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1、Breeding Variability in Local Entrepreneurship: The Effect of MNE Knowledge Flows and Local Absorptive CapacityNachiket BhaweCarlson School of ManagementDepartment of Strategic Management and OrganizationUniversity of Minnesota-Twin Cities,Minneapolis, MN 55455Tel: (612) 626-7281Fax: 612-624-8221E-m
2、ail: bhawe001umn.eduShaker A. ZahraCenter for Entrepreneurial Studies &Department of Strategic Management & OrganizationCarlson School of Management University of Minnesota321 19th Ave. SouthMinneapolis MN 55455Tel: (612) 626-6623 Fax: (612) 626-1316E-mail: zahra004umn.eduMNE Knowledge Flows and the
3、 Variety of Local Entrepreneurship:The Role of Absorptive Capacity ABSTRACTMultinational enterprises (MNEs) play an important role in economic and technological development around the world. This has prompted policy makers to provide incentives in order to attract MNEs and capitalize on the knowledg
4、e that flows from them to stimulate local entrepreneurship through new business and firm creation. In this paper, we advance a typology of local entrepreneurship that builds on the dynamic interplay between MNE knowledge flows and local absorptive capacity. The typology provides a foundation for exp
5、laining when local entrepreneurs compete and complement MNEs, enriching local economies in different ways. Our discussion also recognizes the incentives that public policy makers can employ to help transition local firms from one form of entrepreneurship to another. Keywords: International Entrepren
6、eurship; MNEs and Economic Development; Local Entrepreneurial Behaviors; Knowledge-Based ViewMultinational enterprises (MNEs) play an important role in transferring and diffusing innovative technologies, marketing techniques as well as managerial and organizational practices (Adler & Hashai, 2007; D
7、imelis, 2005). They also create jobs and introduce innovations that spur economic development (Almeida & Phene, 2004). Given these benefits, many developing, emerging and even advanced countries have crafted national policies aiming to attract MNEs to their borders (Gardner, Montjoy, & Watson, 2001;
8、 Spencer, Murtha & Lenway, 2005; Zanatta & Queiroz, 2007). One of their most important objectives is to encourage MNEs knowledge diffusion that can stimulate local entrepreneurial activities (Gorg, 2004; Grima & Wakelin, 2000; Spencer, Forthcoming) which foster economic and technological progress. L
9、ocal entrepreneurship refers to the creation of new firms by independent entrepreneurs (Aldrich & Ruef, 2006; Katz & Gartner, 1988) or entry into new market arenas by established companies or business groups (Dess et al., 2003), exploiting knowledge flows from MNEs.Evidence on the effects of MNEs en
10、try on local entrepreneurship has been mixed (Haskel, Pereira & Slaughter, 2007). Some studies (e.g., DeBacker & Sleuwaegen, 2003) have found that MNE entry discourages local business creation while other studies (Grg & Strobl, 2002) have reached the opposite conclusion. These contradictory findings
11、 reflect the varied nature of MNEs knowledge flows and their differential effects on different industries and communities. Another reason for prior conflicting findings is the lack of systematic attention to the characteristics of the local context (e.g., state of development) in determining the eff
12、ects of MNEs entry on local entrepreneurship. For example, some countries and regions have the requisite absorptive capacity to capture knowledge flows from MNEs and exploit them in creating new firms while others do not and therefore fail to gain from these knowledge flows. Absorptive capacity is i
13、mportant in understanding external knowledge (Girma, 2005; Kim, 1997; Todorova & Durisin, 2007) and therefore can determine local entrepreneurs recognition and definition of the various opportunities to create different types of ventures. Researchers have also overlooked the nature of the knowledge
14、that flows from MNEs into the local economies. When codified and easily understood, knowledge is diffused where local entrepreneurs might conceive of different opportunities for business creation than when tacit knowledge is diffused. The nature of knowledge available to entrepreneurs profoundly inf
15、luences the types of opportunities they discover and exploit (Eckhardt & Shane, 2003; Kirzner, 1973). Exploring the interaction of MNEs knowledge flows (codified vs. tacit) with local absorptive capacity can help explain the variety of the local ventures created. This variety is important because di
16、fferent types of firms contribute differently to the regional and national economies, especially in achieving economic and technological progress.In this paper, we address three related questions: (a) What are the types of new firms created based on MNEs knowledge flows?, (2) How do these firms evol
17、ve (change from type to another) over time?, and (3) What are the key factors that determine the pace and probability of successful change from one type to another? To answer these questions, we use the knowledge based perspective of the firm (Grant, 1996; Nonaka, 2000; Eisenhardt & Santos, 2002) to
18、 propose that MNEs codified and tacit knowledge flows can spur the creation of different types of new firms, depending on the absorptive capacity of the local economywhether a region or country. This variability, in turn, influences the relationships that local firms have with MNEs as well as the su
19、ccess of regional (or national) development policies. Further, we invoke agency arguments to suggest that the interests of policy makers are not always effectively aligned with those of MNEs, influencing the speed and probability of successful transition from one type of local entrepreneurship to an
20、other. The speed of this transition influences the pace of economic and technological progress that a society or region experiences. The probability of successful transition determines the quality of entrepreneurial ventures that exist in a society or region which, in turn, influences the progress o
21、f that region or society. Some entrepreneurial companies are more globally competitive than others. Societies seeking to become active participants in the world economy would work hard to create, nurture and help transition companies to play a global role. Therefore, we also explore the effect of th
22、e incentives that public policy makers offer on the transition from one type of entrepreneurial firm to another. We contribute to the literature by identifying the major types of local firms created based on MNEs knowledge flows. This focus moves research beyond its traditional emphasis on the effec
23、ts of MNEs knowledge flows on the intensity of local entrepreneurial activities, often proxied by the number of new companies founded. We believe this is a major shift in the research focus because countries and regions compete to attract MNEs, seeking to promote the formation of particular types of
24、 companies that contribute to regional and national development, improve employment, and spur investments (Dimelis, 2005; Zanatta & Queiroz, 2007). Examining the types of companies formed based on MNEs knowledge flows, therefore, is a crucial policy consideration because different types of firms can
25、 have significantly different effects on the regional and national economy. The bulk of prior research has investigated local productivity increases as a result of MNEs knowledge flows, possibly masking the long-term economic revitalization engendered by local entrepreneurship (Schumpeter, 1942). Fo
26、cusing on the types of the new firms founded can encourage an examination of the long-term effect of MNEs entry and how it might help spawn different types of firms that enrich local economies differently. This focus also addresses a shortcoming of past studies that have examined local entrepreneurs
27、hip (Table 1), generating mixed evidence (Kugler, 2001; McKeon, Johnston, & Henry, 2004; Morisset & Andrews-Johnson, 2003). -Insert Table 1 about here -We add to the literature also by recognizing the important role of local absorptive capacity in capturing MNEs knowledge flows and transforming them
28、 into opportunities for local entrepreneurship. Past researchers have assumed that MNEs knowledge diffusion promotes local entrepreneurship. Though these flows are important (Adler & Hashai, 2007) they do not automatically translate into local entrepreneurship. Knowledge recipients have to be aware
29、of these knowledge flows, able to comprehend and assimilate them (Cohen & Levinthal, 1990; Todorova & Durisin, 2007), motivate to harvest this knowledge, and skilled in discovering opportunities for commercial exploitation (Minbaeva et al., 2003). Countries and regions differ in terms of their absor
30、ptive capacity, inducing variability in their ability to benefit from MNEs knowledge flows in creating different types of new firms. Our discussion also makes clear that MNEs knowledge flows are not equal in their quality (Almeida & Phene, 2004; Adler & Hashai, 2007), comprehensibility or the opport
31、unities they offer. MNEs vary in their knowledge bases and the approaches they use to protect this knowledge. These differences arise from MNEs history, skills and strategic orientations in their target markets. The same MNE might eagerly diffuse some of its knowledge in a given market but work hard
32、 to prevent diffusion in another market, depending on the firms overall strategy as well as long-term projections of market and technology trajectories. Finally, we advance a typology of the different types of new firms that emerge from the tacit and codified knowledge MNEs diffuse into the local ec
33、onomy. This typology highlights the potential interdependence among MNEs and newly created local ventures, enriching our understanding of the conditions under which symbiotic vs. competitive relationships emerge between MNEs and local entrepreneurs. The typology also provides a foundation for analyz
34、ing how countries and regions might seek to spur the emergence of different types of local companies as they map out their development plans. It can also assist public policy makers in choosing the paths that local entrepreneurial companies can follow in order to assume greater roles in economic and
35、 technological progress.Given our focus on the role of MNEs knowledge flows in inducing local entrepreneurship, the following section of the paper discusses the knowledge based perspective, the types of knowledge and how this knowledge is diffused by the MNE. Next, we consider how MNEs manage knowle
36、dge flows for a competitive advantage. Then, we discuss the concept of absorptive capacity and its relevance for local entrepreneurship. Building on our discussion, we introduce a typology of four types of local entrepreneurship based on MNEs knowledge diffusion and local absorptive capacity. We wil
37、l then examine the potential misalignments of goals between MNEs and local policy makers (Spencer et al., 2005) and their consequences for the types of new firms created locally. Our discussion highlights the conditions that favor movement from one form of local entrepreneurship to another. In the f
38、inal section of the paper, we will present the managerial and policy implications of our discussion for promoting different forms of local entrepreneurship and for future research on the topic.A Knowledge Based Perspective Understanding the varied contributions of MNEs to local entrepreneurship requ
39、ires attention to MNEs knowledge base. Earlier theories of internationalization have highlighted the sourcing and asset seeking motives that drive MNEs to expand their global networks (for a review, Porter, 1986; Prahalad & Doz, 1987) aiming to achieve efficiency and build the scale and scope of the
40、ir international operations. Other explanations of internationalization have centered on exploiting MNEs innovations and gaining the benefits of having global networks (Birkinshaw, 2004; Hedlund, 1994). More recent explanations of MNEs advantages underscore their ability to create and amass knowledg
41、e that they could use for gaining a competitive advantage. Knowledge is a key strategic asset in todays markets and determines the effects of competitive rivalry between companies, regions and countries (Helfat, 1997). Ensuring an appropriate stock as well as flow of knowledge is an important task (
42、Grant, 1996; Leonard-Barton, 1995).Definitions of knowledge abound in the literature (e.g., Alavi & Leidner, 2001; Brown & Duguid, 2001; Nonaka, 1994; Nonaka & Takeuchi, 1995). One of the most widely used is Polanyis (1966) distinction between codified and tacit knowledge. Codified knowledge, which
43、refers to what we know that we can articulate, communicate and share with others, is well understood well and even contained in manuals. Tacit knowledge, however, is what we know but cannot explain, define, communicate or share with others. This knowledge results from personal insight, experience, e
44、motions, and observations. Both success and failure could generate tacit knowledge (Brown & Duguid, 2001).Both codified and tacit knowledge are important, but often for different reasons (Leonard-Barton, 1995). Codified knowledge offers a foundation for conceiving things and teaching others what sho
45、uld be done. Yet, codified knowledge diffuses rapidly and others can use it for their own purposes. In contrast, tacit knowledge is more strategically valuable because few have or understand it, which delays its diffusion and subsequent utilization. Though hard to share tacit knowledge, it provides
46、a basis for strategic distinctiveness (Grant, 1996; Nonaka & Takeuchi, 1995). Companies, therefore, work hard to protect their tacit knowledge and reduce its leakage (Eisenhardt & Santos, 2002; Teece, 1986).The knowledge based perspective suggests that MNEs gain competitive advantage by creating and
47、 exploiting new knowledge (Grant, 1996; Eisenhardt & Santos, 2002). To create this knowledge, MNEs invest heavily in R&D activities which they increasingly disperse around the globe in order to gain access to scientific and technological discoveries (Ricart et al., 2004). MNEs also join alliances, a
48、cquire technology and innovative companies, join research consortia, and collaborate with universities and research centers (Kim, 1997; Song, 2002) to gain and assimilate new knowledge and routines. MNEs also encourage their subsidiaries to engage in experimental research that probes market and tech
49、nological dynamics (Almeida & Phene, 2004). Subsidiaries discoveries are also captured and diffused within the MNEs own network. These different activities frequently generate tacit knowledge that spur MNEs innovation. This tacit knowledge is usually sticky in that it is context specific (Szulanski, 1996) and resides mostly in the
