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Knowledge Management Processes and International JointVenturesAndrew C. Inkpen, Adva Dinur,

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454 ORGANIZATION SCIENCE/Vol. 9, No. 4, July–August 1998

1047-7039/98/0904/0454/$05.00Copyright� 1998, Institute for Operations Research

and the Management Sciences

Knowledge Management Processes andInternational Joint Ventures

Andrew C. Inkpen • Adva DinurThunderbird, The American Graduate School of International Management, Glendale, Arizona 85306

School of Business and Management, Temple University, Philadelphia, Pennsylvania 19122

Knowledge creation is now recognized as a key, competitive advantage. In the global economy,international joint ventures are increasingly important as the way of creating knowledge interor-

ganizationally. Yet, research into interorganizational knowledge creation has been underdeveloped. Thispaper offers insights about how international joint ventures can be integrated into a firm’s dynamicsystem of knowledge creation.

Ikujiro Nonaka

AbstractThe management and processing of organizational knowledgeare increasingly being viewed as critical to organizational suc-cess. By exploring how firms access and exploit alliance-basedknowledge, the authors provide evidence to support the argu-ment that the firm is a dynamic system of processes involvingdifferent types of knowledge. Using data from a longitudinalstudy of North American-based joint ventures (JVs) betweenNorth American and Japanese firms, they address three relatedresearch questions: (1) what processes do JV partners use togain access to alliance knowledge; (2) what types of knowledgeare associated with the different processes and how should thatknowledge be classified; and (3) what is the relationship be-tween organizational levels, knowledge types, and the transferof knowledge?

Although many generalizations have been drawn about themerits of knowledge-based resources and the creation of knowl-edge, few efforts have been made to establish systematicallyhow firms acquire and manage new knowledge. Moreover, prioralliance research has not addressed in detail the nature of alli-ance knowledge and how knowledge is managed in the alliancecontext. The authors examine the processes used by alliancepartners to transfer knowledge from an alliance context to apartner context. They identify four key processes—technologysharing, alliance-parent interaction, personnel transfers, andstrategic integration—that share a conceptual underpinning andrepresent a knowledge connection between parent and alliance.Each of the four processes is shown to provide an avenue formanagers to gain exposure to knowledge and ideas outside theirtraditional organizational boundaries and to create a connectionfor individual managers to communicate their alliance experi-ences to others.

Although all of the knowledge management processes arepotentially effective, the different processes involve differenttypes of knowledge and different organizational levels. The pri-mary types of knowledge associated with each process are iden-tified and then linked with the organizational level affected bythe transfer process. From those linkages, several propositionsabout organizational knowledge transfer and management aredeveloped. The results suggest that although a variety of knowl-edge management strategies can be viable, some strategies leadto more effective knowledge transfer than others.(Organizational Knowledge, Learning; Joint Venturesand Alliances, Tacit Knowledge; Knowledge Manage-ment Processes)

Increasingly, the creation of new organizational knowl-edge is becoming a managerial priority. New knowledgeprovides the basis for organizational renewal and sustain-able competitive advantage (Prahalad and Hamel 1994,Quinn 1992). We draw on recent work on knowledgemanagement (e.g., Grant 1996, Hedlund 1994, Nonakaand Takeuchi 1995, Spender 1996b), to explore howfirms access and exploit alliance-based knowledge. Usingdata from a longitudinal study of North American-basedjoint venture (JVs) between North American and Japa-nese firms, we address three related research questions:(1) What processes do JV partners use to gain access toalliance knowledge, (2) what types of knowledge are as-sociated with the different processes and how should that

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ANDREW C. INKPEN AND ADVA DINUR Knowledge Management Processes and International Joint Ventures

ORGANIZATION SCIENCE/Vol. 9, No. 4, July–August 1998 455

knowledge be classified, and (3) what is the relationshipbetween organizational levels, knowledge types, and thetransfer of knowledge? The first question provides a basisfor understanding how firms access and transfer knowl-edge across organizational boundaries. Given that thefirm can be viewed as a system processing different typesof knowledge (Spender 1996b), the second and thirdquestions are directed at exploring the organizational andstrategic implications of different knowledge types. Ourfocus in examining the research questions is knowledgemanagement by the North American JV parents.

Over the past two decades, the formation of interna-tional strategic alliances has increased substantially. Thenumber of domestic and international alliances has grownby more than 25 percent annually since 1990 (Bleeke andErnst 1995). Drucker (1995) suggested that the greatestchange in the way business is being conducted is the ac-celerating growth of relationships based not on ownershipbut on partnership. Researchers seeking to explain thealliance trend have argued that alliances provide a plat-form for organizational learning, giving partner firms ac-cess to each other’s knowledge (Grant 1996, Hamel 1991,Kogut 1988, Westney 1988). Kogut (1988, p. 323) sug-gested that learning can be an alliance motive under twoconditions: one or all partner firms want to acquire theother’s organizational knowledge, or one firm wishes tomaintain an organizational capability while benefitingfrom a partner’s cost advantage or knowledge. Theknowledge is often organizationally embedded and caus-ally ambiguous. If the alliance replicates partner experi-ential knowledge in a jointly owned organization, one orall partners may have access to knowledge that would nothave been available in the absence of collaboration.

In the alliance context, knowledge useful to a parentfirm can be viewed from three perspectives. First, firmsmay acquire knowledge useful in the design and man-agement of other alliances (see Lyles 1988). Such knowl-edge may be applied to future alliances. Second, firmsmay seek access to other firms’ knowledge and skills, butwithout necessarily wishing to internalize the knowledgein their own operations. As Hamel (1991) pointed out,knowledge embodied only in the specific outputs of thealliance has no value outside the narrow terms of the col-laborative agreement. Third, an alliance may generateknowledge that can be used by parent companies to en-hance their own strategy and operations. Our current re-search pertains to that type of knowledge. Knowledgeuseful to a parent may be knowledge transferred by analliance partner to the alliance. The knowledge may becreated independently by the alliance through its inter-actions with customers, competitors, and other firms. The

alliance may also create a forum for interactions betweenthe parents that is itself a source of new knowledge.

Two examples help illustrate how firms learn throughalliances. Much has been written about how General Mo-tors struggled to learn from its New United Motor Manu-facturing, Inc. (NUMMI) joint venture with Toyota(Badaracco 1991, Keller 1989, Mahoney and Deckop1993). In recent years, knowledge has been transferredsuccessfully from NUMMI to other General Motors di-visions and plants. In particular, General Motors has usedits NUMMI experience as a catalyst for several successfulinternational greenfield plants (Miller 1993).1 The knowl-edge transferred has been primarily in the areas of manu-facturing process and human resource management. As asecond example, Sony, a firm with a culture of indepen-dence in product development, has formed various alli-ances with computer and telecommunications firms in aneffort to forge new technology linkages for its consumerelectronics products (Hamilton 1995). The alliances giveSony access to a wealth of new knowledge, such as howto manage product development cycles that are much fas-ter in the computer industry than in consumer electronics.In forming the alliances, Sony has enabled personnel atvarious organizational levels to gain access to newknowledge. The challenge for Sony and other firms in-volved in alliances, and for all firms seeking access toknowledge beyond their boundaries, is to incorporate dis-parate pieces of individual knowledge into a wider or-ganizational knowledge base.

A still rather small but growing body of research(Dodgson 1993, Doz 1996, Hamel 1991, Inkpen andBeamish 1997, Inkpen and Crossan 1995, Kogut 1988,Makhija and Ganesh 1997, Mowery et al. 1996, Parkhe1991, Pucik 1991, Simonin and Helleloid 1993, Westney1988) is addressing the issue of alliances and learning.Researchers have begun to explore some of the importantquestions associated with how organizations exploit al-liance learning opportunities but have not examined indetail the nature of alliance knowledge and how knowl-edge is managed in the alliance context. In organizationalstudies in general, knowledge management has receivedlimited attention, perhaps because dominant theoreticalparadigms are inappropriate for addressing the issue(Hedlund 1994). Therefore, we explore alliance knowl-edge with the objective of developing a framework thatintegrates knowledge states and knowledge managementprocesses with the organizational levels involved in thetransfer processes.

We focus on alliance forms that combine resourcesfrom more than one organization to create a new orga-nizational entity (the “child”) distinct from its parents. In

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most of the cases, such an alliance is an equity joint ven-ture. Examining that type of alliance allows for a cleardelineation of the partner relationship and the nature ofalliance knowledge. Siecor, an alliance between Siemensand Coming, is an example. The partners in that alliancebrought together their complementary capabilities in tele-communications and glass technology to build an inde-pendent organization with its own headquarters, CEO,board of directors, and staff.

Conceptual BackgroundTypes of Organizational KnowledgeIn developing an understanding of organizational knowl-edge, we begin with the distinction between tacit and ex-plicit knowledge. Tacit knowledge was defined byPolanyi (1962) as knowledge that is nonverbalizable, in-tuitive, and unarticulated. Spender (1996a) suggested thattacit knowledge could be understood best as knowledgethat has not yet been abstracted from practice. It is knowl-edge that has been transformed into habit and made tra-ditional in the sense that it becomes “the way things aredone around here” (Spender 1996b) Tacit knowledge ishighly context specific and has a personal quality, whichmakes it difficult to formalize and communicate (Nonaka1994). Explicit knowledge is knowledge that is transmit-table in formal, systematic language and may include ex-plicit facts, axiomatic propositions, and symbols (Kogutand Zander 1992). It can be codified or articulated in man-uals, computer programs, training tools, and so on.

The distinction between explicit and tacit should notbe viewed as a dichotomy but rather as a spectrum withthe two knowledge types at either end. Winter (1987)identified other taxonomic dimensions of knowledge, in-cluding complex versus simple, not teachable versusteachable, and not observable in use versus observable inuse. Similarly, we argue that although the distinction be-tween tacit and explicit is important, it does not allow usto consider any gray areas between completely tacit andcompletely explicit knowledge. Knowledge types, there-fore, must be classified on a continuum that ranges fromexplicit knowledge embodied in specific products andprocesses to tacit knowledge acquired through experienceand use and embodied in individual cognition and orga-nization routines.

Nonaka and Takeuchi (1995) argued that a key chal-lenge for organizations is the conversion of tacit knowl-edge to explicit knowledge. Knowledge that is tacit andhighly personal has little value until it can be convertedinto explicit knowledge that other organizational mem-bers can share. However, such a conversion process ex-poses the knowledge to the hazard of imitation by other

firms. Zander and Kogut (1995) discussed the tradeoffbetween the need to share and transfer knowledge inter-nally and the risk of exposing the knowledge to imitation.To address the knowledge conversion dilemma, there isa need for a better, broader taxonomy of both tacit andexplicit knowledge.

Recognizing that firms’ idiosyncratic knowledge con-sists mostly of tacit, difficult to imitate knowledge,Spender (1996b) developed a more comprehensive ty-pology of organizational knowledge encompassing indi-vidual and social levels. Whereas individuals haveknowledge that is practical, communities have knowledgethat constitutes the socialization and social activities ofthe individuals within them (Spender 1996b). Individualsconstantly acquire knowledge, share it with their orga-nizational community, and thus increase the collectivestore of knowledge, while maintaining a common indi-vidual knowledge with their coworkers.

In Spender’s (1996b) typology, explicit knowledgestored in databanks, standard operating procedures, man-uals, and so on is referred to as objectified knowledge.Tacit knowledge is separated into three subtypes: con-scious, automatic, and collective. Individual tacit knowl-edge can be either conscious or automatic.2 Automaticknowledge is implicit knowledge that “happens by itself”and is often taken for granted. Conscious knowledge maybe codified, perhaps as a set of notes, and is potentiallyavailable to other people. Collective knowledge is tacitknowledge of a social or communal nature.

Organizational Levels and Knowledge MovementClearly, organizations are repositories of knowledge. Theimportant question is how individual and group interac-tions contribute to organizational knowledge creation.Organizations cannot create knowledge without individ-uals, but unless individual knowledge is shared with otherindividuals and groups, the knowledge will have a limitedimpact on organizational effectiveness. Hence, organi-zational knowledge creation should be viewed as a pro-cess whereby the knowledge held by individuals is am-plified and internalized as part of an organization’sknowledge base (Nonaka 1994). As knowledge is trans-formed from an individual to a collective state, organi-zational knowledge is created (Nonaka and Takeuchi1995). The transformation occurs in a dynamic processinvolving various organizational levels and carriers ofknowledge. Specific learning processes are at work ateach level. At the individual level, the critical process isinterpreting and sense making; at the group level it isintegrating; and at the organization level it is integratingand institutionalizing (Inkpen and Crossan 1995). To cap-ture the dynamic movement of knowledge across the lev-els, Nonaka (1994) developed the concept of a spiral of

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Figure 1 Knowledge Transfer Classification Framework

knowledge creation. In the spiral, knowledge moves up-ward in an organization, starting at the individual level,moving to the group level, and then up to the firm level.As the knowledge spirals upward in the organization, itmay be enriched and amplified as individuals interactwith each other and with their organizations.

Hedlund and Nonaka (1993), in their analysis of Jap-anese and Western knowledge management, proposed amodel linking organizational levels and types of knowl-edge. Their objective was to develop an understanding ofhow different knowledge types travel and change be-tween individuals and organizations. On the basis of theHedlund and Nonaka (1993) model, we propose Figure 1as a framework for an empirical examination of knowl-edge management processes. In the framework, the or-ganization is seen as a repository of various knowledgetypes in different organizational locations. The verticaldimension refers to knowledge tacitness and the horizon-tal dimension distinguishes between the organizationallevels where knowledge resides. In Figure 1, knowledgetacitness is a continuum in which explicit knowledge hasvery low tacitness. The figure implies that as knowledgebecomes more tacit, it becomes less teachable, less cod-ifiable, and hence, less transferable (Kogut and Zander1992).

The key assumption underlying this framework is thatorganizations have a range of types of knowledge andcarriers of knowledge. Where organizations differ is intheir view of the importance of different types of knowl-edge and their ability to transform and move knowledgeacross organizational levels. For example, Hedlund andNonaka (1993) argued that Western firms lose much oftheir potential for knowledge creation by overemphasiz-ing explicit knowledge and the development of complexmanagerial hierarchies, systems, and standardization. Us-ing JVs as the empirical context, we examine the linkagesbetween knowledge transfer processes, knowledge types,and organizational levels. The next section is an overviewof JVs and learning.

Knowledge Management and Learning Through JVsIn arguing that strategy making is a learning process,Mintzberg (1990) suggested that strategic initiatives cre-ate experiences, actions, and strategic choices that pro-vide the foundation for learning. The focus of our studyis a particular strategic initiative—the formation of a JV.The JV experience can be the action that triggers learningbecause it provides new stimuli that may force changesin the mental maps of the organization (Nonaka andJohansson 1985). An underlying assumption is that man-agers have some understanding of the causal relationshipsassociated with knowledge, action, and outcomes.

Following Inkpen and Crossan (1995) and Nonaka(1994), we view knowledge creation through JVs as amulti-stage process, analogous to the innovation diffusionprocess (e.g., Tushman and Scanlon 1981). The first stagebegins with the formation of the JV and interactions be-tween individuals from the two (or more) partners. Thesecond stage and our primary focus is the transfer ofknowledge from the JV to the partners. Huber (1991) re-ferred to that process as “grafting,” whereby organiza-tions increase their store of knowledge by internalizingknowledge not previously available within the organiza-tion. For internalization to occur, the parents must firstengage in efforts to transfer partner skill-related knowl-edge from the JV to themselves. Those efforts create the“connections” through which individuals can share theirobservations and experiences (Von Krogh et al. 1994).The intensity of a parent firm’s learning efforts reflectsthe degree to which the parent is actively trying to inter-nalize the skills and capabilities of its partner.

Knowledge connections are formed through both for-mal and informal relationships between individuals andgroups (Inkpen 1996). Those internal managerial rela-tionships facilitate the sharing and communicating of newknowledge and provide a basis for transforming individ-ual knowledge to organizational knowledge. When oneindividual’s or group’s knowledge connects with otherknowledge, it can be discussed, debated, and possibly dis-carded. The knowledge may be further developed andmove upward in the organization. Individual knowledgeis inherently “fragile” and therefore, without knowledgeconnections, new knowledge may be ignored or viewedas irrelevant (Von Krogh et al. 1994). Grant (1996) ar-gued that organization structures can be designed to max-imize the efficiency of knowledge integration. In the lit-erature on innovation, specialized personnel such as“technological gatekeepers” (Katz and Tushman 1980)and specialized organizational structures such as transfergroups (Katz and Allen 1988) have been shown to havea significant effect on the transfer of information betweenorganizations. When a JV partner has a strategic objective

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of acquisition and proprietary control over allianceknowledge, knowledge connections are the mechanismsfor knowledge acquisition.

Although the transfer of alliance knowledge is a nec-essary condition for knowledge creation, the parent mustensure that the transferred knowledge is moved andshared within the parent organization. The risk, particu-larly with tacit knowledge, is that knowledge transferredfrom a JV to a parent will dissipate as it spirals up to theorganization level. The rate of dissipation will be influ-enced by a variety of factors. For example, when con-fronted with learning opportunities, successful firms maysee little need to change behavior and thus, may becometrapped by their distinctive competence (Levinthal andMarch 1993). The strength of a firm’s learning intent willhelp determine the organizational resources committed tolearning (Hamel 1991). Alliance control mechanismsmay influence the transfer of knowledge (Makhija andGanesh 1997). The type of knowledge creation mecha-nisms plays a key role in how new knowledge is “man-aged” by alliance parent firms (Hedlund and Nonaka1993). Finally, managerial belief systems permeate alllevels of knowledge creation and correspondingly, con-tribute to knowledge dissipation (Inkpen and Crossan1995).

In summary, our study examines the processes used byfirms to gain access to and transfer different types ofalliance-based knowledge. Although much of the learningliterature addresses the product or content of learning, theprocess of learning and the types of knowledge are alsovery important. A focus solely on content ignores thecomplex cognitive and behavioral changes that must oc-cur before a learning “outcome” can be identified. Giventhat the question of whether or not organizations learn iscontroversial, studying knowledge creation may providea more valid foundation for understanding how knowl-edge travels and changes within organizations (Hedlundand Nonaka 1993).

Research Methods and DataWe designed a two-stage study. The first stage establishedthe industry context and basis for the selection of casesfor longitudinal study. In the second stage we used anopen-ended approach of grounded theory building(Glaser and Strauss 1967) to examine types of knowledgeand processes of alliance-based knowledge management.The industry, alliance, and partner contextual data fromstage I were critical in interpreting the case study datafrom stage 2.

Stage 1: Context DefinitionThe initial research stage was designed to provide con-textual understanding of the alliance learning issues and

to gain a cross-sectional perspective on the basic dimen-sions of alliance learning. A sample of North American–Japanese JVs located in North America provided the em-pirical base.3 The primary data collection method forstage 1 was field interviews with 58 managers associatedwith 40 two-partner JVs. Most managers held positionssuch as JV president or JV general manager and wereeither employed by the American partners or appointedby the American partners to senior management positionsin the JVs. Geringer and Hebert (1991) found that suchmanagers are a valid source of JV data. Being at theboundary between the JV and parent firms, those man-agers were expected to have an important influence onparent access to and management of alliance knowledge.(For more detail on the stage one methodology, seeInkpen, 1995a and 1995b.)

All JVs were suppliers to the automotive industry andonly one had less than 50 percent of its sales to auto-motive customers. The primary JV motive for the major-ity of the American partners was access to the Japanesetransplant market in the United States. Most of the JVswere direct suppliers to the automotive assemblers (i.e.,tier-one suppliers). With two exceptions, all JVs werestartup or greenfield organizations. In terms of ownership,17 ventures were 50-50, in 15 ventures the Japanese part-ners had majority equity, and in 8 ventures the Americanpartners had majority equity.

Stage 2: Longitudinal Case StudyStage 1 of the research yielded evidence that the JVs cre-ated important learning opportunities for the AmericanJV parents. The American firms were provided an excel-lent “window” into their Japanese partners’ capabilities.The window had two main sources of potential value.First, all but five JVs were transplant suppliers, and gen-erally the products supplied to the transplants were simi-lar to products manufactured by the Japanese partners inJapan. The JVs gave the American partners access toskills created by the Japanese partner for the Japanesemarket and also access to how those skills could beadapted to the North American work style and infrastruc-ture. Second, the JVs were often the American partners’initial experience in supplying Japanese automakers. Inmost cases the Japanese partners had established relation-ships with the Japanese automakers. Therefore, the JVsafforded the American partners an opportunity to learnhow to manage a long-term Japanese customer relation-ship, albeit adapted to the North American context.

Stage 1 also provided the foundation for an emergingunderstanding of alliance knowledge management. Thesecond research stage explored the knowledge manage-ment process in detail. An emphasis on process suggested

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Table 1 Case Characteristics

Characteristic Alpha Beta Gamma Kappa Sigma

American partnerlearning potential

High Medium Medium High Low

JV performance Low Medium High Medium High

Partner history None prior totechnologyassistanceagreement signed in1988

Limited; 10-yeartechnologyrelationship

Limited; licensingagreement from1980

Extensive; 25-yearrelationshipbetween partnerpresidents

None

Senior JVmanagement

President from outside;Japanese VP

Japanese president;American COO andplant managers

Japanese chairman;American presidentand COO;Japanese salesmanager

Americanpresident/GM;Japanese VP

American presidentand plantmanagers;Japanese salesmanagers

Equity shares 50/50 65% Japanese, 35%American

50/50 50/50 50/50

Key partnercontributions

Japanese:manufacturingprocess andengineering,customer contacts,product design,access to rawmaterials. American:plant startup, accessto American partnermanufacturingequipment, plantmanagement,administrationsupport

Japanese:manufacturingprocess andengineering, productdesign, customercontacts. American:plant startup, plantmanagement,administrationsupport

Japanese:manufacturingprocess andengineering,product design,customer contacts.American: plantstartup,administrationsupport HR, legal,finance), plantmanagement

Japanese:manufacturingprocess andengineeringcustomer contacts.American: rawmaterials, JVmanagement andplant management,startup support

Japanese: salessupport. American:manufacturingprocess, plantstartup, plantmanagement,administrativesupport.

Customers Primarily Japaneseautomakers

Japanese and JVautomakers

Primarily Japaneseautomakers

Japanese and U.S.automakers

Mix of Japanese andAmericanCustomers

the need for a longitudinal approach that would providedeep and extensive access to the individuals involved incollaborative exchange. Therefore, a multiple case studydesign was used. It was based on theoretic replication(Yin 1989) because the choice of cases was directed bythe emerging theory developed from stage 1. For effi-ciencies in data collection and to capitalize on establishedindustry contacts, we selected a subset of five of the casesfrom stage 1. We used several criteria to select the cases,with the objective of finding variance across several di-mensions. Table 1 reports case characteristics. Of partic-ular interest was the learning potential created by the JVs.It was important because it influenced the knowledge

management processes initiated by the JV parents and themotivation of the American parents to exploit the learningpotential. To evaluate learning potential, we consideredsuch factors as the nature of partner contributions to theJV, the functional similarity of products produced by theJV and the American parent, manufacturing quality dif-ferences between the JV and the American parent, geo-graphic proximity of the JV plant to the American parent,and the willingness of the Japanese partner to share itstechnology. For example, the Alpha JV was classified ascreating high learning potential because (1) the Japanesepartner contributed key manufacturing process technol-ogy and the customer contact, (2) the JV and American

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parent produced similar products, (3) the Japanese parentwas open in its willingness to share technology, (4) theJV’s quality record was superior to that of the Americanparent, and (5) the JV plant was located in an unusedAmerican facility a short distance from the American par-ent headquarters. JV performance was evaluated from theperspective of the American parent and was based on theAmerican parent’s overall satisfaction with performance.Partner history reflects the extent of previous collabora-tive relationships between the partners.

Building on the data collected in the first stage, webegan second stage site visits and interviews in May 1993and continued to September 1994. The interviews in stage2 were usually 90 minutes to two hours long, although afew were a half day or more. For the cases studied in thisstage of the research, a total of 20 interviews were con-ducted with senior American managers in the JVs andparent organizations. Including the first stage interviews,observations were collected over a period of three andone-half years.

FindingsKnowledge Management ProcessesFor each of the cases, we collected data on the knowledgemanagement processes used by the American parents.From the data, four critical processes were identified:technology sharing, JV-parent interaction, personneltransfers, and strategic integration. The four processesshare a conceptual underpinning in that each represents aknowledge connection, which creates the potential for in-dividuals to share their observations and experiences.Each of the four processes provided an avenue for man-agers to gain exposure to knowledge and ideas outsidetheir traditional organizational boundaries and created aconnection for individual managers to communicate theirJV experiences to others. In that sense, the four processesrepresent the locus of knowledge creation because it isthrough those processes that different types of knowledgeconverge and become accessible.

On the basis of the interview data, the cases were eval-uated individually on the intensity of the processes fortransferring knowledge (Table 2). The high, medium, andlow classifications are a function of comparison acrossthe cases. “Low” means that we found no evidence of aknowledge management process. “Medium” means thatthe process was occurring but at a lower intensity than itwas in at least one of the other “high” cases. For example,we observed that all of the knowledge management pro-cesses were present for Kappa and were occurring at ahigh intensity level. Alpha was classified as low for threeprocesses and medium for one. To provide examples of

actual knowledge management, Table 3 summarizessome of the knowledge management activities associatedwith the Kappa JV. Similar data were collected for eachof the cases. In the following sections, each of the pro-cesses is described in detail and additional examples areprovided. We then link the processes with knowledgetypes and the parent’s organizational levels affected bythe processes.

Technology Sharing. American parent firms insti-tuted various technology sharing processes to gain accessto technology resident in the JV and in the Japanese part-ner. The most evident knowledge transfer approach wasthrough structured meetings between JV and parent man-agers. In Gamma, monthly meetings were held, with thelocation alternating between the JV and one of the Amer-ican parent plants. In attendance at the meetings wereplant managers, heads of quality control, R&D managers,the VP manufacturing at the American parent head office,and several senior JV managers. In addition, quarterlyR&D meetings were held involving the JV and Americanparent. The manufacturing vice president of one of theAmerican parents said that “while [he] hated to admit it,the quality of the JV product was superior to that in theparent.” As a result, a program was initiated with plantmanagers to address the need to improve quality and cus-tomer service.

Access to partner technology skills also was availablethrough direct linkages between Japanese and Americanpartners. In both Kappa and Sigma, American parent per-sonnel regularly visited Japanese parent facilities. To cap-italize on the Japanese partner’s fabrication knowledgeand ability to operate with fewer equipment operators,Kappa managers invited several Japanese engineers to theUnited States to train parent engineers. The Japanese en-gineers brought very detailed equipment designs thatwould enable the American firm to replicate their manu-facturing process. When no visible progress was made indesigning new equipment, the American president de-cided to contract equipment design and manufacturing tothe Japanese partner. An American engineer would besent to Japan to learn about the equipment so it could beinstalled in the United States.

In another case, the partners signed a very broad globaltechnology agreement. Both partners agreed to be com-pletely open in sharing both product and manufacturingtechnology. For product technology, explicit terms on li-censing and royalties were established. For manufactur-ing technology there were no terms. For example, theAmerican parent might ask to borrow a Japanese partnerengineer for a few weeks. When that had happened in thepast there had been no financial considerations because“it all comes out in the wash.” The American partner

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Table 2 Knowledge Management in the Five Cases

Alpha Beta Gamma Kappa Sigma

Technology sharing Low Low High High MediumInterorganizational interaction Medium Medium High High HighPersonnel transfers Low Medium Medium High MediumStrategic integration Low Low High High Medium

Table 3 Examples of Knowledge Management Processes inKappa

1. The American parent (AP) studied various aspects of the JV’soperation, including its use of employee involvement programs,kaizen teams, and scheduling system. The AP has also studiedsome of the JV’s process innovations, one of which the JV con-siders proprietary.

2. Several JV managers were promoted to positions within the AP.One manager was promoted into an AP staff training position atAP HQ. Several engineers were also promoted.

3. AP senior managers were committed to the JV and to an Asianconnection. The JV is the strongest Asian connection. The pres-ident of the AP had a very close relationship with the former Jap-anese parent chairman.

4. The AP set up what it called “gatekeepers,” units of the companyresponsible for certain aspects of manufacturing. The gatekeeperwas expected to be available to all units of the company on thespecific process or technology. The JV was asked to be the gate-keeper for JIT.

5. The AP had several engineers temporarily working in Japan in theJapanese parent organization.

6. The AP and the Japanese parent initiated a joint engineering pro-ject. A piece of manufacturing equipment was to be made by theJapanese partner in Japan, with an American engineer visitingJapan during the project period.

7. More than 15 employees in the JV visited Japan.

recognized the need for reciprocal commitment (cf.Gulati et al. 1994) and tried to make the technology shar-ing a two-way relationship.

JV-parent Interactions. Individual knowledge andperspectives remain personal unless they are amplifiedand articulated through social interaction (Nonaka 1994).Interactions between parent and JV managers beyondspecific technology initiatives can create the social con-text necessary to bring JV knowledge into a wider arena.In this study, the interactions were primarily social andinvolved a variety of groups. In effect, the JV-parent in-teractions provided the foundation for evolving commu-nities of practice (Brown and Duguid 1991). Communitymembers share knowledge and may be willing to chal-lenge the organization’s conventional wisdom.

Visits and tours of JV facilities were an effective andsimple interactive means for parent managers to learnabout their JVs. The JV managers were generally con-vinced that the differences embodied in the JV were visi-ble and parent managers would appreciate the differencesif they spent time in the JV. However, visits were notalways perceived as effectively utilized, as various man-agers indicated. A utilization of a JV visit that producedan observable change occurred when an American parentsent several managers to visit its JV to study the JV’shuman resource management systems. In contrast to mostof the American parent plants, the JV was a nonunionoperation with a hybrid mix of Japanese and Americanhuman resource practices. The American parent was es-tablishing a new nonunion operation and decided to usethe JV as a model. With the JV managers’ support, thevisiting managers spent several days studying the JV andthen incorporated much of their knowledge in the newnonunion plant. One explanation for the success of theknowledge transfer is that learning was focused on a dis-crete system that could easily be replicated.

Customer-supplier relationships between the JV andthe American parent also created a basis for extensive,although not always amicable, interaction. In the Alphacase, the JV acted as both supplier and customer for theAmerican parent. Neither relationship was considered

satisfactory, although the JV was a rich source of knowl-edge for the American parent. In another example, theAmerican parent substantially increased its quality be-cause of pressure from the JV customer, which in turnwas under pressure from its Japanese transplant supplier.Until the JV was formed, the American parent had nothad any extensive interactions with Japanese customers.In supplying the JV, and indirectly becoming a transplantsupplier, the American parent was forced to evaluatesome of its manufacturing operations.

Meetings, such as monthly sales meetings between par-ent divisions and the JV, were also a means of interacting

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and exchanging knowledge. Finally, in several cases theJV relied extensively on the American parent for variousservices, such as purchasing, accounting, human resourcemanagement, and in one case laboratory facilities. Con-sequently, the American parent managers had no choicebut to be involved with the JV.

Personnel Transfers. Personnel transfers can be con-sidered a process of organizational reflection (Hedlundand Nonaka 1993) and a means of mobilizing personalknowledge. Transfers and rotation of personnel helpmembers of an organization to understand the businessfrom a multiplicity of perspectives, which in turn makesknowledge more fluid and easier to put into practice(Nonaka 1994, p. 29). The rotation of managers throughJV positions and back to the parent may encourage the“bleedthrough” of ideas from the venture to the parent(Harrigan 1985).

None of the cases studied had a structured process ofrotation between the JV and the parent. However, Kappahad an extensive informal system of personnel transfersbetween the organizations. For example, the Americanparent promoted a Kappa manager to a staff training po-sition at parent headquarters. Several engineers also werepromoted. In four of the cases, senior managers in the JVhad been transferred to the JV when it was formed. Thecareers of the managers were considered closely linkedto the American parent and not just the JV. In Gamma,the chief operating officer of the JV came from the Amer-ican parent to act as mentor for the younger JV managersand will eventually return to the American parent. InBeta, two plant managers spent time in the JV and thenreturned to plant management positions in American par-ent plants.

Strategic Integration. Doz (1996) argued that thepartner interface is critical to the parent’s appreciation ofthe differences between the partners. A narrow and dis-tant interface was found to be an obstacle to learning (Doz1996). The process through which a JV strategy is linkedwith a parent strategy is termed strategic integration(Harrigan and Newman 1990). A JV perceived as periph-eral to the parent organization’s strategy is likely to yieldfew opportunities for the transfer of alliance knowledgeto the parent. A JV closely related to the parent strategymay receive more attention from the parent organization,leading to substantial parent-JV interaction and a greatercommitment of resources to the management of the col-laboration. As Hamel (1991) argued, receptivity to learn-ing is enhanced if the parent and its alliance are closelyrelated. Note the assumption that the linkages are consis-tent with the strategic goals of the parents and JVs.

Through strategic linkages between the JV and the par-ent, the partners can gain important insights into each

other’s businesses. For example, one of the American par-ents won a contract to supply a part but was unable tomeet the target cost. The parent decided to use its JV toproduce the part because of the JV’s superior processtechnology. Such a linkage indicates that the Americanparent management had internalized the knowledge as-sociated with differences between the parent and JV. Thelinkage also opened the door for more knowledge sharingand cooperation in the future.

To maximize exposure to strategic knowledge, alliancepartners must go beyond the narrow confines of the JVagreement. In Gamma and Kappa, the JV functioned likea related division of the American parent, with the parentfocused on managing the partner relationship, not just theJV itself. The JV was incorporated into the parent’s stra-tegic planning processes and was expected to contributenew ideas and provide leadership in a particular technol-ogy area. The relationship between the partners was be-coming much tighter. For Kappa, the JV was formedstrictly as a transplant supplier that was relatively inde-pendent of its American parent, relying extensively onthe Japanese partner for product technology and market-ing support. Over the years, Kappa became less indepen-dent as ties between the two partners increased. ForGamma, the JV was initially presented to the transplantcustomers as a Japanese company. The JV evolved intoa much less “Japanese” firm and, through its Americanparent’s contact, developed a substantial amount of busi-ness with domestic customers. The objective, as a Gammamanager remarked, was for both the JV and the parentsto benefit.

Types of KnowledgeBuilding on the preceding description of the knowledgemanagement processes, the primary types of knowledgeassociated with each process were identified. Table 4,based on Spender’s (1996b) typology, shows the classi-fication and provides examples of each type of knowl-edge. Because the table is based on our observations ofknowledge types, it does not include certain knowledgetypes that might be associated with the processes in dif-ferent research settings. For example, technology sharingin our study involved knowledge with low tacitness.Clearly, technology could be viewed as having a signifi-cant tacit dimension, but in the cases studied, the knowl-edge transferred (and the knowledge of apparent interestto the American partners) had a minimal tacit dimension.

The knowledge associated withtechnology sharingwas classified as explicit, objectified knowledge becauseit was related primarily to product designs or specificmanufacturing processes. For example, knowledge aboutquality control processes and factory scheduling systems

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Table 4 Knowledge Management Processes and Types ofKnowledge

KnowledgeManagement

ProcessesTypes of

Knowledge

Examples ofKnowledgePotentially

Useful to AmericanJV Parents

Technology sharing Explicit/objectified Quality controlprocesses

Product designsScheduling systems

JV-Parentinteractions

Explicit/objectified Specific humanresourcepractices

Tacit/collective QualityCommitment

Personnel transfers Tacit/collective Continuousimprovementobjectives

Commitment tocustomersatisfaction

Tacit/conscious Meaning of qualityfrom Japanesepartnerperspective

Strategic integration Explicit/objectified Market intelligencePartner’s keiretsu

relationships

Tacit/collective JV competitiveadvantage

Tacit/conscious Visions for thefuture

Implications of thepartner’s keiretsurelationships

was of potential interest to most of the American partners.For the technology-based knowledge, a strong explicitmemory component was embodied in the practices of theJV and, because much of the knowledge in the JV orig-inated in Japan, also in the practices of the Japanese par-ent.

Most knowledge shared throughJV-parent interactionswas objectified, although there was a high potential forsharing tacit, collective knowledge, such as that associ-ated with a commitment to product quality. We viewproduct quality knowledge as tacit because it was asso-ciated with a culture and philosophy about business andwas not based on specific rules or guidelines.4 The JV-parent interactions provided an excellent opportunity forthe American parents to acquire such knowledge, but con-siderable resistance to it was evident at the American par-ent level. In one case, the value of quality process knowl-edge was discounted by the parent (even after theJapanese parent had offered to facilitate the knowledgetransfer) with the argument that “what the JV does wouldnever work here,” even though the JV and parent wereproducing very similar products.

Personnel transfers had the potential to transfer tacit,difficult to articulate knowledge, such as beliefs andnorms of behaviors. For example, an important belief inthe JVs was that Japanese transplant customers hadgreater expectations about customer satisfaction thanAmerican customers. Because that belief was usuallyshared across levels of the organization, it is classified ascollective knowledge within the JV. Other types ofknowledge were more personal, such as the nature andimportance of Japanese partner approaches to human re-source practices. Because our focus was managerialmovements between the JV and parent, the type of indi-vidual knowledge of greatest potential for transfer wasconscious knowledge. Had we addressed the transfer ofpersonnel below the managerial level, we undoubtedlywould have identified instances of automatic knowledgetransfer.

Althoughstrategic integration creates linkages that areorganizational, our findings suggest that potential knowl-edge transfers may involve both social and individualknowledge. Through strategic cooperation, JV partnerscan gain access to objectified, explicit knowledge as wellas to culture-related, communal knowledge about orga-nizational behaviors and norms. The knowledge may alsobe of a tacit, individual nature because there is no con-sensus about the strategic value of the information. In thisstudy, individual JV managers learned much about theJapanese partner’s interorganizational or keiretsu rela-tionships. Such knowledge had potential strategic value,

although our study suggests that American partner man-agers were generally unsure of how to capture the value.

Organizational LevelsLearning and knowledge creation occur through a processinvolving various organizational levels and actors. Foreach of the knowledge management processes, Figure 2provides a multidimensional view linking the primaryknowledge type and organizational levels in the parentfirms. Like Table 4, the figure summarizes the findingsfor the five cases and is based on theidentified (as op-posed to ideal) knowledge transfer. As Table 3 shows, in

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Figure 2 Knowledge Management Processes and Type of Knowledge Transferred

two of the cases little knowledge was transferred from theJV to American parent.

The boxes in Figure 2 can be interpreted by height,width, and volume. The height of the box represents therange of knowledge types associated with the knowledgemanagement process. The higher the box, the greater therange of knowledge types. Box width represents the rangeof organizational levels affected by the knowledge man-agement process. Box volume provides an indication ofthe overall intensity of the process.

The technology sharing process involved primarily ex-plicit, social knowledge that could be transferred to thegroup and organizational levels within the American par-ents. The personnel transfers process involved mainlyknowledge with medium to high tacitness that influencedindividual and group levels. Based on our findings, we

conclude that only a limited amount of knowledge asso-ciated with personnel transfers “spiraled” beyond thegroup level to the organizational level. Strategic integra-tion involved knowledge ranging from low to high in tac-itness that penetrated mainly the group-organization lev-els. Strategic integration also generated some individualknowledge. The JV-parent interaction process had the po-tential to transfer knowledge with similar tacitness to thattransferred by strategic integration, but on a more limitedscale and at lower organizational levels. Resistance in theAmerican parents to the costs of learning limited the ef-fectiveness of the process at the organization level. Oneexplanation for that resistance was that American parentorganizations were so lean that little time was availableto invest in learning. This supports the view that Westernorganizations try to learn in large, discrete steps (Hedlund

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and Nonaka 1993) and often fail to recognize the valueof incremental learning.5

DiscussionThis study contributes to the literature on knowledge andthe firm by examining knowledge management in an al-liance context. We have sought to systematically estab-lish how firms acquire and manage new knowledge. Weidentified specific knowledge management processes byexamining firms’ efforts to exploit JV learning opportu-nities and linked those processes with types of knowledgeand organizational levels.

Proposition DevelopmentSeveral propositions about organizational knowledgetransfer and management can be derived from the find-ings. Two pertain to relationships between knowledgetacitness, organizational level, and transfer effectiveness,and three pertain to transfer effectiveness when the coreof knowledge transferred is highly tacit.

First, we can predict that the more tacit the knowledge,the lower the organizational level through which suc-cessful transfers will occur. Highly tacit knowledge is in-tuitive, nonverbalizable, and related to individual expe-riences. First-hand experiences with tacit knowledge arecritical to its successful transfer. Knowledge that is lowin tacitness is often related to product and process tech-nology transfers that can occur on a higher, more collec-tive level. Hence, Proposition 1.

PROPOSITION1. The tacitness of transferred knowl-edge will have an inverse relationship to the organiza-tional level where initial transfer takes place; the greaterthe tacitness, the more likely individuals will be the pri-mary knowledge transfer agents.

Similarly, we can argue that when knowledge transfersare initiated at the group and organization levels, perhapsthrough team visits or group seminars, the transfers willbe less effective when the knowledge has a high tacitelement.

PROPOSITION 2. The effectiveness of knowledgetransfers initiated at the collective level will be negativelyrelated to the tacitness of the knowledge.

Figure 2 shows that the identified knowledge transferprocesses are primarily in quadrant 2, with personneltransfers occupying the top half of quadrant 3. Clearly,the American firms were focused on explicit knowledge.This is consistent with the argument that in their approachto organizational learning, Western firms tend to focus onexplicit knowledge that can be created through analyticalskills and concrete forms of oral and visual presentation

(Nonaka and Takeuchi 1995). Although in all the casesthe American firms formed JVs with an objective oflearning from their Japanese partners, the learning expec-tations revolved around “what” the Japanese knew, ratherthan “how” and “why” the Japanese firms knew what theyknew. In other words, initial emphasis was on explicitknowledge. The American firms expected to find visibledifferences in the JV that could be analyzed and incor-porated in the parent. The absence of highly visible dif-ferences in systems and processes was often equated withlow learning potential.

Because of the focus on explicit knowledge, the Amer-ican firms often began their collaboration with the viewthat the knowledge management processes based on tech-nology sharing and interorganizational interaction werethe most viable. However, in one of the cases, the focuson narrow, technology-related learning objectives re-sulted in an early abandonment of technology sharing ef-forts. Hence, Proposition 3.

PROPOSITION3. Firms that focus their initial learn-ing efforts on explicit knowledge will tend to ignore tacit-knowledge-based learning opportunities, thereby in-creasing their propensity to undervalue overall learningpotential.

Earlier we noted that knowledge connections create thepotential for individuals to share their observations andexperiences. The firms most successful in knowledgetransfer recognized that important knowledge could notbe internalized without substantial interaction betweenthe people in the parent and those in the JV. This wasparticularly true when the knowledge had a high level oftacitness.

PROPOSITION4. The more successful the transfer oftacit knowledge, the greater the individual interactionsbetween the “learning” organization and the “teaching”organization.

Firms increasingly saw the need for strategic relation-ships between the two organizational units as a means ofsolidifying the knowledge linkages. The strategic inte-gration process involved less visibly defined objectivesthan the technology sharing process and in that sense,enabled the communication of more tacit knowledge.

PROPOSITION5. The more successful the transfer oftacit strategic knowledge, the greater the strategic rela-tionship between the “learning” organization and the“teaching” organization.

Managerial ImplicationsSpender (1996b) argued that the most strategically im-portant feature of a firm is its body of collective knowl-edge. We identified several knowledge management pro-cesses that firms use to exploit alliance learning

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opportunities. Although all of the processes are poten-tially effective, we found that the different processes in-volved different types of knowledge and different orga-nizational levels. Organizations create, store, transfer, anddiscard various types of knowledge. Therefore, organi-zations must engage in a variety of knowledge manage-ment processes.

Personnel transfers can be an effective process throughwhich to acquire tacit knowledge that can be acquiredonly through time and experience. The risk with person-nel transfers is that if the knowledge remains individual,the potential social impact of the learning is lost. To max-imize the effectiveness of personnel transfers, systemsmay have to be established to ensure that knowledge goesbeyond the individual level. Strategic integration can bean effective higher level knowledge sharing tool. It en-ables meaningful communication and collaboration be-tween organizations at the group and organizational lev-els rather than at the individual level. Personnel transferschemes and strategic integration suggest a long-term ba-sis for knowledge sharing and potentially allow for thelargest amounts of knowledge to travel interorganization-ally. Additionally, such long-term processes create thepotential for a continuous flow of knowledge, which inturn can lead to continuous learning and change. How-ever, as we found, personnel transfers do not always re-sult in significant organization level knowledge transfer.

The other two processes, technology sharing and JV-parent interactions, are based on shorter term knowledgerelationships and as such, are less effective in transferringtacit knowledge. Nevertheless, this study shows that theycan be effective as a means of acquiring explicit, objec-tified knowledge. Moreover, given that the decision toinitiate knowledge creation efforts must be balanced withthe cost of doing so, technology sharing and JV-parentinteraction processes may be less costly than strategic in-tegration and personnel transfers. Visits and tours of JVfacilities were identified as a simple and effective meansfor parent managers to interact with JV managers.

In summary, this research suggests that organizationsmust be aware of the different types of knowledge anddesign appropriate systems to process the knowledge.Clearly, firms will attach different values to JV knowl-edge, and therefore knowledge creation and processingstrategies will differ across organizations and also evolveover time. We found that a variety of knowledge man-agement strategies can be useful, although some strate-gies lead to more effective knowledge transfer than oth-ers. For example, in four of the five cases (all but Sigma),the Japanese partner was responsible for the manufactur-ing process and product technology, which obviously in-fluenced the type of technology knowledge that could be

exchanged between the partners. Also, industry condi-tions can influence learning intent and managerial com-mitment. When our research began in 1990, the U.S. au-tomotive industry was under serious attack by Japanesefirms. Suppliers had to cope with new competitors, andtheir traditional customers were losing market share. By1994, the situation had changed dramatically. The do-mestic auto industry was recapturing some of its marketshare, and suppliers were reaping the benefits. The learn-ing imperative that prevailed in 1990 was no longer ascritical. That change highlights one of the problems withcross-sectional research, namely that firms and industriesare in constant evolution. Longitudinal research capturesthe evolutionary patterns in the underlying research con-text.

ConclusionThere are several underlying assumptions in the paper.First, there can be a significant payoff in cooperating,namely knowledge creation. Although not all knowledgecreation efforts will have immediate performance pay-offs, over the long term successful knowledge creationshould strengthen and reinforce a firm’s competitive strat-egy. Second, each alliance partner has knowledge that, atleast in part, should be considered valuable by the otherpartner(s). Third, knowledge creation is a dynamic pro-cess involving interactions at various organizational lev-els and an expanding community of individuals that en-large, amplify, and internalize the alliance knowledge.Finally, knowledge creation and the upward movementof knowledge through the different organizational levelscan be at least partially responsive to managerial influ-ence.

To be successful, organizations must not only processinformation but also create new information and knowl-edge. This study explored how organizations involved inalliances can use their alliance experience as the basis formanaging and creating knowledge. We provide some em-pirical evidence to support the conceptual argumentsmade by Hedlund (1994) and Spender (1996b) about thefirm as a dynamic system of processes involving differenttypes of knowledge. Further research is needed to probedeeper into the relationships between organizational lev-els, types of knowledge, and organizational processes. Inparticular, there is a need to study how organizationsmanage highly tacit knowledge that resides at the collec-tive level of the organization. Such an orientation canhelp capture the dynamics of knowledge management andgreatly enrich understanding of how firms acquire andtransfer knowledge.

AcknowledgmentsGrants to the first author from the Carnegie Bosch Institute for AppliedStudies in International Management, Temple University’s Center for

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East Asian Studies, and the Thunderbird Business Research Center aregratefully acknowledged. The authors thank Rob Grant, IkujiroNonaka, and J. C. Spender for their helpful comments.

Endnotes1Confirmed through discussions between the first author and severalGeneral Motors managers.2Spender (1996b) emphasized that the boundaries between the types ofknowledge are imprecise.3Although the sample included two Canadian firms, for brevity we referto the sample as American rather than North American.4In contrast, specific quality control systems or processes that involverules and guidelines would be classified as objectified knowledge.5For a detailed discussion of Western versus Japanese knowledge man-agement processes, see Hedlund and Nonaka (1993). Nonaka andTakeuchi (1995, ch. 8) use several Japanese company examples to de-scribe how organizational knowledge creation takes place on a globalscale.

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