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Knowledge Development and Transfer in Foreign Subsidiaries and Their Parent Transnational Corporations

Abstract

The article aims at analysis of knowledge-oriented growth of TNCs' foreign subsidiaries, their transformation and evolving participation in knowledge development by parent transnational corporations (TNCs). The author's concept of increasing involvement of foreign subsidiaries in leveraging knowledge in TNCs' organizations is presented with a focus on a new process of “creative transition” by corporate foreign subsidiaries and its implications for the parents and host economies. The research method is based on integration of concepts, elements and instruments used in international management and international business to investigate the evolution of the knowledge development process in TNCs' cross-border organizations.

The analysis of knowledge development and transfer in TNCs, and growth of their foreign subsidiaries as well as key factors of expanding their knowledge-oriented activities reveals the “creative transition” process which is underway in the subsidiaries. It leads to their increased participation in the knowledge development by TNCs and implies some results for parent firms and host economies. It is concluded that the knowledge-oriented activity of foreign subsidiaries can result in possible capturing valuable knowledge co-created by domestic entities what can imply weakening innovativeness and competitiveness of the host economies.

The problem of knowledge-oriented activity of TNCs' foreign subsidiaries and its domestic impacts has not been investigated in Polish publications yet. The article offers a conceptual basis for further theoretical and empirical research with a focus on impacts in a host economy resulting from the knowledge-oriented activity of TNCs' foreign subsidiaries and shows a necessity to work out a fair approach to sharing benefits of knowledge creation and utilization in the host economy.

Open access
Exploring Links Between Engaging Customers in Value Co-Creation and Product Innovativeness

Abstract

The study examines the hypothesis that firms engaging customers in value co-creation tend to display more innovativeness. As such, it is one of the few quantitative studies on the link between these two concepts. Customer engagement in value co-creation was operationalized as a multiple scale following the DART framework by Prahalad and Ramaswamy. The DART acronym denotes four salient dimensions of enabling co-creation: Dialog, Access, Risk and Transparency. The applied innovativeness metric was revenue share from new and modified products. Data were collected from 432 managers of manufacturing and service SMEs. Statistical data analysis methods included EFA, CFA and multiple regression modeling.

The major finding is the existence of a significant positive effect between engaging customers in value co-creation and innovativeness. In particular, certain DART dimensions, such as Dialog, elements of Access and Risk, coincided with increased levels of innovativeness. Among the study’s limitations, two are particularly pertinent. First, different conceptualizations of customer engagement in value co-creation could yield different results in terms of effect magnitudes, although the authors believe that the direction of relationships should remain the same. Second, the research considered customer engagement from the perspective of managers, which could induce bias. Hence, it may be worthwhile to examine how customers evaluate their own engagement.

In terms of practical application, to enhance innovativeness, firms should intensify their efforts to engage customers in day-to-day operations. However, not all aspects of co-creation provide equal benefits – it appears that more involved actions on the part of the company are needed to produce noticeable positive effects.

From a theoretical viewpoint, the findings empirically validate the business relevance of engaging customers in value co-creation. Unlike many other studies of the co-creation stream, this paper relies on a large, representative sample of manufacturing and service firms.

Open access