What does organizing mean - Case Study Example

Running Head Organizing Paper Organizing Paper Body Shop is the company specialized in natural cosmetics and ecologically sustainable products.Anita Roderick, the founder and leader of the company, provides effective management which helps the company to sustain strong market position and create unique product image for customers (Body Shop 2007). Within the company, planning determines organization objectives and purposes, while organizing function helps to implement these strategies and goals. In general, organizing means "establishing the internal organizational structure of the business. The focus is on division, coordination, and control of tasks and the flow of information within the organization" (Erven 1994). Organizing allows the company to manage its resources and introduce effective management practices. Organizing function of management has a great impact on HRM (human resources management) and employee relations. Training is one of the tools used by Body Shop to improve skills and knowledge of employees. Body Shop proposes its employees eternal short courses, and further professional study in order to meet changing conditions and technological innovations. It motivates employees to pursue further education which helps employees to identify their career opportunities and goals. This training and learning is aimed at providing a blend of technical competence, social and human skills, and conceptual ability. This form of training is time and cost consuming. Following Hetman (1992), "managers must foster a culture of change in their departments. They must develop an environment in which workers expect but can cope with frequent and gradual changes in the way things get done and what is expected" (70). Body Shop organize its activities in order create a positive climate and corporate culture. Organizing function of management deals with delegation of authority and division of labor. In considering the limits of authority, an obvious limitation is that action conforms with the policies and programs of the company. In many cases, specific limitations are made (e.g. not to take on more staff without the approval of a superior). The reason why a subordinate accepts a superior's decision has been considered by many authorities. One line of thought is that there is an 'area of acceptance' wherein the subordinate is willing to accept the superior's instructions. In Body Shop, the main purpose of delegation is organize labor and introduce effective HR management. One employee cannot exercise all authority in making decisions as the company grows (Foss and Pedersen 2004). There is a limit to the number of persons that a manager can personally supervise. After this limit, the manager delegates authority to subordinates to make decisions. The work is delegated and the superior holds the subordinate accountable. The subordinate is responsible for doing the job; it is the superior's responsibility to see the job is done. "Delegation frees the manager from the tyranny of urgency. Delegation frees the manager to use his or her time on high priority activities" (Erven 1994). In Body Shop, it is upon this discretionary content that people feel the weight of responsibility and this is deemed measurable by finding the maximum period during which a person is relied upon to use his own judgment. The term 'time-span of discretion' therefore refers to the longest period that can pass before a superior makes an effective check on a person's work. Body Shop uses centralization and departmentalization of activities in order to provide effective management of HR. Body Shop groups in each organizational unit activities having a common purpose: sales department, accounting department, HR department, etc. The whole process is controlled by the problems that present themselves and the way the persons involved react to those problems, their value systems and their skills (Foss and Pedersen 2004). Because the concrete problems cannot be anticipated in any detail, and because they would in any event not present themselves in any logical order, it is impossible to guide the process of growth so as to end up with a finished department corresponding to some a priori ideal of an organization. As a result, any technology of organization structure is chiefly applicable to reorganization of existing structures, although the possibility must not be ruled out of exerting at least some influence upon the growth of new organizations (Erven, 1994). Another important area of management is knowledge management. Body Shop uses information collected from a wealth of news sources and public records that employees can search and retrieve over the Intranet. Knowledge management software that utilizes intranet search engines is the most basic and widely used tool for finding and accessing information housed on networks. Typically, search engines often make up just one part of a broader-based knowledge management product package (Foss and Pedersen, 2004). This function is extremely important for Body Shop because it deals with millions of customers around the world and sells of items daily. Knowledge management software shares its borders with search and knowledge discovery and data mining tools where the differences are somewhat subtle. That is, search tools ferret out information known to be present, but they do not necessarily reveal anything inherent in the data. In Body shop, knowledge management software provides the capability for users to collect and organize information and knowledge, search for what is needed, and share the findings with others. Body Shop has optimized these resources in order meet changing market conditions and respond effectively to market demands. Successful knowledge management systems require the cooperation of the vendors, the computer department, and the company's decision makers and their staffs (Herman, 1992). Technology management is another area of concern. Body Shop admits that changes in the technology of communication have changed both the structure and the problems of administrative organizations. Probably more than any other single factor, the improvement of the means of communication has had a centralizing effect upon administration--centralizing in the sense that a field officer can now be supervised in much greater detail than was previously possible. Organization function of management helps Body Shop to optimize its technology and introduce new technological solutions. When people advocate a particular organizational change they expect that change to bring about something they desire or consider good. Technology and information technology is a core of management and production. Today, technology often integrates a variety of off-the-shelf software products, such as groupware, document management systems, E-mail, relational databases, and workflow, software, intranet search engines, data mining software. In addition, information technology employs OLAP software, statistical analysis software, and GUI/4GL software packages to assist decision makers in getting at the knowledge at hand (Foss and Pedersen, 2004). Although data warehouses are useful for collecting and storing structured information in an organization, a large amount of information resides in unstructured text-E-mail messages, documents, presentations, etc (Herman, 1992). Additionally, the software approach, generally a combination of software packages, must be able to handle the organization's size or it will be outgrown in a few years. The software should allow for changes and updates as deemed necessary (Body Shop 2007). These examples show that decisions about organizing, like other decisions, are choices between alternatives to achieve some desired result. Those who oppose a change do so for the same reason--because by not making the change they will achieve something they desire. Employees constantly evaluate decisions, consciously and unconsciously, in terms of their own personal goals: possible salary increases or promotions, relations with superiors and subordinates, status in the organization, physical comfort, and the like. Human resources, knowledge and technology are the key areas which help Body Shop to remain competitive and profitable. Organizing function of management helps to organize all activities and allows access to a very large amount of knowledge in a format that allows decision makers to find their own answers as problems and opportunities arise. References 1. Body Shop. (2007). Retrieved 05 July 2007, from http://www.thebodyshopinternational.com/ 2. Erven, B. L. (1994). Organizing. Retrieved 05 July 2007, from http://extension.osu.edu/mgtexcel/Organize.html 3. Foss, N.J., Pedersen, T. (2004). Organizing Knowledge Processes in the Multinational Corporation: An Introduction. Journal of International Business Studies 35 (5) 340. 4. Herman, J. (June 1992). Organizing around Service Delivery. Business Communications Review 22 (6), 70. Articles Organizing Knowledge Processes in the Multinational Corporation: An Introduction. by Nicolai Juul Foss , Torben Pedersen Introduction: why this focused issue It is a truism that scientific curiosity is evoked by contrasts, and that most scientific activity means solving the puzzles implied by those contrasts (Laudan, 1977). Contrast-driven puzzles take many forms. For example, they may emerge from contrasts between theories designed to explain the same phenomenon, of contrasts (clashes) between a theory and an observed phenomenon, or they may consist of 'digging deeper,' that is, identifying explanatory mechanisms on deeper levels, constructing micro-foundations and the like. Special issues, such as the present one, are often published in order to take stock on puzzle-solving activity, to account for how a field has progressed so far, to identify the remaining puzzles, etc. This Focused Issue is different: it represents an attempt to define and partially answer a set of puzzles for research in the MNC that while they may occasionally have emerged in various discussions have not yet been clearly framed and have in no way been given the attention they require. It is thus an attempt to carve out a distinct research program within MNC research, although one that seeks to take existing research streams in new directions rather than entirely redefining these. The effort has been prompted by a number of those contrasts just alluded to. These relevant contrasts may be conceptualized in terms of, on the one hand, the widespread acceptance and dominance of knowledge-based approaches to the MNC (1) and, on the other, the apparent lack of a micro-foundation in much of this work, as well as an absence of an adequate understanding of many of the causal mechanisms and contextual factors that mediate between knowledge processes and administrative and other organizational arrangements. This contrast has an observational dimension: we can observe managers pulling levers of organizational control in MNCs to influence processes of sourcing, combining, creating, deploying, leveraging, etc. knowledge. This leads to the explanatory dimension of the contrast, for our theoretical knowledge about which levers should be pulled under which conditions is scant and meager. In fact, we are pretty much in the dark about the extent to which MNC managers can pull levers of organizational control at all in order to successfully influence knowledge processes. Finally, it has a dimension that relates to contrasts between theories, specifically theories of the MNC. Consider this final point. Tallman (2003) has recently drawn attention to a '... transition of the dominant conceptual model of the multinational firm from the market failure approach of internalization theory and transaction cost economics theory to the market imperfections approach of capabilities of knowledge-based theories of the firm' (Tallman, 2003, 495) that took place during the 1990s. This changed lens has arguably produced a host of new insights. A fundamental one is the conceptualization of the MNC as a knowledge-sharing network whose existence can be understood in terms of its ability to transfer, create, integrate and deploy certain kinds of knowledge more efficiently than markets are capable of (Kogut and Zander, 1993). A more specific insight concerns the importance of stickiness for knowledge transfer in MNCs and (some of) the cognitive and motivational characteristics of such stickiness (Szulanski, 1996; Gupta and Govindarajan, 2000), an insight that has come to define a whole cottage industry in MNC research. However, at least one baby was thrown out with the bathwater of 'the market failure approach of internalization theory and transaction cost economics theory', namely the concern with mechanisms of organizational control (broadly conceived) that characterizes these approaches. (2) A strong indication of this is that the main research interest in the management of MNC knowledge processes has been on cognitive aspects, such as absorptive capacity, tacitness, complexity, etc., and on how these may influence the costs of transferring, combining and deploying knowledge. Considerably less attention has been devoted to how the delegation of authority (and decision rights more generally), the provision of incentives, the monitoring of managers and employees, etc., may impact MNC processes of sourcing, transfer ring, integrating and deploying knowledge. To put the matter in general terms that are perhaps reminiscent of the market failure/transaction cost approach, there is little theory-based understanding of how mechanisms of organizational control are aligned with knowledge transactions in an economizing manner. This would seem to be a serious lack in understanding, because there are many a priori reasons, as well as substantial anecdotal evidence, to support the argument that organizational factors affect knowledge processes as well as the relation between knowledge processes and MNC performance. This lack of understanding of how organizational design issues relates to knowledge processes in MNCs has a theoretical, an empirical and a managerial dimension. Theoretically, little work exists on how MNC managers can best orchestrate knowledge processes by means of designing and implementing mechanisms of organizational control. This means that although some empirical work exists on the relevant issues, this work seems somewhat ad hoc. In the managerial dimension, MNC managers are left without much theory-based guidance when it comes to organizational design in knowledge-intensive MNCs. (3) In the remainder of this introductory paper, we further briefly discuss the 'knowledge movement' in the MNC literature and its relative lack of attention to organizational mechanisms, as well as outline some of the research challenges ('Knowledge and Organization in the MNC: Research Challenges') before we finally explain how the articles in this Focused Issue take steps toward bridging the gap between knowledge and organization in the MNC ('Bridging (Some of) the Gaps: The Articles'). Knowledge and organization in the MNC: research challenges Knowledge and organization in the theory of the MNC It is to the lasting credit of the theory of the MNC that it recognized knowledge as a key factor shaping economic organization long before the mainstream economics of organization did this (e.g., Buckley and Casson, 1976; Dunning, 1977). (4) As late as 1998 Holmstrom and Roberts (1998, 90), two leading mainstream organizational economists, observed that Information and knowledge are at the heart of organizational design, because they result in contractual and incentive problems that challenge both markets and firms ... In light of this, it surprising that leading economic theories ... have paid almost no attention to the role of organizational knowledge. At the time that this statement was made, organization-specific knowledge had already been a key construct in the international business field for more than a decade, complementing (Buckley and Casson, 1976; Dunning, 1977; Rugman, 1981; Caves, 1982; Hennart, 1982), and later challenging (Kogut and Zander, 1993) the 'leading economic theories' in that field. The idea that economic organization--specifically, the comparative contracting issue of whether to export, license or establish foreign operations--may be influenced by the characteristics of firm-specific knowledge assets had been around much longer (Hymer, 1960; Vernon, 1966). (5) Thus, the impression is easily gained that the theory of the MNC enjoys significant lead-time with respect to understanding how knowledge and economic organization connects relative to the more generic economic theories of the firm. This is perhaps not so surprising, because the issue of coordinating knowledge processes may be more pressing in the full-blown MNC than in firms that have more of a national orientation. However, a general problem is that thinking about how to govern knowledge transactions inside firms is not a very advanced field. In economics, as well as in the strategy field, theories of the firm are either fully concerned with knowledge issues to the neglect of organizational issues (i.e., the 'knowledge-based view of the firm') or fully concerned with organizational issues (governance, incentive, etc.), but suppress knowledge issues (i.e., organizational economics). The theory MNC does slightly better. In particular, the recent emphasis in the differentiated MNC literature on orchestrating knowledge flows between MNC units has brought some--although largely empirically based--insight into the organizational requirements of knowledge transfer. Thus, the most comprehensive study published on this topic, Gupta and Govindarajan (2000), observed that the knowledge inflows into a subsidiary are positively associated with the richness of transmission channels, motivation to acquire knowledge, and capacity to absorb incoming knowledge. Minbaeva et al. (2003) found that use of HRM-practices as training, performance appraisal, promotion, compensation and communication have a positive impact on the transfer of knowledge. The upshot is that important parts of the MNC literature are indeed concerned with knowledge flows between MNC units and often explicitly considers the role of organizational mechanisms in the process of knowledge transfer. However, even this literature is still in the early stages of understanding the central aspects, mechanisms, and contextual factors in the process of managing knowledge in MNCs. Problems and research challenges In the following, we briefly outline on an abstract level some of the--rather closely related--research challenges that face research in how MNCs may influence knowledge processes by organizational means. The MNC as a knowledge-based entity It has become almost axiomatic that knowledge and learning are at the root of understanding how competitive advantage is gained and sustained. The 'knowledge-based view' of the firm encapsulates this position (e.g., Kogut and Zander, 1992; Grant, 1996) and an explicitly knowledge-based view has been adopted in much recent MNC research (e.g., Martin and Salomon, 2003). While there are reasons to be sympathetic to the knowledge-based conceptualization, it is also hard to dispute that the view appears to be rather incomplete in the basic conceptual dimension. In particular, very little research has been devoted to systematically understanding and theoretically framing the ways in which heterogeneous knowledge elements may be stratified, distributed, partly overlapping, complementary of, in other words, structured inside MNCs (see Lyles and Schwenk, 1992; Foss and Pedersen, 2003). An indication of this is that most recent research on the differentiated MNC has given much more attention to understanding knowledge flows between MNC subsidiaries than understanding the stratification of knowledge stocks across the MNC. While the examination of MNC knowledge flows is an important undertaking, the existing neglect of the MNC stratification of knowledge stocks is not satisfactory, for flows emerge from stocks and flows change stocks. (6) Moreover, costs of transfer arise because firms control heterogeneous knowledge elements that they wish to somehow integrate with other knowledge elements or at least deploy in different contexts. In other words, the costs and benefits of knowledge transfer (and integration, deployment, creation, etc.) can only be systematically comprehended through an explicit understanding of how heterogeneous knowledge elements are dispersed across an MNC. However, the field seems far from a consistent understanding of what it means that the MNC is a knowledge-based entity. Some of the research challenges implied by these observations are: * What is the unit of analysis in a knowledge-based approach to the MNC Subsidiary-level capabilities Lower-level routines What about patents and other IPRs * What are the dimensions of the knowledge units other than tacitness that helps us to understand the costs of knowledge transfer * What are the dimensions of the knowledge units that help us to understand the benefits of integrating knowledge Complementarities If so, which kinds of complementarities are relevant Absence of micro-foundations Like the knowledge-based literature in general, research on knowledge in MNCs often work with notions such as 'capabilities', 'knowledge assets', 'knowledge processes', etc. These are aggregate concepts. Such concepts are, of course, not illegitimate per se, but it is desirable that they come equipped with a micro-foundation, that is, there is some understanding of how they are related to individual behavior. However, this is hardly the case for a notion such as firm-level 'competence.' Definitions of these terms, to the extent that they are given at all, tend to 'define' these ill-defined concepts in terms of other ill-defined concepts (e.g., defining competence in terms of 'capabilities' and 'routines'). This makes empirical work on knowledge transfer inside MNCs difficult to undertake (because operationalization is hampered). However, it also makes it hard to link knowledge processes, such as knowledge transfer, to behavior: what exactly does it mean in terms of the knowledge of individual agents to 'transfer a competence' from one MNC unit to another one While this is a theoretical problem, it has obvious managerial implications. More generally, because there is little disciplined attention to individual behavior in recent work on knowledge transfer in MNCs, arguments pertaining to intra-MNC knowledge transfer acquires an ad hoc character and, indeed, the literature seems to be very much empirically driven. This raises challenges such as: * How are individuals motivated to share knowledge, that is, what are the micro-foundations of knowledge-sharing within and between MNC units Does knowledge sharing raise particular concerns about intrinsic motivation, and may the proper balances between intrinsic and extrinsic motivation be at least partly culturally determined * On which models of behavior should research on knowledge processes in MNCs be founded Is the rational choice paradigm sufficient (as advocated by Buckley and Casson, 2001) of are more sociological models appropriate Insufficient attention to organization An implication of the lack of proper micro-foundations is that it is unclear how knowledge processes may be influenced by mechanisms of organizational control, such as authority, the use of incentives, monitoring and the building of shared context. This is because there is rather little understanding of how these controls influence individual behavior with respect to accumulating, building, sharing and integrating knowledge. This is not to deny that many contributions to the MNC literature do recognize that the process of knowledge transfer is likely to be supported by different organizational means of control and motivation (e.g., Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 1991, 1994; Buckley and Carter, 1999). However, knowledge characteristics and the transfer of knowledge itself are thus seldom consistently taken to be endogenous to organizational arrangements. This means that a host of research challenges are largely ignored. These are questions such as: * How can incentive mechanisms be used to foster inter-subsidiary knowledge transfer To what extent can organizational mechanisms that have been implemented to foster knowledge sharing within business units or within national firms be used to foster knowledge sharing between subsidiary units that may be placed in very different cultural spheres * How should decision-making authority be allocated across the MNC network if the aim is to optimize knowledge creation Can we relate thinking on this issue to existing thinking on subsidiary mandates Unclear causality A closely related and key problem in thinking about the interaction of knowledge and organization in the MNC has to do with the causal-temporal structure of managerial choice. To use the language of optimal control theory (Pontryagin et al., 1962; Winter, 1987), the argument so far has been that organization variables may best be thought of as 'control variables', with knowledge-related variables partaking in the role of 'state variables'. (7) However, it is also arguable that knowledge-related variables may be constraints on the control variables. For example, how much MNC headquarters know about a given subsidiary's normal performance may influence its possibilities of somehow rewarding the subsidiary in case it exceeds normal performance. Or some subsidiaries may control 'capabilities' that are so different from those controlled by other subsidiaries that MNC headquarters have difficulties benchmarking the subsidiaries against each other. The tendency in the literature is clearly to take knowledge characteristics as something determining organizational arrangements. Thus, pondering the issue of what 'knowledge approaches can contribute to organizational theory,' Grandori (Grandori and Kogut, 2002, 225) recently observed that what has been added is 'a new 'contingency' factor for understanding organizational arrangements ... Knowledge complexity, differentiation and specialization, complementarity and interdependence are emerging as important contingencies affecting effective organization and governance solutions' (e.g., Kogut and Zander, 1993; Birkinshaw et al., 2002; Foss and Pedersen, 2002). However, at least some of these knowledge characteristics may also be endogenous to organizational arrangements; for example, knowledge differentiation and specialization are partly endogenous to the choice of organizational structures. Of course, the two positions are not necessarily inconsistent if understood in their proper causal-temporal context. It may very well be that what we think of as MNC 'capabilities' is a short-hand for those aspects of the existing MNC knowledge stock that both constrain and enable the MNC's shorter-run actions, including the choice of organizational mechanisms to influence know ledge flows. The problem is that the MNC literature does not provide much insight into this causal structure, partly because of the above problems of inadequate conceptualization of the MNC as a knowledge-based entity, absence of micro-foundations and insufficient linking of knowledge and organization. Bridging (some of) the gaps: the articles The five articles in this Focused Issue are all occupied with the interaction between knowledge processes and organization. However, they differ substantially in a number of dimensions, such as the particular knowledge processes and organizational mechanisms that they investigate, as well as the theories that are applied and the empirical context that is chosen. Table 1 presents some of the basic differences among the five articles. Although most of the articles focus on the transfer of knowledge, they look at different organizational mechanisms and structures, including MNCs, strategic alliances and joint ventures, and some apply the headquarter (of teacher) perspective while others make use of the subsidiary (or student) perspective. In terms of applied theories, the articles seem to mainly draw on two rather different branches of theorizing, namely organizational economics (e.g., agency theory) and perspectives that are closer to organizational behavior theory (e.g., organizational learning theory and socialization theory). The first article, 'A Constrained Process Analysis of Knowledge Combination in Multinational Enterprises', by Peter Buckley and Martin Carter, is a purely theoretical piece that outlines a process model for knowledge combination within MNCs. Knowledge combination is seen as the process of creating value through the combination of different types of spatially separated knowledge in the MNC. The outcome of knowledge combination depends on how the process is designed in terms of allocation of decision rights, the determination of knowledge boundaries and the design of motivational measures. If not properly designed, the knowledge combination process will incur imperfections in the form of knowledge losses, decision objective losses and coordination losses. One way among many in which the authors take explicit steps towards creating a micro-foundation for thinking about organizational issues in knowledge processes is by introducing the 'initiator-entrepreneur' as the motor of the process and the agent responsible for anticipating potential gains as well as costly imperfections. Ram Mudambi and Pietro Navarra's article 'Is Knowledge Power--Knowledge Flows, Subsidiary Power and rent seeking within MNCs' takes its starting point in the literature emphasizing the increasing strategic independence of MNC subsidiaries. The strategic independence of subsidiaries gives a number of benefits to the MNC, such as tapping into local systems of innovation, integrating local competencies and introducing more dynamism into the parent MNC; however, too much subsidiary independence might be inefficient from the perspective of the MNC. This tradeoff is modeled in the following manner. Subsidiaries are conceptualized as pursuing rent-seeking behavior within the MNC, that is, increases in subsidiary bargaining power will enable subsidiaries to appropriate rents within the MNC and subsidiaries strive for achieving such bargaining power. A mechanism behind this is that subsidiary managers who gain bargaining power will be able to influence the distribution of MNC resources to their own advantage. Intra-MNC knowledge flows are the key source of subsidiary bargaining power. Subsidiaries that control knowledge that is vital to the rest of the MNC will be able to accumulate high levels of bargaining power. As rent seeking by subsidiaries with strong bargaining power is inefficient from the perspective of the firm, the headquarters' decision problem becomes one of increasing strategic independence in subsidiaries without provoking rent-seeking behavior. The main contribution of this article lies in the identification of the interplay between knowledge processes (subsidiary knowledge creation) and organizational processes (subsidiary bargaining power) that foster rent-seeking behavior (i.e., the appropriation of MNC resources, including MNC knowledge). In the study by Bernard Simonin, 'An Empirical Investigation of the Process of Knowledge Transfer in International Strategic Alliances', the context is the process of knowledge transfer between international strategic alliances partners. The study presents an integrated model of knowledge transfer that accounts for the concurrent effects of learning intent (i.e., organizational motivation), learning capacity, knowledge ambiguity and tacitness, and partner protectiveness. The basic structure of the model applied by Simonin on the organizational level is: Learning intent-learning capacity-knowledge transfer, which has many similarities with a fundamental model of individual learning (motivation-capacity-learning). Organizational mechanisms enter through the learning capacity construct, which is an expression for all the organizational resources dedicated towards learning. These resources include human resources and physical assets (resource-based learning capacity), institutional routines and rules inducing commitment to a learning objective (incentive-based learning capacity), and general attitudes and beliefs towards learning (cognitive-based learning capacity). Learning capacity is related to the more well-known concept of absorptive capacity, but while much of the discussion surrounding the absorptive capacity focuses on the complexity and takes the absorptive capacity for more of less exogenous given, Simonin brings back the focus on the firm-specific levers and resources that can be manipulated (the actionable side of absorptive capacity) as the key of learning capacity. Empirically, the study points to the import roles played by somewhat 'traditional' variables such as learning intent, knowledge ambiguity and tacitness. However, more distinctly organizational mechanisms such as incentive-based learning capacity and partner protectiveness gain support as, respectively, stimulating and hindering knowledge transfer. The context of the paper by Charles Dhanaraj, Marjorie Lyles, Kevin Steensma and Laszlo Tihanyi on 'Managing the Dynamics of tacit and Explicit Learning in international joint ventures (IJVs): The Role of Social Embeddedness and the Impact on Performance' is knowledge transfer from a foreign parent to their joint ventures located in Hungary. Drawing on organizational learning theory and economic sociology, the authors identify the relational embeddedness between the foreign parent and IJV as a key determinant of knowledge transfer. As a construct, relational embeddedness captures the social aspects of the relationship and facilitates the transfer of knowledge since it allows for clarification (i.e., proper interpretation and feedback), and ensures the foreign parent some kind of control and motivation to transfer. Relational embeddedness consists of three dimensions: strength of ties, trust and shared values and systems, and these can be seen as organizational mechanisms that can be applied by managers in order to facilitate the knowledge transfer, since they are all outcomes of managerial action. The study gains support for the importance of relational embeddedness; moreover, it is found that relational embeddedness has a stronger impact on transfer of tacit knowledge than on explicit knowledge transfer. All three dimensions of relational embeddedness have a positive impact on the transfer of tacit knowledge, while only shared systems have an impact on the transfer of explicit knowledge indicating that these organizational mechanisms are particularly important for tacit knowledge transfer, which typically is the more difficult type of knowledge to transfer. While other studies primarily have focused on the impact of cognitive factors (e.g., the tacitness of knowledge), the contribution of this article is the endogenous view of organizational processes where relational embeddedness is constraining the transfer of different types of knowledge (rather than the other way around). Finally, in 'Managing Knowledge Transfer in MNCs: A Comprehensive Test of Headquarters Control Mechanisms', Ingmar Bjorkman, Wilhelm Barner-Rasmussen and Li Li explore a comprehensive model based on agency theory and socialization theory that addresses organizational mechanisms used by MNC headquarters to control the inter-unit transfer of subsidiary competences. The organizational mechanisms that they include are, on the one hand, safeguards against potential subsidiary opportunism/moral hazard applied by the headquarters (i.e., specification of performance evaluation criterion, subsidiary management compensation, and use of expatriate subsidiary managers) and, on the other, the development of shared values, objectives and beliefs across MNC units (i.e., a corporate socialization mechanism). It turns out that MNC headquarters can influence the flow of subsidiary knowledge by tailoring the criteria used to evaluate subsidiary performance and implement corporate socialization mechanism (Table 2). Conclusion In this introduction, we have sketched an ambitious program for MNC research. In terms of the historical development of the MNC field, we applaud the strong focus on knowledge in the MNC literature of the last decade, but argue that it needs to be combined with a view of organizational mechanisms as instruments of influencing the sourcing, building, deployment and transfer of knowledge resources. In some ways, the transition from the market failure approach of the 1970s and the 1980s to the present knowledge-based view led to a Kuhnian loss of content (Kuhn, 1970). Thus, the earlier perspective had a view of the MNC as a contractual entity and a distinct governance structure (e.g., Teece, 1986). Moreover, it had clear micro-foundations, to a large extent derived from economics. And it had a clear, if somewhat crude, view of the function of various organizational mechanisms. Our argument has been that the knowledge approach to the MNC needs to be at least on par with the earlier approach in terms of conceptualization of the MNC, micro-foundations and treatment of organizational mechanisms. In line with this, we formulated a number of corresponding research challenges. We also showed in which ways the articles that are included in this Focused Issue take steps toward meeting the challenges that we identified by suggesting micro-foundations, putting forward elements of a knowledge-based conceptualization of the MNC, pondering how organization and knowledge are related in the MNC, etc. It is noticeable that the articles are built on rather different theoretical positions, and therefore approach and answer the challenges very differently. Furthermore, the subject of organizing or governing knowledge processes is also addressed in different MNC contexts, from overall MNC organization to strategic alliances. This indicates that the issue of the organization of knowledge processes is an overarching one in MNC organization. Furthermore, it is one that probably needs to be addressed by different approaches, because of the inherent multidimensionality and complexity of the subject matter. This Focused Issue therefore only represents a first step in an immensely complicated set of issues. We are confident that future work on the MNC that addresses the governance of MNC knowledge processes will prove not only challenging but also fruitful. Notes (1) As signaled by the recent conferment of the 2003 Palgrave Macmillan/Journal of International Business Studies Decade Award to Bruce Kogut and Udo Zander for their article, Knowledge of the Firm and the Evolutionary Theory of the Multi-National Corporation (Kogut and Zander, 1993). (2) This is not to say that the market failure approach of internalization theory and transaction cost economics theory have provided very detailed comparative treatments of issues of organizational control, but at least these issues are more clearly framed and conceptualized than in knowledge-based approaches. (3) These gaps are not necessarily problems of complete neglect, and they are not absolute. The literature on the 'differentiated MNC' is, in fact, characterized by paying considerable attention to organizational mechanisms (e.g., Hedlund, 1986; Bartlett and Ghoshal, 1986, 1989; Birkinshaw, 1996; Gupta and Govindarajan, 1991, 1994, 2000; Holm and Pedersen, 2000; Foss and Pedersen, 2002, 2003). However, even in this literature the organizational dimension of MNC knowledge processes is not addressed, conceptualized and theorized in any coherent and systematic manner. (4) It is perhaps somewhat overlooked today that the theme of MNC-specific knowledge comes prior to the advent of explicitly knowledge-based approaches to the MNC in the 1990s. (5) The dominant knowledge-based approach to the MNC may therefore be a continuation with a different twist of existing themes in the MNC field rather than a radical theoretical discontinuity (as argued by Tallman, 2003). (6) Cf. also Kogut and Zander's (1992) observation that much work on organizational learning (flows) has neglected organizational knowledge (stocks). (7) Control variables are those that can be set quickly (in principle, instantaneously) at the various values within their feasible ranges, while state variables are those that change under the influence of the control variables. (8) Forthcoming as an Introduction to a Focused Issue of Journal of International Business Studies on 'Organizing Knowledge Processes in the Multinational Corporation'. 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Hymer, SH (1960) The International Operations of National Firms: A Study of Direct Investment, MIT Press: Cambridge, MA. Kogut, B and Zander, U (1992) 'Knowledge of the firm, combinative capabilities, and the replication of technology', Organization Science 3(3): 383-397. Kogut, B and Zander, U (1993) 'Knowledge of the firm and the evolutionary theory of the multinational corporation', Journal of International Business Studies 24: 625-645. Kuhn, T (1970) The Structure of Scientific Revolutions, University of Chicago Press: Chicago. Laudan, L (1977) Progress and its Problems, Routledge and Kegan Paul: London. Lyles, MA and Schwenk, CR (1992) 'Top management, strategy, and organizational knowledge structures', Journal of Management Studies 29:155-174. Martin, X and Salomon, R (2003) 'Knowledge transfer capacity and its implications for the theory of the multinational corporation', Journal of International Business Studies 34(4): 356-373. Minbaeva, D, Pedersen, T, Bjorkman, I, Fey, C and Park, HJ (2003) 'MNC knowledge transfer, subsidiary absorptive capacity and HRM', Journal of International Business Studies 34(6): 586-599. Pontryagin, LS, Boltyanskii, VG, Gamkrelidze, RV and Mischenko, EF (1962) The Mathematical Theory of Optimal Processes, Interscience: New York. Rugman, AM (1981) Inside the Multinationals: The Economics of Internal Markets, London: Croom Helm. Szulanski, G (1996) 'Exploring internal stickiness: impediments to the transfer of best practice within the firm', Strategic Management Journal 17(Winter Special Issue): 27-43. Tallman, S (2003) 'The significance of Bruce Kogut's and Udo Zander's article, 'Knowledge of the firm and the evolutionary theory of the multinational corporation", Journal of International Business Studies 34(6): 495-497. Teece, DJ (1986) 'Transaction cost economics and the multinational enterprise: an assessment', Journal of Economic Behavior and Organization 7: 21-46. Vernon, R (1966) 'International investment and international trade in the product cycle', Quarterly Journal of Economics 80: 190-207. Winter, SG (1987) 'Knowledge and Competence as Strategic Assets', in D.J. Teece (ed.) The Competitive Challenge, Ballinger Publ. Co.: Cambridge, MA. Nicolai Juul Foss (1,2) and Torben Pedersen (3) (1) Department of Management, Politics, and Philosophy, Copenhagen Business School, Center for Knowledge Governance, Copenhagen N, Denmark; (2) Department of Strategy and Management, Norwegian School of Economics and Business Administration, Bergen, Norway; (3) Department of International Economics and Management, Copenhagen Business School, Frederiksberg, Denmark Correspondence: Dr NJ Foss, Department of Management, Politics, and Philosophy, Copenhagen Business School, Center for Knowledge Governance, Blaagaardsgade 23B, 2200 Copenhagen N, Denmark. E-mail: njf.lpf@cbs.dk Nicolai Juul Foss is Professor of Economic Organization at the Department of Management, Politics and Philosophy, Copenhagen Business School, and the Director of the Center for Knowledge Governance at CBS. He has published numerous articles, book chapters and books on organization and strategy issues. See further on http://www.cbs.dk/ staff/nicolai-foss/njf.html Torben Pedersen is Professor of International Business in Copenhagen Business School's Department of International Business. He has published over 40 articles and books concerning the managerial and strategic aspects of multinational enterprises. His research has appeared in journals such as Strategic Management Journal, Journal of International Business Studies, Management International Review and International Review of Law and Economics. Organizing around Service Delivery. by James Herman Psychologists say that people who frequently rear-range their furniture are expressing their need to take more control over their lives. Similarly, executives who need more control over their business often resort to rearranging organizational charts. We are in a period when there is tremendous pressure on businesses to increase quality and efficiency, which translates into corresponding pressures on workers. Headcounts are being reduced, and reor-ganizations have become an almost daily event. The network support organization (a.k.a. network operations center or telecom group) is not immune to these organizational and staff pressures. Network managers have had to take a hard look at how they should organize their department, how their department should relate to the rest of the business and whether they have the right mix of staff skills and experience to meet the new challenges brought on by new information technology. If changes have to be made, how can the transitions be least disruptive in terms of service and the impact on employees Outdated Organizational Models At the dawn of the Information Age, most organizations had a group who worked on mainframe networking. When minicomputers became popular, a different group was formed to support them. Similarly, most enterprises have a group that provisions and operates a leased line wide-area network, which usually includes multiplexers of one sort or another. Today, router backbones are growing rapidly and, yet again, a new support group is being formed. There are often additional groups devoted to LAN support, while voice usually remains in its own separate corner of the IS organization. The problem with this approach to organization is that technology changes quickly, and each change spawns separate groups and overlapping responsibilities. Multiple help desks are one typical result, as are incompatible support systems, such as trouble ticket applications and configuration database. Worse, perhaps, is the tendency for people to institutionalize their particular network or technology platform. They support and even enhance it long after it should decline. For example, if staff members identify with a particular technology, such as SNA or packet switching, or with a particular approach to delivering a service, such as mainframe-based Profs electronic mail, they often resist efforts to introduce newer, more effective offerings, often because of fears over job preservation. Another common approach to structuring an organization is to group people on the basis of training, education and experience. Engineers with electrical engineering backgrounds form a hardware group, while software gurus make up the analysis section. Programmers are clustered together in a custom development department, while technicians inhabit their own installation support office. The motivation behind this strategy is to treat each type of worker differently, in terms of supervision, hours and workspace amenitites. But the downside is that it creates a fragmented environment, in which to get anything done requires crossing organizational boundaries. It also often results in information support systems being designed with "tunnel vision" and places barriers in front of people who need to work together to meet user needs. Organizing around Service Delivery There is a new concept in organizational design, however, that can be applied to the network support organization with amazing results. "Process reengineering techniques," which started with Total Quality Management (TQM) efforts and are becoming a mainstream part of business management thinking, suggest that organizations can be structured along service delivery lines. The idea is to organize into groups that deliver a complete, well-defined service to a specific group of users. This approach would break a network support organization into departments, such as problem handling, change implementation, capacity planning, technology planning and invoicing for all of the technologies employed in the enterprise. The primary advantage of organizing around service delivery is that it is more impervious to technological changes. Responsibilities can remain intact, even if there are major changes in the systems being managed. No matter what technologies are added to or taken from the network, the basic functions of fixing problems and making changes stay the same. This approach also mixes skill levels and backgrounds of people found within a group, which encourages cross-training and upgrading of employee skills. As new technologies are introduced, people in a service delivery organization can be brought up to speed more quickly than if the new technology is handled by an entirely new and separate group. The service delivery approach to organization offers users a clear and stable set of contacts for specific services, such as making a move, adding or changing a terminal or getting a problem resolved. They no longer have to navigate through a maze of technology-specific contact points. It also allows managers to refine and improve the business process within their domain, since responsibilities are more long lasting. When organizations create new groups to handle new technologies, each group often has to reinvent the wheel on how to deliver efficient and responsive service. The service delivery model also encourages the development of common, integrated, management systems that can better support a multivendor and multitechnology network. Whether you work on LANs or network components, there is a shared trouble ticket system or only one change scheduling application. With the direction in networking toward integrated, enterprise utilities, the network support organization must also become more integrated. Fuzzy Demarcations Inter- and intraorganizational issues are becoming messier and harder to sort out. Where do the responsibilities of a network support group end and those of a computer support group start What are the responsibilities of a central, corporate support group vs. what the workgroups do for themselves What is done in house and what is handled by outsourcers or carriers Distributed computing is blurring the distinction between computing and communications, and a potentially nasty turf battle looms over control of distributed server management. New networking technologies no longer have the clear DCE-DTE interface boundary that used to define the edges of the network. Everyone in the network support organization must adjust to the new reality of shared responsibility and fuzzy boundaries. Control over end-to-end resources is, for the most part, a thing of the past. Cooperation and interorganizational teamwork are critically important, but they won't occur unless the network support organization gets beyond its own internal squabbles and confusion over how responsibilities are to be allocated. Shared management responsibility also implies shared management systems, or, at least, interoperability among the management systems used by the different parts of the enterprise. In today's environment, it makes less sense to organize around "telecom" or "MIS" than to think about distinguishing between information management and distributed system management. In an era of selective outsourcing, a standalone telecom group is an obvious and ready target, while within the IS organization, the old computing (data center) versus network (wide-area) split needs updating. Data centers are being consolidated and shrunk, while wide-area networks are being outsourced or are migrating to public virtual networks. In contrast, standardizing the data definitions across the enterprise and getting a handle on how to manage distributed computing approaches remain two of the more difficult challenges CIOs will face in years to come. Keeping Your Staff Tuned in and Tuned up In every project that I have been involved with over the past year, questions of how to best upgrade the skills of network support staff has been a top concern. In one case, the top network support managers concluded that 75 percent of the current staff had the wrong skills and lacked the motivation to deliver the goals of the organization over the next few years. Sending workers to training classes on new technologies or protocols often has minimal effect; classroom learning fades fast unless it is put to use right away. The only effective way to upgrade knowledge and skills--short of massive firing and new hiring--is to pair inexperienced people with experienced personnel; learning has to be a continuous, day-to-day, on-the-job effort. Organizing around specific technologies or strict professional lines tends to inhibit cross-training, while organizing along service delivery lines tends to promote it. Another solution to the skills problem is to hire outsourcers to manage new technologies. But the areas that are easiest to outsource involve very mature and stable technologies, such as voice and mainframe operations. It can be risky to outsource emerging technologies because there are so few accepted metrics for service quality and pricing (see BCR, May 1992, pp. 22-26). Moreover, outsourcing a new technology requires close interaction between the business managers and the technical staff in order to match the technology to the really important business problems. The network support organization must concentrate on areas where it can add the most value, and these usually involve emerging technologies. It is clear, however, that outsourcing places new demands on the network support organization to manage the outsourcers. Few companies have addressed the policy issues that are raised when responsibility for a function is shared between internal and external groups. In short, outsourcing is not a panacea for the skills problem. Expanding the staff's basic knowledge of the technologies for networking and distributed computing will continue to be a major challenge for any network support organization. Empowerment and Responsibility An even more fundamental challenge, however, is improving the processes the network support organization uses to perform service delivery. The pressures for productivity and service quality are too great, especially with outsourcers breathing down your neck, for an ad hoc, undisciplined work style. Each staff member has to perform his or her tasks completely, and according to established procedures for information recording, testing and notification of other members of the support team. When someone fails to fill out a configuration database record completely or to let others know--promptly--that a software upgrade has been completed, the entire group's productivity can suffer. We know from studies about personal empowerment that employees have to be treated as adults, and recognized for their ability to make significant contributions to quality and efficiency. Quality improvement has to occur at the point where work is first performed, not by supervisory checks and after-the-fact touch-ups. Instilling a sense of responsibility and discipline is one of the biggest challenges facing network managers today. Sloppy or incomplete work must be identified and repeat offenders must be reassigned within or transferred out of the organization. The flip side of empowerment is responsibility. Small but Continuous Progress Like any part of the business, the network support organization will undergo change in the years to come, and change isn't always comfortable. Managers must be extremely careful and not indulge in senseless or half-baked reorganization schemes. The idea is to make meaningful changes, not just rearrange deck chairs on the Titanic. Total Quality Management (TQM) approaches again yield some appropriate suggestions: The fundamental principle should be continuous improvement. Make many small changes rather than a big bang; major reorganizations are almost always devastating. You know what it's like: For months before the big change nothing gets done; organizations often deteriorate into almost complete paralysis. Similarly, months after a reorganization, confusion and ongoing negotiation over who is responsible for what sap time, energy and attention. Gradual change is easier to absorb, less threatening and has the added benefit of being measurable; effects can be assessed more accurately. When many multiple changes are made at once, it is usually impossible to sort out which made things better and which were counterproductive. Some old management proverbs still ring true: Managers must foster a culture of change in their departments. They must develop an environment in which workers expect but can cope with frequent and gradual changes in the way things get done and what is expected. Ideally, staff members will embrace change as an opportunity for advancement and learning rather than as a threat. The organization as a whole should see itself as engaged in an ongoing process of rejuvenation and progress. Work process need to be continually examined, revamped and automated. New technologies, vendors and services must be brought in, and older ones phased out. Workers must move with the times and get better at what they already know, while adding to their skills and knowledge. The goal is to create a learning, responsive organization, and meeting that goal requires managers with vision, tact and a willingness to explore new organizational models. Read More