A suppliers’ perspective study Personnel exchange, employee empowerment and knowledge acquisition-

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Personnel exchange, employee empowerment and

knowledge acquisition-A suppliers’ perspective study

Master Thesis

MSc Supply chain Management

University of Groningen

Faculty of Economics and Business

Athanasios Lolos

S3153525

Supervisor: Mr. C. Xiao

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Effective knowledge acquisition is vital for all companies in order to obtain market and technological information from their supply chain partners. Although the physical move of employees among firms is quite popular but costly, it cannot be safely concluded whether or not personnel exchange is beneficial for knowledge acquisition. The aim of this research is to fill the gap in the existing literature regarding personnel exchange and knowledge acquisition by successfully incorporating the influence of employee empowerment in the former relationship. As this study addresses the suppliers’ perspective, 126 supplying firms from Greece, China and the Netherlands participated in a joint survey. All companies are currently established in the automobile, electronics and healthcare sector. The results have revealed a significant positive effect of personnel exchange on knowledge acquisition. However, employee empowerment was found to affect neither the relationship between personnel exchange and knowledge acquisition nor knowledge acquisition itself. The findings provide useful theoretical and managerial insights related to how personnel exchange among firms can contribute to their overall knowledge acquisition as well as the degree of employee empowerment’s effect on this relationship.

Keywords: personnel exchange, employee empowerment, knowledge acquisition

1. Introduction

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employee mobility can be considered as a source of information exchange (DeCarolis & Deeds, 1999), this study will therefore investigate the impact of personnel exchange on knowledge acquisition from a supplier perspective. Finally, the former relationship will be tested for potential influencing factors such as the level of employees’ empowerment within the supplying firm.

Knowledge acquisition is accurately defined in the existing literature as “the process used by an organization to obtain external knowledge” and it includes the “acquisition of relevant information, capabilities or skills” (Parra-Requena, Ruiz-Ortega, García-Villaverde, & Rodrigo-Alarcõn, 2015, p. 152,157). In supplier-buyer relationships, it is important that both parties share human resources among all in order to achieve joint tasks (Carton & Cummings, 2012 cited by Yan & Dooley, 2014). Furthermore, Bernstein, Gürhan Kök, & Meca (2015) studied knowledge sharing with respect to cost reduction in production, where different suppliers visited one another to exchange ideas about different production practices. Despite the indications of the above mentioned studies, no previous research has scientifically proven whether personnel exchange can influence the knowledge acquisition procedures of the supplying companies.

Previous studies on employee empowerment have shown its influence on knowledge. For example, Bashir Memon, Syed, & Arain (2017) revealed a significant positive relationship between employee empowerment and knowledge creation, although this study concerned the banking sector. As employee empowerment has also been found to enhance performance (Hanaysha & Tahir, 2016), this study expects that employee empowerment will positively moderate the relationship between personnel exchange and knowledge acquisition as empowerment is essential for moving employees to acquire knowledge for their focal firm. Given that people are deemed an important asset in a supplier-buyer relationship, Berry (2013) stated that future research should focus on employee movement in order to examine its impact on knowledge sharing and generation. In response to his call, the following research question has been formulated:

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In order to provide an answer to the research question, a survey has been conducted for Dutch, Greek and Chinese supplying firms deployed in the automobile, electronics and healthcare sector. After having contacted managers regarding the employee’s exchange and empowerment for knowledge acquisition purposes, questionnaires were administered and delivered to them. Subsequently, data were pooled for statistical analysis with regard to better understanding the impact of personnel exchange in suppliers’ knowledge acquisition.

Prior studies have revealed a relationship between employee exchange and knowledge acquisition as well as an influence of employee empowerment on knowledge creation. However, this study will determine the degree to which employee empowerment can positively influence the relationship between personnel exchange and knowledge acquisition. Consequently, the aim of this paper is to further extend the existing literature upon this topic by incorporating the underestimated supplier perspective. From a managerial point of view, valuable information will be accessible to suppliers who are interested in the contribution of exchanged employees in their firm’s overall knowledge acquisition performance with their supply chain partners. In addition, a potential influence of employee empowerment in this relationship could lead managers to rethink and/or redesign their company’s empowerment policies.

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6 2. Theoretical background

The aim of this section is to present prior studies that have defined and investigated knowledge acquisition, personnel exchange and employee empowerment. Furthermore, the hypotheses that this paper will examine are developed. Finally, the conceptual model adds a graphical representation of all 3 constructs in order to provide a clear overview of the examined relationships.

2.1 Knowledge acquisition

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Although Lichtenthaler (2016) has connected a firm’s knowledge with its absorptive capacity, research on this topic had already started a few decades before. For example, Cohen & Levinthal (1990) stated that any firm that wishes to acquire knowledge from its current activities should focus on creating absorptive capacity. Absorptive capacity is defined as “the ability to recognize the value of new information, assimilate it, and apply it to commercial ends” (Cohen & Levinthal, 1990, p. 128). In addition to that, Zahra & George (2002) identified 4 dimensions of a firm’s absorptive capacity: acquisition, assimilation, transformation and exploitation. A few years later, Sun (2010) argued that the first 2 dimensions of acquisition and assimilation are critical elements of the knowledge acquisition process while a firm’s absorptive capacity has been also described as an accelerator of knowledge creation (Zelaya‐Zamora & Senoo, 2011 cited by Zelaya‐Zamora, & Senoo, 2013). For Lane, Koka, & Pathak (2006), the development and preservation of absorptive capacity is critical for a firm to survive as it strengthens its knowledge base. This statement is in line with Narasimhan, Rajiv, & Dutta (2006), who describe absorptive capacity as a dynamic capability of a company to acquire external know-how and maintain its competitive advantage. As it can be inferred, previous studies have approached absorptive capacity as a prerequisite that should be developed by a firm in order to be capable of acquiring the desirable knowledge by their external partners.

In the supply chain environment, the relational ties among suppliers and buyers have long been investigated concerning the effectiveness of knowledge generation. Knowledge acquisition is considered as fundamental for supply chain partners in their effort to improve their operations (He, Ghobadian, & Gallear, 2013), while Johnson (2016) reported that the extent of knowledge acquired by external partners is related to the nature of communication and cooperation among them. As most studies till now have followed the buyer’s perspective, it has already been proved that the effectiveness of supplier development activities related to knowledge transfer should be tailored to the specific supplier in order to motivate him in an engaged relationship (Kim, Hur, & Schoenherr, 2015). However, Zhou et al. (2014) claimed that extremely strong ties among partners can be devastating for knowledge acquisition while contractual policies, competitiveness and firm size can seriously affect it too.

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focus of this study will be on the supplier perspective, knowledge acquisition will be addressed as the degree to which a supplier is effectively acquiring both technological and market knowledge from his buying partner in the supply chain.

2.2 Personnel Exchange

As far as personnel exchange is concerned, multiple studies have indicated the significant importance of employee mobility on knowledge acquisition. Advanced enterprises make use of knowledge sources on a structured way where multiple individuals interact through their enterprises (Johnson, 2016). This fact is also confirmed by DeCarolis & Deeds (1999, p. 956) who stated that “employee mobility among firms is another opportunity for information exchange”, although in this example they referred to employees transferring their previous company’s knowledge to their new employers.

It is well-known that no firm in the supply chain can stand alone if it is isolated from its partners. The level of social interaction between partner firms is of paramount importance as recognized by Howard, Steensma, Lyles & Dhanaraj (2016) who argued that firms with sufficient social interaction with their partners will experience a greater opportunity to learn while others will struggle. In addition, Mawdsley & Somaya (2016), in their study concerning employee mobility and its consequences on recipient firms, they have described mobile employees as important agents that change the inter-organizational relationships of both source and destination organizations. For this reason, many firms invest in their absorptive capacity by sending personnel to acquire advanced technical training (Cohen & Levinthal, 1990). This fact is also examined in the study of Inkpen (2008 p. 447) who stated that “knowledge can be transferred by moving people”. He supported it with the most accurate example: employees of General Motors (GM) working for a company called NUMMY (a joint venture of General Motors and Toyota), were immediately brought back to GM after having visited Toyota’s plants for educational reasons in order to transfer valuable knowledge concerning the high quality Toyota production system. Consequently, it can be inferred that companies consider the human aspect as a determinant factor through which they get access to market and technological sources of knowledge.

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that they should be considered as an option only for the most complex interactions. Regarding this study, personnel exchange will be investigated in terms of personnel employed in supplying companies that is physically traveling to the buyers’ facilities or predefined locations in order to acquire technological and market knowledge on behalf of their own company.

Up to now, prior studies have already underlined the importance of personnel exchange in order to acquire external knowledge for their companies. On the one hand, as already been stated, many companies invest in their absorptive capacity by sending personnel to acquire advanced technical training (Cohen & Levinthal, 1990) while absorptive capacity itself is essential for a firm’s overall knowledge acquisition. On the other hand, the high costs related to the physical movement of people as introduced by Aguiléra & Lethiais (2015) infer that firms may hesitate in investing on personnel exchange, especially if the benefits are not remarkable in the short term. Consequently, as it is yet unknown whether personnel exchange is beneficial for supplying firms in their knowledge acquisition efforts, the following hypothesis has been introduced:

H1: Personnel exchange has a positive influence on knowledge acquisition.

The outcome of this hypothesis is vital as it will allow for further investigation regarding the effect of employee empowerment on H1. However, the priority at this point is to introduce the existing literature and concepts related to employee empowerment.

2.3 Employee empowerment

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“a motivational construct manifested in four cognitions: meaning, competence, self-determination and impact” which “reflect an active, rather than a passive, orientation to a work role”(Spreitzer 1995, p. 1444).

As empowering conditions regarding decisions and responsibilities are highly appreciated by employees (Safari, Haghighi, Rastegar, & Jamshidi, 2011), managers ought to support and promote empowerment (Arnold, Arad, Rhoades, & Drasgow, 2000). For this reason, empowerment is clearly related to a high leadership style (Randolph, 1995). As leaders have a catalytic role in their environment, they can directly challenge their employees to formulate new solutions to problems and follow the organizational vision instead of implementing strict control (Özarallı, 2015). Since the significance of employee empowerment has long been suggested, prior studies have extensively examined its positive effects on employee work behaviors. Özarallı (2015) argued that psychological empowerment is positively motivating employees to give their best in terms of creativity while Dust, Resick & Mawritz (2013) have investigated the impact of psychological empowerment on employee job-related behaviors. Finally, Wall et al. (2002) proposed a challenging investigation for future research regarding knowledge application and development among all as outcomes of empowerment.

As higher levels of absorptive capacity among individuals can lead to more efficient empowerment leaderships (Lee, Lee, & Park, 2014), it is obvious that employee empowerment levels will follow the increase of the company’s absorptive capacity. The same dependence on absorptive capacity has been already discussed above for both personnel exchange and knowledge acquisition. Therefore, the positive relationship between personnel exchange and knowledge acquisition as presented in the hypothesis 1 can also be positively affected by employee empowerment. For example, empowered employees with significant autonomy on decision making would possibly feel more confident to succeed on their purpose when visiting the buyer’s facilities for knowledge acquisition purposes. As a result, as this study will approach employee empowerment as a key factor that enhances the relationship between personnel exchange and knowledge acquisition, a second hypothesis has been formulated:

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For reasons of clarity, this study will approach employee empowerment as an organizational attribute. Hence, employee empowerment will be regarded as the level of autonomy that the employees of the supplying company are granted in order to acquire the buyer’s knowledge.

2.4 Conceptual model

After having extensively evaluated prior studies regarding the constructs of personnel exchange, employee empowerment and knowledge acquisition, it is clear that the relationship among them has not yet been examined. Hence, this research aims to explore the underlying mechanisms among them and contribute to the existing theory by successfully addressing this gap. The relationships among these three concepts will be addressed in this paper as presented below in Figure 1.

H2 +

H1 +

Figure1. Conceptual model

In the next part, the Methodology section will provide a clear overview of the sample, the data collection procedure, the measurements and finally the steps implemented to ensure reliability, validity and common method bias in this study.

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12 3. Methodology

3.1 Sampling and data collection

For the aim of this research to be accomplished, a large number of supplying companies has been contacted. All companies are currently operating in knowledge-intensive industries such as the automobile, electronics and healthcare industry in 3 different countries: China, Greece and the Netherlands. As numerous supplying companies collaborate with their buyers in the above mentioned countries, a high opportunity for access to valuable data would lead to increased generalizability of the results. In this way, it will possible to acquire valuable information about their knowledge acquisition activities with the buyers of their network and hence investigate the effect of employee empowerment on personnel exchange and knowledge acquisition.

One questionnaire per company was split and answered by 2 respondents of the same company depending on their own preferences and familiarity with each question that stems from their field of expertise. The single criterion for participation was them working within the company for a minimum of 5 consecutive years. After having confirmed their participation via e-mail, phone or in person, questionnaires were developed and delivered through email. During the whole procedure and until all answers were retrieved, constant communications occurred with all managers for reasons of clarity and explanation about potential problems regarding the questionnaire comprehension. All managers were assured beforehand that their participation to the survey would be anonymous and all responses would be treated fairly in terms of privacy and confidentiality. This information was also included in the cover letter of the questionnaire along with the researchers’ contact details. Finally, after having retrieved all answered questionnaires, managers were contacted again in order to validate their participation.

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13 3.2 Measures

For managers to provide more efficient answers, all questions were structured by using a seven-point Likert-type scale (1=totally disagree, 7=totally agree). A Likert-type scale is used to measure the degree of agreement with a certain statement and it represents the possible responses with a predefined number of answer options that are placed in order (Kuhlmann, Dantlgraber, & Reips, 2017). Moreover, Likert scales have been found to generate higher quality of data when used in Web surveys compared to face-to-face interviews (Liu, Conrad, & Lee, 2016). As questionnaires were delivered electronically, Likert-type questions were selected for reasons of higher comprehension and reliability. In total, 14 items were used and prior studies regarding each construct were crucial in order to develop representative questions for each and every variable.

3.2.1 Instruments

Overall 14 items have been developed and categorized accordingly in order to measure knowledge acquisition, employee empowerment and personnel exchange. All items related to the 3 constructs can be found on Appendix A.

Knowledge acquisition: Based on the study of Yli-Renko, Autio, & Sapienza (2001) regarding knowledge acquisition, their scale consisting of 4 items has already been used in order to measure the technological and market knowledge acquired by a young technological-based firm. These items refer to the amount of technical know-how and market knowledge acquired while supplying their customer. Therefore, as their study focusses on the supplier’s side and incorporates the technological and market knowledge acquisition, it is in line with the aim of this paper and hence their scale has been fully adopted due to its appropriateness and suitability.

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Personnel exchange: As mentioned in the theory section above, personnel exchange will be addressed in this study as the physical movement of employees to the buyer’s facilities in order to acquire technological and market knowledge. Hence, after having considered its designated role, 5 items have been selected from the study of Backmann, Hoegl, & Cordery (2015). These items had been developed in order to measure the team absorptive capacity and more specifically the dimension of acquisition (all 4 dimensions have been described above in the theoretical background by Zahra & George (2002)). The dimension of acquisition assesses the level of interaction, visits and meetings with a partner company for knowledge acquisition purposes. Therefore, it has been preferred as it premises the physical movement of employees (personnel exchange).

3.2.2 Control variables

Several control variables have been also included in this study in order to examine their influence on the overall knowledge acquisition performance. Consequently, the firm’s location, size (number of employees), age (in years) and relationship with its main buyer (in years) have been incorporated in the model. The motive behind this choice is that big and well-established firms may encounter considerably less opportunities for knowledge acquisition, mainly because of flexibility issues. Moreover, long-established relationships with partners would probably lead to more interaction and hence facilitation of knowledge acquisition. Finally, two dummy variables were created in order to compare the location of the established companies (Greece, China or Netherlands). This comparison may generate potential deviations per country with regard to the level of the acquired knowledge, as the business environment and practices between Europe (Netherlands and Greece) and China diverge.

3.3 Reliability and Validity

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comprehension of the instructions, questions as well as the adequacy of the answers provided. Potential improvements in the structure of the questionnaire before the actual survey would dramatically drop the non-respondent rate, thus leading to more appropriate and generalized results. Next, as wording is a decisive factor when developing questionnaires, all managers received and completed the questionnaire in the native language of the country that their firm is currently established, in order to minimize the chances of misinterpretation and confusion. The translation of the questionnaires to Greek and Chinese was conducted with the aid of experienced and native-speaking academics of the University of Groningen while all Dutch companies have replied in English. For the data analysis to follow, all answers were then translated back to English.

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Items used (after deleting) Factor Loadings

1 2 3 Backmann, Hoegl, & Cordery (2015) CA= 0.782 AVE= 0.82

Our company frequently interacted with the buying company.

Our company regularly visited our project buying partner.

Our company collected new information and ideas from buying companies.

Our company regularly conducted meetings with buying companies to acquire new knowledge.

0.53 0.56 0.87 0.75 Hanaysha & Tahir (2016) CA= 0.749 AVE=0.66

My company believes that I am

competent to perform the tasks required for my position

I have been given the authority to make the necessary decisions to perform my job well.

My company trusts me to make the appropriate decisions in my job.

I have considerable opportunity for interdependence and freedom given by my company in how I do my job.

0.62 0.65 0.83 0.54 Yli-Renko, Autio, & Sapienza (2001) CA= 0.777 AVE= 0.86

Because we supply to this customer we are able to obtain a tremendous amount of market knowledge

Because we supply this customer we are able to obtain a tremendous amount of technical know-how

We get most of our valuable technical know-how related to supplying our product/service from this customer relationship

0.58

0.80

0.85

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17 3.4 Common method bias

In order to confront common method bias issues, certain measures had been followed before the distribution of the questionnaires. Consequently, after having successfully approached the managers, they were strictly asked to complete the same questionnaire together with another manager employed in the same company. Although this procedure was time consuming and therefore unwelcome by many managers, it was very important in order to ensure the non-variance and the internal consistency of their answers. Nevertheless, it was still important to assess the level of observed common method bias in all items by using SPSS Amos 23. Therefore, the standardized regression weights were calculated twice: with and without the effect of a common latent factor. Then, the difference between the estimates of each and every item revealed that no item presented a significant difference (>0.20). Hence, it can be concluded that this study has followed all the necessary steps in order to successfully encounter potential common method bias issues.

4. Results

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Table 2

Table 3 summarizes the overall descriptive data that derived from Excel analysis. As can be seen, the vast majority of the participating companies were domestic private (67%) while almost a third of the companies are currently employing 100-499 employees in total. Furthermore, more than half of the sample (58%) stated that their company operates for 6-25 years while almost half of the contacted managers (48%) indicated a relationship of 6 to 15 years with their major buyer.

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19 Firm’s relationshi p length (years) 0-5 26 21% 6-15 61 48% 15 or more 39 31% Total 126 100% Table 3

The following table (Table 4) summarizes the results from the correlation analysis. There is statistical significance and a strong positive correlation between personnel exchange and knowledge acquisition (β= 0.293, p<0.05). In addition, employee empowerment is again strongly and positively correlated with personnel exchange (β=0.382, p<0.01). However, the correlation between employee empowerment and knowledge acquisition is statistically insignificant (β=0.025, p>0.05). As far as the control variables are concerned, firm’s age affects significantly personnel exchange (β= 0.180, P=0.043) and knowledge acquisition (β= -0.229, p=0.01) while the relationship length with the buyer is significantly related with personnel exchange (β=0.177, P=0.047). However, despite the indications, no safe conclusions can be drawn from this analysis as the multiple regression analysis is yet to follow.

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The last and most important step in data analysis was to examine the two hypotheses developed in the theory section. For this reason, a multiple linear regression analysis was conducted in 3 models. In the first model, only the control variables had been included in order to examine their effect on knowledge acquisition. The second model tests the relationship among personnel exchange, employee empowerment and knowledge acquisition. Finally, the third model examines the interaction effect of personnel exchange and employee empowerment with knowledge acquisition.

The summary results of the regression analysis (table 5) present the overall and cumulative variation experienced in each one of the 3 models (R Square). In model 1, control variables contribute to 14.3 % of the variation while in model 2, the addition of personnel exchange and employee empowerment more than double the variation to 31.2 %. Finally, the examined moderator in model 3 slightly increases the cumulative variation to 31.4 %.

Table 5

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employee empowerment. However, the insignificant interaction effect (β= -0.049, P=0,546) indicates that employee empowerment does not moderate the former relationship. Hence, hypothesis 2 is not supported. In addition, model 3 presents that the relationship between employee empowerment and knowledge acquisition is also insignificant (β= -0.073, P>0.05). For this reason, it can be concluded that employee empowerment does not interact at all with the rest of the constructs.

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22 5. Discussion

By following the call of Berry (2013), this study has examined the influence of personnel exchange and its impact on knowledge acquisition. Although previous research related to the topic has revealed the importance of social interactions between firms (Howard, Steensma, Lyles & Dhanaraj 2016) and mobile agents (Mawdsley & Somaya 2016) in information exchange, this practice has risen severe concerns. For example, Aguiléra & Lethiais (2015) have warned about the high costs of employee’s movement and urged for careful consideration. For this reason, these controversial opinions have further triggered the interest upon this topic. Moreover, employee empowerment has also been included and examined in the former relationship for a possible moderating effect after having considered previous studies stating that it is positively affecting knowledge creation (Bashir Memon, Syed, & Arain 2017) and firm’s performance (Hanaysha & Tahir 2016).

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23 5.1 Theoretical implications

From a theoretical perspective, this study has enriched the existing literature by shedding light to several unexplored issues. First of all, despite the seminal work of Chen, Zhao, Lewis, & Squire (2016), Dyer & Nobeoka (2000) and others, their studies have approached knowledge sharing and acquisition by following the buyer’s perspective for reasons of supplier integration. In contrast, this study has strictly incorporated the supplier’s perspective because the suppliers’ purpose of knowledge acquisition is mostly related to their own firm’s sustainability rather than the integration of their partner. This differentiation of motives for both sides could lead to different outcomes between the two perspectives. Secondly, this paper has successfully responded to the call of Berry (2013) and fulfilled the gap in the existing theory concerning the influence of personnel exchange on knowledge acquisition. Furthermore, although the results have not confirmed a positive moderating influence of employee empowerment, this research has nevertheless shown that even though employee empowerment aims to improve the overall business performance (Hanaysha & Tahir, 2016), knowledge acquisition performance is not affected at all. Finally, although the firm’s country of operation was not of primary interest, this study has revealed considerable discrepancies which indicate that knowledge acquisition differs per country.

5.2 Managerial implications

From a managerial point of view, senior managers and owners of supplying firms can receive valuable insights from this paper. First of all, personnel exchange in terms of the physical travel of employees to the buyer’s facilities should be advocated by top management as it was found to positively affect the technological and market knowledge acquisition of their firm. However, given the high costs related to this activity, personnel exchange should be only preferred when knowledge cannot be transmitted otherwise (Aguiléra & Lethiais, 2015). Moreover, as employee empowerment does not significantly influence knowledge acquisition, managers are advised to establish clear rules, scripts and procedures to their mobile employees in order to ensure the viability of the knowledge acquisition procedure. Finally, it is of paramount importance for managers to realize that the process of knowledge acquisition does not remain unaffected by the country that the company is currently established. For example, Dutch and Greek companies are less involved into knowledge acquisition processes than Chinese firms. For this reason, managers should consider that the extensiveness of the acquired knowledge differs per country.

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24 5.3 Limitations and future research

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Appendices

Appendix A. Constructs and Items

Employee Empowerment: Hanaysha & Tahir (2016)

1. My company believes that I am competent to perform the tasks required for my position

2. The company is confident about my capabilities and skills to do my job. 3. I have been given the authority to make the necessary decisions to perform my

job well.

4. My company trusts me to make the appropriate decisions in my job.

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Personnel exchange: Backmann, Hoegl, & Cordery (2015)

1. Our company frequently interacted with the buying company. 2. Our company regularly visited our project buying partner.

3. Our company collected new information and ideas from buying companies. 4. Our company regularly conducted meetings with buying companies to acquire

new knowledge.

5. Our company regularly approached buying companies to obtain new knowledge.

Knowledge acquisition: Yli-Renko, Autio, & Sapienza (2001)

1. Because we supply to this customer we are able to obtain a tremendous amount of market knowledge

2. We get most of our valuable information on customer needs and trends from this customer

3. Because we supply this customer we are able to obtain a tremendous amount of technical know-how

4. We get most of our valuable technical know-how related to supplying our product/service from this customer relationship

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Appendix C

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