Strategic management of China local knowledge : European multinationals in China
China has been attracting significant foreign investment since it opened up. Yet, foreign
investors' performance in this strategic market has been variable. Previous literature does
not fully investigate the causes and forces that explain their performance differences. This
study contributes to our understanding of this issue by looking into the role of local
knowledge and investigating its management strategies. It examines the concept and the
nature of local knowledge, identifies local knowledge sources, explores the local
knowledge management process, and investigates its implementation in terms of
resistances and strategies.
The study first advances a general framework of knowledge management. It then
introduces the key argument of this theoretical framework into the Chinese business
context and develops a theoretical model of strategic management of China local
knowledge, from which eight qualitative hypotheses are derived.
A multi-method qualitative empirical study was undertaken in order to examine the
concept of local knowledge and investigate how local knowledge was actually exploited by
multinational firms. Eleven face-to-face interviews with managers from 11 European
multinationals in 10 sectors, field observation of 2 Chinese projects involving 6 European
companies, and 17 multi-level interviews with local managers from 4 Chinese
organizations were conducted.
The empirical findings were compared with the key arguments of the theoretical model in
order to assess the extent to which they support the theoretical stand, and propose a
justified model of strategic management of China local knowledge.
It is concluded that the findings supported many, but not all, of the theoretical arguments.
The most striking findings are as follows:
First, unlike global knowledge transferred to China market, which is codified and
accessible, China local knowledge is highly tacit, undiffused and fast-changing. It is this
intrinsic and fast-changing nature of China local knowledge determines its greater impact
upon the multinational firm's business performance in this dynamic market.
Second, local knowledge cannot be effectively managed unless specific management
conditions are created. These conditions include common knowledge, multi-layered
knowledge interfaces, and a 'pull and push' system.
Third, knowledge transfer is not an optimal choice of managing local knowledgc~ to
exploit the full value of local knowledge both knowledge transfer approach and knowledge
integration mechanism should be employed.