The Effects of Organizational Culture on Knowledge Transfer: A Comparative Case Study

The Effects of Organizational Culture on Knowledge

Transfer: A Comparative Case Study

Wiebe-Jan Kloosterman

S1534955

University of Groningen

Supervisor: F.A.A. Becker-Ritterpach Co-Supervisor: drs. H.C. Stek

2 1. INTRODUCTION

In this paper, I will do an explanatory study into the effects of organizational culture on the transfer of knowledge between subsidiaries, because it is a new and undeveloped field of theory. The concentration of this paper will be on how organizational culture affects the ability of an organization to adopt and implement transferred knowledge. The method used in this paper is a comparative case study, in order to identify all the possible effects of organizational culture on knowledge transfer. The paper will feed into a theoretical framework for further research in the future. The research was done at PGZ International. PGZ International is a company that specializes in trade and logistics. The company provides its services to “do it yourself stores” (DIY stores) in the Netherlands and Belgium. I did a comparative case study between two subsidiaries of PGZ. In this case study I researched the organizational culture and the ability of the subsidiaries to implement transferred knowledge.

Knowledge transfer has become a very important issue in the field of international business and management. Knowledge transfer can give a multinational corporation (MNC) several competitive advantages, such as mutual learning, the creation of new knowledge and increased innovation (Tsai, 2001). Another advantage is the adoption of best practices in subsidiaries. Unfortunately, transferring knowledge across borders is a difficult task.

Several perspectives on knowledge transfer have already been discussed in the current literature. Three of the main perspectives are the institutional (e.g. Kostova & Roth 2002; Ferner et al. 2001), the cultural (e.g. Bhagat et al. 2002; Javidan et al. 2005) and the translation perspectives (e.g Becker-Ritterspach 2006; Holden & Von Kortzfleisch 2004). The theory on the effects of culture on knowledge transfer has so far focused on the national cultures of the home country of the sending and the receiving organizations of the knowledge. However, culture exists on different levels. An interesting level to study culture in relation to business is the organizational level. Organizational cultures may vary a lot within a country. Therefore, organizational culture might also affect knowledge transfer.

3 In Japan, the theme park was very successful. In France on the other hand, the theme park went bankrupt within one year after the opening of the park. Considering the differences in national cultures, this is a surprising outcome. The cultural distance between Japan and the US is much higher than the cultural distance between France and the US, so one would expect that an exact copy of the American theme park would be more successful in France than in Japan (Brannen, 2004). Current literature on cultural differences, including the GLOBE studies, falls short in explaining why the park was successful in Japan and unsuccessful in France. According to Brannen semiotics can explain these results. However, I argue that there may be another explanation for these outcomes.

This explanation can be found in the organizational culture of the Disney Company. The culture of Disney in the United States is very different from the American culture. The orientation of the company was on great service in a clean and safe environment. This was brought to a high level for American standards. When these practices were transferred to Japan, this fitted right in the Japanese national culture where harmony, cleanliness and order are the norms. However, this culture did not fit in the national culture of France (Brannen, 2004).

Apparently, the organizational culture of the Walt Disney Company deviated from the national American culture. The organizational culture of the Walt Disney Company seemed to be closer to the Japanese national culture than the French national culture. Many more companies’ cultures will deviate from the cultures of their home countries. Therefore, I argue that in certain cases, it is more useful for organizations to look at differences in organizational cultures between the parent company and its subsidiaries than it is to look at differences in national culture. I then define the research question as follows:

“Does and how does organizational culture influence the ability of organization’s subsidiaries to successfully adopt and implement knowledge transferred from other parts of the organization?”

2. THEORETICAL BACKGROUND

4 knowledge transfer process. This theoretical background resulted in four different propositions.

2.1 Organizational vs. National Culture

Hofstede (1994, p12) defines culture as "the collective programming of the mind which distinguishes the members of one category of people from another". In this definition, a category of people can exist on different levels. Examples of such groups are nations, regions, ethnic groups and organizations. Every group of people has its own mindset and values. The culture of these groups is complex and based on many elements. (Hofstede, 1994). This definition of culture also implies that different groups of people within a nation can have different cultures from other groups.

So far, the literature on the cultural perspective of knowledge transfer has focused on the differences in national culture between the sending and receiving business units in knowledge transfer. National culture is a very complex concept and therefore difficult to describe and compare between nations. In order to compare cultures, it needs to be simplified into a few main characteristics. One of the most well-known models concerning the classification of national cultures is Hofstede’s (1983) cultural dimensions model. In this model, Hofstede classified national cultures according to four dimensions. In later studies, a fifth dimension was added (Hofstede, 1994). However, this theory has simplified national culture to such an extent that it might fail to recognize other important elements of national culture which could influence the successfulness of knowledge transfer.

A more recent model on national culture is the GLOBE cultural dimensions model. The GLOBE studies classify national cultures according to nine dimensions. Based on these dimensions, national cultures are clustered based on similarities in their cultures. According to Javidan et al. (2005), the more distant different national cultures are from each other in these dimensions, the more difficult cross-border knowledge transfer will be between organizations in these culturally different countries. The nine dimensions cover more elements of national culture than Hofstede’s five dimensions; however, it is still a very strong simplification of national culture.

5 positions in management. According to Graen (2006), this is not a representative sample to describe the culture of a whole country.

Another common critique is that the GLOBE studies on national culture are too generalizing. Within a nation, there will be cultural differences. For example in different regions of a nation you will find different cultures. This is not taken into account in the GLOBE studies. This makes the differences in national culture a poor predictor or explanation of possible problems in certain cases.

Therefore, it may be more useful for organizations to compare organizational cultures than it is to compare national cultures in order to identify problems. Although organizational cultures are usually related to the national culture in a way, they do not necessarily follow the national culture of the home country. When an organization’s culture deviates from the national culture, it seems inappropriate to compare national cultures of the sending and receiving business units engaged in knowledge transfer.

According to Nelson & Gopalan (2003), there are three different ways in which organizational cultures relate to the national culture of a country. Within a nation, organizations can be categorized into three different clusters.

The first cluster or organizations has a culture which follows the national culture quite closely. The second cluster on the other hand completely rejects the national culture of the country where it is located. The third cluster of organizations has a culture which seems to be independent from the national culture of the home country, rejecting some values of the national culture and accepting others. This implies that there is a lot of variation within a nation in which values of the national culture organizations adopt. This variation is not included when national cultures are researched in relation to the transfer of knowledge. Therefore, this research provides a different insight in how culture affects knowledge transfer.

2.2 Organizational Culture

6 Different subsidiaries within the same organization may have different cultures, which may cause problems in communication and collaboration between subsidiaries. The beliefs and values of the two subsidiaries may be totally different, causing a lack of understanding between the two subsidiaries. Therefore, organizational culture should be managed in such a way that collaboration between subsidiaries is stimulated. According to a research by Hong et al. (2006) into the learning systems of Japanese subsidiaries in China, MNC’s need to find the right balance between the organizational culture of the parent company and the local culture of the subsidiary to create a good learning context in the subsidiaries. This allows for better communication between the source and the recipient of the knowledge. An important aspect of the organizational culture to facilitate knowledge transfer is that the culture should promote information sharing and participation of all people in the organization (Lucas and Ogilvie, 2006).

However, creating such a culture is a difficult task. Culture is difficult to change and manage. According to Holden (2002), it is possible to manage and convey culture over to subsidiaries with different cultures. In other words, it is possible to change, to a certain extent, some aspects of the culture in subsidiaries. In order to transfer business practices, the cultural beliefs and mindset need to be changed in certain cases. However, this is a very difficult task as culture is deeply rooted within people.

2.3 Types of Organizational Culture

Quinn (1988) distinguishes organizational cultures along two different dimensions, in their competing values framework. The first dimension is flexibility versus control and the second dimension is an external versus and internal focus. Based on these dimensions, four ideal cultural types can be distinguished. A visual representation of these dimensions and the cultural types can be found in figure 1 on the next page.

7 FIGURE 1

The Competing Values Framework

The four ideal cultural types, based on the internal vs. external dimension and the flexibility vs. control dimension. Adapted from: Desphandé, R. Farley, J.U. & Webster JR F.E. 1993. “Corporate Culture Customer Orientation and innovativeness in Japanese Firms: A Quadrad Analysis.” Journal of Marketing57, p25.

Quinn, R.E. 1988. Beyond Rational Management. San Fransisco: Jossey-Bass. P.48.

Cameron K.S. & Freeman S.J. 1991. "Cultural Congruence, Strength and Type: Relationships to Effectiveness,"

in Research in Organizational Change and Development, Vol. 5, R. W. Woodman and W. A. Passmore, eds.

Greenwich, CT: JAI Press, Inc.

The second type of organizational culture is the ‘Clan type.’ This type of organizational cultures has an internal focus and based on flexibility. The clan type organization is characterized as a personal place; the focus of the organization is on the development of human resources. Teamwork, consensus and participation are important in clan type organizations, in order to create loyalty, trust and personal commitment amongst the individuals working in the organization (Yong & Pheng, 2007). In this type of organizations, the goals of individuals in the organization become similar to the goals of the organization as a whole. Each individual needs to be socialized completely in the organization in order to create these common goals (Ouchi & Price, 1993).

Flexibility

External

Internal

8 The third type of organizational culture is the ‘Adhocracy type.’ This type of organizations is based on flexibility and an external focus. According to Yong & Pheng (2007), the adhocracy type organization is an entrepreneurial organization. Creativeness, innovation and risk-taking are important aspects of adhocracy type cultures. The goal is to get the newest products and/or production methods. Central in this culture is acquiring new resources and creating new things within this type of organizations in order to reach the organization’s goals. In an adhocracy type organization there is freedom and personal initiative is encouraged.

The fourth and final type of organizational culture is the ‘Market type.’ This type of organizational cultures is based on control and an external focus. The market type of organizations is characterized as very results-oriented. People in the organization are very competitive. The reputation and the success of both the company as a whole and of the individuals in the organization are very important in a market type culture. The focus in this type of organizational cultures is on the market place, where the organization wants to outpace the competition, by achieving certain measurable goals (Yong & Pheng, 2007). People want to develop themselves and their career is very important. This causes people to regularly change jobs. Table 1 provides an overview of how the different cultural types deal with Smircich’s (1983) four functions of organizational culture as described in section 1.2. According to Yong & Pheng (2007), little to no organizations reflects only one cultural type. Every organizational culture will contain characteristics of all four the ideal types. However, this typology is still useful in this research, as most cultures will lean mostly to 1 of the ideal types.

Following Smircich (1983), organizational culture fulfills four different functions. Each of the four organizational types fulfills these four functions in different ways.

The first function is to give individuals in the organization an organizational identity.

The second function of organizational culture is that culture facilitates collective commitment. This refers to the way in which individuals in the organization are committed to the goals and the success of the company.

The third function of organizational culture is the promotion of social system stability. This concerns how conflict and change are managed within the organization. Furthermore, it concerns whether the work environment is positive or negative.

9 things and how these things are intended to accomplish the long-term goals of the organization. Table 1 summarizes how each of the cultural types fulfills the four functions of organizational culture.

TABLE 1

Characteristics of cultural types

Cultural Types Functions of

Organizational

Culture Hierarchy Clan Adhocracy Market

Organizational Identity: Controlled and structured with formal procedures An extended family and a personal place Dynamic and entrepreneurial place Results –oriented and internal competition Collective Commitment established through: Formal Rules and Procedures Loyalty and trust of individuals and teamwork Commitment to innovation and development Emphasizing goal accomplishment and personal achievements

Change, Conflict and Social System

Stability:

Change and conflict managed by formal rules and procedures Change and conflict managed by employee participation and mutual trust Change and innovation stimulated, creating a dynamic positive workplace Conflict is stimulated as internal competition is a possible source of conflict

Long-term Goals for Sense-Making Operational Efficiency Development of human resources Having the most unique or newest products Outpacing the competition

Table 1 describes the four ideal cultural types according to the functions of organizational culture.

Adapted from: Yong K.T & Pheng L.S., 2007. “Organizational culture and TQM implementation in construction firms in Singapore.” Construction Management and Economics 26, 237-248.

10 2.4 Knowledge Transfer

According to Szulanski (2000) there are five elements involved in knowledge transfer: The source, the transmission channels, the message, the recipient and the context.

The context of the knowledge transfer has a strong effect on the social interaction between individuals. The relationship between the source and recipient is very important in this respect. A distant relationship makes communication more difficult. Interaction between individuals is needed to make them share knowledge and ideas. This social interaction allows for knowledge to spread through the organization and for new knowledge to be created (Nonaka, 1994). This interaction should be apparent both within units and between different units in an organization, in order to spread knowledge throughout the whole organization and for it to become an advantage to the organization.

To increase communication, systems to share and encode the knowledge of individuals are needed to enable other individuals to use the knowledge. According to Gupta and Govindarajan (2000), business units should be connected through several transmission channels. The richer these channels are, the more integrated units are in the organization. This increases communication and therefore knowledge sharing. These transmission channels can both be formal and informal.

11 compared to a newly established subsidiary. This is because the subsidiary is likely to be more adapted to the organizational culture of the MNC.

The transfer process can be initiated by both the source and the recipient of the knowledge. Both can be drivers behind the knowledge transfer (Monteiro et al. 2007).

2.5 Causes of problems in knowledge transfer

Knowledge needs to be managed properly in order to create, transfer and implement new knowledge successfully. However, knowledge transfer is difficult due to internal stickiness of knowledge in the organization (Szulanski, 1996). Internal stickiness can arise from the characteristics of the knowledge that is transferred, characteristics of both the source and the recipient of the knowledge and the characteristics of the context of the transfer. All of these factors can be causes for failure in knowledge transfer. The main concern in this paper is the recipient of the knowledge. The rest of this section discusses the main factors that are likely to influence the ability of an organization to adopt and implement transferred knowledge. These factors are also discussed in relation to the four cultural types. Finally, this section discusses some other factors that could influence the adoption and implementation of the transferred knowledge in this case.

2.5.1 Absorptive Capacity An important factor that can cause internal stickiness is the absorptive capacity of the recipient organization (Szulanski, 1996). Low absorptive capacity of the recipient unit means that the unit cannot exploit the transferred knowledge properly. The recipient may have difficulty in valuing, implementing and applying the new knowledge successfully. A cause of this can be the previous stock of knowledge existent in the recipient unit. The unit may need some basic skill or knowledge on the latest scientific and technological advancements in order to be able to implement the knowledge (Cohen & Levinthal, 1990). The existing knowledge stock in an organization determines largely whether the receiving business unit can value, assimilate and implement the new knowledge (Szulanski, 1996).

12 This is in line with the theory of Björkman et al. (2007), who did research in the transfer of capabilities after an acquisition. In the case of an acquisition, there will be two organizations which need to transfer capabilities in order to gain the most advantage from the acquisition. Usually, this involves two cultures which are different to some extent. According to this research, larger differences in organizational and/or national culture lead to less absorptive capacity of the receiving business unit involved in the knowledge transfer process. This means the particular business unit is less able to acquire and implement the knowledge.

Hierarchy cultures are likely to have the lowest absorptive capacity of the four cultural types. The absorptive capacity in this type of organizations is likely to be low, because the knowledge stock is mostly captured in formal rules and procedures. This is explicit knowledge that can be learned easily. There is a tendency to just follow the rules and procedures and managers control people using these formalities. This decreases the creativity in the workplace and the ability to learn and implement knowledge that cannot be captured in formal rules and procedures. Tacit knowledge will therefore be hard to implement in a hierarchy type organization, due to the focus on explicit knowledge.

Clan type organizations are likely to have a medium amount of absorptive capacity, in comparison to the other cultural types. Clan type organizations invest in human resources. People in the organization are pushed to develop themselves. People participate in the organization and think of ways on how to improve the organization. This constant development of human resources and participation of all members in the organization leads to a higher knowledge stock in the organizations, which continues to grow. A high knowledge stock in the organization allows for more successful implementation of new knowledge. The market type organization is also likely to have a medium amount of absorptive capacity. The company constantly tries to keep pace with or to stay ahead of its competitors. In order to do so, it constantly needs to gather information and knowledge from other organizations. The internal competition in this type of organizations will likely make people feel the need to gather new knowledge, to get a better position in the organization. On the other hand, this competition may cause these people to keep the knowledge to themselves, instead of sharing it with colleagues. This allows this people to maintain a better position in the company. This means the knowledge will not spread quickly throughout the organization, but is kept by individuals in the organization.

13 innovative. This causes a high knowledge stock within the organization, because people are actively looking for new knowledge and innovations. This existing knowledge stock increases the absorptive capacity of the organization, as it is better able to understand and value new knowledge. This in turn can increase the organization’s ability to adopt and implement new knowledge from other business units and organizations. Knowledge is also shared amongst employees in order to create new knowledge. This allows the organization to reach its goal of having the newest products.

Based on the above discussion, I define the following proposition:

Proposition 1: Absorptive capacity is low in hierarchical cultures, medium in clan and market cultures and high in adhocracy cultures.

2.5.2 Motivational Disposition Another factor that can cause internal stickiness is the motivational disposition of the recipient of the knowledge (Gupta & Govindarajan, 2000). The receiving business unit needs to have motivation to implement the knowledge. This motivation can come from incentives or pressure from the headquarters for example. If this motivation is not there, the recipient unit will not actively work on implementing the knowledge. An important aspect in this respect is uncertainty avoidance (Javidan et al. 2005). The organization with high uncertainty avoidance will focus on structured and formal communication, while the organization with low uncertainty avoidance will focus on unstructured and informal communication. In high uncertainty avoidance organizations, there is a lot of time invested in the planning and testing of the knowledge to be implemented, before it is actually implemented to avoid risk. In low uncertainty avoidance organizations, more of the testing and adaptations is done after implementation. The more open an organization is to uncertainty, the more willing the organization will be to implement changes. Organization with low uncertainty avoidance are more flexible and more willing to make changes. This makes these organizations more open to knowledge transfer. They will also implement the new knowledge more quickly. This can increase the success of knowledge transfer.

14 Resistance to change can both be passive and active. Examples of active resistance are ridiculing, sabotaging and undermining the change. Examples of passive resistance are dragging one’s feet, faking compliance and allowing change to fail, without doing something about it. However, there are many more ways in which resistance may take form (Hultman, 1995). This can increase the costs of transferring the new knowledge or even cause the implementation of knowledge fail altogether.

The motivation to implement new knowledge is likely to be the lowest in hierarchical type organizations. This type of organizations is based on stability. People in the organizations do not want things to change and do not like taking risks. This high uncertainty avoidance can cause a lot of resistance in the case of new knowledge implementation.

Organizations with a clan culture are likely to have a medium motivational disposition to implement new knowledge, compared to the other cultural types. The clan type company is characterized by flexibility and wants to develop. However, the organization is focused internally. New developments need to develop human resources, to be interesting to the organization. Other types of knowledge are less interesting to this type of organization.

The motivational disposition of people in the market type organizations to adopt and implement the new knowledge is also likely to be medium. Some people may benefit from the new knowledge and are motivated to implement the change. Others may lose from the new knowledge, as they lose some of their importance in the organization for example. This may be extra strong in an organization where there is a lot of competition between the members of the organization. This means some will support the changes and others will resist them.

The motivation to adopt and implement new knowledge is likely to be the highest in adhocracy type organizations. People in adhocracy type organizations are always looking for renewal and innovation. In doing so, the organization is willing to take risks. There is low uncertainty avoidance and people are used to change in the organization. Therefore, when new knowledge is implemented in the organization, they will less likely resist the changes it brings.

Based on the above discussion, I define the second proposition as follows:

15 2.5.3 Transmission Channels The third factor is the existence and richness of transmission channels. Both formal and informal transmission channels need to exist in order to transfer knowledge between business units (Gupta & Govindarajan, 2000). Without these transmission channels, there will be little to no communication between the business units. This means that no knowledge is transferred.

According to Björkman et al. (2007), culturally close organizations will be attracted to each other. Culturally close organizations can create a shared identity and trust towards each other. This in turn limits the potential for conflict. In culturally different organizations on the other hand, there is less likely a feeling of trust. This increases the conflict potential. When there is conflict and mistrust between two organizations, there is likely to be less social integration between the two organizations. This will decrease the communication and collaboration between the two organizations. This in turn, can make knowledge transfer less successful. Especially tacit knowledge seems to be difficult to transfer in the case where there is mistrust and conflict, because tacit knowledge requires much communication between the individuals in both organizations (Nonaka, 1994).

Each type of culture is likely to have a preferred method of communicating with other organizations. This influences the richness of the transmission channels of th particular organizations.

Hierarchical organizations are likely to have the poorest transmission channels and the least contact with other organizations and business units, compared to the other cultural types. This is caused by an internal focus. This internal focus makes it hard for the organizations to communicate and socialize with other business units, which is very important in the transfer of new knowledge. The focus is on formal communication.

In clan culture organizations the transmission channels and relationships with other organizations are likely to be poor, like in the hierarchical type organizations. The focus is on the internal organization and this will decreases communication with other organizations and business units.

16 Adhocracy type organizations are also likely to have many and rich transmission channels. The continuous lookout for new information and knowledge is likely to create rich transmission channels and relationships with other organizations and business units. An adhocracy type is likely to get many contacts to get new information from and is able to communicate with other organizations. They need to do so in order to get the newest products and/or production methods. Its focus on acquiring new resources is likely to result in the ability to communicate and socialize with members from other organizations.

Based on the above discussion, I define the third proposition as follows:

Proposition 3: Transmission channels are poor in hierarchy and clan type cultures and rich in market and adhocracy type cultures.

Table 2 provides a summary of the three propositions and the theory they are based on. Table 2

Cultural Types and Knowledge Transfer

Cultural Types

Hierarchy Clan Adhocracy Market

Absorptive Capacity: Low Rules and procedures cause and focus on explicit knowledge. Medium People develop themselves, increasing knowledge stock of organization. High

Active search for new knowledge, increasing the knowledge stock of organization. Medium People gather knowledge for better position. They may not share with others.

Motivational Disposition: Low Based on stability High uncertainty avoidance causes resistance to change. Medium The focus is on human resources, new knowledge needs to develop them. High Organization is willing to take risks, causing low uncertainty avoidance.

Medium

Resistance from losing employees and support from benefitting employees. Transmission Channels and Relationship with other Organizations: Low Focus on internal organization, causing little contact with other organizations. Low Focus on internal organization, causing little contact with other organizations. High Many contacts and high ability to communicate, because of constant search for knowledge. High External focus. Lots of contacts to get information to stay ahead of competition.

17 2.5.4 Other Factors There are some other factors that could influence the successfulness of knowledge transfer as well. These factors may not be related to the type of culture the receiving business unit has.

The first factor is causal ambiguity. Causal ambiguity is a characteristic of the knowledge transferred. Causal ambiguity means that it is sometimes impossible to determine which factors or interaction of factors determine the success or failure of a certain capability (Szulanski, 1996). This can cause problems when the knowledge is transferred.

The second factor is an arduous relationship between the source and the recipient of the knowledge. The existence of an arduous relationship means that there is little connection between the source and the recipient (Szulanski, 1996). According to Nonaka (1994), knowledge transfer involves many individual exchanges. Following Szulanski (1996), these exchanges require a lot of communication. A distant relationship may make this difficult. A distant relationship can exist when there are large cultural differences. Cultural distance makes communication and mutual understanding more difficult due to differences in language, norms and values. Therefore, cultural differences between the source and the recipient can cause difficulties in transferring knowledge.

The third and final factor is the value of the knowledge stock of the business unit that could send the knowledge to other business units or organizations. When the knowledge stock in a business unit is perceived to be high and relevant to other units in the organization, there is likely to be more transfer between business units and vice versa (Gupta & Govindarajan, 2000). Cultural differences may make it difficult for the receiving business unit to evaluate the potential advantages of the knowledge that is transferred, lowering the perceived value of the knowledge stock by the receiving business unit.

18 3. METHODOLOGY

This chapter discusses how the research was designed, how data was collected and the case that was actually used in this research.

3.1 Research Design

This paper is an explanatory paper, for the reason that little is known about the relationship between organizational culture and knowledge transfer. Therefore, the research will mainly be qualitative, in the form of a comparative case study between different subsidiaries within one company. Qualitative research allows to explore new areas of research, because it provides in-depth insights in what you are researching and it is not limited to closely defined variables. This allows me to grasp all the possible effects of organizational culture on knowledge transfer, which would have been missed when using quantitative research methods. The findings from the case study can be used as a theoretical framework for further research, which gives the research external validity (Yin, 1994).

The company for this case needs to have two or more subsidiaries with different cultures. Each of these subsidiaries will probably have different mixes of the cultural types. This method allows which characteristics of which cultural types indeed influence implementation of new knowledge, whether this influence is positive or negative.

The best case scenario is an organization with two subsidiaries which were acquired by the parent company. According to Björkman et al. (2007), this will provide the most differences in organizational culture, as the subsidiaries already had its own prior organizational culture before it was acquired. This culture is difficult to change. Furthermore, it is likely that acquired companies or subsidiaries that came to existence through a merger require much transfer of practices from the headquarters to integrate the subsidiary in the organization. Therefore, this will be the best situation to identify the difficulties in knowledge transfer. These two subsidiaries need to be located in the same country, to control for national culture. When the two subsidiaries are located in the same country, there are no differences in national culture. This increases the internal validity of the research.

The knowledge to be transferred needs to be the same in both cases. It is impossible to get valid results from the research if the knowledge that was transferred in the two cases is different. That would be comparing to totally different situations.

19 closest involved in the transfer process and making it all work out. This provides new insights in how organizational culture could have affected the knowledge transfer process.

The second source of information is a questionnaire, which I handed out to employees in both subsidiaries. This information is used to control the information gained from the interview. Furthermore, it provides insight in how the employees think about the transferred knowledge and the way they would characterize the organizational culture of their subsidiary.

No regressions will be done in this research, as this would result in a more quantitative research. This would mean I would have to closely define variables and hypotheses. I wanted to avoid this, as this is an explanatory, qualitative research.

3.2 Interview and Questionnaire Design

Since the organization under study is located in the Netherlands, the interviews and questionnaires were all done in the Dutch language. They were all done face-to face with the interviewee. The interviews were structured according to several questions, however, the questions were open-ended and left a lot of room for necessary follow-up questions. These questions just served as a guideline to get all the necessary information from the interviews. The first part of the interview concerned general questions about the organizational culture. The second part concerned questions about the knowledge that was transferred and its implementation. The third part concerned the relationship between the organizational culture and the knowledge transfer.

The questionnaire concerned the same issues as the interviews. The first part of the questionnaire concerned the organizational culture. The questions were based the organizational culture assessment instrument by Cameron & Quinn (1998). This instrument measures the organizational culture according to the four ideal types. For each of the cultural types, several statements were provided. The respondents had to fill in how similar the culture in their organization was to these statements, according to a 5-point Likert scale. The average scores on these statements determine the scores for each of the cultural types. In order for the scores to be used in this qualitative research, without turning it into a quantitative research, the scores will be classed as ‘low’, ‘medium’ or ‘high’. An average score below 2.5 is classified as ‘low’. An average score between 2.5 and 3.5 is classified as ‘medium’. Finally, a score of 3.5 and up is classified as ‘high’.

20 3.3 The case

Unfortunately, in the limited time span available to write this paper, it was not possible to find a company that had all the characteristics that needed for this research. However, I have been able to find a company which suited the most important characteristics, which made it applicable to this research. The company has two subsidiaries in the Netherlands, with different cultures and both are receiving the same new knowledge that influences both the subsidiaries a lot.

The company used in the research is called PGZ International and it is a holding company. It has two group members, called PGZ Retail Concepts and the Feeder Company. The company was created after a merger between two organizations, called AGZ and Pril.

This paper will only deal with the Feeder Company. The Feeder Company’s core activities are distribution, warehousing and billing. The market this company serves is the “do it yourself’ or “DIY” market. It is responsible for the distribution to some large DIY stores in the Netherlands and Belgium.

The distribution section of the company consist of three different subsidiaries. Two of these subsidiaries are located in the Netherlands and one is located in Belgium. Only the two Dutch subsidiaries are considered in this research, in order to control for differences in national culture.

The largest subsidiary is called Feeder One, which from now on will be referred to as subsidiary A. Most of the distribution is done here. The other subsidiary is located at the same place as the headquarters and is smaller that subsidiary A. From now on, this subsidiary will be referred to as subsidiary B. These subsidiaries existed before the merger between the two companies, however, they were both part of another company.

The perfect scenario would be a case where the subsidiaries would be acquired by a single company. The reason behind this is that would likely provide the most cultural differences between the two subsidiaries and the sender of the new knowledge. In this case however, a merger is suitable for the research. The research concentrates on the receiving and implementation of new knowledge and has little concern for the sender of the knowledge. Before the merger, both subsidiaries would have had different cultures, as they were part of different companies. These cultures are likely to remain different to some extent after the merger.

21 equal for both the subsidiaries. This should improve the productivity of both the subsidiaries and would improve the service towards the company’s clients.

This system involved scanners which allow the work to go quicker and the number of errors made when collecting the orders lower. The scanners scan the bar code of the products and recognizes whether the scanned product is the right product for the order. Employees do not have to check whether they have the right product manually anymore, reducing the number of wrong products delivered and increasing the productivity. The knowledge that is transferred mainly consist of tacit knowledge.

Unfortunately, both subsidiaries are in different stages in their implementation of the new system. In subsidiary A, most departments are already working with the new system. In subsidiary B however, preparations for future implementation are still in progress. The system is not implemented yet in this subsidiary. Therefore, the questionnaires are a different in respect to the statements about the new system. However, they both show the attitude and to the new system and how both subsidiaries are dealing with the changes. Therefore, we can still make some assumptions on how organizational culture affects knowledge transfer. However, it would be better if both subsidiaries were in the same stage of implementation, for a proper comparison.

The research will therefore focus on how people in both subsidiaries think about the scanners and the problems that arose or are expected to arise in the subsidiaries.

4. ANALYSIS AND DISCUSSION

This chapter discusses the cultural differences between the two subsidiaries and the ability of both the subsidiaries to adopt and implement the transferred knowledge. This chapter concludes with a discussion of the relationship between the organizational culture and the ability to adopt and implement new knowledge in these subsidiaries.

4.1 Subsidiary Cultures

22 cannot hire more personnel and we are therefore a little understaffed. Our employees do not mind putting in some extra hours to get the work done.” In fact, another interviewee said that the people working in the office were willing to assist on the shop-floor if needed. There is a strong sense to make it together and to keep this subsidiary alive.

Furthermore, the culture in subsidiary A is also characterized as an extended family. There is a group of individuals who value teamwork a lot. This feeling of a family also becomes clear on Friday afternoon’s, when this group of employees finish the week with a few drinks together in the company canteen. Furthermore, all the employees can participate in the organization and provide ideas on what to improve. However, this is usually limited to small changes. This indicates that subsidiary A has strong characteristics of the clan culture.

However, subsidiary A also has strong characteristics of the market type organization. The focus is on outpacing the competition and being more efficient than the competition. One interviewee gave the following reason for the focus on the market: “PGZ is active in the distribution sector. Our clients can easily switch to our competitors in this industry. We need to be very efficient and we need to stay ahead of the competition..”

There is also a little internal competition in subsidiary A. The productivity of each employee is published every day. This can motivate people to perform better. This is also a characteristic of the market type organization.

Subsidiary B is similar to subsidiary A in the respect that they are both highly market-oriented. Subsidiary B is strongly steered by the management team, that identifies what the market need and how this subsidiary should react to that. There is little consideration for the effects on the employees in these decisions. Staying ahead of the competition is the most important consideration.

An interviewee in subsidiary B describes the culture in this subsidiary as follows: “People in subsidiary B are conservative and there is a lot of island behavior.”

By island behavior, he means that each department operates as a separate island. There is little cooperation. There is also a lot of internal competition and little cooperation between departments, which has a negative influence on the subsidiary.

23 fired in a downsizing a few years ago. The high average age has a strong effect on the culture within subsidiary B. The older employees are used to the way they work and do not want to change this anymore. They want to perform their tasks and nothing more. This group of people is less motivated to develop themselves. This is different to subsidiary A, where employees have a lower average age. This lack of flexibility makes subsidiary B have less in common with the adhocracy and clan type cultures than subsidiary A.

There is also a group of immigrants that work in this subsidiary. These immigrants generally need more structure and procedures. They just do what they are told and do not argue with their superiors. This is a characteristic of a hierarchical culture, where people just follow rules and procedures.

The employees prefer more stability and do not like change. This means that the culture mainly demonstrates characteristics of the hierarchy and market cultures. Teamwork and participation are less common in subsidiary B, compared to subsidiary A.

There is also a lot of negativism in subsidiary B. After the merger between the two organizations, a lot of employees of subsidiary B lost their jobs. The management team lost its credibility towards the employees. This caused the employees to dislike change. As an interviewee in subsidiary B puts it: “We need to be careful when implementing changes that could be unpopular. Otherwise, our employees will not accept them. This is due to the fact that the management team has lost its credibility.”

The questionnaires support a lot of the findings of the interviews. However, it also reveals some new information and some contradictions with the interviews. The scores for each of the subsidiaries are demonstrated in table 3.

TABLE 3

Cultural Scores Subsidiaries

Cultural types Scores Subsidiary A Scores Subsidiary B

Hierarchy High (3.54) Moderate (2.92)

Clan Moderate (3.13) Low (2.00)

Adhocracy Moderate (3.42) Moderate (2.83)

Market High (4.06) High (3.58)

24 Both subsidiaries seem to score the highest on the cultural types that stimulate stability in the organization. These types are the hierarchy type and the market type. Efficiency and development are important for both subsidiaries to stay ahead of the fierce competition. Even though both the subsidiaries focus more towards stability, subsidiary A seems to be more flexible than subsidiary B. Subsidiary A scores higher on both the clan and adhocracy type cultures, compared to subsidiary B. These two cultures are characterized by flexibility. This difference is mainly visible when looking at the clan culture type, where the difference between the two subsidiaries is the highest. These findings are consistent with the outcomes of the interviews.

In the interviews, it became clear that both subsidiaries tried to change the culture a little to get more participation from its subsidiaries. Apparently, this was more successful in subsidiary A, since subsidiary A demonstrates more characteristics of a clan culture. This means there is more employee participation in subsidiary A. The employees in subsidiary B also felt like their ideas were not taken as seriously as the employees in subsidiary A did. On the question whether the employees felt their ideas were taken seriously, the employees in subsidiary A scored an average of 3.38. On the contrary, the employees in subsidiary B scored it a lot lower, with an average score of 2.25.

In summary, both subsidiaries have a strong focus on the market and hierarchy types, to stay ahead of the competition and to remain as efficient as possible. However, subsidiary A has higher scores for the clan and adhocracy type cultures. This indicates that subsidiary A has more flexibility, innovativeness and teamwork, compared to subsidiary B.

4.2 Absorptive Capacity

25 reason behind this is that there is a lot of cooperation between individuals. When people cooperate, they will also communicate and socialize more with each other. This makes the employees share more knowledge with each other.

Subsidiary A also wants to innovate more than subsidiary B, as can be seen in the higher scores for the adhocracy type cultures. People think about what can be improved to the system and gather more information about the system. These improvements can be made without too many problems, because of the high absorptive capacity in the subsidiary.

In subsidiary B, there is less absorptive capacity. The score for the clan culture is much lower than in subsidiary B. People do not cooperate as much as in subsidiary A. This lack of teamwork results in people not sharing their knowledge with each other through socialization in subsidiary B.

The island behavior and internal competition of the departments in subsidiary B also decreases the absorptive capacity of the subsidiary. Most of the knowledge about the new system is likely to remain within departments. Knowledge about the system in one department will not likely be shared with other departments. This decreases the overall knowledge about the system in the subsidiary. This may make it more difficult to identify and implement changes, after the new system is introduced.

Apparently, if an organization has more characteristics of the clan and adhocracy cultures, this increases the absorptive capacity of the organization. Hierarchy and market type cultures have less absorptive capacity. There is less cooperation and less gathering of knowledge in these types of cultures.

4.3 Motivational Disposition

26 TABLE 4

Scores for Knowledge Implementation in subsidiary A

Statements Subsidiary A My ideas for improvem ents are taken seriously The new system made my work easier The new system was necessary and useful There are many problems with the new system Problems are solved quickly The scanners are often adapted and improved Scores Subsidiary A 3.38 (Medium) 4.63 (High) 4.69 (High) 2.00 (Low) 4.27 (High) 2.60 (Medium)

This table demonstrates how employees in subsidiary A scored the similarity of their organization to the statements in the questionnaires.

One of the interviewees mentions that the successful implementation is made possible by the fact that individuals in the organization want to perform together, there is a strong feeling that people need to work as a team to survive in the current business world. This made the motivation of the employees to implement the new system very high. If changes are made in order to improve performance, they are usually accepted quite quickly. An important aspect in the acceptance is that the management team properly explains why these changes are necessary. People in subsidiary A are quite flexible, compared to people in subsidiary B. This can be explained by the scores for the adhocracy and clan cultures. These cultures are concerned with flexibility. People are willing to change.

This does not mean that no problems occurred in the implementation at all. There were some problems with the stability of the system in the beginning. These problems were however solved quite quickly. The system is being improved constantly. New functions are added and the system is much more efficient now compared to when it was first introduced. However, the introduction of the system and the improvements went through a lot of testing before they were implemented. This can be caused by the risk avoiding behavior associated with the market and hierarchy oriented culture of the subsidiary. The subsidiary does not want to take risk by implementing a system that might cause some problems in the beginning. This risk avoiding behavior is also necessary to some extent make the organization avoid introducing reckless and untested changes.

27 negativism makes these employees unwilling to change. They do not trust the management very much.

Furthermore, employees in Subsidiary B are also, on average, older than the employees in subsidiary A. This causes differences in culture. The older people are generally less willing to change. They want to keep working in the same way as they used to.

This will result in very negative reactions to change in subsidiary B. This negative attitude is also confirmed by the questionnaires. The results of the questionnaires are presented in table 5 on the next page. Apparently, people prefer to work with the old system instead of the new system. Employees think that the new system will not make work much easier with a score of 2.18, neither do they think it will benefit the results of the company much, with a score of 2.27. One interviewee in subsidiary B said: “The people working here are at the peak of their abilities. They do want to do their tasks and nothing more. They want these jobs to stay the same as they are. Most of them do not have aspirations to develop themselves.”

TABLE 5

Scores for Knowledge Implementation in subsidiary B

Statements Subsidiary B My ideas for improvemen ts are taken seriously I like to see changes in the company, even if it changes the way I work I think the new system will make my work easier I think the new system will improve the results of the company I prefer to keep working with the old system I think people are generally positive about the new system Scores Subsidiary B 2.25 (Low) 3.18 (Medium) 2.18 (Low) 2.27 (Low) 3.27 (Medium) 2.73 (Medium)

This table demonstrates how employees in subsidiary B scored the similarity of their organization to the statements in the questionnaires.

28 Furthermore, the uncertainty avoidance associated with the focus on stability is even higher in subsidiary B. The reason is that subsidiary B scores a lot lower for the clan and adhocracy type cultures. This causes the system to be implemented even later, as more testing is done to the new system in subsidiary A. Only when the new system is perfect, it will be implemented in subsidiary B. An interviewee said: “We need to make sure the system works perfect when we implement it in subsidiary B. When there are a lot of problems with the new system, there will be a lot of resistance against it.”

4.4 Transmission Channels

The transmission channels of the subsidiaries with the headquarters and other subsidiaries were very similar. People working in the office of both subsidiaries would have meetings in the other business units. This is mostly formal communication. There is only little informal communication. This can be explained by the fact that both subsidiaries have the second highest scores on the hierarchical type culture, compared to the other types. In hierarchy type cultures, formal rules and procedures are followed closely. This will also be reflected in the transmission channels with other parts of the organization. The subsidiaries will mostly follow the standard procedures in communication as well, resulting in mostly formal transmission channels.

Internal to the subsidiaries, I did find some differences in the way people communicated across departments. In subsidiary A, there was a lot of informal communication between departments. An interviewee said: “Employees who work in the offices also work on the shop floor when it is very busy. This allows everybody to get to know the new system. This allowed knowledge about the system to spread easily across departments.” This makes the system successful, as everybody knows how it works and everybody can see what can be improved.

29 4.5 Discussion

The analysis suggests that organizational culture indeed influences the receiving and implementation of new knowledge in subsidiaries. Both the subsidiaries were characterized by stability, because they were most similar to the market oriented and the hierarchy oriented cultures. This makes them avoid uncertainty as much as possible. In this case, the knowledge needed to be implemented, in order to become more efficient. However, to avoid the risk of problems with the new system, both subsidiaries went through a lot of testing. This slows down the knowledge transfer process. Organizations and subsidiaries that focus on stability and are risk avoiding, take a longer time to implement new knowledge. This is in line with Javidan et al. (2005), who already indicated that high uncertainty avoidance is associated with more planning and testing when transferring knowledge. A subsidiary that is characterized by stability will be more uncertainty avoiding, compared to a subsidiary that is characterized by flexibility.

It was also clear from the analysis that the motivational disposition to implement the new knowledge was a lot higher in subsidiary A, compared to subsidiary B. Two causes can be identified for this. The first cause is that there is a stronger team-spirit in subsidiary A. The employees have a feeling that they need to do everything together in order to survive in the current times of crisis. If this means that changes need to be introduced, to improve the results, they are willing to accept these changes. In subsidiary B, this feeling is less strong. This is also indicated by the results of the questionnaire, where subsidiary A scores much higher on the statements about the clan culture.

The second cause is that employees are more open towards changes in general. This can be seen in the scores of the adhocracy type culture. These scores are higher for subsidiary A, than they are for subsidiary B. Employees in subsidiary A apparently have a stronger feeling that change and innovation are needed. This may also be caused by the age difference between the two subsidiaries. Employees in subsidiary B are on average a lot older than employees in subsidiary A. This has a strong effect on the culture in subsidiary B. Older people are not as willing to change as younger people. They are used to a certain way of working and want to keep working this way.

30 subsidiary B. This arduous relationship and the organizational culture of subsidiary B are likely to be both causes for the low motivational disposition to implement new knowledge.

In subsidiary B, the employees would only perform the tasks that they are supposed to do. There is little participation and teamwork between departments. This decreases the knowledge stock in the subsidiary, because knowledge held by an individual remains in the department where this individual works. This decreases knowledge flows and prevents individuals learning from each other between departments. This decreases the absorptive capacity of the subsidiary.

In subsidiary A on the other hand, there are no strong boundaries between departments, due to a culture of teamwork and cooperation. Employees in subsidiary A are more willing to help out other departments if needed. People gain and share more knowledge about the system in this way as they get knowledge about all the aspects. This can be explained by the fact that subsidiary A scores higher on the internally focused cultural types. The internal types are likely to also have more internal communication and cooperation between departments. This in turn enables people to share knowledge with other individuals in the subsidiary. Individuals get more knowledge about the system, which increases the absorptive capacity. Employees will be better able to see opportunities for improvements to the new system to make it more successful. Thus, an internal focus can increase the understanding of newly implemented knowledge throughout the subsidiary.

An external focus is likely to increase the existence and richness of the subsidiaries’ transmission channels with subsidiaries and organizations. However, the research did not find differences in the transmission channels between the two subsidiaries. Both subsidiaries had face to face meetings at the headquarters and with each other. Furthermore, both the subsidiaries scored rather high for externally oriented cultures. Therefore, this cannot be confirmed with this research.

31 of testing before implementing changes. To make knowledge transfer successful, a company needs to find the right balance on both dimensions. In other words, a company needs to find the right balance between the four cultural types. For each organization, this balance may be different.

Subsidiary A was the most balanced between the four cultural types, as it scored higher for all four cultural types. The interviews in subsidiary A also demonstrated that there were characteristics of all four cultural types in the organization.

In subsidiary A, everybody was positive about the new system and the implementation only presented little problems. In subsidiary B, more resistance can be expected. The culture of subsidiary A seems to consist of a better mix of the four cultural types, compared to subsidiary B.

5. CONCLUSION AND RECOMMENDATIONS

The objective of this research was to find out whether organizational culture could influence the ability of organizations and business units within an organization to adopt and implement knowledge transferred from other organizations or other parts of the organization. The research suggests that organizational culture does influence the successfulness of knowledge transfer. However, this influence seems to be different from what was suggested in the theoretical background of this paper. The theoretical background and the propositions of this paper suggested that certain types of organizational culture are better able to implement new knowledge than others. However, based on the research, it seems that organizations should find the right mix of the four cultural types, instead of focusing on one cultural type in order to improve the successfulness of knowledge transfer.

32 The second proposition of this paper suggested that the motivational disposition to implement new knowledge is low in hierarchical cultures, medium in clan and market cultures and high in adhocracy cultures. This proposition is again only partially supported. The organizational culture can affect the motivational disposition of the source to implement the knowledge. Flexibility is important in this respect, because it can increase the motivational disposition of the recipient business unit to implement the new knowledge. The more flexibility an organization has, the more willing employees are to change. The clan culture and the adhocracy cultures are flexible and are therefore more open to change. The motivational disposition is high in the clan and adhocracy cultures.

In market and hierarchical type organizations, the motivational disposition is lower compared to the clan and adhocracy type cultures. These two types of culture are much slower in the implementation of new knowledge. These types are based on stability and uncertainty avoidance. Therefore, they will thoroughly test and plan the implementation of new knowledge. This makes the implementation process take much longer. However, this testing is also important to make sure that the new knowledge works well when it is implemented.

The third proposition of this paper suggested transmission channels are poor in hierarchy and clan type cultures and rich in market and adhocracy type cultures. This proposition cannot be confirmed. Externally focused organizations, with characteristics of the market and adhocracy culture, are likely to have more and richer transmission channels with other organizations. This increases communication with the other organizations, which is important for knowledge transfer. However, this cannot be proved with this research, because both subsidiaries in the research were too similar in this respect. The external transmission channels and external focus were very similar.

I did find that organizations which are more internally focused have more internal communication. This is mainly the case in a clan culture. The transmission channels within the organization are generally richer in internally focused organizations, because there is teamwork and cooperation between departments. This allows knowledge to spread amongst the individuals in the organization. These individuals will get more knowledge, potentially increasing the absorptive capacity of the organization.

33 framework. In this research, all characteristics the cultures of both subsidiaries could be attributed to one of the cultural types.

5.1 Recommendations for PGZ

For subsidiary A of this research, the mix between the four cultural types seems to be the right mix to implement new knowledge. In subsidiary B, improvements can still be made to increase the motivation and ability to implement new knowledge.

First of all, employees who will be working with the system need to get more information about the changes that the new system will bring. People need to be convinced that the implementation of the new system will be beneficial for them and the organization. This can increase their motivation to implement the knowledge.

The cooperation between departments should also be improved. This can be done by letting people work in different departments for a while. Another method is to set up more formal and informal communication channels between departments. People need to be stimulated to communicate and socialize with people from other departments.

Another method to improve the motivation of employees is let them participate more in the organization. People need to feel their ideas are taken seriously and that they are listened to. If they see some of their ideas are actually implemented, they may become more positive towards change.

A final, more long-term approach to improve the motivation to implement new knowledge is to gradually make the workforce younger. When older people leave the organization, fill these positions with young people. These people are less likely to resist change.

5.2 Limitations and Further Research

The first limitation was that it was not possible to test all four propositions with this case study. This would require an organization with more subsidiaries, which would have more differences in organizational culture. I could not get access to such an organization.

The sample of only two subsidiaries was rather small. A comparison of more cases would be better. This would allow me to make get more insight into how organizational culture influences knowledge transfer. Furthermore, it would provide stronger support for the conclusions.