Exploring Internal Stickiness: Impediments to the Transfer of Best Practices Within the Firm (Gabriel Szulanski, SMJ 1996) Group 1 Meredith, Barclay, Woo-je, and Kumar

Motivation Impediments to the transfer of best practices BETWEEN firms has been examined, yet this has not been examined WITHIN firms Transferring capabilities within a firm is not easy: General Motors – difficulty transferring manufacturing practices between divisions (Kerwin & Woodruff, 1992) IBM – limited success in transferring reengineered logistics and hardware design processes between business units (The Economist, 1993) Thus, this paper provides us with an empirical investigation of internal stickiness

Some Definitions Transfer of best practice inside the firm: To practitioners connotes firm’s replication of an internal practice that is performed in a superior way in some part of the organization and is deemed superior to internal alternate practices and known alternatives outside the company Practice: refers to organization’s routine use of knowledge, often has a tacit component Transfer of best practice (for this paper): dyadic exchanges of organizational knowledge between a source and recipient unit in which identity of recipient matters

Stages in the Transfer Process Initiation: comprises all events that lead to decision to transfer (discovery of need, search for potential solutions, search leads to discovery of superior knowledge) Implementation: begins with decision to proceed (resources flow between recipient and source, transfer specific social ties) Ramp-up: begins when recipient starts using transferred knowledge (recipient concerned with identifying & resolving unexpected problems) Integration: begins after recipient achieves satisfactory results (use of transferred knowledge gradually becomes routinized)

Analyzing difficulty of transferring practices within the firm Notion of internal stickiness connotes difficulty of transferring knowledge within the organization Some past researchers have referred to difficulty of transferring knowledge in terms of costs (Arrow, 1969; Teece, 1977; von Hippel, 1994) Szulanski suggests cost could be a poor descriptor of the difficulty: Deciding which portion of cost actually reflects difficulty is a matter of conjecture Cost might fail to discriminate between problems that are equally costly but qualitatively different

Analyzing difficulty of transferring practices within the firm Eventfullness: extent to which problematic situations experienced during a transfer are worthy of remark: Could be translated into outcome-based descriptor of stickiness Combined with stages, provides descriptor of stickiness for each stage Initiation – problems stem from efforts to identify needs and knowledge that meets those needs Implementation – communication problems or adaptation of practice to recipient’s needs Ramp-up – struggle to achieve satisfactory performance Integration – problems associated with achieving routinization

Origins of Internal Stickiness Characteristics of knowledge transferred Causal Ambiguity Unprovenness Characteristics of source of knowledge Lack of motivation Not perceived as reliable Characteristics of recipient of knowledge Lack of motivation Lack of absorptive capacity Lack of retentive capacity Characteristics of the context Barren organizational context Arduous relationship

Empirical Method 2-step questionnaire survey: Self-selection of theoretically relevant companies (those with strong incentives to transfer best practices, were actively attempting to do so, and viewed it as important) Model testing – 8 companies accepted for second step (AMP, AT&T, Paradyne, British Petroleum, Burmah Castrol, Chevron, EDS, Kaiser Permanente, Rank Xerox) 271 returned questionnaires, 122 transfers of 38 best practices (both technical and administrative) Companies instructed to rule out practices that could be performed by single individual and to choose only practices that required coordination of many people

Results Explanatory power of the framework and relative importance of each barrier assessed by canonical correlation – can assess relationship between 2 SETS of variables Explanatory Power Canonical-R (0.87): Simple correlation between weighted sums of scores from each set of variables, using weights for first canonical root Relative Importance of Each Barrier Canonical weights reflect contribution of each construct to its canonical variate – weights can be compared and the larger the absolute value of a coefficient, the more important its contribution

Results Results suggest that 3 most important barriers are lack of absorptive capacity of the recipient (0.54), causal ambiguity (0.34), and an arduous relationship between source and recipient (0.33).

Limitations Correlational design does not imply causation Survival bias – problematic or aborted transfers not included. Only transfers that occurred were included.

Implications of Results Practitioners and conventional wisdom attribute stickiness almost exclusively to motivational factors Researchers agree with the dominant view of practitioners (e.g. Porter (1985) ) Yet, Szulanki’s (1996) empirical results suggest that knowledge related barriers (lack of absorptive capacity, causal ambiguity, arduousness of relationship) dominate motivation-related barriers