Proceedings of the 12th European Conference on Knowledge ...

Knowledge Creation in Multinational Corporations: The
Role <strong>of</strong> Organizational Structure
Pamela Chidiogo Izunwanne
University <strong>of</strong> Agder, Kristiansand, Norway
pamelaci@uia.no
Abstract: Organizational structure has been linked to several strategy constructs: organizational learning; firm
internationalization; innovation;firm performance;organizational capabilities; product development etc. However,
until now, studies have not classified <strong>the</strong> role that organizational structure plays in facilitating or inhibiting
knowledge creation. This paper attempts a classification using multinational corporations as context. The paper’s
aim is to show how <strong>the</strong> formal organizational structure could influence knowledge creation activities.
Organizational structure components include: reporting relationships; organization routines; standard operating
procedures; reward systems. This list is by no means exhaustive and could vary from one organization to <strong>the</strong>
o<strong>the</strong>r but this paper focuses on reporting relationships and routines.
Knowledge creation is a process that adds value for multinational corporations. It has been identified by <strong>the</strong>
knowledge based view as a process that leads to competitive advantage for firms if well coordinated (Grant,
1996b, Nonaka, 1994b). This paper adopts ideas <strong>of</strong> <strong>the</strong> emerging knowledge governance approach which
hypo<strong>the</strong>sizes that organizations can influence knowledge creation through <strong>the</strong> use <strong>of</strong> formal mechanisms(Foss,
2007). The overall proposition is that formal organizational structure components particularly reporting
relationships and routines influence knowledge creation through particular organizational controls.
Keywords: Knowledge creation; organizational structure; organizational controls; knowledge governance;
knowledge-based view; multinational corporations
1. Introduction
Knowledge creation has generated a lot <strong>of</strong> research in recent times. Scholars have proposed different
mechanisms and methods through which knowledge can be created in an organization. The
mechanisms and methods proposed are mostly based on different <strong>the</strong>ories <strong>of</strong> knowledge creation; <strong>the</strong>
emerging knowledge governance approach (Foss, 2007, Foss et al., 2010); <strong>the</strong> organic approach
(adhoc freelance knowledge creation)(Bartunek et al., 2001, Ba<strong>the</strong>lt et al., 2004, Choo, 1996) and a
combination <strong>of</strong> both approaches (Nonaka et al., 2000, Nonaka, 1994a).
New approaches are however emerging and gaining ground fast, proposing <strong>the</strong> role <strong>of</strong> outsiders;
personal social networks; virtual teams and customers in <strong>the</strong> knowledge creation activities <strong>of</strong>
organizations. The emerging knowledge governance approach is backed by research on <strong>the</strong> use <strong>of</strong>
organizational controls in knowledge creation(Turner and Makhija, 2006). Henceforth referred to as
KGA, <strong>the</strong> emerging knowledge governance approach highlights <strong>the</strong> role that formal mechanisms like
organizational structure play in knowledge creation in firms(Foss, 2007). It is <strong>the</strong> aim <strong>of</strong> this paper to
specifically highlight <strong>the</strong> role that formal structural components like reporting relationships and
routines play in facilitating or inhibiting knowledge creation in multinational corporations henceforth
MNCs.
The application <strong>of</strong> knowledge in organizations known as knowledge management (Walczak,
2005)does not only involve <strong>the</strong> storing or codification <strong>of</strong> knowledge as many IT pr<strong>of</strong>essionals like to
think, but also involves <strong>the</strong> creation and management <strong>of</strong> knowledge intensive work. It can be broken
down into knowledge creation, knowledge sharing and knowledge transfer (Alavi and Leidner, 2001,
Alavi and Leidner, 1999, Nonaka, 1994a). These three elements are difficult to separate in
practice(Argote et al., 2003), and this paper would not attempt to do so because knowledge creation
may be impossible without knowledge transfer.
The paper is organized as follows.First, using MNCs as context, I present a review <strong>of</strong> knowledge
creation that includes a brief overview <strong>of</strong> existing knowledge creation <strong>the</strong>ories discovered in literature.
Secondly, I present propositions highlighting <strong>the</strong> role that formal organizational structure components
like reporting relationships and routines play in inhibiting or enhancing knowledge creation through
specific control mechanisms. Finally, based on <strong>the</strong> identified knowledge creation <strong>the</strong>ories and
approaches, I present a conceptual model and propose possible classifications.
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