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Cited by 3,996International Business and FDIInnovation and Knowledge ManagementOutsourcing and Supply Chain Management

Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation

Open access
Kogut, Bruce, Zander, Udo·1993·Journal of International Business Studies
DOI 10.1057/palgrave.jibs.8490248
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Abstract

Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporation.

Integrity signals

Registry

Crossref · 10.1057/palgrave.jibs.8490248

Cites

30 of 30 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

0 of 14 cited sources checked · 0 supported · 0 flagged

  • Findingown data

    The more tacit the technology, the more likely it will be transferred within the firm.

    “strong support was found for the proposition that the choice of transfer mode is explained by the degree of tacitness of technology.”
    • Also stated in: § Results · hedged
      “They consistently show that the more tacit the technology is, the more likely it will be transferred to a wholly owned subsidiary.”
    Quote in the paperSubstantial claim
  • Findingown data

    The less codifiable and harder to teach a technology is, the more likely its transfer will be to wholly owned operations.

    “The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations.”
    • Also stated in: § Results · hedged
      “They consistently show that the more tacit the technology is, the more likely it will be transferred to a wholly owned subsidiary.”
    Quote in the paperSubstantial claim
  • Findingreasoning

    Knowledge that is difficult to codify or teach and is complex will tend to be transferred within the firm.

    “The following investigation is meant to show that knowledge that is difficult to codify or teach and is also complex will tend to be transferredwithin the firm.”
    • Also stated in: § Results · hedged
      “The positive coefficient to Complexity indicates that as technologies increase in their complexity, they are more likely to be transferred to wholly owned subsidiaries.”
    Quote in the paperSubstantial claim
  • Findingown data

    The results suggest there remains a distinguishable boundary in the knowledge between partner firms.

    “Ourresults suggest, though, that there remains a distinguishable boundary in the knowledge between the partner firms.”
    Quote in the paperSubstantial claim
  • Findingreasoning

    When the sample was partitioned by grouping joint ventures and wholly owned subsidiaries together, the significance levels of the coefficients deteriorated.

    “We also partitionedthe sample by groupingjoint venturesand wholly owned subsidiaries together.The significance levels of the coefficients deteriorated.”
    Quote in the paperSubstantial claim
  • May combine two claims. 25
  • Classified as probably not a substantial claim. 15

  • May combine two claims.

    Findingown data

    Knowledge is transferred by joint ventures, but for uncodified knowledge, the preferred vehicle is transfer between wholly owned units.

    “Knowledge is transferredby joint ventures, but for uncodified knowledge, the preferred vehicle is transfer between wholly owned units.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    The number of previous transfers is negatively related to transfer to wholly owned subsidiaries, contrary to expectation, but the relationship is insignificant.

    “The number of previous transfers is negatively related to transfer to wholly owned subsidiaries, contrary to expectation, but the relationship is insignificant.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The multinational corporation exists not because markets for knowledge fail but because it is a more efficient organizational vehicle for transferring knowledge across borders.

    “The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationnone given

    Firms are social communities that specialize in creating and internally transferring knowledge.

    “Firms are social communities that specialize in the creation and internal transfer of knowledge.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    Analyzing firm growth and boundaries in a comparative statics framework is difficult.

    “It is difficult to discuss and analyze the growth of the firm, and its boundaries, in the context of comparative statics.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    These costs derive from efforts to codify and teach complex knowledge to recipients; more effort is needed the less capable the user.

    “Rather, these costs are derived from the efforts of codifying and teaching complex knowledge to recipients; more efforts must be expended, the less capable the user.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    When deciding which activities to keep internal, an important consideration is the firm's advantage in specialized knowledge of cooperating with agents and the potential for shared knowledge to accumulate and create future platforms.

    “And surely, when such a decision is considered, an importantaspect would be the extent to which a firm has an advantage in specialized knowledge of cooperating with agents and the extent to which their shared knowledge will further accumulate and provide platforms for future opportunities.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    Horizontal foreign direct investment is the transfer of knowledge within the firm across borders and is the primary expression of firm growth.

    “Horizontal foreign direct investment is, therefore, the transferof knowledge within the firm and across borders, and in this regard, such transfers are the primary expression of the growth of the firm.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationreasoning

    Technologies that are difficult to codify serve as platforms for expansion into future markets.

    “Another interpretation,rarely discussed in the literature,is that technologies that are difficult to codify also representplatforms for expansion into future markets.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Study design and conductreasoning

    Multiple respondents for an innovation were not used, and the risk of misattribution is low.

    “Multiple respondents for an innovation were not used, though, for some questionnaires, one individual scored the basic information and another answered the section dealing with the manufacturing process.(As the questions did not reflect on the respondent's performance, the risk of misattributionis low.)”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Study design and conductnone given

    A response rate of 80% was attained; the remaining 20% were similar in size and industry affiliation to the responding organizations.

    “A response rate of 80% was attained; the remaining 20% were similar in size and industry affiliation to the responding organizations.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationown data

    Tacitness increases transfer costs and reduces the speed of knowledge transfer within the firm or between partners.

    “By our results, tacitness will increase the costs of transfer and decrease the speed by which knowledge is transferred within the firm or between partners.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Interpretationreasoning

    The attributes of knowledge influence where the boundaries of the firm are drawn.

    “What our propositions and empirical tests have sought to put forth is the view that the attributes of knowledge influence the decision of where to draw the boundaries of the firm.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    The decision to license is influenced not only by costs relative to internal transfer but also by expected revenues foregone from failing to accumulate experiential knowledge in the foreign market.

    “In short, the decision to license is not simply based on the costs of this made relative to an internal transfer; it is also influenced by the expectation of revenues that would be foregone by failing to accumulate experiential knowledge in the foreign market.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Study design and conductnone given

    The three scales measuring codifiability, teachability, and complexity (or any set of measures) are unlikely to fully specify the tacitness of technology.

    “We include these additional two variables in our estimations, as it is unlikely that the three scales measuring codifiability, teachability, and complexity (or any set of measures) can fully specify the tacitness of technology.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    The findings are consistent with Teece's discovery that transfer costs vary widely.

    “These findings are perfectly consistent with Teece's discovery that the costs of transfer vary widely.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Teece

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationreasoning

    It is reasonable to conclude that age and previous transfers act as proxies for a latent variable of tacitness; once more direct measures are provided, their influence should disappear.

    “In short, it is reasonable to conclude that age and previous transfers act as proxies for a latent variable of tacitness; once more direct measures are provided, their influence should disappear.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    These transfer costs declined with each subsequent transfer and with the experience of the recipient.

    “These costs declined with each subsequent transfer and with the experience of the recipient of the technology.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Teece [1977] source

  • May combine two claims.

    Premisecitation

    Davidson and McFetridge found that transfer to unaffiliated recipients is promoted if the firm has transferred technology in the past, while experience in internal transfers encourages more internal transfers in the future.

    “Davidson and McFetridge [1984] similarly found that transferto unaffiliatedrecipients is promoted if the firm has transferred technology in the past.However, experience in internal transfers encourages more internal transfers in the future.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Davidson and McFetridge [1984] source

  • May combine two claims.

    Interpretationnone given

    Competition among firms rests on differential capabilities and on abilities to create and replicate new knowledge faster than competitors' imitation and innovation.

    “Competition among firms is based upon their differential capabilities, and their abilities to expand by the creation and replication of new knowledge faster than the imitative and innovative efforts of competitors.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    The costs of transferring technologies should differ among firms, and these differences should affect the desirability of transferring technology within the firm or by license, independent of opportunism.

    “The cost of the transfer of technologies should differ among firms, and these differences should have an effect on the desirability to transfer technology within the firm or by license, independent of the issue of opportunism.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationnone given

    Firms compete based on superior information and know-how and on abilities to develop new knowledge through experiential learning.

    “Firms compete on the basis of the superiority of their information and know-how, and their abilities to develop new knowledge by experiential learning.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    In advanced evolution, this process alters the firm's global knowledge and may transform it into a network of subsidiaries characterized by cross-border transfer of learning.

    “In its more advanced evolution, this process alters the global knowledge of the firm and may result in its transformationtowards a network of subsidiaries characterized by the cross-border transfer of learning.20”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites [20] 20. Semi-Synthetic Penicillin:PENGLOBE1970 (ASTRA) 24. Selective Beta-Blocker:SELOKEN1970 (HASSLE/ASTRA) 25. Roller Bearing: CC 1972 (SKF)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationreasoning

    The view put forth is compatible with an evolutionary perspective on firm growth.

    “In this sense, the view that we put forth is compatible with an evolutionary perspective on the growth of the firm.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Interpretationreasoning

    Firms can transfer technologies that are difficult to understand and codify at lower cost to wholly owned subsidiaries than to third parties.

    “One interpretationof this result is that firms are able to transfer these technologies at a lower cost to wholly owned subsidiaries than to third parties.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    Contractor found that technology transfer via licensing increases with the number of other firms using a technology, suggesting spillovers can create a generalized and cumulative capability in its use.

    “Contractor[1981] found thattechnologytransfer(via licensing) increases with the number of other firms using a technology, suggesting that spillovers can create a generalized and cumulative capability in its use.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Contractor [1981]

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationreasoning

    The standardization of evaluation systems and procedures expresses shared knowledge, values, and assumptions and eases knowledge transfer within the firm.

    “The standardizationof evaluation systems and procedures is an expression of the shared knowledge, values, and assumptions and eases the transfer of knowledge within the firm.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Study design and conductnone given

    The scales measure the latent construct of the tacitness of knowledge.

    “These scales measure the latent construct of the tacitness of knowledge.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisenone given

    At any point in time, given its current knowledge stock, a firm's managers must decide how to serve a foreign market: by license, export, or direct investment.

    “At any point in time, given the current stock of knowledge of the firm, managers will face the problem of deciding how to service a foreign market: by license, export, or direct investment.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Interpretationnone given

    Novel technologies are likely to be less codified.

    “At the same time, novel technologies are likely to be less codified.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Study design and conductown data

    Discriminant validity could not be tested by factor analysis, but a comparison within and between correlations of the items indicated reasonably strong discrimination.

    “Discriminant validity could not be tested by factor analysis, but a comparison within and between correlations of the items indicated reasonably strong discrimination.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Experience in internal transfers is codified in a way idiosyncratic to the firm, but once a firm has invested in codifying knowledge for licensing, external transfers are subsequently promoted.

    “These findings lend themselves to the interpretationthatthe experience in internal transfers is codified in a way idiosyncratic to the firm, but once a firm has invested in codifying knowledge for the purpose of licensing, external transfers are subsequently promoted.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    Technology is not a public good; Teece estimated transfer costs range from 2% to 59% of total costs of the twenty-seven projects he analyzed.

    “In a seminal paper, Teece [1977] established that technology is not a public good, estimating the costs of transfer to range from 2% to 59% of total costs of the twenty-seven projects he analyzed.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Teece [1977] source

  • Probably not a substantial claim: may not pass S4 (based).

    Interpretationnone given

    The more complex a manufacturing technology, the more difficult it should be to transfer or imitate.

    “The more complex a manufacturing technology, the more difficult it should be to transfer or to imitate.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Interpretationreasoning

    The notion of team skills independent of individuals is difficult to reconcile with the belief that internalization defines firm boundaries.

    “But what is more important, the second point suggests a notion of team skills independentof individualswhich is difficult to reconcile with a belief that internalization defines the boundary of the firm.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationown data

    One explanation for the deteriorated significance is that grouping 53 cases into the joint venture/wholly owned category and only 29 into the licensing/contract choice may have affected the results given the sample size.

    “One explanation is simply that such a procedure grouped fifty-three cases of transfer into the joint venture/wholly owned category, and only twentynine into the licensing/contract choice; given the sample size, this imbalance may have affected the results.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The problem with the argument that the firm exists due to market failure is that it is overdetermined; the assumption of opportunism is not needed, only the differential in costs of transmitting knowledge within the firm versus between firms.

    “The problem with the argument that the firm exists due to market failure is that it is overdetermined; the assumption of opportunism is not needed, only the differential in costs in the transmission of knowledge within the firm as opposed to between firms.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Study design and conductown data

    The test is not fully specified; in particular, the study does not look at the capabilities of the recipient.

    “We recognize that this test is by no means fully specified.In particular,we do not look at the capabilities of the recipient.”
    Quote in the paperNot a substantial claim
38 of 38

  • The paper relies on this without support.

    The 35 Swedish innovations and 82 transfer cases are representative of technology transfer by multinational corporations generally.

    “The innovations were identified from a studyby Walhmark andMcQueen [1986] on 100 majorSwedish innovations.”
    “The sample size of the tests thus consists of the eightytwo instances of the transfer of the capability to manufacture.”

  • The paper relies on this without support.

    Markets are imperfect even if they rarely fail, and human behavior can be motivated by self-interest.

    “Markets, even if they rarely fail, are imperfect; human behavior can be motivated by self-interest.”

  • The paper relies on this without support.

    Knowledge transfer is not trivial even within the firm.

    “That the transfer of knowledge is not trivial even within the firm is a fundamental observation.”
3 of 3

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

  • Negative transfer coefficient described as unexpected

    Minor

    The results describe the negative relationship for previous transfers as contrary to expectation, but the methods explicitly predict a negative relationship. The discrepancy concerns the interpretation of a reported result, not the coefficient itself.

1 of 1

Cites

Flagged first, then by citations

Research works printed but not linked: 8

  1. [7]7. Quintus Type Steel Press for Use in the ASEA-STORA Process 1962 (ASEA)
  2. [15]15. Isostatic Press for Steel Processing 1967 (ASEA)
  3. [33]33. Casson, Mark. 1987. Thefirmnand the mlarket.Cambridge, Mass.: MIT Press.
  4. [39]39. Hall, G. & R. Johnson. 1970. Transfers of United Aerospace Technology to Japan. In Raymond Vernon, editor, The technology factor in international trade. New York: Columbia University Press.
  5. [44]44. Hymer, Stephen. 1976. The international operations of national firms: A study of direct investment. Cambridge, Mass.: MIT Press (reprint of Ph.D. thesis, Department of Economics, MIT, 1960).
  6. [45]45. Johnson, Harry. 1970. The efficiency and welfare implications of the multinational corporation. In Charles Kindleberger, editor, The international corporation. Cambridge, Mass.: MIT Press.
  7. [53]53. Nunnally, John C. 1978 (second edition). Psychomletric theory. New York: McGraw Hill.
  8. [55]55. Rogers, Everett. 1962. Diffusion of innovations. New York: Free Press.

Cited by

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Related

Authors
Kogut, B., & Zander, U.
Affiliations
  • University of Pennsylvania (US)
  • Stockholm School of Economics (SE)
ORCID
Venue
Journal of International Business Studies
Publisher
Springer Science and Business Media LLC
Published
1993-12
Volume
24
Issue
4
Pages
625-645
ISSN
  • 0047-2506 (ISSN-L)
  • 1478-6990
DOI
10.1057/palgrave.jibs.8490248
OpenAlex
W3152457815
Cited by
3,967
References
29
Citations by year
2026: 83 · 2025: 89 · 2024: 80 · 2023: 100 · 2022: 102 · 2021: 107 · 2020: 111 · 2019: 139 · 2018: 157 · 2017: 166 · 2016: 164 · 2015: 196 · 2014: 222 · 2013: 220 · 2012: 214
FWCI
43.92
Type
journal article
Language
en
Open access
Licence
Locations
Journal of International Business Studies (publishedVersion, public-domain)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › International Business and FDI
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Innovation and Knowledge Management
  • Social Sciences › Business, Management and Accounting › Management Information Systems › Outsourcing and Supply Chain Management
Keywords
multinational corporations, evolutionary theory of the firm, tacit knowledge, knowledge transfer, wholly owned subsidiaries, firm specialization, internal knowledge transfer, technology transfer

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