2 management - School of International Business and ...

173 The Puzzle of Globalization
national, global companies is shaped to a high degree by learning how to convert tacit into codi-
fied knowledge and transforming it into a kind of routine. When analyzing cross-border joint ven-
tures and mergers&acquisitions that failed, the concept of absorptive capacity 5 is often applied
to explain organizational deficiencies. It is obvious that the stock of organizational knowledge is
determining the absorptive capacity. But also the reverse interdependence has been attested:
Organizational forms influence the absorptive capacity. Gaining competitive advantages through
organizational changes (e.g. by acquiring a foreign producer of parts and components) needs
three types of absorptive capacities [Deng, 2010, p 675):
– Firstly, the ability to identify and understand the value of external knowledge results at
least partly from the company’s prior knowledge.
– Secondly, the ability to assimilate, integrate, synthesize newly internalized knowledge re-
quires combinative capabilities which include coordination and socialization mechanisms.
– Thirdly, the ability to transform the acquired assets that change the organizational struc-
ture into competitive advantages needs an absorptive capacity in terms of an effective
execution strategy.
Comparative studies of cross-border M&A as well as other forms of cross-border operations
suggest that absorptive capacity arguments may explain differences in their performance despite
similar competitive market positions [e.g. Xia and Roper, 2008; Harris and Li, 2009]. Effective
management of the firm's internal cross-border knowledge flows (as part of the absorptive capac-
ity) influences significantly the MNCs’ innovation capability. In addition, the effects of absorptive
capacity on innovative capabilities need the adaptation of a supportive organizational culture
[Hui, 2007]. The widely accepted concept of organizational learning set the framework for differ-
ent approaches to internalizing globally available knowledge and competencies.
The successful management of globalization requires leadership in building a cross-border or-
ganizational structure of the company which allows balancing market and non-market strategies.
The crucial challenges seem to be how to identify the intangible assets that globalization offers,
how to integrate cultural diversity into frictionless functioning cross-border transactions, opera-
tions and communication in MNCs/TNCs, and how to adapt a currently optimal organizational
structure to the dynamics of the globalization.
To unravel the permanently changing puzzle of globalization and transfer the result into sustain-
able performance need more than knowledge and skills: Competence and intuition are indispen-
sible personal attributes which international managers have to bring into their companies.
5 Cohen and Levinthal define absorptive capacity as »the ability to recognize the value of new, external infor-
mation, assimilate it, and apply it to commercial ends«[Cohen and Levinthal, 1990, p. 128].