Transfer mechanisms and lean practice transfer performance

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Transfer mechanisms and lean practice

transfer performance

A multiple-case study within the intra-firm network of a

global lean manufacturing organization

Master’s Thesis,

MSc Supply Chain Management,

University of Groningen, Faculty of Economics and Business

28

th

_{January 2019}

Author: David Janssen

Student Number: s2168448

Supervisor: Dr. Stefania Boscari

Co-assessor: Dr. Martin J. Land

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ABSTRACT

Purpose: The global expansion of organizations created large intra-firm networks, which

brings forth challenges in the management of heterogeneous, dispersed and low-performing networks of plants. Therefore, this master thesis provides advice for lean managers that face the challenge of transferring lean practices within the intra-firm network of a global lean manufacturing organization. This is achieved by presenting managerial implications that can contribute to overcome these challenges.

Originality/value: Overall, the literature on corporate lean programmes (XPSs) is rather new.

This research contributes by exploring the influences of new contextual conditions, adapted from a current theoretical model, on the choice of transfer mechanisms and the corresponding performance. In addition, the analysis contains both a nodal and dyadic approach within a large global lean manufacturing organization. The contextual conditions in this research are: value of knowledge stock, motivational disposition to transfer lean practices, the existence and richness of transfer mechanisms and absorptive capacity.

Design/methodology/approach: The method applied in this master thesis is a multiple-case

study, which is composed of lean practice transfers within the intra-firm network of a Dutch-based global lean manufacturing organization. The data analyses the lean practice transfers on a nodal level within 4 subsidiaries and on a dyadic level between the headquarters and the same subsidiaries. The information is gathered through 8 semi-structured interviews, a manufacturing plant observation and the analysis of documents provided by the organization. Last, the gathered data is analysed in a cross-case analysis.

Findings: The cross-case analysis results in propositions that clarify the influence of the

contextual conditions on the choice of transfer mechanisms and the corresponding

performance. Moreover, this master thesis provides a list of transfer mechanisms used in lean practice transfers.

Keywords:

• Corporate lean programmes (XPSs) • Lean manufacturing (LM)

• Multi-plant improvement programmes • Lean practice transfers

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PREFACE

This thesis represents the final piece of my Master of Supply Chain Management at the University of Groningen. A hand full of people have contributed to the conclusion of this thesis and should therefore be acknowledged.

On top of everything, I would like to show gratitude to my supervisor Dr. Stefania Boscari and co-assessor Dr. Martin Land for providing constructive feedback and clarification whenever it was necessary. Likewise, I would like to thank Mariska Rottiné, who simultaneously worked on a comparable subject and has provided me with valuable feedback and updates. In addition, I am grateful for all the people that contributed in the discussion during my presentation, which really helped me to find the proper path.

I would like to give a special thanks to the people at BDR Thermea who not only agreed to participate and share their valuable knowledge and experiences, but also for their kindness and the smooth cooperation. This thesis would not have been made possible without their contribution.

Last, I give my blessing to my friends and family for showing interest, being supportive, encouraging and to keep my mind on what’s important whenever needed throughout the course of this thesis.

David Janssen,

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1. INTRODUCTION

In the last decades, the increasing globalization induced organisations to expand internationally. This development resulted into the creation of global intra-firm networks and the establishment of multinational corporations (MNCs). This international expansion created a difficult task for many MNCs to manage a heterogenous, dispersed and low-performing network of plants (Netland and Aspelund, 2014). To overcome this, MNCs tend to transfer previously developed or newly acquired operations management knowledge to these low-performing plants and construct a new system of knowledge creation, diffusion, combination and continuous learning within this intra-firm network (Secchi and Camuffo, 2016). Especially lean practice transfers1_{have become a major issue}

for operations managers, who need to manage this large intra-firm network, with many widely differing implementations of lean practices (Danese, Romano and Boscari, 2017). This complex process including the choice of the best transfer mechanisms requires MNCs to determine in what form or shape their lean journey will be structured and articulated (Secchi and Camuffo, 2016). Some contextual conditions to take into consideration during the transfer of lean practices within an intra-firm network are unit’s value of knowledge stock, absorptive capacity, motivational disposition to share and acquire knowledge, and the existence and richness of transmission channels (Gupta and Govindarajan, 2000). This dissertation provides clarification and insight for operations managers on lean practice transfer performance and the issues regarding the choice of transfer mechanisms and the affecting contextual conditions.

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Despite the magnitude and popularity of the previously discussed subjects, there is no large variety of literature available on multi-plant improvement programmes (Netland and Aspelund, 2014). However, some implications are provided: ‘’future studies can explore whether other mechanisms are more important for medium and large MNCs. Future studies could also investigate whether mechanisms vary when different initial contextual conditions are found.’’ (Boscari et al., 2016, p. 66). An interesting unexplored approach is to focus on both the nodal (i.e., behaviour of single unit) as the dyadic (i.e., behaviour between pair of units) level regarding lean practice transfers and the decision making of transfer mechanisms by the headquarter in a large MNC. This is followed up by exploring the performance of the lean practice transfers, which is particularly interesting in the implementation stage of a MNC, as they are new to this process and currently face the results of their own lean transfer performance, which provides a solid base for new research. Therefore, this research consists of a qualitative multiple-case study and answers the following research questions:

- How do contextual conditions of a MNC positively or negatively affect the choice of transfer mechanisms for lean practice transfers within the intra-firm network?

- What is the effect of the choice of transfer mechanisms on lean practice transfer performance?

This research is conducted by starting with a literature review that explores the corporate lean programmes and network and identifies contextual conditions that influence the lean practice transfer between headquarter and subsidiaries. Subsequently, a multiple-case study is performed within a large MNC to compare the empirical data with the previously found literature. This dissertation tests the model of Gupta and Govindarajan (2000) for lean practice transfers, instead of the in- and outflow of subsidiary knowledge. It also extends on previous literature by exploring a large MNC in its implementation stage. Finally, the results form propositions and managerial implications, which can be used in practice by current and future lean operations and supply chain managers that encounter the challenge of lean practice transfers within intra-firm networks.

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2. LITERATURE REVIEW

To start, section 2.1 provides an explanation of the general concept of a corporate lean programme within a MNC, and in what way this concept contributes to the simultaneous improvement and competitiveness of multiple plants within an intra-firm network. Following, section 2.2 provides an explanation regarding the importance of lean practice transfers and in particular lean practice transfer performance, for MNCs within this corporate lean programme. Next, section 2.3 is used to identify all transfer mechanisms from current literature, which can be used for the transfer of these lean practices within the corporate lean programme of a MNC. Last, section 2.4 is used to further explain the chosen contextual conditions that influence the decision making of transfer mechanisms used for lean practice transfers. In addition, implications and conclusions for each section are provided. After the analysis, a conceptual model is created, this includes the independent variables, their relationship to dependent variable 1 and dependent variable 2 with its relationship to the previous dependent variable 1. These variables and relationships to each other are further explained in section 2.4.

Figure 1. Conceptual model adapted from Gupta and Govindarajan (2000)

2.1 Corporate lean programmes (XPSs)

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manufacturing firms through improved productivity, quality and the reduction of costs if managed correctly (Bhamu and Sangwan, 2014).

The concept of LM consists of two closely related levels, a strategic more philosophical level and the operational more practical level, both including lean practices that can be applied on lean operational processes in the entire organization. (Hines, Holweg and Rich, 2004; Shah and Ward, 2007). Lean practices were divided into four distinct, but inter-related concepts of lean practices: the total preventive maintenance (TPM), just-in-time (JIT), human resource management (HRM) and total quality management (TQM) (Shah and Ward, 2003). These various concepts of lean practices can include both hard and soft practices, where soft practices are associated with relationships and people (e.g. small group problem solving, employee training) and hard practices are involved with lean analytical and technical tools (e.g. Kanban, setup time reduction) (Bortolotti, Boscari and Danese, 2015; Shah and Ward, 2007). The core objective for lean practices and principles is to increase the overall operational performance of a MNC through the elimination of waste, continuous improvement of operational processes, reducing variability and the standardization of production. (Shah and Ward, 2003, 2007; Womack and Jones, 1996).

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2.2 Lean practice transfer performance in multi-plant improvement programmes

One of the most important factors for great performance in the implementation process of multi-plant improvement programmes (e.g. XPS), is being able to transfer lean practices and knowledge within the intra-firm network (Netland and Aspelund, 2014). A definition provided by Netland and Aspelund (2014, p. 392) regarding the multi-plant improvement programme emphasizes the importance of transferring lean practices within the intra-firm network: “the systematic process of creating, formalising and diffusing better operational practices in the intrafirm production network with the aim of increasing competitiveness”.

Earlier international business research on this subject strengthens the theory that the ability to transfer lean knowledge in the intra-firm network is of high importance, as this ability is considered the major reason for the existence of MNCs (Kogut and Zander, 1992; Buckley and Casson, 1998). Consequently, a MNC should be able to generate a competitive advantage using its combined superior knowledge of all global subsidiaries acquired through excellent lean practice transfer performance. (Bartlett & Goshal, 1997; Kogut, 1991 in Kostova, 1999). An example for the implementation of XPS is the required transfer of the different lean practices TPM, HRM, JIT and TQM. (Danese et al., 2017). If the corporate lean programme is successfully implemented, the next challenge is to continuously update and transfer lean practices to maintain a global advantage of the improvement programme within the intra-firm network of a MNC (Netland and Aspelund, 2014; Voss, 1995). This focus of lean practice transfers on the inter-firm network of differentiated subsidiaries creates a view of three different levels, the nodal level, the dyadic level or the network level (Gupta and Govindarajan, 2000; Szulanski, 1996; Tsai, 2001). First, the nodal level of lean practice transfer takes place within a single subsidiary, this can be between several departments (Gupta and Govindarajan, 2000). Second, the dyadic level is viewed as an exchange of lean practice between a recipient and its source, being either two different subsidiaries or both ways between a headquarter and a subsidiary. (Szulanski, 1996). Last, the network level in which the exchange of lean practice can be described as a network of multiple subsidiaries, in which each subsidiary is connected through sharing its own lean knowledge and practices among others (Tsai, 2001).

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explanation is that: “tacit knowledge is deeply rooted in action, commitment and involvement in a specific context” (Nonaka, 2004, p. 16). Moreover, lean practices often consist of both explicit and tacit knowledge, making it even more complex to transfer lean practices (Kostova, 1999). This can be seen as one of the major reasons for poor lean practice transfer performance, due to its complexity and development of challenging scenarios (Argote and Ingram, 2000; Maritan and Brush, 2003; Szulanski, 1996). To overcome these challenges and achieve excellent lean practice transfer performance, it is important to choose the appropriate transfer mechanisms (Ferdows, 2006).

2.3 Transfer mechanisms

Previously conducted research regarding to lean practice transfers in MNCs have resulted to a significant amount of different transfer mechanisms (table 1). The analysis of the literature concludes the existence of two types of lean practice transfer mechanisms: codified mechanisms and social mechanisms (Ferdows, 2006; Jasimuddin, 2007). Social mechanisms can be defined as experience, skills and ideas that people possess and may not necessarily be easily expressed, whereas codified mechanisms can be written down and documented. (Chugh, 2015). The codified mechanisms are generally used for the transfer of explicit knowledge (e.g. providing online workshops, sending e-mails), where the social mechanisms (e.g. employee teamwork, company tours) are more common for transferring tacit knowledge (Ferdows, 2006). If the transfer mechanisms are used for the right knowledge type, the effectiveness of the mechanisms is greatly increased (Ferdows, 2006; Kogut and Zander, 1992). An overview of transfer mechanisms derived from previous literature is provided in table 1, where they are categorised by the knowledge type transferred through the mechanisms.

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Table 1. Adapted list of transfer mechanisms found in literature (De Jong, 2018)

Transfer mechanism Short description Source

Codi fi e d m e cha n is m s to t ra ns fe r e xpl ic it know le dg e

Standards Lean standards, includes the specific steps to do a task

Boscari et al., 2016; Danese et al., 2017; Ferdows, 2006 Manuals A manual describing the task (more

detailed than standards)

Boscari et al., 2016; Dinur et al., 2009; Ferdows, 2006 Emails To describe practices and principles and

to ask questions and/or feedback

Boscari et al., 2016

E-learning (Short) training provided online, teaching the basics of certain skills or principles Dinur et al., 2009 S oc ia l m e c h a ni sm s to tra ns fe r ta ci t know le dg e

Phone calls To describe practices or principles and to ask direct questions and/or feedback

(Video) meetings To describe practices or principles and to ask direct questions and/or feedback

Demeter and Losonsci, 2016; Goyette et al., 2014 Plant tours To quickly show practices or principles

by showing the way of work

Boscari et al., 2016; Inkpen, 2008

Short-term visits (days) To show practices or principles by showing the way of work

Boscari et al., 2016; Dinur et al., 2009

Short-term residence (weeks)

To extensively practices or principles by showing the way of work

International teamwork International team that leads the transfer of practices and principles

Lean practice transfer teams

A team that guides the transfer of lean practices (in general a team from the HQ)

Boscari et al., 2016; Denese et al., 2017; Ferdows, 2006; Inkpen, 2008

Training Training in which the practices or principles are described and explained in detail

Dinur et al., 2009; Goyette et al., 2014

Lean practice assessment Audit the way of work to see which practices can be improved or shared

Netland and Ferdows, 2014

Long-term residence (months)

To extensively show practices or principles by participating in the way of work

Dinur et al., 2009; Inkpen, 2008

Junior management programme

As part of a traineeship working with the practices or principles to learn and understand them

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social mechanisms to transfer lean practices is also emphasized by other studies on knowledge management (e.g., Ferdows, 2006; Jasimuddin, 2007). There are several social mechanisms such as international teamwork, training or long-term residence, which can help in transferring the tacit part of lean practices (Boscari et al., 2016; Dinur et al., 2009).

Even though there is already prior research regarding transfer mechanisms used for transferring lean practices, there is still future research required between the type of knowledge and transfer process between units, because there are no implications as to why organizations make no distinction between types of knowledge (Dinur et al., 2009). Therefore, a main aim of this research is to investigate what transfer mechanisms can be used for lean practice transfers and to provide a comprehensive overview of these transfer mechanisms. In addition, Dinur et al. (2009) propose that there is a relation between transfer mechanisms and contextual conditions and the success of lean practice transfers within MNCs. This is also highlighted by Boscari (2016) and Inkpen (2008), who suggest that contextual conditions affect the choice of transfer mechanisms. In line with these studies, this research investigates the relation between transfer mechanisms and contextual conditions.

2.4 Contextual conditions

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2.4.1 Value of knowledge stock

The flow of knowledge between plants is not without costs (Teece, 1981). In addition, differences in resources also mean differences in level of value (Barney, 1991). Therefore, this would mean that the greater the value of a subsidiary's knowledge provided to the rest of the MNC, it would also gain attractiveness for the other subsidiaries (Gupta and Govindarajan, 2000). Rogers (1995) argues a similar kind of concept called ‘relative advantage’, which argues that the adoption rate of an innovation positively relates with the ‘relative advantage’ of a subsidiary. However, no research has yet been conducted on the intra-firm lean practice transfers. The value of knowledge stock of a plant within an intra-firm network consists of duplicative and non-duplicative knowledge. Non-duplicative can be of value for other subsidiaries in the intra-firm network, therefore the knowledge outflow will be high when the knowledge value of a subsidiary is non-duplicative and highly interesting for other subsidiaries within the intra-firm network (Gupta and Govindarajan, 2000). Inkpen (2008) mentions that the transfer of lean practices through social mechanisms is critical for transferring the meaning and value of lean practices. Therefore, I expect that plants prefer the use of social mechanisms over

Table 2. Variables found in literature

Model of Gupta and Govindarajan (2000)

Variables found in literature Section

C

ontextua

l

condit

ions

Value of knowledge stock Value of knowledge stock Barney, 1991; Inkpen, 2008; Rogers, 1995; Teece, 1981 2.4.1 Motivational disposition to share knowledge Motivational disposition to transfer lean practices

Cyert, 1995; Katz and Allen, 1982; Levit and March, 1988; Pfeffer, 1981; Sherif and Cantrill, 1947

2.4.2

Motivational disposition to acquire knowledge

Existence and richness of transmission channels

Existence and richness of transfer mechanisms

Ghoshal and Bartlett, 1988; Gupta and Govindarajan, 1991; Szulanski, 1996

2.4.3

Absorptive capacity Absorptive capacity Cohen and Levinthal, 1990; Lazarsfeld and Merton, 1964; Rogers, 1995

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codified mechanisms when the value of knowledge stock is high and prefer codified mechanisms when the value of knowledge stock is low.

2.4.2 Motivational disposition to transfer lean practices

The motivational disposition to transfer lean practices of a subsidiary within an intra-firm network takes multiple forms. An organizational unit within the network with unique valuable practices will likely maintain an ‘information monopoly’ (Cyert, 1995). This directly causes power struggles within the network, as some subsidiaries will use this unique valuable knowledge as currency to maintain power within the MNC (Pfeffer, 1981). Other literature states that diffusion of experience negatively influences the organizational network (Levit and March, 1988). Therefore, a subsidiary with a high motivational disposition towards lean practice transfers could counterbalance the stacking of knowledge stock value and thus have a positive impact on the overall knowledge outflow in the network (Gupta and Govindarajan, 2000).

Another related concept to motivational disposition to transfer lean practices mentioned in the literature is the ‘Not-Invented-Here’ (NIH) syndrome (Katz and Allen, 1982). This phenomenon can be created by two discovered concepts. The ego-defence mechanism, which causes managers to block any kind of information that makes them feel less valuable than another manager, just due to their own ego (Sherif and Cantrill, 1947). The other is the earlier mentioned intra-firm power struggle, where managers might act as if knowledge from other subsidiaries is not unique or valuable in order to save their own knowledge value (Pfeffer, 1981). All in all, if no countermeasures are presented, a major barrier can be created by the managers from the intra-firm network through the NIH syndrome and block any knowledge inflow (Gupta and Govindarajan, 2000). Some of these countermeasures can be incentives for managers to learn, pressures from higher management or just the simple lack of knowledge value from the focal subsidiary. As this contextual condition contains a significant amount of personal influences, I expect that plants willing to share their lean practices or in other words, have an open motivational disposition to transfer lean practices, are more likely to prefer social mechanisms than codified mechanisms.

2.4.3 Existence and richness of transfer mechanisms

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plant to transfer mechanisms, which can be influenced by both resource limitation and geographical dispersion. Besides the presence of transfer mechanisms, it is expected that other characteristics of transfer mechanisms also influences the nature of lean practice transfers. The most important characteristic is the richness of transfer mechanisms, which is an element of openness, density and informality of lean practice transfers (Gupta and Govindarajan, 1991). The shape of the transfer of lean practices relies on the needs of the recipient and is adapted accordingly (Szulanski, 1996). Therefore, I expect plants with a large amount of existing transfer mechanisms to prefer social mechanisms, as these are more easily adapted to the needs of the recipient due to the possibility of discussions.

2.4.4 Absorptive capacity

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3. RESEARCH METHODOLOGY

In order to answer the research questions: How do contextual conditions of a MNC positively or negatively affect the choice of transfer mechanisms for lean practice transfers within the intra-firm network? What is the effect of the choice of transfer mechanisms on lean practice transfer performance?, a multiple-case study is used as this form of research is fitting for what and how research questions (Benbasat, Goldstein and Mead, 1987). It is important for this research to be conducted as a multiple-case study as they are seen to be most powerful for new theory building (Yin, 1994). A multiple-case study generally provides new creative insights on the relationships between variables and has high validity with practitioners (Vos et al. 2002). In addition, a multiple-case study is seen as a proper method when there is inadequate prior research on the subject, and therefore a call for extensive future research (Eisenhardt & Graebner, 2007). The argumentation behind the decision of a multiple-case study that includes a multi-plant MNC is based on the replication logic, as this dissertation is an extension to comparable research conducted previously on a single case (Yin, 1989). In order to obtain the most reliable data, multiple sources of evidence have been used to achieve data triangulation (Yin, 1997). In this setting, the collected data originates from multiple different plants with each their own environment and characteristics.

In this research, the unit of analysis is described as lean practice transfers and is analyzed on two levels. The first is on a dyadic level, on which there is always a source and recipient. However, this source and recipient can change between headquarter (source) and plant (recipient) or plant (source) and another plant (recipient). The second is on a nodal level, which takes place within a single plant. An example of such analysis is the connection between a lean manager (source) and an employee (recipient).

3.1 The research process

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recipients. To conclude, the analysed data was used to construct propositions and managerial implications for both practical and theoretical use.

3.2 Case selection

The case selection procedure is based on the through literature recommended two-step theoretical sampling approach (Eisenhardt, 1989; Meredith, 1998). The first step involves the creation of selection criteria that the organization should meet in order to be relevant for the research (table 3).

The first criterion is for the organisation to be a multinational, multi-plant

organization, that owns manufacturing subsidiaries in either Europe, Asia, North and/or South America. This creates a more diverse pool of sources to maintain a significant amount of data triangulation. Next, the organization suitable for research in this dissertation should have at least one plant (preferably its headquarters) located in the Netherlands for easier

communications and to create the possibility of a plant visit for gathering data through an observation. Furthermore, the organisation must have dealt with previous successful

implementation of XPS (implementing any lean practice according to Shah and Ward, 2003 as discussed in section 2.1). This is important, as the research is focussed on the lean practice transfers within an intra-firm network, therefore any experience according the implementation of these practices is required. The last criterion is that the organization should be active in a discrete manufacturing industry, instead of a service industry. The reason for this criterion is that a lean strategy is generally correlated with a manufacturing organization and too little research is conducted in the field of lean service strategies.

Table 3. MNC selection criteria

Criteria BDR Thermea

MNC headquarters in the Netherlands

✓

Multinational, multi-plant organization (subsidiaries

in Europe, Asia, North and/or South America) ✓ Successful implementation of lean strategy in at least

one plant (implementing lean bundles as described by

Shah and Ward, 2003: JIT, TOM, HRM, TPM) ✓ Manufacturing company – Discrete (no process)

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After the criteria were finalized, the process of finding and selecting a suitable

candidate for the case research was started. This process required the creation of a general list of candidates that were found by searching the internet for organizations that fit every

criterion. The generated data included organizational characteristics like number of subsidiaries, locations, industries, XPS, implementation phase etc. Eventually, after eliminating the majority of organizations through either contacting or other kinds of

unavailability (e.g. holidays), BDR Thermea was selected. This MNC is a Dutch-based global top competitor in the heating industry (table 4). BDR Thermea is a company that has multiple manufacturing plants on several continents, second largest in its industry. They are currently still situated in the early implementation stage as a global corporate lean strategy, varying from low to high incorporation per subsidiary. However, they do own one plant (Remeha, Netherlands) that has fully incorporated a lean strategy, which makes it a perfect fit for the research in this dissertation.

The second step of the theoretical sampling approach is the selection of subsidiaries, which create relevant cases of lean practice transfer within BDR Thermea. As can be seen in table 4, the network of the organization consists of fifteen globally situated manufacturing plants besides its Dutch headquarters. After the identification of all subsidiaries and their characteristics, the plants were selected on their country of origin, lean implementation stage and interesting aspects for the different contextual conditions. However, the only contextual condition of the plants known beforehand was the existence and richness of transfer

mechanisms. Therefore, the selection entails an as large variety of geographical dispersion, existence and richness of transfer mechanisms, and lean implementation stages as possible, for gathering the most significant data in the cross-case analysis. Due to time and resource limitations, it is not possible to analyse all available plants. The selection procedure resulted in five different plants including the headquarters. This left at least one manufacturing plant in two different continents, plants in both implementation and integration stages of lean and contain both low and high capacities. The manufacturing plant in China mainly produces smaller items like screws and sub-assemblies for the larger plants (e.g. Remeha, the

Table 4. Overview of BDR Thermea

Plants Headquarters Products Size 15 manufacturing plants in

Europe, North America and Asia

Netherlands (Apeldoorn)

Smart climate and sanitary hot water solutions

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Netherlands). The plants in the UK and France are similar to the large manufacturing plant in Apeldoorn, however are much less advanced in terms of lean implementation. The final list of relevant plants analysed in the research is provided in table 5.

3.3 Data collection

The data collection process took place in a five-week period, visiting both the headquarters and the manufacturing plant in Apeldoorn. In this collection process, it is important to maintain reliability of the data, which can be done through data triangulation. This is achieved through the collection of data from multiple kinds of sources. The methods used for the research in this dissertation were semi-structured interviews, observations and provided company documents (Eisenhardt, 1989).

Table 5. Overview of plants and interviewees

Plant Plant function Lean stage2 _Interviewee

BDR Thermea

(Netherlands, Apeldoorn)

Headquarters

- Group Lean Coach BDR Thermea

Headquarters

- Group Logistics & Supply Chain Manager BDR Thermea

Headquarters

- Group OPS director Remeha (Netherlands,

Apeldoorn)

Manufacturing subsidiary

supplying globally Integration

Lean coach and Commodity buyer Remeha (Netherlands,

Apeldoorn)

supplying globally Integration

Lean coach

Baxi (United Kingdom, Warwick)

supplying mainly in the UK Implementation

Lean coach De Dietrich (France, Reichshoffen) Headquarters of multiple subsidiaries supplying globally Implementation

Lean coach manager

BDR Thermea Heating Equipment (China, Shanghai)

Manufacturing subsidiary supplying globally

Implementation Lean coach

2_{Adapted from Danese et al. (2017). The lean transfer process is divided into three stages: initiation,}

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3.3.1 Semi-structured interviews

The semi-structured interviews with the company representatives are conducted according an in-depth interview protocol (Yin, 1994). An interview protocol is mandatory for a solid interview structure, which covers all aspects of the research that is required for

appropriate data collection. It consists of two sections, the first is general information regarding the company and how its lean improvement program is structured and developed. The second section includes the transfer mechanisms for lean practice transfers and the corresponding performance, with the goal of finding contextual conditions that influence these transfer mechanisms (see Appendix A). The final part of section two is focussed on the personal experience of the interviewee. All face-to-face semi-structured interviews took place during my short-term visit at the headquarters and manufacturing plant in Apeldoorn. The remaining semi-structured interviews were conducted through phone calls and video

meetings. Table 5 includes every manager, employee or director that is interviewed, which is specified for each plant. A wider variety of interviewees would be more appealing, however this was not achieved due to time-constraints and resource limitations. All interviews took between 60-90 minutes, after which data saturation was accomplished (Eisenhardt, 1989). If continued, the quality of the collected data from the interview could deteriorate due to lack of concentration or expand beyond the borders of the research. The interviews itself were recorded and afterwards transcribed.

3.3.2 Observations

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3.3.3 Documents

The documents that were provided by BDR Thermea mainly contained information regarding the development of the lean strategy within the Dutch subsidiary and the lean practice transfer between the headquarters and the same subsidiary. It also included their entire global corporate lean strategy and how they envisioned the future of the global

corporate lean strategy integration within their plants. These documents were workshops and presentations on how to implement and transfer lean practices into the production facilities. In addition, these documents not only provided information on BDR Thermea, but it also

contained external data regarding lean practice transfers in other large manufacturing MNCs like Porsche and Volvo with which they have been learning and transferring these strategies with for years.

3.4 Data analysis

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4. RESULTS

Section 4.1 provides an overview of the global corporate lean programme and intra-firm network of BDR Thermea. This should clarify the main strategic points of their lean implementation together with the characteristics of their XPS. The successive section provides insight into the transfer mechanisms used by BDR Thermea, which specifies what types of transfer mechanisms they apply for their lean practice transfers. The following section presents and discusses a cross-case analysis regarding the four contextual conditions and how each of these contextual conditions influences the choice of transfer mechanisms. The last section focusses on another small cross-case analysis, which determines what the influence of the choice of transfer mechanisms is on the lean practice transfer performance.

4.1 The corporate lean programme

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fantastic for BDR Thermea, however in reality managers struggle with rough decisions when it comes to waste elimination in HRM. According to the Group Operations Director from BDR Thermea’s headquarters (GOD_B): ‘’HRM is probably the most difficult, as in lean it usually comes down to eliminating waste, which basically means firing your excessive workforce as production becomes more efficient and employees are no longer necessary’’. This is especially strange as one of the main goals in lean manufacturing is to create a shared and homogeneous atmosphere and mind-set. This could mean that certain employees might be working on a project that includes the loss of his co-worker’s job, while everyone is aware of the outcome due to the lean mind-set. All in all, BDR Thermea encounters many challenges in their wide variety of implementations of their lean programme.

4.2 Transfer mechanisms used for lean practice transfers

To achieve smooth lean practice transfers BDR Thermea used a large variety of transfer mechanisms within their intra-firm network. An overview of their transfer mechanisms including a short description can be found in table 6. The two types of transfer mechanisms, codified and social, are found to be used for two different purposes within the transfer of lean practices. Codified mechanisms are primarily used by BDR Thermea to create awareness of the lean programme, where social mechanisms are characterized by practical training and the development of the knowledge required for the implementation of lean practices. Last, BDR Thermea makes another, more surprising distinction between their transfer mechanisms. Namely, transfer mechanisms that are used within their own intra-firm network and transfer mechanisms for the lean practice transfer from external organizations (table 6).

4.3.1 Codified mechanisms versus social mechanisms

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reminder’’ and the Lean Coach from Baxi, Warwick (LC_BW) said: ‘’We like to use mechanisms that can be handed out or emailed in large numbers like manuals and instructions, as these have a bigger reach.’’. It seems that foreign lean coaches and managers are more eager to point towards the preferred use of codified mechanisms. According to their argumentation, the main logic behind it was the ease of transferring the lean practices. However, the majority stated that lean practice standards were transferred through codified mechanisms from the headquarters to their subsidiary, where their task was to implement the lean practices within

Table 6. Transfer mechanisms found at BDR Thermea

Transfer mechanism Short description Internal versus external

Codi fi e d m e cha n is m s to tra ns fe r e xp li c it know le dge

Standards Lean standards, includes the specific steps to do a task

Internal

Manuals A manual describing the task (more detailed than standards)

Internal

Emails To describe practices and principles and to ask questions and/or feedback

Internal and external

S oc ia l m e c h a ni sm s to tra ns fe r ta ci t know le dg e

Discussions To interactively learn practices or principles

Internal

Video meetings To describe practices or principles and to ask direct questions and/or feedback

Internal and External

Presentations To describe practices or principles and to ask direct questions and/or feedback

Plant tours To quickly show practices or principles by showing the way of work

Short-term visits (days) To show practices or principles by showing the way of work

Short-term residence (weeks)

To extensively practices or principles by showing the way of work

Internal

Workshops To interactively learn practices or principles to use them in practice

Training Training in which the practices or principles are described and explained in detail

Internal

Long-term residence (months)

To extensively show practices or principles by participating in the way of work

Internal

Internships To cheaply work with the practices or principles to learn and understand them

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their company for employees to assimilate them. This can be derived from a statement of the Lean Coach and Commodity buyer from Remeha (LCC_R): ‘’From the corporate headquarters we receive codified instructions, these can be PowerPoint presentations from meetings or manuals.’’.

As mentioned, the social mechanisms also received a specific role in the following step of the implementation process of lean practices. As stated by the Lean Coach of Remeha (LC_R): ‘’Manuals are present, but they are only used to read through and gain basic knowledge. Next, they are tested in practice through meetings and trainings.’’. This refers to the social mechanisms being used as the practical implementation of the knowledge gained from the codified mechanisms. The subsidiaries that bear a preference for social mechanisms provide the argument that the open atmosphere guides them towards this more interactive type of mechanism. So, why are these social mechanisms primarily used in the later stages and evaluations of the lean practice transfer? The answer is simple according to the Group Lean Coach of BDR Thermea’s headquarters (GLC_B): ‘’Social mechanisms are more effective but require a lot more resources’’, which restricts them from using them on an even larger scale.

4.3.2 Internal versus external mechanisms

Another interesting result is the significant amount of transfer mechanisms used outside of the intra-firm network. The surprise was not due to some email or video meetings, but rather the extensive collaboration between corporations that practice in a similar industry. These corporations shared presentations, workshops, short-term visits, internships and plant tours, which I first discovered during the examination of the provided documentations. These included workshops with multiple automotive organizations. A provided example from the interviews is: ‘’We have recently had a workshop for our lean coaches organized by Porsche, with representatives from multiple corporations with similar industries.’’ (GOD_B). The argumentation for the external transfer mechanisms was clever, as the Group Logistics and Supply chain manager from the BDR Thermea headquarters (GLS_B) stated: ‘’We can learn from companies that are more advanced in the implementation process than ourselves, without the potential loss of valuable knowledge to our competitors.’’.

4.3 Influence of contextual conditions on the choice of transfer mechanisms

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following sections explain the four contextual conditions and their influence on the choice of transfer mechanisms for lean practice transfers.

Table 7. Data reduction

Variable Characterization Rating

Contextual conditions Value of knowledge stock High: High level of attractiveness due to value of

knowledge stock for other units in the intra-firm network.

Low: Low level of attractiveness due to value of

knowledge stock for other units in the intra-firm network.

Motivational disposition to transfer lean practices

High: High motivation towards lean practice transfers. Low: Low motivation towards lean practice transfers.

Existence and richness of transfer mechanisms

High: High number and richness of transfer

mechanisms.

Low: Low number and richness of transfer

mechanisms.

Absorptive capacity High: High ability to recognize, assimilate and

implement new lean practices.

Low: Low ability to recognize, assimilate and

implement new lean practices. Choice of Transfer

mechanisms

Frequency Rarely: Rare use of type of transfer mechanism. Occasionally: Regular use of type of transfer

mechanism.

Frequently: High use of type of transfer mechanism.

Type of transfer mechanism

Codified: Use of codified mechanisms when

transferring lean practices

Social: Use of social mechanisms when transferring

lean practices Lean knowledge transfer

performance

Weak: Weak performance in lean knowledge transfer. Average: Average performance in lean knowledge

transfer.

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4.3.1 Influence of value of knowledge stock on the choice of transfer mechanisms

Within the intra-firm network of BDR Thermea, the value of knowledge stock is high when the source unit contains valuable lean practices for the rest of the units. In the case of BDR Thermea, this holds for the headquarters and the manufacturing plant Remeha. The headquarters of BDR Thermea provide the lean improvement ideas and strategies, which they transfer through either codified or social mechanisms into the intra-firm network. This holds value for the other units, as they require these lean practices in order to improve their lean programme and their resulting performance. In the case of Remeha, it is known within the intra-firm network that Remeha was a first-mover regarding the implementation of the lean improvement programme. ‘’As you know, the process started in the Netherlands at Remeha. We are kind of the follow-up company for the implementation as they had great success LC_BW). It is also known that Remeha is currently one of the top performing companies within the intra-firm network, therefore their transfer of lean practices is of value to the other units.

The low value of knowledge stock from Baxi, BDR Heating Equipment and De Dietrich originates from the fact that these subsidiaries have just entered the implementation stage of the lean improvement programme. This statement can be grounded by a comment of the Lean Coach of BDR Thermea Heating Equipment in Shanghai (LC_BS): ‘’Our stage is still at implementation, it will probably take years before we reach maturity and see major improvements in performance.’’ This means that their lean practices are not completely integrated and have not shown any proof of improvement in performance. Therefore, do these

Table 8. Cross-case analysis: Value of knowledge stock

Choice of transfer mechanisms

Codified mechanisms Social mechanisms

Value of knowledge stock

High value of knowledge stock HQ and Remeha (Occasionally) HQ and Remeha (Frequently)

Low value of knowledge stock Baxi, BDR Thermea Heating Equipment and De Dietrich

(Frequently)

Baxi, BDR Thermea Heating Equipment and De Dietrich

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companies not own any value of lean practices to other units in the intra-firm network. Subsidiaries that have a high level of knowledge stock should primarily use social mechanisms, where subsidiaries with a low level of knowledge stock should primarily use codified mechanisms. This goes against the way the units within this intra-firm network look at these types of transfer mechanisms. As discovered through the interviews, the social mechanisms are used for the within-plant implementation practical improvements and codified mechanisms are primarily used for the transfer to other units within the intra-firm network. However, this contrast could explain the lacking performance of the currently implementing subsidiaries.

These propositions summarise the results from the cross-case analysis (table 8):

P1a: A subsidiary within an intra-firm network that has low value of knowledge stock should use codified transfer mechanisms as the primary tool for lean practice transfers.

P1b: A subsidiary within an intra-firm network that has high value of knowledge stock should use social mechanisms as the primary tool for lean practice transfers.

4.3.2 Influence of motivational disposition to transfer lean practices on the choice of transfer mechanisms

Within the intra-firm network of BDR Thermea, subsidiaries with low motivational disposition to transfer lean practices are less eager to transfer new lean practices. In the case of the intra-firm network of BDR Thermea, this accounts for BDR Heating Equipment, which is the Chinese manufacturing plant. The reason for this low motivational disposition is that the employees at BDR Heating Equipment are frustrated, as they have not yet seen any improvement in performance. Another reason is that they are afraid of major consequences due to this poor performance, as the final products produced by BDR Heating Equipment are small parts and sub-assemblies for the other subsidiaries and is therefore very important to perform well. ‘’the other subsidiaries depend on the products we deliver, if we don't deliver actions will be taken against us ‘’ (LC_BS).

Again, BDR Heating Equipment should use codified mechanisms in order to regain their performance and overcome their motivational disposition to transfer lean practices.

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P2: A subsidiary within an intra-firm network that has low motivational disposition to transfer lean practices should use social mechanisms as the primary tool for lean practice transfers.

4.3.3 The influence of absorptive capacity on the choice of transfer mechanisms

The existence and richness of transfer mechanisms within the intra-firm network of BDR Thermea could potentially have an influence on the transfer mechanisms. However, all lean knowledge transfers between the units in this intra-firm network contain a high existence and richness of transfer mechanisms. This means that there is no data to compare with, and therefore makes it impossible to do a cross-case analysis on this contextual condition.

Table 9. Cross-case analysis: Motivational disposition to transfer lean practices

Choice of transfer mechanisms Codified mechanisms Social mechanisms

Motivational disposition to transfer lean practices

High motivational disposition to transfer lean practices

Baxi, De Dietrich, HQ and Remeha (Occasionally)

Baxi, De Dietrich, HQ and Remeha (Occasionally) Low motivational disposition to

transfer lean practices

BDR Thermea Heating Equipment

(Frequently)

BDR Thermea Heating Equipment

(Occasionally)

Table 10. Cross-case analysis: Existence and richness of transfer mechanisms

Choice of transfer mechanisms Codified mechanisms Social mechanisms

Existence and richness of transfer mechanisms

High existence and richness of transfer mechanisms

Baxi, BDR Thermea Heating Equipment, De Dietrich, HQ and Remeha (Occasionally)

Low existence and richness of transfer mechanisms

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4.3.4 The influence of absorptive capacity on the choice of transfer mechanisms

The absorptive capacity within the intra-firm network of the MNC is defined as the ability to recognize, assimilate and implement new practice transfers. A high absorptive capacity as seen in the headquarters of BDR Thermea and Remeha is determined by their historic performance on lean implementation. They both recognized the ideas, assimilated it and are currently further developing the lean improvement programme. Again, social mechanisms should be used according to the outcome of the cross-case analysis on absorptive capacity. In turn, codified mechanisms should be used for the other three foreign subsidiaries, BDR Heating Equipment, Baxi and De Dietrich.

P4a: A subsidiary within an intra-firm network that has low absorptive capacity for transferring lean practices should use codified mechanisms as the primary tool for lean practice transfers.

P4b: A subsidiary within an intra-firm network that has high absorptive capacity for transferring lean practices should use social mechanisms as the primary tool for lean practice transfers.

Table 11. Cross-case analysis: Absorptive capacity

Choice of transfer mechanisms Codified mechanisms Social mechanisms

Absorptive capacity

High absorptive capacity HQ and Remeha (Occasionally) HQ and Remeha (Frequently) Low absorptive capacity Baxi, BDR Thermea Heating

Equipment and De Dietrich

(Frequently)

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4.5 The choice of transfer mechanisms and lean practice transfer performance

After all the cross-case analyses of the contextual conditions are concluded, the next step in this research is to use another cross-case analysis on the choice of transfer mechanisms on the lean practice transfer performance (table 12). This way we can conclude, if the choices of transfer mechanisms made by subsidiaries within an intra-firm network influence the final performance of their lean practice transfers.

The cross-case analysis on the choice of transfer mechanisms influencing lean practice transfer performance provides data, which is insufficient for either a positive or negative effect on the lean practice transfer performance. Therefore, we can conclude that in the case of BDR Thermea, the choice of transfer mechanisms does not influence the lean practice transfer performance at all. The lean practice transfer performance does not change if the type of mechanism is adapted. An explanation for this phenomenon can be that all units within BDR Thermea’s intra-firm network use a very wide variety of transfer mechanisms, both codified and social. From the empirical data, we can see that the variety of transfer

mechanisms does have a positive effect on the performance of a BDR Thermea. ‘’We prefer to use a large variety of transfer mechanisms in order to maximize the success of the lean practice transfers. Social mechanisms are more effective but require a lot more resources. Luckily, this has not been an issue, therefore we prefer the use of these type of mechanisms.’’ (GLC_B). Therefore, the following proposition is provided accordingly:

P4a: A subsidiary within an intra-firm network should adopt a large variety of transfer mechanisms, both codified and social, in order to increase lean practice transfer performance.

Table 12. Cross-case analysis: Choice of transfer mechanisms on lean practice transfer performance

Lean practice transfer performance High performance Low performance

Choice of transfer mechanisms

Codified mechanisms Baxi and De Dietrich (Average) Baxi and De Dietrich (Average) Social mechanisms BDR Thermea Heating

Equipment, HQ and Remeha (Average)

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5. DISCUSSION

5.1 Influence of contextual conditions on the choice of transfer mechanisms

The research in this dissertation is based on the adapted model of Gupta and Govindarajan (2000), where the contextual conditions are tested on the choice of transfer mechanisms, instead of the knowledge in- and out-flows of subsidiaries within lean practice transfers. This has provided a different view to current literature on the analysis of contextual conditions affecting transfer mechanisms in lean practices (Boscari et al., 2016; Danese et al., 2017). The data was gathered through a multiple-case study from a large and unique MNC that contains many subsidiaries in the early stages of lean implementation. It provides insight in influences of unexplored contextual conditions about choosing types of transfer mechanisms within intra-firm networks. It answers the following research question:

Do contextual conditions of a MNC positively or negatively affect the choice of transfer mechanisms for lean practice transfers within the intra-firm network?

The hypotheses included positive relationships between all contextual conditions on the choice of social mechanisms, which is partially answered. The answer is that both the level of knowledge value of a unit within an intra-firm network and the absorptive capacity of a unit are positively related to the choice of transfer mechanisms. In specific, the choice of social mechanisms, which was also highly recommended by the interviewees. The hypotheses for motivational disposition to transfer lean practices did not hold completely as it is only slightly related to the choice of transfer mechanisms according to the findings of this research. However, there can be many other variables that have influenced the outcome of the analysis regarding this contextual condition. The existence and richness of transfer mechanisms did not meet the requirements for a data analysis and therefore no conclusion can be provided regarding the relationship to the choice of transfer mechanisms.

5.2 The choice of transfer mechanisms and lean practice transfer performance

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provides further insight into these subjects due to the exploratory nature of the research. It answered the following research question:

What is the effect of the choice of transfer mechanisms on lean practice transfer performance?

The hypothesis that was provided included a positive effect of choosing transfer mechanisms on lean practice transfer performance under the influence of the contextual conditions. However, the answer to the research question concluded that there is no direct relationship between the analyzed choice of transfer mechanisms on lean practice transfer performance.

5.3 Managerial implications

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6. CONCLUSION

Many researchers have acknowledged the importance of the strategic transfer of organizational practices within intra-firm networks of MNCs, however more research is being discovered that these transfers are often a challenge and not always end with the desired performance (Ghoshal & Bartlett, 1988; Netland and Aspelund, 2014; Szulanski, 1996). This research can aid in positive performance when transferring lean practices within the intra-firm network of a MNC. It includes practical advice regarding the implementation and further development of the XPS improvement programme within a multi-plant MNC. This information is obtained through a multiple-case study that examines the choice of transfer mechanisms and the influence of contextual conditions. The result includes a list of multiple transfer mechanisms used in the transfer of lean practices and propositions that consider the influence of contextual conditions on the choice of transfer mechanisms for desired performance.

6.1 Limitations and future research

In the process of the determining the limitations of this dissertation, multiple intriguing suggestions for future research emerged. The first limitation is the fact that just a single organization has been analysed and therefore the results lack generalizability. However, a multiple-case studies is a suitable approach in the investigation of relatively new topics and development of new theories (Voss, Tsikriktsis and Frohlich, 2002). In addition, BDR Thermea provided the opportunity to interview resourceful representatives, access to comprehensive data regarding their XPS and observations in both a manufacturing plant and their headquarters. It would have been too laborious to analyse multiple MNCs due to a lack of time and resources, which contemplates the method in this dissertation as suitable. Therefore, a proposition for future research is to verify the results of this research on generalizability.

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The final limitation originates from the fact that only one interview was held at most of the subsidiaries. Therefore, the data resulting from these interviews are potentially biased as they are derived from a single source. On the positive side, all interviewees at these single source subsidiaries had sufficient knowledge concerning lean practice transfers, as they were all experts in their field as lean coaches or lean coach managers. A proposition for future research is to analyse lean practice transfers through multiple sources, including employees from the lean office with different tasks to verify the results of this research. A last proposition is to investigate the surprising result regarding the influences of external lean practice transfer mechanisms, which is rather unexplored.

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Transfer mechanisms and lean practice transfer performance