Managing reverse knowledge flow inmultinational corporations

Nishant Kumar

Abstract

Purpose – This study aims to provide insight to the little-researched phenomenon of reverse knowledge

flow within multinational corporations (MNCs) and to explain the role of managerial attention in exploiting

the prospect of knowledge transfer from subsidiaries located in developing countries.

Design/methodology/approach – Existing literature across disciplines has been integrated to provide

a clear description of the concept of reverse knowledge flow and managerial attention, in order to

explain the role of managerial attention in reverse knowledge transfer activities within MNCs. Two pilot

studies were conducted on European MNCs to build the background for this study.

Findings – Managerial attention is a key factor in recognising potential source of knowledge within the

multinational network, and a prior requirement for knowledge transfer to take place. Attention decisions

are partially based on the knowledge source location, awareness/attractiveness, and the strategic

importance. Thus, MNCs can adopt managerial practices and control mechanisms to influence the

attention of executives and achieve higher knowledge flow from subsidiaries.

Research limitations/implications – There is a need to undertake empirical research and in-depth case

studies of knowledge management practices using the arguments and framework provided in this article.

Practical implications – MNCs can develop mechanisms for overcoming attention biases influence on

reverse knowledge flow. The attention based approach can lead to better subsidiary integration and

knowledge management practices in MNCs.

Originality/value – This study advances the theory on reverse knowledge flow in MNCs by presenting

an attention based theoretical framework for effective knowledge transfer.

Keywords Knowledge management in multinational corporations, Managerial attention,Reverse knowledge transfer

Paper type Research paper

1. Introduction

There has been a shift in the role of headquarters with regard to how knowledge is generated

and distributed across the multinational corporation (MNC) network. Increasingly,

headquarters have been acting as a receiver and coordinator of knowledge from their

internationally dispersed subsidiaries (Ciabuschi et al., 2010, 2012). Whereas prior studies

have illuminated the ways in which knowledge flows between headquarter and subsidiaries

(Nohria and Ghoshal, 1997; Hakanson and Nobel, 2000, 2001; Foss and Pedersen, 2002;

Mudambi and Navarra, 2004; Frost and Zhou, 2005; Mudambi et al., 2007; Adler and

Hashai, 2007; Yang et al., 2008), other possible flows of knowledge seem to remain largely

discounted. An important yet relatively less explored area in the knowledge transfer

research is the flows of knowledge from subsidiaries to MNC headquarter (Monteiro et al.,

2008). This underexploited possibility of knowledge diffusion from subsidiaries seems

particularly persistent among subsidiaries located in developing countries. For instance,

Paik and Choi (2005) found that the global knowledge management experiences of

Accenture consultants in the East Asian region was seldom, if at all, shared with colleagues

in other regions or sites.

DOI 10.1108/JKM-02-2013-0062 VOL. 17 NO. 5 2013, pp. 695-708, Q Emerald Group Publishing Limited, ISSN 1367-3270 j JOURNAL OF KNOWLEDGE MANAGEMENT j PAGE 695

Nishant Kumar is based at

the Department of

Marketing and

Management, Stockholm

University School of

Business, Stockholm,

Sweden.

The author is thankful to theeditor and four anonymousreviewers of the Journal ofKnowledge Management fortheir valuable feedback. Thepaper was originally submittedon 5 May 2009.

Received 7 February 2013Revised 21 April 2013Accepted 22 April 2013.

Although there are numerous examples that suggest the growing importance of reverse

knowledge flow for the MNCs, there are practically very few attempts made to explain

theoretically or through empirical examinations the reasons to why reverse knowledge flow

from subsidiaries located in developing countries largely remains underperformed

(Monteiro et al., 2008; Bouquet and Birkinshaw, 2008). Most existing literature tends to

focus on identifying the barriers (Sun and Scott, 2005) and facilitators of knowledge transfer

from the units which are already involved in knowledge transfer activates. Previous studies,

Gupta and Govindarajan (2000), Szulanski (1996), Foss and Pedersen (2002), Ambos and

Ambos (2009) and others, take into account only those units which were already involved in

the existing knowledge transfer activities of the MNC. However, some studies (Gupta and

Govindarajan, 1991, 2000; Bouquet and Birkinshaw, 2008; Monteiro et al., 2008) have

indicated that some subsidiaries might not participate or have only limited experiences from

lateral knowledge transfer activities, this issue remains largely unresolved.

Thus, the aim of the paper is:

B to identify the factors that have effects on reverse knowledge flow from subsidiaries

located in developing countries; and

B propose a managerial attention based view for effective knowledge transfer in MNC

networks.

In doing so, this study elaborates on the issue by drawing on recent thinking around

managerial attention (Ocasio, 1997) – the understanding that managers’ attention towards a

knowledge source can lead to the decision of transfer and initiation of knowledge transfer

activities (Monteiro et al., 2008), and conducting pilot study on two European MNCs. By

expanding our understanding of the role managerial attention plays in reverse knowledge

flow, this study adds to previous efforts made by Gupta and Govindarajan (2000), Levy

(2005), Levy et al. (2007), Bouquet et al. (2009) and others. I hope that the ideas developed

in this paper may bring into light some implications for management. While most

headquarter executives understand the value of looking around for the best sources of ideas

and knowledge, they seldom have the luxury to attend all the signals that matter, and thus

limiting the scope of knowledge transfer. However, as the paper suggests, there are ways of

overcoming such attention biases that management may bring into their range of explorative

activities within the MNC knowledge network.

The paper proceeds by presenting two cases to illustrate the problem being discussed here,

followed by the identification of the factors that affect effective reverse knowledge transfer

from subsidiaries. Finally, the paper proposes managerial attention based perspective to

understand how MNC headquarter can influence the knowledge flow from subsidiaries by

shaping the attention of headquarter executives. The paper concludes with a discussion,

implications for theory and practice, limitation and suggestions for future research.

1a. Case of a European security multinational company (ESMC)

ESMC is a leading European manufactures of security products with around 7,000 staff in

more than 60 countries, offering its customers a wide range of innovation driven security

solutions. The company develops and maintains its competitiveness through superior

technology innovations and continuous knowledge development, supported by customer

service. The company has been in business for many decades, and developed solutions for

a range of security requirements. The company entered Indian market, to explore the

emerging market opportunities. India is a growing economy, with an increasingly large

number of construction works, such as apartments, and office buildings, market potential for

security products is very high and this offers tremendous business opportunities for

companies like ESMC. The company has been in the Indian market for almost six years, and

reported high growth over the period.

The business head of the company in India, explained that the ESMC products are premium

priced, while India is a very high price sensitive market place. The firm started facing growth

challenges as the high price of the products was showing negative effect on the market

performance. Salesman reported that one of the main security products has needless

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additional features, such as heating equipment, which are useless for the Indian conditions.

This happened mainly because the products were designed, developed and produced to

meet the customer and environmental requirements in the Europe, where the weather

conditions are extreme cold and require heating feature in the products. So the company

decided to remove the heating feature and the cost reduced by almost 30 percent. This also

reduced the operating and maintenance cost of the product. After the changes the produce

became a huge success in terms of gaining market share. On further enquiry, the business

head could not recognize if this knowledge was used in other markets where the

environmental conditions and customer sentiments are similar to that in India. Furthermore, it

appeared through the interview that the company was mainly interested in increasing its

market share through the help of existing product ranges and therefore it was channeling its

energy on enlarging its sale coverage area. This example illustrates how multinational firms

fail to harness the knowledge originating from subsidiaries in developing countries.

1b. Case of a Scandinavian medical equipment company (SMEC)

SMEC is a leading manufacturer and global supplier of medical equipment and training

products based in Scandinavia. The company operates on a global basis, has more than

1,400 employees, sales operations in 23 countries, and manufacturing and R&D operation

units in four different locations. The manufacturing unites are located in Scandinavia, South

America, and Asia. SMECmanufactures a wide range of products and tries to utilize different

efficiency techniques, like TPM and lean principles, and in-house developed assembly

processes. The firm works on continuous improvement, and have programmes running that

are linked to product development andmanufacturing excellence. Efficiency also spreads to

managing the supply chain within the business as SMEC sources its main materials from

global suppliers. The firm mainly sources products as close to plants as possible, so there

are always local factors to be considered. Research and development is understandably

very important to SMEC, and the firm has put a lot of resources into this area.

In 2004, SMEC started its manufacturing facility in China with the aim to enable the company

to be better prepared for the future growth and access to the rapidly growing Asian market.

SMEC factory in China is mainly run by local managers and employees and they are trained

by SMEC on product and quality processes. The factory is headed by a Chinese who had

previously worked for another western European company. The firm has also positioned

three Scandinavian experts in the factory, they are not directly engaged in the production or

supply chain activities but their role is of an observer and they are mainly engaged in

knowledge development activities. By being close to the factory they are able to witness

most of the critical incidents in the production process and used that learning into product

and process change. They had little interaction with other employees, and they were working

quite independently despite the fact they were continuously present in the same premises.

The above two stories illustrate two different scenarios, both suggest that subsidiaries are

potential source of knowledge, yet, the transfer mechanism is not well established in the first

case and reverse knowledge flow is almost non-existent, in the second case there is high

degree of recognition of the importance of reverse knowledge flow, but reverse knowledge

flow mechanism is not well integrated to the subsidiary motivation.

2. Factors affecting effective reverse knowledge transfer in MNCs

Reverse knowledge transfer in MNCs can be defined as the transfer of know-how and

information, about product, process, technology, market, government agencies,

competitors, and suppliers, from a subsidiary to its headquarter in all kinds of ways,

e.g. via telephone, e-mail, regular mail, policy revisions, meetings, shared technologies, and

reviews of prototypes, that can be lead to some change in product, process, policy, or

technology. There is an established body of literature that highlights various organizational

and contextual factors that either promote or impede the transfer of knowledge in MNC type

organizations. According to Argote et al. (2003), theoretical assumptions and empirical

examinations of the factors influencing knowledge transfer can be organized according to

three properties of the context within which knowledge transfer occurs:

VOL. 17 NO. 5 2013 j JOURNAL OF KNOWLEDGE MANAGEMENTj PAGE 697

1. properties of the units;

2. properties of the relationships between units; and

3. properties of the knowledge itself.

With regard to properties of units, characteristics of both the source and the recipient unit

affect the process of knowledge transfer. For example, the motivational dispositions of the

source and recipient units (Gupta and Govindarajan, 2000); the absorptive capacity of the

recipient units (the ability to absorb and assimilate transferred knowledge) (Cohen and

Levinthal, 1990); values of source unit’s knowledge stock (Gupta and Govindarajan, 2000);

as well as the existence and richness of transfer mechanisms between the units

(Subramaniam and Venkatraman, 2001).

Some researchers emphasize properties of relationships between units, such as closeness

in the relationships in terms of high level of trust, degree of interdependence and tie among

different units, shared understanding and normative integration in the organization, which

may vary across the organization (Hansen, 1999; Ghoshal and Bartlett, 1988; Ghoshal et al.,

1994). Cultural and institutional distance between units may also create stickiness in internal

knowledge transfer (Szulanski, 1996; Kostova, 1999). While other researchers emphasize

the different properties of knowledge, such as knowledge tacitness (Nonaka, 1994) and

knowledge ambiguity (Simonin, 1999), and knowledge complementarity (Buckley and

Carter, 1999) that facilitate or act as knowledge related barriers to knowledge transfer.

In general, MNC based literature tends to suggests that knowledge flow takes place mostly

from headquarter to the subsidiary in the form of transfer of expertise (e.g. skills and

capabilities) and technology. As headquarters are believed to have superior knowledge and

expertise that they want to exploit in a new market. On the other hand knowledge flow from

subsidiaries is not so common, as it is widely believed that as a local innovator subsidiary

knowledge is totally location specific and therefore less likely to be transferred. Thus, it can

be inferred that knowledge flow from subsidiaries to headquarter or other unites of the MNC

network can occur, when the subsidiary is able to generate knowledge which is globally

relevant. Such units are defined either as global innovator or in a less self-sufficient manner

as integrated players. But mere generation of globally relevant knowledge does not make

knowledge transferrable unless other units are aware of it and they perceive it valuable and

worth transferrable. Furthermore, whether the knowledge is globally relevant and worth

transfer or not is a matter of decision by headquarters executives, as they are believed to be

the facilitator and coordinator of such knowledge flow (Ambos and Volker, 2010; Ciabuschi

et al., 2010, 2012; Rabbiosi, 2011; Miao et al., 2011).

In these terms, MNC headquarters’ role become important in shaping the decisions and

actions of executives and can be done by exercising different organizational control

mechanisms. Therefore, it is important to understand the various factors that can have

influence on the headquarters’ efforts in shaping such knowledge flow inside the

organization.

2.1 Perceived value of knowledge

The perceived value of knowledge is the value that an individual places on the knowledge,

and it may affect one’s willingness to seek such knowledge. There are multiple perspectives

on how knowledge can be valued. The marketing and knowledge management literature

defines value as an ‘‘interactive relativistic preference’’ or, more formally, as a ‘‘relativistic

(comparative, personal, situational) preference’’ characterizing a subject’s experience of

interacting with some object (Holbrook and Corfman, 1985). Zeithaml (1988) found that the

term value is used in many different ways, by describing a wide variety of attributes and

higher level abstractions that provide value. According to Zeithaml (1988) what constitutes

value appears to be highly personal and idiosyncratic. In these terms, value is a perception

(Day and Crask, 2000) and it can also apply when the object being considered is

knowledge.

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Knowledge can be valued from the perspective of knowledge seeker. Research suggests

that the perception of seeker does have influence on knowledge-seeking behaviours; a

person is more willing to seek out the knowledge if that is valuable in his/her perception

(Gupta and Govindarajan, 2000). In the knowledge management literature, ‘‘uniqueness’’ is

the basis of knowledge’s value, such that unique knowledge is more valuable. While, Augier

et al. (2001) argue that the ‘‘relevancy’’ of knowledge may determine its value; the more

relevant the knowledge is to the problem at hand, the more valuable it is for the user.

Davenport and Prusak (1998) argue that knowledge is valuable because it is ‘‘close to

action’’. These are some of the possible dimensions of perceived value of knowledge, which

may guide an organization to understand it better and manage it effectively. In these terms,

this study argues that the headquarter executives’ perception (i.e. from the receivers

perspectives) about the value of knowledge is important to shape the flow of knowledge from

subsidiaries located in developing countries.

2.2 Knowledge source awareness/attractiveness

Monteiro et al. (2008) argue that to understand the challenges of knowledge transfer from

remote subsidiaries we need to focus on the initiation stage of a knowledge transfer process,

the stage that comprises events that leads to the decision of knowledge transfer (Szulanski,

1996). Based on the behavioural theory of the firm (Cyert and March, 1963), Monteiro et al.

(2008) suggest that knowledge transfer between units can be framed as a problemistic

search process on the part of recipient (Hansen, 1999). In these terms, knowledge flow in the

MNC can be viewed as a managerial search process for a solution to a problem faced by the

unit, and the search process, which is predicted as ‘‘simple-minded’’ and ‘‘biased’’ (Cyert

and March, 1963, p. 121), leads to the identification of a potential source.

Two issues can be clearly identified here, first is the attractiveness of the source and second

is awareness level of the manager about the source through its active involvement in the

process. According to Perez-Nordtvedt et al. (2008) the attractiveness of a source as a

repository of knowledge affects knowledge flow to recipient organization. A foreign source

becomes attractive when it exhibits superior results in generating and using knowledge,

consistently over a period, useful to the recipient. A consistent superior performance over a

time enhances its trustworthiness, as it exhibits its ability to ‘‘accomplish something on its

own’’ (Szulanski et al., 2004, p. 604).

Perez-Nordtvedt et al. (2008) further argue that if a recipient organization is very motivated to

acquire knowledge possessed by a foreign source, it will be better prepared psychologically

to understand the knowledge that is being transferred. They link the learning intent with the

speed of transfer and suggest that cross border knowledge transfer is likely to be faster

when the recipient organization is motivated. This study argues that the motivation to acquire

knowledge is linked to the awareness level of the receiver, and the pre- and post-awareness

perception of the receiver towards the knowledge stock. As the headquarter manager

(receiver) becomes aware about the knowledge stock through formal and informal

organizational and communication ties, and develops positive mind-set about the value of

the knowledge stock then he/she becomes motivated to explore the stock. Thus, the scope

and speed of knowledge flow may differ along with formal and informal organizational and

communication ties. The basic assumption is that the underlying formal and informal

structures shape the headquarter executives awareness level and facilitate perception

building.

Schulz (2003) states that external knowledge is more likely to be considered relevant when

knowledge sharing participants are aware of the types of knowledge residing in other units,

i.e. the sender is aware of the knowledge requirements of the recipient and the receiver is

aware of the relevant knowledge residing in source. Awareness might lead to initiation of the

process of knowledge transfer from one unit to other unit and social relations are key factor in

facilitating such awareness and transfer. Informal communication networks and ties have

been suggested as pivotal in facilitation of such type of knowledge transfer (Ghoshal et al.,

1994; Szulanski, 1996). Schulz further argues that ease of communication, like informal ties

and networks, is a necessary condition but not a sufficient reason for knowledge transfer. In

VOL. 17 NO. 5 2013 j JOURNAL OF KNOWLEDGE MANAGEMENTj PAGE 699

order to knowledge transfer take place, knowledge worth sharing needs to be available and

recognized as such and an absence of such knowledge or awareness simply hampers the

communication process (Smith et al., 1994). As the flow of information within the MNC is far

from perfect (Birkinshaw et al., 2000), and subsidiaries are imperfectly integrated into their

corporate network (Ghoshal and Nohria, 1989). In such a situation headquarter manager’s

perception about the capabilities of the subsidiary play an important role in decision making

process.

2.3 Location specific effects

Where the subsidiary is physically located can have impact on the outward knowledge flow

from the subsidiary (Gupta and Govindarajan, 2000). Despite its importance, few studies

have empirically linked subsidiary location to reverse knowledge transfer in MNCs. This

study argues that the perceived value of subsidiary’s knowledge stock may suffer if the

subsidiary is located in developing country. As a subsidiary’s knowledge base is embedded

in the local environment in which it develops, the location of the subsidiary will have

significant effect on the reverse knowledge transfer motivations. Subsidiaries located in

technologically advanced countries or locations may find it easier to persuade the

headquarter executives about the value of its knowledge, and it is likely that the perception

of the headquarter executive towards such subsidiaries will be positive. In these terms more

advanced countries are likely to serve as trend-setters and as the sources of technological,

marketing, and managerial know how (Gupta and Govindarajan, 2000).

Gupta and Govindarajan (2000) in their study of 374 subsidiaries belonging to 75 MNCs

located in the USA, Japan and Europe found that knowledge outflow from the subsidiaries

that are larger in size and located in countries with a higher level of economic advancement,

are higher in relative to the country of the parent corporation. This means, a subsidiary

located in Silicon Valley may be regarded highly valuable for sourcing IT related knowledge

in contrast to a unit located in Istanbul. This also means that knowledge received from units

located in economically and technologically less advanced countries might – due to a sense

of superiority or ethnocentrism – be perceived as contextually less sensitive and lower in

commercial value. A major hurdle is lack of motivation to learn/accept ‘‘not-invented-here’’

knowledge on the recipient side, which limits the MNC’s ability to exploit knowledge

developed in other locations (Gupta and Govindarajan, 2000).

Chan et al. (2008) examine the country specific influences on the business activities and

performance level of MNCs and argue that the average foreign affiliate performance is likely

to be low in institutionally underdeveloped host countries. As the poor performance may

lower the attractiveness of the source, it may create negative perception about the source

subsidiary, leading to a possible isolation of the unit from any future knowledge sourcing

activity. Likewise, literature in the marketing area suggest that a manufacturing nation’s

image has a significant impact on how consumers perceive and evaluate the quality of

products from that country, and hence on their propensity to buy those products (Roth and

Romeo, 1992). Applying a similar reasoning to context of reverse knowledge transfer within

the MNCs, one can argue that the location of a subsidiary will have influence on how

managers in other MNC units perceive the value of knowledge residing in that subsidiary.

2.4 Socio-cultural and institutional distance

Another explanation to the varying degree of attractiveness to the knowledge source can be

drawn from the Jensen and Szulanski’s (2004) argument that the differences in cognitive

institutional environments may create difficulties in understanding the nature and purpose of

the practices and thus create barriers to the acceptance and implementation of transferred

practices. As institutions vary from country to country, one could expect different degrees of

difficulties in recognising and transferring the same practices to different locations. The

socio-cultural and institutional distance between the foreign and the home country of the

MNC may have deep influence of the knowledge transfer. According to Hofstede (1984),

knowledge in firms is contingent on the socio-cultural environment of the firm, what is

appropriate knowledge in one country may be inappropriate to the firms in other countries. In

turn, this may cause problems to the knowledge transfer process (Pedersen et al., 2003).

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Factors such as different languages, business cultures, and institutional framework make up

a ‘‘psychic distance’’ as perceived by the MNC manager (Johanson and Vahlne, 1977). As

the psychic distance between nations increases it is more difficult for firms to acquire

knowledge from abroad.

Nahapiet and Ghoshal (1998) suggest that differences in language may influence

individuals’ perception. The specification of this problem can be found in the study of

Marschan-Piekkari et al. (1999), who argue that limited natural language skills may lead to

individuals or even units to be ‘‘left outside’’ organizations. For instance, limited language

skills may affect the structural social capital by isolating people or units from each other and

making them inaccessible. Thus, a clash between national cultures may jeopardize the

international transfer of knowledge (Pedersen et al., 2003). This study argues that, language

barrier is not necessarily an important issue, because in many MNCs, working language is

English and many of the employees in developing countries have good English language

background such as India, and other commonwealth countries. Yet, socio-cultural and

institutional distances have to be taken into account while considering knowledge flow from

subsidiaries located in developing countries.

2.5 Strategic importance of subsidiary

A better and consistent performance may improve the subsidiaries attractiveness as a

potential knowledge source, but its strategic position within the MNC network may also have

an effect on the managerial decision to transfer knowledge. Yang et al. (2008) posits that

conventional transfer (transfer from headquarter to subsidiaries) is a ‘‘teaching’’ process

whereas reverse knowledge transfer (transfer from subsidiaries to headquarter) is a

‘‘persuading’’ process. Additionally, there is reason to believe that because of the

principal-agent relationship, parent’s commitment to learning from subsidiaries is less than

the subsidiaries commitment to learning from their MNC parents. In these situations,

subsidiary managers through their initiative can channel information to parent company

executives and facilitate their understanding of how the subsidiary’s knowledge or

experience can contribute to the rest of MNC (Monteiro et al., 2008). Nevertheless, it is a

difficult process when the subsidiary is located in economically and technologically

disadvantage location. What can make a difference is the strategic importance of the

subsidiary in the network. As the term strategic importance is a broad and less developed

concept, with respect to subsidiaries located in developing countries, their role is

ever-increasing, not limited to selling MNC products and covering large market share, most

now also perform higher value-added activities such as manufacturing and R&D (Forsgren

et al., 1992). These differentiations of roles make some subsidiaries strategically important

and consequently headquarter executives’ are required to pay better attention to them.

Furthermore, it has been widely observed that headquarters impose their best practices on

implementer subsidiaries and does not allow locally available knowledge to flourish. This

may led to continued neglect of reverse knowledge flow prospects. According to this study,

subsidiaries involved in production activities, due to cost advantages, cannot be considered

strategically important, as when the cost benefits shrink, headquarter may relocate or

disperse the production activities[1]. Thus, headquarters should continuously evaluate the

role of subsidiaries and allow knowledge development activities in subsidiaries not originally

mandated for that.

3. Managerial attention perspectives on effective knowledge transfer

Managers and executives are confronted with far more information that they can handle, and

so they have to be selective in those aspects of the environment that enter their

consciousness (March and Simon, 1958; Cyert and March, 1963; Mintzberg, 1973). This

assumption of bounded rationality has inspired a large literature on attention, which

constitutes a broad field of research that spans several disciplines and fields of enquiry

(Jones and Baumgartner, 2005). Attention is the initial step in the information processing

sequence of attention, interpretation and action (Daft and Weick, 1984). Here, attention

implies how managers discriminate among available stimuli, selecting those that will be

VOL. 17 NO. 5 2013 j JOURNAL OF KNOWLEDGE MANAGEMENTj PAGE 701

given further consideration, and discarding others (Calori et al., 1994; Huff, 1990). In this

respect the inner experiences and cognitive schemas of individuals are emphasized.

Attention is viewed as a collection of relatively tacit psychological mechanisms that occupies

the consciousness of managers, and activate, buffer or guide managers in their strategic

thoughts (Cowan, 1986; Kiesler and Sproull, 1982; Dutton et al., 1983, 1989; Fiske and

Taylor, 1984).

Another view on attention is that attention is socially embedded, and cannot be explained

solely by reference to cognitive processes. According to Ocasio (1997, p. 190), attention is

intrinsically linked to the immediate context in which cognition and actions are situated. This

framework emphasizes the organization practices in which real work of managers takes

place, rather than particular source of cognitive influence, i.e. managers enter particular

type of procedural and communication channel to process matters available for their

consideration and it is by understanding how much time and effort they invest in the course

of such activities that one gains evidence as to what constitutes their actual focus of attention

(Bouquet and Birkinshaw, 2008; Ocasio, 1997). This is a practice oriented view of attention

which explains how the attention of managers and executives, their accumulated

experience, and critical aspects of environment in which they operate come together to

create a situated cognition that has implications for reverse knowledge flow.

The focus of this paper is on the attention of headquarter managers towards subsidiaries in

developing countries. Attention in general can be in different forms. For instance, Bouquet

and Birkinshaw (2008) introduce the concept of ‘‘positive headquarter attention’’ and define

it as the extent to which a parent company recognizes and gives credit to a subsidiary for its

contribution to the MNC as a whole. This definition is based on the assumption that

headquarters act as facilitator to subsidiaries for their future developments. Another

assumption is that subsidiary’s contribution to the MNC as a whole is highly important for a

positive attention. This definition mainly explains the organizational attention and has some

limitations, for instances headquarters can act as a facilitator as well as resource seeker from

subsidiaries. So attention can be two sided, one for mentoring and another for seeking.

Attention also depends upon the level of control. A higher control requires higher degree of

attention and a loose control may require less attention. In this respect it is not always

necessary for subsidiary to contribute to whole MNC to gain attention, but it is the operational

conditions which set the level of attention. In these terms, headquarter executive’s attention

can be broken down into following five sub-constructs.

Relative attention

Attention can be viewed as a competitive process, wherein the level of recognition and credit

given to a focal subsidiary is relative to the level given to other subsidiaries in an MNC

(Bouquet and Birkinshaw, 2008). Studies have found that poor countries typically do not get

much attention from parent executives (Bouquet and Birkinshaw, 2008). But why poor

countries receive poor attention is a little researched phenomenon. This is not yet clear that

which type of attention is poor, as headquarter managers may apply supportive (giving

support to subsidiaries and making them prosper) as well as support seeking attention

(seeking knowledge from subsidiaries). Sometimes a subsidiary may receive good

supportive attention but at the same time may draw little support seeking attention.

Supportive attention

MNC headquarters’ controlling discretionary resources may use this as a way to facilitate a

subsidiary’s development (Luo, 2003). Subsidiaries are not equal in resources and

capabilities. The reasons are local factors, such as lack of trained human resources, lack of

infrastructure in the host environment; organizational factors, such as to bring conformity

between the headquarter and subsidiary business processes, to create better coordination

between the headquarter and subsidiary; and strategic factors, such as, the role of

subsidiary in the organization, strategic importance of the subsidiary. Due to the above

reasons subsidiaries may require varying degree of support from headquarter. Such

attention may be regarded as value-added interventions of parent executives.

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Knowledge-seeking attention

Subsidiaries are not only receiver of knowledge and support from headquarter, but they can

also be producer of knowledge and contribute to the organization as a whole. Headquarter

managers may seek knowledge from subsidiaries, and it may depend upon the knowledge

seeking attention paid by headquarter managers to subsidiaries. It is being argued that

many MNC organizations lack this type of attention. And therefore, MNC headquarter

executive’s should focus on improving knowledge seeking attention.

Explicit attention

The explicit recognition of subsidiaries achievements and contribution to the MNC as a

whole by headquarter, such as a presentation in the annual reports or in media can be

described as visible or explicit attention (Bouquet and Birkinshaw, 2008). Visible attention

may be useful in boosting the confidence level of subsidiaries with headquarters. For

example, Sony Europe’s President Masaru Tamagawa in his public statement was highly

appreciative of the Sony’s business model in India, where he had led the company for five

years from 2007 to 2012. This is evident from the following statement.

We want to replicate everything of India in Europe. The working style of various divisions,

including product strategy, distribution channel and marketing, are very good in India and

we want to replicate these in Europe[2].

Tacit attention

Apart from expressing explicit visible attention, headquarter executives may show interest

and have awareness about the activities of subsidiaries, for instance, about an ongoing

development project or best practices developed and adopted by subsidiary. Such

attention does not appear in explicit form, but exists in tacit form. Subsidiary managers can

recognize such attention through their interaction with headquarter managers. Such

attention is difficult to formalize in the organization processes because of the tacit nature of it,

but organizations can promote such attention by adopting mechanisms such increased

interaction between headquarter and subsidiary managers in form of personal visits or

through communication.

Sustained attention

Sustained attention is ‘‘the ability to direct and focus cognitive activity on specific stimuli’’

(DeGangi and Porges, 1990). In order to complete any cognitively planned activity, any

sequenced action, or any thought one must be able to focus on the activity long enough to

complete the task. A distraction can interrupt and consequently interfere in sustained

attention. Sustained attention is important for knowledge transfer from subsidiary units not

previously involved in such activities, as it may require headquarter executives to ‘‘pay

attention’’ to things or stimuli that can occur at different occasions and in different forms or

can be complex. DeGangi and Porges (1990) indicate that there are three stages to

sustained attention which include: attention getting, attention holding, and attention

releasing. Attention holding is the ‘‘maintenance of attention when a stimulus is intricate or

novel’’, it encourages information processing. It is important because of its role in learning. If

an activity or stimulus is moderately complex, the person will expend energy in information

processing and learning. But holding attention can be difficult when the headquarter

executives are not motivated.

The attention based view presented above can be used to analyze the two cases ESMC and

SMEC discussed in this article. In the case of ESMC, headquarters’ attention towards the

subsidiary is mainly supportive in nature and the subsidiary figures low on all factors that

have an effect on reverse knowledge flow. In the second case, the positioning of three

headquarter executives at the subsidiary on continuous basis illustrates that there is both

support giving and knowledge seeking type attention and also it is present in both explicit

and tacit form. But such type of arrangement may also have negative effect on the motivation

of the subsidiary employees. As they may perceive it as lack of trust by headquarter in

subsidiary. Also, it may not be feasible for the MNCs to position headquarter executives at

VOL. 17 NO. 5 2013 j JOURNAL OF KNOWLEDGE MANAGEMENTj PAGE 703

every subsidiary office. Expatriate managers or subsidiary heads can play an important in

the reverse knowledge flow process but it cannot be left entirely on them, as they might have

others priorities, and reverse knowledge flow may not be that effective.

4. Conclusions, implications, and limitations

The aim of this paper was twofold:

1. to identify the factors that can have influence on headquarter executives’ decisions to

seek knowledge from subsidiaries not previously involved in reverse knowledge transfer

activities, more precisely subsidiaries located in developing countries; and

2. suggest attention based view to manage reverse knowledge flow in MNCs.

The paper argues that MNCs lack efficiency in exploiting knowledge from distant

subsidiaries; particularly from those located in developing countries. It reviews a range of

literature on how MNC headquarters’ decision and behavior to seek knowledge from

subsidiaries is influenced by different factors.

This paper supports the view presented by Gupta and Govindarajan (2000) that a higher level

of knowledge outflow will occur from the units with more valuable knowledge stock. It also

supports the view of Monteiro et al. (2008), that the perception of the recipient about the

source of knowledge can influences the process of knowledge transfer. But also highlights

some issues with the existing models of knowledge transfer that might not fully capture the

dynamics of reverse knowledge flow in MNCs. Previous studies have primarily focused on the

perception of the recipient and the capabilities of subsidiary to transfer knowledge. This study

suggests the importance of managerial attention in reverse knowledge flow from subsidiaries

in developing countries and proposes six modes of managerial attention – relative attention,

supportive attention, knowledge-seeking attention, explicit and tacit attention, and sustained

attention. The study offers a rich conceptualization of the attention concepts and explains their

role in managing reverse knowledge flow in MNCs with the help of examples.

This study also highlights a major problem with the problematistic search approach of the

headquarter executives, that is, executives are more likely to search for knowledge from the

sources which have an established reputation of knowledge creation and transfer to other

units, and are perceived highly (Herriott et al., 1985). This study argues that such type of

search behavior may result in inefficient reverse knowledge flow from new and remote

subsidiaries for prolong period, and thus may negatively affect the firms’ potential to benefit

from undervalued knowledge stock held up in the unawareness and unwillingness of

recipient. For instance, a unit located in technological low environment but employing highly

educated and trained human capital may experience higher knowledge stock level or high

potentiality to generate solutions to the problems faced by the focal unit, but may be

considered unimportant by the recipient because of its existence in technologically low

environment, newness, or having less strategic importance for the MNC.

Furthermore, this study provides an example of how MNC use expatriate managers to

transfer knowledge from subsidiaries to other part of MNC and thus to some extent

addresses the call made by Bjorkman et al. (2004) to investigate the use of expatriate

managers in outward knowledge transfer from subsidiaries to other parts of the MNC. This

study supports the view of Bjorkman et al. (2004) that extensive use of expatriate managers

in the subsidiary may have a negative impact on the development of the long-term, trustful

relationships between MNC headquarter and subsidiaries.

In summary, the attention based view can provide a potent framework for understanding

reverse knowledge flow in MNC andmanaging it effectively. The above explanation is shown

in Figure 1.

Overall, this study contributes to the literature on reverse knowledge flow in MNCs, but it also

suffers from a number of limitations. There is a need to undertake empirical research and

in-depth case studies of knowledge management practices using the arguments and

framework provided in this article. Apart from the empirical studies or in-depth case studies

PAGE 704 j JOURNAL OF KNOWLEDGE MANAGEMENTj VOL. 17 NO. 5 2013

there is need to identify some other aspects of reverse knowledge flow. One such aspect is

the perception gap between headquarter and subsidiary. A perception gap may have

negative impact over the position of subsidiary within the network (Birkinshaw et al., 2000).

Another limitation is that, this study is based on the assumption that headquarter executives

play important role in dissemination of knowledge as they are more active in communicating

with different subsidiaries and therefore considered as more important to study. But attention

of subsidiary executives is also important. As with increasing network based view of MNC,

role of subsidiary executives are becoming increasingly important for study. In another

suggestion, it can be argued that manager’s global attention power is inherent characteristic

of a global mindset and thus the issue of reverse knowledge flow should be studied in the

context of global mind-set. Hopefully, I can proceed by developing a number of propositions

and empirically testing them under different circumstances, and locations that normally do

not draw researchers’ attention, and in different MNC constellations.

Notes

1. On 8 January 2009, Dell announced that it would move all Dell manufacturing in Limerick to Dell’s

new plant in the Polish City of Łodz by January 2010 (www.rte.ie/news/2009/0108/dell.html).

2. On 8 January 2013, Sony Europe President made an statement on Indian Business Model www.

thehindu.com/sci-tech/technology/gadgets/sony-looks-to-replicate-indian-model-in-europe/

article4287065.ece

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About the author

Nishant Kumar holds a PhD in International Business from the Stockholm University where heis working as an Assistant Professor and researcher in the Department of Marketing andManagement. He is currently working in the areas of reverse innovation, entrepreneurshipand innovations in emerging markets. Nishant Kumar can be contacted at: nku@fek.su.se

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