ORGANISATIONAL LEARNING AND INTER-FIRM COLLABORATION:
THE CASE OF LICENSING

 

 

 

Vitor Corado Simões
CEDE,
Instituto Superior de Economia e Gestão
Technical University of Lisbon

 

 

ORGANISATIONAL LEARNING AND INTER-FIRM COLLABORATION:
THE CASE OF LICENSING

 

  1. Introduction

  2. Organisational learning became in recent years a fashionable topic, both in general management and international management. Three main reasons explain such a development.

    First, there is a trend towards a knowledge-based economy, where intangibles, especially tacit knowledge, are the foundation of competitive advantage. Lundvall and Johnson (1994) went even further, arguing that we already live in a "learning economy". Following Nelson and Winter (1982) and the quest for worlwide learning expressed by Bartlett and Ghoshal (1989) there was a strong movement towards the study of knowledge management processes in organisations, both at national and international levels (Hedlund, 1994; Spender, 1996; Nonaka and Takeuchi, 1995; Leonard-Barton, 1995; Ghoshal and Bartlett, 1997; Davenport and Pruzak, 1998; Inkpen and Dinur, 1998; von Krogh, Roos and Slocum, 1994; von Krogh, 1998; O’Dell and Grayson, 1998; Edvinsson and Sullivan, 1996; Nahapieth and Ghoshal, 1998).

    Second, firms need to accurately manage what March (1991) called "exploiting" and "exploring". Firms capabilities are constrained by their past trajectories, by their heritages. But, simultaneously, they need to be constantly renovated (Ghoshal and Bartlett, 1997). In a fast changing, complex and turbulent environment (Huber, 1996), organisational learning becomes even more relevant, since it becomes a critical device for reconciling exploitation and exploration. For some authors, a fast pace of learning is the only sustainable competitive advantage (Stata, 1989). Taking this perspective even further, Grant (1996) suggests that knowledge should not be envisaged as a resource, but rather as a process. We go, then, from knowledge to knowing. A company becomes a "stream of knowledge" (von Krogh, Roos and Slocum, 1994) instead of a repository of knowledge (Caraça and Simões, 1995; Kogut and Zander, 1996). Learning capability becomes the key element of competitiveness: "the learning firm" (Senge, 1990), "the knowledge creating company" (Nonaka and Takeuchi, 1995), "the individualised corporation" (Ghoshal and Bartlett, 1997) or "the value-adding knowledge company" (Thissen et allii, 1998). All these approaches aim at reconciling history and change, competence and performance, exploitation and exploration.

    The third reason concerns the expansion of inter-firms agreements and alliances, particularly cross-border ones. According to Dunning (1995), we moved from a "hierarchical" to an "alliance capitalism". Firms need to simultaneously learn how to cooperate and learn from co-operation, to reach "co-operative advantage" (Kanter, 1994). The increasing pace of change, strengthening the relevance of knowledge and time, forces co-operation. But, as Hamel (1991) pointed out, not all partners may benefit. Benefits are not evenly shared. The capability to absorb partner’s knowledge and to integrate it in the firms’ knowledge base becomes a key issue.

    We think, however, that there is a bias in the research on organisational learning. This has taken an intra-organisational perspective (Nonaka and Takeuchi, 1995; Hedlund, 1994). In the international business field, the analysis has been focused on the transfer of knowledge within the multinational firm (Szulanski, 1996; O’Dell and Grayson, 1998; Bartlett and Ghoshal, 1997; Kulkki, 1996; Doz et allii, 1997; Doz and Santos, 1997) or in the context of joint-ventures (Inkpen, 1996; Inkpen and Crossan, 1995; Inkpen and Dinur, 1997; Tiemessen et allii, 1997). There is a lack of empirical research concerning both the setting up of frameworks and the analysis of learning processes in inter-organisational international agreements which do not entail equity participation or the creation of new firms, such as licensing or technology-based co-operation. A few exceptions may be pointed out: Hamel (1991), who studied international alliances from a learning perspective, but also with a mindset where conflict prevailed over co-operation; Doz (1996), who identified five very helpful learning dimensions, but whose main interest was not so much on learning per se but rather on the contrast between teleological and evolutionary perspectives of alliances; and Larsson et allii (1998), who developed a framework comparing partner’s learning strategies, but did not analyse how learning is done in the context of the alliance. Our argument is that further research is needed to understand learning processes in arms’ length international agreements (technology exchange, licensing, franchising, collaborative development). This would enable to work out a suitable framework to understand how learning takes place, and the relevance of the various levels of the "ontological dimension" (Nonaka and Takeuchi, 1995) or "carriers of knowledge" (Hedlund, 1994): individual, group, organization and inter-organisational linkages. We are convinced that such a task requires a multidisciplinary approach, melding contributions from Psychology, Biology, Sociology and Cognitive Science with those from Economics and Management.

    The paper includes six sections, besides this introduction. In section 2, the issue of organisational learning will be presented from a multidisciplinary perspective, showing how several concepts now used in the management field have their roots in other disciplines. We proceed then to a closer analysis of organisational learning (section 3). The process of transformation of individual into organisational knowledge will be the subject of section 4, where the contributions of Kim (1993), Dixon (1994), Hedlund (1994) Ghoshal and Bartlett (1997), Nonaka and Takeuchi (1995) and Doz et allii (1997) will be presented. This leads us to the issue of inter-organisational learning, namely to the discussion of the possibilities and processes of learning in the context of international inter-firm agreements. A closer assessment of learning processes in licensing agreements will follow. The final section summarises the main conclusions.

  3. Organisational Learning as a Multi-Disciplinary Field

    1. Individual versus Organisational Learning

    2. Following Herbert Simon, one may question whether organisations do learn. As a matter of fact, Simon (1991: 125) wrote that "all learning takes place inside individual human heads".

      However, Simon concedes that organisations can, and do, learn, through either the learning of their members or by engaging new members with knowledge that the organisation did not previously have. So, organisations learn. And learning in organisations is "a social, not a solitary, phenomenon" (Simon, 1991: 125). In fact, learning in, and between, organisations is based on social relationships, particularly on what tacit knowledge is concerned (Nahapiet and Ghoshal, 1998). The firm may be envisaged, as Kogut and Zander (1996: 503) suggest, "as a social community specialising in the speed and efficiency in the creation and transfer of knowledge."

      A firm is not just a set up "human heads" with given levels of intelligence and learning capabilities. Organisational environment matters too: the co-ordination of actions of those individuals, in the framework of organisational routines, with the purpose of achieving firm’s goals. Such co-ordination requires the existence of structures of meaning (languages, signs, histories, organisational myths, weltanschauungs) which lend coherence and structure learning at different levels: individuals, groups, the whole organisation. Individuals are not alone – their mindsets are influenced by the very fact of belonging to an organisation. The organisational frame leverages individual learning capabilities, through interaction and knowledge sharing. In March’s words, organisations learn from their members, but at the same time "individuals in an organisation are socialised to organisational beliefs" (March, 1991: 73).

      But what Simon (1991) called "internal learning" is only one part of organisational learning. Organisations also learn with other organisations. No organisation is an island. Either in their day-to-day activities or through specific purpose agreements, organisations have access to information and knowledge from other organisations. Firms do not just trade products: they also share knowledge, to a larger or smaller extent, in their dealings.

      To be more specific, one has to acknowledge that the "acquisition" of new knowledge from outside cannot be done by organisations as such. It can only be done by individuals, members of organisations. The latter only can assimilate such knowledge to the extent that it is shared and diffused throughout the organisation. Such a process requires the existence of a common language (Caraça and Simões, 1995), a codification exercise to facilitate the diffusion (Boisot, 1987; Nonaka and Konno, 1998) and, at a later stage, its embodiement in organisational routines and procedures (Nelson and Winter, 1982; Levitt and March, 1988). The process entails mutual learning, by individuals and by the organisation (March, 1991). Knowledge is no longer exclusively individual. It acquires an organisational nature: it was digested, transformed, as a result of the introduction of new elements and new meanings stemming from the interaction and from the integration in the beliefs, procedures and knowledge base of the organisation. As Hedberg (1981) put it, although organisational learning takes place through individuals, organisations have cognitive systems and memories, which preserve specific behaviours, mental maps and values across time. From the organisational perspective, cognition is less an act of representation of a given reality, rather than a process of interpreting and thereby constructing the reality (von Krogh, 1998; Nonaka and Takeuchi, 1995; Kogut and Zander, 1996).

      The sum up, learning in organisations is mainly a collective, social process, and not so much an individual one. To understand how learning takes place, an inter-related analysis of the various levels of knowledge actors (individuals, groups, organisations, inter-organisational relationships…) is needed. This analysis requires, in our opinion, a multi-disciplinary perspective. It is impossible to fully understand organisational learning with the instruments of Economics and Management only.

    3. Putting together different contributions

Ten years ago, Dunning (1989) made a strong plea for a more inter-disciplinary approach in the study of international business. Such a plea is especially relevant to understand the process of organisational learning, particularly when it takes place between units or firms in different countries.

As a matter of fact, to fully grasp organisational learning, organisation theory is increasingly importing concepts and perspectives developed in other scientific fields. A basic contribution comes from Biology. While long since biological paradigms have made inroads in economics and business (Louçã, 1997), the evolutionary approach is increasingly applied in the study of innovation, multinationalisation and organisational learning (Nelson and Winter, 1982; Cantwell, 1989; Kogut and Zander, 1993 and 1996; De Geus, 1997; Teece, Pisano and Shuen, 1997). Furthermore, the concept of auto-poiesis developed by the biologists Humberto Maturana and Francesco Varela has been used by several authors studying organisational learning, namely von Krogh, Roos e Slocum (1994), Nonaka and Takeuchi (1995), Whitaker (1996), De Geus (1997) and von Krogh (1998). Auto-poiesis means that the components of a system are able to produce new components and their relationships, in a way to recreate the system. Although Maturana and Varela did not specifically apply their approach to the organisational field, it – together with the perspective they put forward that cognition is a creative act generating body-specific knowledge – had a strong impact on organisational learning. "Similarly to an autopoietic system, autonomous individuals and groups in knowledge – creating organisations set their task boundaries by themselves to pursue the ultimate goal expressed in the higher intention of the organisation" (Nonaka and Takeuchi: 76).

From Sociology two main contributions should be acknowledged. The first concerns the understanding of learning as a social process, strongly embedded in social networks, both at the individual and organisational levels (Granovetter, 1985; Karnoe, 1996; Lam, 1997; Gulati, 1998). The organisation itself is a social community (Kogut and Zander, 1996). The cognitive dimension of social capital, concerning shared interpretations and systems of meaning, becomes a critical element of organisational learning (Nahapiet and Ghoshal, 1998). The second contribution is the notion of "communities of practice", a concept used by Brown and Duguid (1991) to characterise inter-active social processes of knowledge generation by working teams.

The widest contribution comes, however, from Psychology. This is not surprising since learning has been at the heart of Psychology, particularly of Development Psychology. Organisational learning literature is pervaded by what Dodgson (1993) aptly called the "individual learning metaphor".

The notions of cognitive maps and mental models of Tolman and Johnson-Laird,

respectively, are transferred to organisations. From Kurt Levin are taken the theory of experiential learning (Kim, 1993) and the concept of "unfreezing", expressing the need to "shake" the organisation in order to fasten their learning processes (Schein, 1993). The influence of Albert Bandura is also acknowledged, particularly the notions of role models and observational learning (Kogut and Zander, 1996), together with the relationship between environmental changes and internal factors as stimuli for learning (Dodgson, 1993). Piaget’s development psychology has been used to illustrate the dialectics between the use of existing competencies and the renewal of firms’ knowledge bases. Also the ideas of Lev Vygotsky – a critic of Piaget – have been introduced in the study of organisational learning. The three main contributions of Vygotsky concern the activity theory (children learn through their activities, so that learning is associated with the development of tools), the "zone of proximal development" (the difference between the child’s problem solving capacity with adult or peer support and alone) and the notion of "inner language" (Blackler, 1993 and 1995; Di Bello and Spender, 1996; Spender, 1998). Knowledge creation and transformation processes in organisations are studied by Spender (1996) with reccourse to Vygotsky’s activity theory and "zone of proximal development". The implicit components of social cognition are initially transferred to the individual, in a similar way to the management by adults of children’s zone of proximal development. In a second step, they are transmitted from the individual to the social level (Spender, 1996). Organisational learning is thus envisaged as a dialectic process, an individual/social construction, where language – not always verbal, sometimes developed by the participants themselves - plays a key role (Brown and Duguid, 1991 and 1998; Caraça and Simões, 1995; Von Krogh and Roos, 1996). The development of an organisational language is a critical instrument for linking intra- and inter- psychological levels.

To understand the kaleidoscope of actions and relations required by organisational learning, the meshing of different scientific streams is needed. Since organisational learning is a complex, dialectic process involving individuals, groups, organisations and inter-organisational contexts (networks, contracts, equity participation…), the advantages of both Sociology and Psychology become clear. However, the individual learning metaphor should not be carried too far: an organisation is not a sum of individuals. Organisational knowledge has specific characteristics and rhythms which are a research issue on its own.

  1. Organisational Learning: Definition and Dimensions

    1. Towards a Definition of Organisational Learning

    2. An analysis of the multiple definitions of organisational learning shows that there are

      significant differences among the authors. Such differences are particularly clear on what concerns the relationships among learning, action and action effectiveness. Such differences broadly reflect the contrast, traditional in Psychology, between behaviourism and cognitivism.

      From the organisational standpoint, we think that learning is closely associated with action, with the achievement of specific goals (Levitt and March, 1988; Doz and Santos, 1996). In the context of companies, learning is geared towards management behaviours and situational interpretation (Koenig, 1994), to be translated into profits, present or potential. For instance, the 15% of "free time" given to 3M researchers only makes sense from a perspective of "interiorisation" of firms’ goals and opening future opportunities for the firm. So, "metanoia" – that perceptual change pointed out by Senge (1990) – only becomes relevant, in the organisational context, if it is translated into a different repertoire of behaviour.

      A word of caution is, however, needed. Organisational learning does not ipso facto translate into improved effectiveness, as Fiol and Lyles (1985) or Kim (1993) suggest. Firms can incorrectly learn, and can learn what is not appropriate (Huber, 1991). This is to a large extent due to the existence of causal ambiguity. Such ambiguity is compounded when there are environmental changes. Actions appropriate in the past may not be so in the future. The awareness of this fact, however, is not immediate – and is not easy to diffuse throughout the organisation. Unlearning is difficult. "Core rigidities" (Leonard-Barton, 1995) or "competence traps" (Levitt and March, 1988) constrain firms’ adaptative capabilities and thereby organisational learning.

      Huber (1991) also points out that learning does not necessarily imply observable behavioural changes. The development of new insights, interpretations and meanings may not be reflected into actions. An enlarged repertoire of knowledge may be envisaged as a potential that will only be translated into behaviour if certain specific conditions are met. Some knowledge may never turn into action, either because of environmental changes or because learning itself led to the conclusion that it would be more appropriate not to take any action. In other cases, action may take time, since the turning point was not reached yet (Burgelman and Grove, 1996).

      The cognitive dimension is undoubtfully important. Learning requires the development of shared mental models (Daft and Weick, 1994). But learning is not just about that. Learning is also action. Individuals come into existence and only think later on (Damásio, 1994). Similarly, in firms acting comes often before thinking, as Imai, Nonaka and Takeuchi (1988) have shown with regard to product development in Japanese firms. Production and marketing activities often encapsulate the very processes of learning: hence, the notions of "learning-in-doing" (Arrow, 1962), "learning-by-trying" (Fleck, 1994) or "learning-in-working" (Brown and Duguid, 1991). The mental-manual divide may lead organisations to undervalue the importance of knowledge stemming from practice (Brown and Duguid, 1998; Nonaka and Takeuchi, 1995). However, such knowledge may be a cornerstone of competitive advantage, since it is very difficult to imitate by organisations which have neither faced the same problem nor developed the same solution.

      So learning is not just translated into weltanschauungs (Kim, 1993; Dougherty, 1990), social representations (Durand, Mounod and Ramanantsoa, 1996) or interpretation systems (Daft and Weick, 1994). It is also expressed through activity systems (Blackler, 1993 and 1995), "ways to act" (Kulkki, 1996) and routines (Nelson and Winter, 1982; Levitt and March, 1988; Coriat and Dosi, 1998). Cognitive and behavioural perspectives are often closely related. Some knowledge is forgotten by organisations, when it is not applied in current activities (Argote, Beckman and Epple, 1990). Forgetting may be envisaged as a consequence of the non application of a set of practices which supported knowledge (Spender, 1998). Hence, firms may take in some instances specific actions in order to retain particular capacities, that is, they try to "remember-by-doing" (Nelson and Winter, 1982). Similarly, in multinational organisations, we often find in less advanced countries subsidiaries some practices and solutions which have long since been abandoned (and forgotten) at headquarters or at "leader" subsidiaries.

      On the basis of the above literature review and discussion, we may now suggest an operational definition of organisational learning, as the process of strengthening an organisation’s knowledge and capabilities base aimed at changing its scope of potential behaviours, to enhance effectiveness.


    3. Dimensions of Organisational Learning

A first typology of the dimensions of organisational learning is the contrast between internal and external learning. The first corresponds to the in-house efforts to develop knowledge and capabilities, while the second involves the collaboration with, or copy of, others. This distinction is, however, blurred in real world, since organisations are not islands: they are embedded in a context and have relationships with other organisations. Learning always involves to some extent a dialectic process between internal and external dimensions. The problem is compounded in the case of multinational firms. These are networks whose units have, to some extent, a double embeddedness (Forsgren, Holm and Thilenius, 1997; Caraça and Simões, 1995): in the multinational group and in the economy of the country where they are located. Learning by subsidiaries is therefore a result of the interplay among three different levels: subsidiary’s knowledge base and internal efforts; sharing of knowledge within the multinational network, which is not an easy task, as Szulanski (1996) has shown; and external linkages between the subsidiary and the "outside" world.

Every firm learns through a mix of five different learning types: congenital, experimental, vicarious, grafting and search (Huber, 1991). The above case of a subsidiary involves congenital (the basic culture, knowledge and organisational routines set up by its founder or founders), experiential (the knowledge stemming from subsidiary’s current activities), vicarious (through the observation of how other organisations – other members of the multinational network and outside firms within its task environment – behave), grafting (namely through the assignment of people from other units of the multinational to the focal subsidiary, but also through the admission of local experts or the acquisition of other firms), and search features (subsidiary actions specifically aimed at developing or adapting knowledge).

While learning in practice is the outcome of the interplay among all those dimensions, vicarious learning is the most relevant for the purposes of the present paper. Huber (1991) defined vicarious learning as the process of understanding and assimilating the strategies, administrative practices and technologies of other organisations. It involves some kind of observational learning, either collaborating or not with the "model", target organisation. Benchmarking is undoubtfully a form of vicarious learning, as is imitation (Zander and Zander, 1993; Zander and Kogut, 1994). What mostly matters for us, however, is that vicarious learning is behind the setting up of many inter-firm agreements of different kinds, from strategic alliances and joint-ventures to franchising, technical assistance and licensing contracts. In licensing, for instance, the licensor is a "model", from the technological and/or marketing standpoint, which the licensee is eager to copy, to replicate. Full carbon copy, however, is impossible, especially when the knowledge has a strong contextual, and tacit component. The "model" has to be adapted having in mind licensee’s prior congenital and experimental learning. Such adaptation requires search efforts by the licensee, and in many cases grafting, through the integration of new members in the organisation.

Vicarious learning does not imply the existence of one "model" only. Models, references may evolve over time. And firms increasingly rely on a mix of agreements with different organisations, in order to capture various perspectives which may be put together in close inter-action with the firm’s knowledge base (Granstrand and Sjöllander, 1990; Kim, 1998).

  1. Organisational Learning Processes

  2. How do organisations learn?

    To answer this question is a necessary condition for understanding how learning takes place in the context of inter-firm arms’ length agreements. We need then to understand learning processes, to figure out how organisations strengthen their knowledge and capabilities bases. This task will be developed in two stages. First, there will be a reference to the generic actions concerning knowledge management, particularly the interplay between individual and organisational knowledge. More complex and encompassing approaches will follow.

    1. The Interplay between individual and organisational learning

    Since knowledge is not additive (Caraça and Simões, 1995), the relationship between individual and organisational learning is not equivalent to the dissemination, within the organisation, of individual knowledge and mental maps. The key issue becomes the process of creation of meanings and interpretation systems stemming from individual interactions within the context of an organisational culture (Bartlett and Ghoshal. 1989; De Geus, 1997; Nahapiet and Ghoshal, 1998).

    A first approach to this issue was the analysis of the interplay between individual and organisational learning provided by authors such as Dixon (1994) or Kim (1993). Both start from Kolb’s individual learning cycle, and try to translate it to the organisational level. Dixon (1994) considers that organisations learn through the learning capacity of their members, and learning corresponds to the building up of meanings. Organisational learning takes place by the transformation of accessible meaning structures (individual cognitive maps open to other organisation members) into collective meaning structures. These structures may be tacit or explicit and include the set of norms, strategies and assumptions concerning the division of work inside the organisation. Dixon’s perspective is, however, too simplistic, implicitly envisaging the firm as a closed system, and forgetting that organisational cultures shape the characteristics of accessible meaning structures.

    Kim’s approach is more complex and realistic. The main tenet is the creation of shared mental models, which structure organisational learning. Such models (organisational routines and weltanschauungs) generate the appropriate conditions for intra-organisational relationships. They promote intra-firm trust and facilitate the transfer of tacit knowledge, while enabling the generation of new interpretations and meanings.

    Focusing on the web of relationships between individuals and the organisation, the proposals put forward by Kim (1993) have several features similar to the process of organisational learning advocated by Ghoshal and Bartlett (1997). They extend the logic of the "transnational firm", to argue that knowledge creation and learning involves the conversion of individual expertise into organisational learning. The firm should therefore behave as a network. Drawing on the experience of firms such as McKinsey, Skandia, Intel or Andersen Consulting, they consider that there are three main conditions for organisational learning: development of members’ knowledge; promotion of the tools, processes and relationships supporting horizontal flows of information and embedding individual knowledge in "a collective process of shared learning" (Ghoshal and Bartlett, 1997: 77); and creating an atmosphere of trust at all levels in the organisation.

    The perspective of Ghoshal and Bartlett highlights two important issues. First, the interplay between individual and collective capabilities. Organisational memory, culture and administrative heritage influence the process of transforming individual into organisational knowledge. Second, the relevance and complexity of knowledge sharing. The horizontal flow of knowledge is critical for generating new, shared perspectives which enable the identification of new product offerings (Dougherty, 1990), strengthen cohesion and trust needed for sharing knowledge and improving "combinative capabilities" (Kogut and Zander, 1992), and stimulate the individual understanding of the knowledge which is relevant for the organisation (Nahapiet and Ghoshal, 1998). Bartlett and Ghoshal also introduce a feature that is not apparent in both Kim and Dixon’s approaches – the international business perspective. Organisational learning does not take place at one location inside the firm, and is "projected" (Doz et allii, 1997) internationally. It is rather a world-wide phenomenon, involving affiliates in different geographical locations. Unfortunately, however, the inter-organisational dimension is not given enough consideration. Additionally, the influence of tacit and explicit knowledge, and its interplay, in organisational learning processes are not analysed in depth. To fill this gap one needs to look elsewhere.

    4.2. From the "knowledge spiral" to the "7 As of knowledge management"

    Nonaka and Takeuchi (1995) stress a very important point, decisive in our view to fully understand organisational learning processes: knowledge creation does not take place within the organisation only. Rather, it requires a social process of sharing knowledge with other organisations and its "conversion". As they wrote, "Japanese companies have continually turned to their suppliers, customers, distributors, government agencies, and even competitors for any new insights or clues they may have to offer" (Nonaka and Takeuchi, 1995: 5).

    The "knowledge spiral" is a consequence of the interplay between two dimensions: epistemological and ontological. The first corresponds to the distinction between tacit and explicit knowledge. The second concerns the level of social interaction where knowledge is transformed and legitimised (Nonaka, 1994): individual, group, organisation, inter-organisational. While the role of individuals cannot be underestimated, the core of knowledge creation processes is the group, organisations providing the appropriate environmental conditions. This perspective is, not by chance, very similar to Gunnar Hedlund’s one. Hedlund (1994) proposes a model of knowledge categories and transformation processes whose building blocks are, on the one hand, the distinction between tacit and articulated knowledge and, on the other, the "agents of knowledge (individual, group, organisation, inter-organisational domain). For him, "much of knowledge transfer and learning take place" at the group level (Hedlund, 1994: 75).

    Four modes of knowledge conversion are considered by Nonaka and Takeuchi (1995): (1) Socialisation, sharing tacit knowledge between individuals, which may belong to different organisations; (2) Externalisation, articulating the tacit knowledge to be transmitted to other members of organisation, often using metaphors and analogies; (3) Combination, by putting together explicit knowledge existing at individual and group levels, and crystallising it into an organisational system; and (4) Internalisation, corresponding to a return to the tacit and the absorption of organisational knowledge through personal experience. Hedlund (1994) introduces a wider range of concepts to picture the same process. He makes an interesting point with regard to articulation (the explicitation of tacit knowledge), arguing that it is essential in international technology transfer, both for licensing and FDI.

    This remark leads to the concepts of "metanational" and "knowledge management cycle" introduced by Doz et allii (1997). Focussing on multinational firms, these authors make a very challenging exercise of identification of the main mechanisms for international knowledge transfer and sharing. They pointed out three main sub-processes (accessing, melding and leveraging), which can be further detailed in the "7 As of knowledge management": anticipation (foreseeing future opportunity windows), awareness (identification of different market needs and critical capabilities), access (ways to access the knowledge required), appropriation (conditions for sharing and "understanding" the knowledge), assimilation (integrating the appropriated knowledge into the firm’s skill base), accumulation (development, upgrading, inter-action and renewal of existing knowledge) and allocation (enhancing firm’s capabilities to use and leverage its knowledge bases).

    All these approaches are very relevant for understanding how firms share, assimilate and leverage knowledge. They stress the relevance of shared experience and interaction as well as the development of metaphors and "languaging" as tools – almost in a Vygotskyan sense – for making ideas "visible" and shared, thereby giving rise to common insights, perspectives and understandings, and converging expectations among the various groups or units of the organisation. Similarly, all the approaches acknowledge the role of what Doz et allii (1997: 15) call "external connectivity": firm’s capability to develop linkages with other organisations in order to access, share and assimilate relevant knowledge. Their main concern, however, is intra-organisational.

    Additional effort is therefore needed to understand inter-organisational learning processes. In our view, the approaches just reviewed may help to understand such processes, provided that some adaptations and modifications are introduced. What we need to understand is how learning takes place in the context of inter-organisational agreements, how knowledge is shared by organisations, through the inter-action between individuals and groups.

  3. From Intra-Organisational to Inter-Organisational Learning

  4. In a World where "alliance capitalism" (Dunning, 1995) and knowledge-based industries are gaining ground, learning is often associated with inter-firm cooperation. If this contention is widely accepted, there is no agreement on what concerns the "spirit" underlying firm involvement. Some authors argue that alliances should be characterised as competitive collaboration: they are envisaged as learning races, where the winner is the firm which learns faster (Hamel, 1991). Others stress the cooperative dimension, underlining aspects such as collaborative advantage (Kanter, 1994) or suggesting that alliances are experiences of how to learn together (Ciborra, 1991). Their differences notwithstanding, these perspectives have something in common – both envisage learning as a key ingredient in inter-firm agreements, and often the main reason for them (Parkhe, 1991; Inkpen, 1997).

    While inter-organisational learning processes are not easy (Szulanski, 1996; O’Dell and Grayson, 1998), the problems are much more formidable when more than one firm is involved. Inter-organisational learning requires a minimum overlap of the knowledge bases of the agents (organisations, groups, individuals) concerned (Ingham and Motte, 1998). Without a common ground, dialogue becomes difficult if not impossible. There is thus a need for a similar "disciplinary knowledge" (Caraça and Simões, 1995), which is the basis for the use of a commonly understandable language; professional acquaintances and relationships play therefore an important role in knowledge sharing (Dickson, 1996). In many instances, the less advanced partner may need to have access to other sources, in order to reduce the knowledge gap and to enhance its absorptive capability (Bessant and Rush, 1995; Kim, 1998). Of course, the need for additional support depends not only on existing capabilities but also on the strategic intent. Here, the distinction between access and internalisation (Hamel, 1991) is particularly relevant.

    While in intra-organisational learning there is already a "field" where interaction takes place, in inter-organisational relations such "field" has to be created. The formal agreement itself or the involvement in an inter-organisational network may provide a basis for that. As Brown and Duguid (1998) argue, contracts may act as "boundary objects", linking the organisations. But for knowledge sharing to be effective, operational relational grounds – or "ba", to use Nonaka and Konno’s (1998) words – are needed. These are the locus where information and experiences are shared, new insights are developed and knowledge is transformed and assimilated. Socialisation and dialogue processes between individuals and groups from different organisations are critical to generate shared insights and perspectives which enable the sharing of tacit knowledge and the development of new approaches. These relational grounds play also an important role in contextual adaptation of knowledge (Doz and Santos, 1997).

    In the present paper we are interested in relational grounds involving organisations, as well as groups and individuals based in different countries. Those grounds are, however, contingent upon the characteristics of the international inter-firm agreements concerned. For instance, in product development alliances there is often a joint development team, so that members from all the partners are co-located. Such teams may be operational throughout alliance life. In the case of joint-ventures, the joint-venture itself provides the relational ground where individuals and groups from both partners meet. Following Harrigan and Newman’s (1990) analogy, the "child", though being a separate organisation, is the privileged place for context sharing and for "parents" to inter-act and share tacit knowledge. In other words, the joint venture is the locus where knowledge transferred from partners is compared, melted and transformed (Tiemessen et allii, 1997).

    Given these particular features of joint ventures it is not at all surprising that they became the main topic in inter-organisational learning research in spite of excellent analyses of international inter-firm alliances in general (for instance, Hamel, 1991; Doz, 1996; or Ariño and De la Torre, 1998). The work of Inkpen is, in our view, particularly interesting (Inkpen and Crossan, 1995; Inkpen, 1997). This author argues that there are four main processes for knowledge creation in joint-ventures: technology sharing, JV-parent interaction, personnel movement, and strategic integration. For such processes to really lead to learning, four conditions must be met – partner intent, managerial commitment, redundancy and trust –, while the performance myopia is a barrier to be overcome (Inkpen, 1997). A framework for understanding learning processes in joint-ventures was worked out by Tiemessen et allii (1997). It is clearly influenced by Nonaka, suggesting four processes of learning, stemming from the interactions at the various ontological levels: intuiting and interpreting (individual interaction), integrating (group interaction), and institutionalising (organisational interaction).

    Several authors argue that joint-ventures offer much more opportunities for knowledge sharing than other inter-organisational agreements such as licensing, especially on what organisational knowledge is concerned. This knowledge is strongly tacit, embedded in the organisation itself or in specific groups. Its sharing therefore requires a common organisational experience, something that joint-ventures offer, but licensing agreements don’t (Kogut, 1988; Davies, 1995). This is, to a large extent, true. But it should not be pushed too far, for three reasons. First, when one partner is dominant, or aspires to dominate at the expense of the other, learning opportunities for the latter stifle. As Kim (1998) argued, the closeness provided by joint-ventures may excessively limit the breathing space of the junior partner, making it just a "sleeping" partner. Furthermore, some distance will be need for experimentation, and for designing new answers (Fujimoto, 1998). Finally, licensing agreements provide relational grounds, where the balance of closeness and distance, of "homophilia" and "heterophilia", may enable the creation (or development) of appropriate conditions for knowledge sharing.

    The question now becomes: how does learning takes place in licensing agreements?

     

  5. Learning Processes in Licensing Agreements

  6. The creation of relational grounds in the context of licensing agreements may take place through the interplay of a mix of elements: (1) the contract itself, acting as a "boundary object", lays the basis for future inter-action, and defines some of its headlines; (2) exchange of knowledge-embodying goods (machinery and equipment, models…), which may be focal points for concerted efforts (Von Hippel and Tyre, 1994; Tyre and Orlikowski, 1994); (3) personal interaction, the dialogue starting with technical assistance and training, and eventually leading to interaction and upgrading routines based upon a layer of personal, professional and organisational trust; and (4) strategic concertation, teaming efforts to respond threats or explore opportunities perceived as common (product adaptation, development of new products, launching joint business projects…).

    For our purposes the most interesting licensing agreements are technology-access package and internalisation intent package contracts. In the first, the licensee aims at getting access to the knowledge and skills needed for manufacturing the products concerned, including not only product engineering but also the organisation of the manufacturing process; marketing knowledge is often involved too. In the second, licensee’s goal is to internalise licensor’s technology and/or marketing skills.

    In both types of contracts the relationships between licensor and licensee are not limited, as it is often implicitly assumed in much of the literature, to the license of industrial property rights (patents and trademarks) and to the communication of formalised knowledge. In most cases, the relationships are wider and deeper. Taking a longer term perspective of the licensing relationship (Svensson, 1984; Welch, 1985) its possible to identify three main phases and five types of knowledge flows, as indicated on Table 1.

     

     

    Phase/Flows

    Characteristics

    Means

    Locus

    Initial Communication of Explicit Knowledge

    Flow 1-Explicit Knowledge

    Explicit

    Forwarding of Formulae, Designs, Operations Manuals, Marketing Procedures

    Licensee’s place

    Initial Sharing of Tacit Knowledge

    Flow 2-Technical Assistance/Training

     

    Flow 3-Training/Awareness Visits

    Largely Tacit

     

    Largely Tacit

    Visits of licensor’s technicians to licensee’s premises; problem solving.

    Visits of licensee’s technicians to licensor’s premises and training at licensor’s premises

    Licensee’s place

     

    Licensee’s

    place

    Learning Development

    Flow 4-Knowledge Exchange

     

     

    Flow 5-Strategic Interaction

    Mostly tacit, but also explicit

     

    Largely Tacit

    Interaction between individuals and groups from both partners; individual conversations; problem solving

    Conversation and interaction between managers from both partners; carrying out of new joint projects

    Licensee’s and/or licensor’s place

     

    Licensee’s place, licensor’s place or elsewhere

    Table 1: Licensing Development and Knowledge Flows

     

    In the period immediately following the contract, the licensor will provide the licensee with the technological and marketing services defined in the agreement (flow 1). The first group of services often corresponds to the supply of the materials needed for the licensee to manufacture and market the licensed products (formulae, designs, operations manuals, standardised marketing procedures, price lists, recommended distribution channels…). It basically consists of explicit knowledge which is transferred from one organisation to the other. Individual involvement is not relevant at this stage.

    Of course the operationalisation and assimilation of this knowledge requires a process of application, interpretation and learning, involving not only the licensee as an organisation, but also lower ontological levels (individuals and teams). The bundle of knowledge communicated has to be applied. This is not an easy task, since the licensee’s level of relevant knowledge may be not enough for an immediate and effective implementation, but also because adaptations to a different context may be needed. There come flows 2 and 3.

    These flows involve basically individuals and groups, since these are the best carriers of tacit knowledge (Arora, 1996). Unlike the previous phase, knowledge sharing is now based on personal relationships. In the context of flow 2, licensor’s experts detached in licensee’s premises will provide their counterparts namely with: training appropriate for understanding explicit knowledge; support for implementing knowledge, including contextual adaptation; support in production launch; production management and/or marketing management assistance. Flow 3 is, to some extent, the other side of the coin: to enable key personnel of the licensee to get acquainted with the way how knowledge is applied by the licensor, in its specific context. It is possible to figure out how the technology works, and to discuss with licensor’s counterparts difficulties, problems and innovation/adaptation possibilities. Learning opportunities are now, to some extent, larger than is flow 2. There are, however, two drawbacks. First, the people involved has, upon their return, to effectively share the knowledge acquired with their mates at licensee’s plant; an "externalisation" process has to take place among licensee’s personnel (Nonaka and Takeuchi, 1995). Second, the awareness of contextual differences may be limited, thereby constraining the possibilities for a successful transfer of the practices identified as relevant.

    Acting together, flows 2 and 3 are the main vehicles for enabling the sharing of tacit knowledge between licensor and licensee. As Arora (1996: 235) put it, "technical services are the means by which important information about procedures and practices, rules of thumb, and modifications to suit different circumstances can be transferred to the licensee". To some extent, licensor’s experts play a role similar to adults in Vygotsky’s "zone of proximal development". The licensee needs to have a minimum knowledge base to fully profit from licensor’s support, to understand the product and process technology or the marketing tacit procedures which are the object of the agreement, especially when it wants to internalise the knowledge. There is, thus, a "zone of proximal development" where the technical assistance and training services provided by the licensor will help problem solving activities by the licensee. The social capital developed at this stage may be further extended, through the adoption of interaction routines and the development of similar cognitive maps.

    Of course, the extent (both the width and the depth) of the knowledge sharing, as well as the future leveraging of the "zone of proximal development" depend very much on licensee’s objectives – on its strategic intent. Two contrasting views were expressed, by our interviewees, in the following terms:

    "Know-how absorption was very limited. Our firm worked mainly as a sub-contracted organisation […]. The market was too limited to justify an investment on design and development for that [product]. To have access to the technology was relatively cheap and for us it was better to have licensor’s support".

    "The contract corresponds to a qualitative change. We entered another field. Technical personnel was selected, and there was a clear purpose of using the contract as a tool for our technological development. We built up in-house design capabilities with a view of development and autonomy".

    This strategic intent has to be translated into individual (and group) capabilities and commitment, as Hamel (1991) or Kim (1998) have shown. Technical assistance provided by licensor’s people tends to be limited to the minimum needed for an acceptable application of the technology. Licensee’s personnel has to "suck" additional information. As one R&D manager put it, the key for learning in the context of licensing is to "raise the right questions", and to get them answered by licensor’s counterparts. But to raise the right questions, two conditions should be met a priori: a good technical knowledge base, to figure out the main technological problems; and organisational knowledge, to identify the matters which are critical for achieving firm’s objectives.

    Our perspective of learning within the framework of licensing agreements does not follow Nonaka and Takeuchi’s (1995) sequence of socialisation externalisation combination internalisation. Instead, as suggested in our approach, the sequence starts with an inter-organisational relationship, dealing with explicit knowledge. An internalisation of such knowledge follows: the groups and individuals which will be at the frontier (the counterparts of licensor’s experts) have to understand such information and knowledge, as well as to assess to what extent it meets licensee’s operational routines, contextual conditions and strategic intent. Only then comes socialisation, that is, the interaction with licensor’s experts in order to share tacit knowledge. From socialisation onwards, the process follows Nonaka’s sequence. To sum up, from our perspective, the "knowledge spiral" in licensing proceeds the following way:

    Combination internalisation socialisation externalisation combination (within the firm) internalisation …

    In some licensing agreements, the technical/marketing knowledge interaction stops with flows 2 and 3. But in many others, there is an ongoing relationship which strengthens over time (Thunman, 1988; Simões, 1992). Knowledge sharing continues to take place (flow 4). This may stem from the contract, as it happens when there is a contractual obligation of communication of product, process or marketing improvements. Often, however, the relationship, particularly at the technical level, gains a life of its own. The relational grounds provided by the contract are still present, and even expanded. Formal relationships are gradually superseded by informal relationships (Ring and Van de Ven, 1994). The contract shadow is still there, but gradually dims as time goes by. The sharing of tacit knowledge, including the generation and development of new insights and understandings becomes easier, since reciprocal knowledge, and personal and professional trust, becomes stronger. People from both organisations feel closer. "We are friends now. When I have a problem, I call Frank; and, though less often, he does the same". An history of learning in common creates ties between individuals and groups. As one manager recalled, "There are affective issues to take into account, since the contract generated a very close relationship between the engineers of both firms; for our engineers it would be difficult to understand a cut in our relationship with those guys [the licensor]".

    These personal attachments may, in some cases, coexist with the persistence of organisational linkages. While technological and marketing issues may be still important, the dialogue may enter new fields, leading to what one may call strategic interaction (flow 5). This is not so deep as Inkpen’s (1997) "strategic integration", but may have profound implications for partners’ learning trajectories. It may include the exchange of views on management routines, common exploitation of scale and scope economics or the identification of opportunities for launching joint ventures. A one-way relationship, in the initial licensing agreement, may become a two-way alliance. The development of relationships and trust between top management teams may play a key role to create an institutional "umbrella" which facilitates the sharing of tacit organisational knowledge. The convergence of perspectives and the existence of similar routines, stemming from an history of working together makes easier the development of strategic cooperation. This may even lead to equity swaps or one-way equity participations. An interesting example is the case of Vulcano (Sousa, 1997). This firm, which started as a licensee of the German group Robert Bosch, become a part of that group, being its centre of excellence for water heaters and boilers. Vulcano is now a fully-fledged player in the industry worldwide, profiting from the leverage provide by this relationship. From licensee it became a licensor, setting up contracts with partners from all the continents. Another example is provided by the Company Alpha, which licensed technology for manufacturing plastic film and products from the French firm Établissements Lavoisier. The knowledge absorption achieved, together with a continued interaction between both firms, led to some forms of strategic coordination. The most relevant was the setting up of a joint-venture in Brazil, where Company Alpha was responsible for project implementation, including the technology transfer process.

  7. Conclusion

This paper stemmed from the need to better understand inter-organisational processes of learning – of sharing, transforming and accumulating knowledge through organisational interaction. Two points were particularly stressed. First, the need to adopt a multi-disciplinary perspective, profiting from the contributions of other sciences, namely social sciences such as Psychology and Sociology. Second, the "opening" of the field, to understand how learning takes place not only within the firm (even if it is a multinational firm), but also in the context of international inter-firm agreements. If joint ventures have already attracted a significant research stream, licensing has been much ignored, in spite of the excellent contributions by a few authors (Arora, 1996; Svensson, 1984; Scott-Kemmis and Bell, 1988; Falzoni and Viesti, 1998).

We found that licensing enables the "building up" of relational grounds where both codified and tacit knowledge may be shared between licensor and licensee, and new, common insights and understandings developed, benefiting both partners. At a first stage, knowledge flows basically run from the licensor to the licensee. The communication of explicit knowledge is often followed by the sharing of tacit knowledge, through technical assistance and training activities. These enable the close personal interaction needed to capture the intricacies of technical, marketing and managerial knowledge. All the "agents of knowledge" (individuals, groups or organisations) are involved, but sharing and learning take place prima facie through the relationships between individuals and groups, members of organisations. A further stage, less related to contractual terms and conditions, may follow then. It was labelled learning development and is based on the strengthening of personal, professional and organisational trust. New learning episodes take place. The knowledge bonds between individuals and groups from both organisations (at production, marketing and top management levels) create "bridges" and "spaces" for further tacit knowledge exchange and facilitate the development of shared mental models as well as strategic interaction.

This paper was only a first attempt to put together various streams of literature and to apply them for a better understanding of an under-researched topic. New empirical studies, meshing different disciplines, are needed to understand how learning takes place in the context of licensing agreements, as well as in other inter-firm agreements like franchising. There is a largely unexplored research path ahead of us – a very challenging but promising one…

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