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

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  • Bruce Kogut

    (University of Pennsylvania)

  • Udo Zander

    (University of Pennsylvania)

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.© 1993 JIBS. Journal of International Business Studies (1993) 24, 625–645

Suggested Citation

  • Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(4), pages 625-645, December.
  • Handle: RePEc:pal:jintbs:v:24:y:1993:i:4:p:625-645
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