Optimal location of a multinational corporation resulting from knowledge transfer

Abstract

Purpose A multinational corporation (MNC) looking to locate within a cluster is mainly interested in gaining access to scarce and highly valuable tacit knowledge. The transfer of such resources first requires sharing a certain degree of architectural and component knowledge. The social, organizational, cultural, institutional, technological, and physical distances between a MNC and the new subsidiary, as well as its local partners, offer a good indication of the way the architectural and technological knowledge is shared. The purpose of this paper is to examine the transfer of systemic technological expertise (component tacit knowledge) that is incorporated into organizational practices (architectural knowledge). Design/methodology/approach The mathematical expression of localization performance is inferred from a conceptual research that formulates hypotheses regarding the impact of these variables on knowledge transfer. The MNC chooses its location in such a way as to maximize this performance. Findings This research contributes to a better understanding of how knowledge transfer effects may interact with local effects, while explaining a subsidiary’s performance with regard to location. Research limitations/implications In order to apply this model, one would need to numerically compute the variables of this model and the performance in order to obtain a numerical estimation of the variables, by the econometric methods, which intervenes in the performance. Then one could use this numerical expression of the performance as a specific criterion of localization. Indeed it would be sufficient to evaluate both architectural and component knowledge which could be exchanged as well as different distances and the motivation for each of possible localizations and to select the one which gives the maximal numerical value for the performance. Practical implications The authors deduced from the mathematical model a simple decisional criterion for a manager in search of an optimal location. Originality/value This research provides an interpretation of the concept of knowledge embeddedness by showing that the effective transfer of architectural and component knowledge involves the prior sharing of a certain amount of this knowledge.