qualitative research methods will be applied. This approach fits the study, in terms of understanding multi-perspective phenomena as can be argued for this thesis subject. The knowledge transfer process between start-ups and their international partners requires a qualitative approach, which provides deeper insights in the complexities of the knowledge transfer process.
The selected research method involves a multiple case study. This research method tries to get a deeper understanding of the situation of several, single cases. Case studies can give good insights in the characteristics the transfer process of different start-up firms. This research method is used due to the richness of information multiple cases can provide in research. This is also a disadvantage; the richness of different cases’ context makes it difficult to generalize to other contexts. (Taylor, 2005) Some of the reviewed literature used case studies to observe the existence of different knowledge phases within firms.
Research context
In order to observe the characteristics of the knowledge transfer process between start-ups and their international partners, this research has chosen to observe different cases in one specific industry with multiple managers as the unit of analysis. The data collection of the qualitative research will be done through conducting semi-structured interviews with start-up managers of the selected cases. The interviews will
be conducted with several managers of start-ups with several different international partners. For the research context start-up firms in the online travel industry have been chosen. The online travel industry is one of the highest alliance dependent industries within the European and American B2C markets (Laudon & Traver, 2007). The recent rise of start-up firms in this industry is interesting to identify the different phases of knowledge transfer between start-ups and their international partners. As mentioned, the phases can be exploratory to find new external knowledge and/or exploitative oriented to exploit external knowledge from partners.
The research objective is of exploratory kind. The specific aim of this study is to observe the characteristics of the knowledge transfer process of start-ups and their international partners. The focus will be from the perspective of the start-ups, as primarily one-way learning is expected.
Selection criteria sample
Once the research setting has been established as startup firms in the online travel industry, the research sample needs to be determined. Previous research used industries such as car manufacturing and communications equipment managers (Harryson et al., 2008). Start-ups in the travel industry were chosen for the sample of this research. Firms in the travel industry are highly alliance dependent, with the use of different partners in different countries. Startup firms are chosen as to identify the use of exploratory innovation to learn from international partners to grow faster (Debrulle & Maes, 2014). Over the last decade the trend has been noticed that the online travel sector is rapidly gaining market share in the travel industry to the detriment of regular booking agencies. Technological developments in the consumer industry such as the increasing availability of Internet resulted in a growing demand for and usage of the
online travel sector. The amount of startups in this industry is very high and the one of the most profitable market segments for business to consumer (B2C) sales in Europe and the United States (Laudon & Traver, 2007).
In this research six different startups were selected the travel industry. As the focus of this study involves startups, these companies are relatively ‘new and young’ (not created before September 2010, i.e. maximum fives years old firms). Furthermore, the selected firms should have multiple international partners. For the online travel industry this is almost for all companies the case, whereas the travel industry is highly dependent on international partnerships. Another condition is that selected cases should also be in different networks, which refers to that the selected firms are not direct partners of each other.
For this research six start-ups were analyzed. The unit of analysis for this research should be a start-up firm in the online travel industry with several international partners. The selected cases are all active in the online travel industry and are all led by Dutch managers. Five of these have been selected as typical cases and share similarities in size, number of employees, and other organizational characteristics. Their position on the business lifecycle is also quite similar. All these cases are start-ups, but some are still in the initial stages of developing their business, whereas others are already expanding their start-up into a more sustainable firm. One case (Case A) has been very successful in its start-up expansion and has grown very rapidly to a large organization with over 500 employees. This case has been selected as an extreme case to research additional explanations of how this case uses international partners for knowledge transfer.
Tables 1 through 6 display the summarized characteristics of the selected cases both of the start-up and of the interviewed managers.
Case A Number of interviews 3 (all three in English) Firm size 500 employees Firm age 5 years Firm HQ location Amsterdam, The Netherlands Primary activities Offer varying deals for travel in Europe Tasks interviewee 1 B2B Germany; sales; marketing campaigns; online promotion; business manager Tasks interviewee 2 B2B Austria; sales; marketing campaigns; online promotion; business manager Tasks interviewee 3 B2B France; sales; marketing campaigns; online promotion; business manager Table 1 Firm characteristics of Case A (Stellingsma, 2016) Case B Number of interviews 1 (in Dutch) Firm size 25 employees Firm age 3.5 years Firm HQ location Amsterdam, The Netherlands Primary activities Taxi service from home to airport and to international destination in the Benelux Tasks interviewee CEO, co-founder; responsible for international partnerships Table 2 Firm characteristics of Case B (Stellingsma, 2016) Case C Number of interviews 1 (in Dutch) Firm size 20 employees Firm age 4 years Firm HQ location Amsterdam, The Netherlands Primary activities Legal services for clients with delayed/cancelled flights in Europe Tasks interviewee Co-founder and B2B manager Table 3 Firm characteristics of Case C (Stellingsma, 2016) Case D Number of interviews 1 (in Dutch) Firm size 8 employees Firm age 4.5 years Firm HQ location Berlin, Germany Primary activities Travel application with destination information Tasks interviewee Co-founder; non-product related activities manager Table 4 Firm characteristics of Case D (Stellingsma, 2016)
Case E Number of interviews 1 (in Dutch) Firm size 3 employees Firm age 1 year in development; 3 months live Firm HQ location Amsterdam, The Netherlands Primary activities Online travel platform for sleeping, eating, and activities in Amsterdam, Buenos Aires and Istanbul. Tasks interviewee CEO; founder; business manager Table 5 Firm characteristics of Case E (Stellingsma, 2016) Case F Number of interviews 1 (in Dutch) Firm size 12 employees Firm age 1 year in development; 5 months live Firm HQ location Amsterdam, The Netherlands Primary activities Travel blog platform for bloggers Tasks interviewee Founder and product development manager Table 6 Firm characteristics of Case F (Stellingsma, 2016) Data collection techniques
The data collection of this qualitative research will be realized through semi-structured interviews. Holding such interviews has proven to be a valid method for multiple case studies (Eisenhardt, 1989). Interviews are useful to determine an interviewee’s thoughts, feelings, and intensions about the research subject. Interviews are a resourceful tool for analyzing the perspective of interviewees on particular subjects. Especially due to the complexity of how different characteristics in the knowledge transfer process might be related to each other, makes interviews a fitting method to explore this research context. The choice for semi-structured interviews over structured interviews has been made due to the opportunity of asking additional questions during interviews, as new themes might be found (Saunders et al., 2012). As this research is of an exploratory nature, the choice for semi-structured interviews makes sense, to identify additional characteristics of the knowledge transfer process.
The data collection with the six selected cases resulted in the total of eight interviews. The length of the interviews varied between thirty and seventy-five minutes. These interviewees were managers of start-up firms in the online travel industry. One important research condition was that the interviewed managers had to be responsible for the contact and interaction with international partners. The data collection was performed with three interviews in English and the remaining five were conducted in Dutch. The latter was due to the diversity of the background of the managers of case A. All but one of the start-ups were based in the Netherlands (Case C is based in Germany, but run by Dutch managers). For all cases their core business was internationally focused, or they had at least several international partners. For the five other cases only single interviews were conducted. Since all these five start-up firms were relatively small, an interview with only one person within the firm to be responsible for the international partnerships would suffice.
The general subject of the interview was the international partnerships and more specifically the knowledge transfer process between the start-up firm and their partners. The questions were divided in different categories. The first set of questions posed, regarded general information about their firm and about the role of the interviewee within the firm. These questions are aimed at the nature of international partnerships. The interviewee was asked to come up with one specific partnership as an example and was asked to use this example for the remainder of the questions. The second set of questions was about the different knowledge types that are used in the firm and are exchanged with international partners. The third set of questions centered around absorptive capacity and how both the firm and the international partner’s exchanged new knowledge. The last set of questions was focused on the network characteristics of the firm. These questions were aimed to identify if the given
international partnership was typical or completely different from other partnerships. The complete interview protocol is attached as an appendix.
Data analysis
Next step in the process is the data transcription of the interviews. For the transcription of the interviews the transcribing tool oTranscribe, an open platform audio transcription tool, was used. Following this was the conversion of the audio files into Word documents. The names of the participating managers, firms, and partners have been anonymized to protect their identity/privacy. The five interviews that were conducted in Dutch were also transcribed in Dutch. The codification of the transcripts was done mostly in English, only used quotations originally in Dutch were translated.
There are different stages for analyzing interview transcripts (Burnard, 1991). Already before codification of the transcribed data, some structure was applied to questions about different themes. This was done to create a coding scheme, which had some pre-coded themes before conducting the interview. The next stage of analysis was open coding. The goal was to identify the different categories from the data. Next step was to find corresponding thematic codes (Burnard, 1991). These thematic codes were in line with the preset themes in formulating the interview protocol. The following themes were identified as relevant for analyzing the knowledge transfer process between start-ups and their international partners: General information about the start-up and about the manager’s activities International partnership characteristics Characteristics of one specific partnership Knowledge characteristics Absorptive capacity Network characteristics Table 7 Themes after coding transcripts (Stellingsma, 2016)
The displayed themes above were combined into groups by clustering the collected interview data to analyze the differences and similarities of the six cases. The interview transcripts were coded into these different categories and if needed, transformed into new codes. The themes were categorized and ordered to assess which category reflects the constructs of the theoretical framework. This process was done multiple times to improve the reliability of finding the best fitting codes of the transcribed data. By doing this all relevant themes and categories were identified to match with the theoretical framework, more specifically with the characteristics of the knowledge transfer process.
