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Knowledge transfer and human resource development practices: Japanese firms in Brazil and Mexico
International Business Review 9 (2000) 599–612 www.elsevier.com/locate/ibusrev
Knowledge transfer and human resource development practices: Japanese firms in Brazil and Mexico John R. Sparkes a
1,a,*
, Maiko Miyake
b
Management Centre, University of Bradford, Emm Lane, Bradford, West Yorkshire BD9 4JL, UK b OECD, 2 rue Andre´ Pascal, 75016, Paris, France
Abstract This paper is based on case studies from the subsidiaries of Japanese manufacturing firms in Brazil and Mexico. It presents empirical findings on the influence of human resource development (HRD) in knowledge transfer, using the case studies in an attempt to delineate appropriate emphases in HRD practices that enhance the transfer of knowledge. The paper examines the proposition that the provision of both on-the-job and off-the-job training constitutes best practice to enhance knowledge transfer. The findings are related to the theory of human capital as a basis for refining the research framework. 2000 Elsevier Science Ltd. All rights reserved. Keywords: Knowledge transfer; Human resource development; Japanese manufacturing subsidiaries; Brazil; Mexico
1. Introduction This paper presents the findings of a study of the influence of human resource development (HRD) in knowledge transfer as observed in the experience of Japanese affiliates in Brazil and Mexico. The importance of human resource development in successful knowledge transfer is widely recognised but little empirical evidence has been put forward to delineate the appropriate emphases in HRD practices. The * Corresponding author. Tel.: +44-1274-234379. E-mail address: [email protected] (J.R. Sparkes). 1 John Sparkes is Professor of Business Economics at the University of Bradford Management Centre. 0969-5931/00/$ - see front matter 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 9 - 5 9 3 1 ( 0 0 ) 0 0 0 2 1 - 4
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authors’ intention in this paper is to examine the HRD practices of firms which are successful in knowledge transfer in an attempt to discover a set of practices which enhances the transfer of knowledge. The fundamental importance of HRD is found in the theory of human capital. The main assertion of the theory is that people possess skills, experience and knowledge that have economic value to firms. The theory was originally developed in the context of the economic value of education, measured by expenditure and return on investment. Empirical work has consistently indicated a positive relationship between the two (World Bank, 1998). Not only is this so in the obvious economic sense, but the importance of investment in human capital is also stressed in more subtle ways: Some of the value is added directly by transforming the firm’s product, but much of it is less tangible consisting of solving problems, co-ordinating the work of departments, and exercising judgement in novel situations. (Snell & Dean, 1992: 469) The theory of human capital has led many authors to argue the importance of HRD as a strategy to enhance the competitive advantage of a firm (Kydd & Oppenheim, 1990; Martell & Carroll, 1995; Leonard-Barton, 1992; Tayeb, 1995). It has been applied to selection, training, compensation, in other words, human resource management (HRM) practices in general. More specific to the interest of this article, various researchers have emphasised the importance of HRM as a way to improve the transfer of knowledge, especially in the form of technological know-how (Teece, 1977; Foley & Watts, 1994; MacDuffie & Krafcik, 1992; Hong, 1994; Fransman & King, 1984; Gruber & Marquis, 1969; UNCTAD, 1995; Zander & Kogut, 1995). HRD in the context of knowledge transfer is often treated as building the capability to absorb and utilise knowledge (Lall, 1994). This notion is very closely associated with learning (Bell & Hill, 1978). Learning occurs as a result of the accumulation of knowledge. Developing an organisation which is capable of knowledge creation requires learning. Hence the study of knowledge transfer derives much inspiration from the literature on the learning organisation. Numerous studies on the learning organisation emphasise the structure of the firm is an important feature to bring about the learning organisation (Nonaka & Takeuchi, 1996; Garvin, 1993; Tucker, Meyer & Westerman, 1996). In particular, the way people are managed — selected, trained, rewarded and retained — is crucial to create a learning organisation (Drucker, 1998; Seely Brown, 1998). The definition of knowledge can itself be a source of lengthy discussion. For the purposes of this study, the authors adopt the broad definition of “what people know about the production operation”. This paper is based on case studies from the subsidiaries of Japanese manufacturing firms in Brazil and Mexico. In considering the transfer of knowledge among Japanese manufacturing firms, the importance of HRM is evident for various reasons. First of all, some of the issues associated with manufacturing technique are closely linked with human resource management practices (Ballon, 1992; Bird & Beechler, 1995). Secondly, human resource development is the core activity of building
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capacity to absorb knowledge (Fransman & King, 1984; Gruber & Marquis, 1969; Hong, 1994). Thirdly, human resource management is inseparable from the study of knowledge transfer, because tacit knowledge is embedded in people. In other words, HRM is indirectly managing tacit knowledge. In essence, the creation, management and transfer of knowledge is inseparable from the influence of the HRM practices of a firm. Fig. 1 depicts the research framework which tackles the proposition that HRD practices have a positive impact on knowledge transfer. Within this schema, HRD is interpreted as a training programme offered by a subsidiary. Training is defined as “attempts to develop any combination of physical and cognitive skills in order to achieve new or more effective ways of behaving” (Taylor, 1989: 143). It includes the development of technical skills as well as the managerial skills of planning, decision making, and control. It also involves the need for organisational development or “team building”. The two main forms of training are on-the-job training (OJT) and off-the-job training (OfJT). OJT is the most common training method utilised by firms (Taylor, 1989; Fisher, Schoenfeldt & Shaw, 1993). It is seen as the most effective method of learning as the theory of learning suggests that “the further removed from the work place, the greater the problem of ‘transference’” (Molander & Winterton, 1994: 81). After a thorough investigation of the in-firm training of Japanese firms, Koike (1990, 1994) concluded that the principal mechanism for workers to acquire knowledge is OJT. Similar emphasis on the importance of OJT has been put forward by others (Cole, 1994; Sako, 1994). OJT helps in the acquisition not only of a task-related skill in one workshop but also other jobs which are closely related in technique. Of course OJT is not always problem-free. There can be a fine line between learning-by-doing and OJT as Fisher et al. (1993) have pointed out:
Fig. 1.
Research framework.
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What many organisations call OJT is really no training at all. Employees are abandoned on the job and expected to pick up necessary skills as best they can. (p. 386) More structured OJT involves guidance and counselling so that learning is constantly monitored. It may include planned job rotation to learn various tasks within a defined period of time. Carvell (1970) argued that the more carefully structured OJT, the greater the impact on learning. OfJT takes place outside the workplace and includes familiar methods such as lectures, group discussions, role playing, assigned reading, case studies, videotapes and computer based training. OfJT is often seen as more costly than OJT, which makes many firms reluctant to use it. Another drawback of OfJT is that the learning can be remote from real life, unless learning materials are closely related to the actual physical and mental work activity (Carvell, 1970). Thus it may be more difficult to reflect the learning experience in real life so as to yield visible outcomes. However, OfJT offers a great opportunity to understand the “why” of the process rather than just the “how”. The two methods of training are complementary. While OJT assists the learning of everyday operations and the understanding of basic concepts, OfJT supplements the development of intellectual skills. Based on the above, we examine the proposition that, rather than using a single training mechanism, the provision of both OJT and OfJT is the best practice to enhance knowledge transfer. The HRD practice may be highly influenced by other human resource management (HRM) factors. This article will also take into account several HRM factors, such as turnover rate, education level of workers and remuneration level in order to explain the effectiveness of HRD (see Fig. 2). Provision of training is not a stand-alone issue. A firm’s decision to provide or not to provide training is often conditioned by the creation of an environment where a sufficient return can be expected. Furthermore, the success of training itself may
Fig. 2.
Interrelation of factors in human resource management.
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depend on other human resource related issues. Turnover rate is often the factor that influences the decision on HRD as a high turnover rate means an immediate loss of investment. A firm feels that its investment in human capital does not yield an adequate return when the turnover rate is high and therefore shows less interest in providing training. The level of wage is often a determinant of the turnover rate. It also influences workers’ motivation and loyalty. Motivation and loyalty may influence the way employees learn and create knowledge. The level of wage is often determined by the educational level of workers employed and vice versa. A firm may prefer to recruit highly educated workers, although expensive, because the kind of operation requires workers who can handle complex tasks. Highly educated workers may also be perceived to be more easily trainable because of their understanding in fundamentals.
2. Methodology The authors’ interests are to examine the kind of training offered by firms that are successfully transferring knowledge and how the training influences the process of knowledge transfer. Nine case studies of Japanese firms in Brazil (B) and Mexico (M) are examined in this paper. The cases are chosen from a sample of twenty-three firms interviewed in the two countries between February and October 1996. The nine firms demonstrated a high degree of knowledge transfer, a judgement based on the following criteria. In a subsidiary, workers absorb the knowledge flows from a parent firm. As a result of this “learning” experience, workers become able to assimilate and develop the existing knowledge. A similar understanding is widely discussed in the context of technology transfer (Lall, 1985, 1994; Hewitt, Johnson & Wield, 1992). The development of creative capacity does not necessarily mean an R&D capacity. A number of minor modifications made on the shop-floor either to product design or the production system indicates the development of indigenous knowledge at a different level. In fact, design modification or new product launch only capture a partial picture of knowledge assimilation. Therefore the authors looked for evidence of knowledge assimilation and creation at shop-floor level as an indicator of successful knowledge transfer. In Japanese firms, knowledge assimilating activities are often enhanced through the use of small group activities. The reason for using small group activities is to give greater autonomy to shop-floor workers and stimulate their intellectual capacity. Instead of small group activity, some firms call their autonomous working groups quality control (QC) circles or kaizen groups. Despite the wide range of names given, the nature of the group and tasks designated are similar: it is an autonomous group which works on improvement. Kaizen in Japanese means continuous improvement and what it represents is a philosophy or an attitude rather than a specific technique. Reflecting this, the main objective of the kaizen activity is to improve product quality and productivity. Taking into consideration the possible variety of company situations, the objective can be
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achieved in various forms. As a result, kaizen activity may be undertaken in the form of group activity in one firm while in other firms it is delegated to a smaller number of workers. The use of a suggestion system is a mechanism to activate workers’ creative capacity. A suggestion system usually asks individuals to submit their ideas to improve shop-floor practice. For Kenny and Florida (1993), a suggestion system is an individual form of kaizen. While the above mentioned mechanisms are widely cited in literature on Japanese management and HRM, “Total Productivity Maintenance” (TPM) is quite a foreign concept. However, the authors discovered that it is often a great promoter of knowledge assimilation. Its main feature is to involve all shop floor operatives in machine maintenance and thereby reduce the division of labour between maintenance and operation. The underlying logic is still that by keeping machines in a good condition, they can achieve maximum productivity but TPM also has the synergistic effect of raising the awareness of each machine operator. Through the TPM programme, workers are taught and encouraged to modify machines in order to improve their operation. After thorough evaluation of each case’s knowledge assimilation experience, the authors judged that nine firms among the twenty-three interviewed are successful. Table 1 summarises the main features of their knowledge assimilation activity. Case analysis necessarily involves interpretation of individual case experience. Here we confine ourselves to a summary of cross-case analysis. Case study analysis relies heavily on two dimensions: search for patterns and replication of theory. The search for meaning often is a search for patterns, for consistency, for consistency within certain conditions . . . sometimes we will find significant meaning in a single instance, but usually the important meanings will come from reappearance over and over. (Stake, 1995: 78) Thus, if there is any consistent pattern of HRD practices, the case is strengthened. Another important dimension is to relate findings to the theory discussed earlier in order to confirm and possibly refine the research propositions.
3. Analysis of HRD practices All the firms claimed to provide OJT; however, as discussed earlier, the form of OJT differs from firm to firm. Only four firms actually monitor in a formal way the process of OJT. The methods of monitor and control utilised by the four firms (B1, B2, M3 and M4) have an important common element. The operational procedure is meticulously divided into small segments, so that the acquisition of a skill is easily judged by a supervisor’s observation of a worker’s ability to perform the task. This systematic sequencing of skill acquisition offered by a firm enables each supervisor to know what is to be expected of his/her subordinates. The provision of OfJT identified in the nine cases makes it sensible to distinguish
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Table 1 Knowledge assimilation effort Firms
Main features of activity
B1
By the introduction of a lean production programme, workers are empowered and motivated to perform active kaizen activities. The factory layout was considerably changed during the course of interview visits. A keen pursuer of TPM activity. Numerous modifications made to equipment were witnessed. The firm incorporates knowledge assimilation activity with TPM. Various improvements in the factory were suggested by employees and identified during the visits. TPM has already become a routine rather than a special programme or event. The firm encourages the suggestion system. The expatriates identified improvements in productivity and efficiency which came from workers. The firm is keen on the use of small group activities. There was evidence of improvements which came from workers. The firm sends a group to participate in the small group activity competition organised by the parent firm. QC circle is actively operated in this firm and is rated satisfactory by expatriates. A group which wins a competition in the firm is sent to Japan to attend the grand contest at the parent firm, and has been successful. Apart from kaizen small group activity, each work section is given an objective regarding quality. There is a “day of quality” once a month for workers to present the results of their activity. Another vigorous use of TPM. The modifications to equipment were visible. The firm also makes active use of kaizen small group activity. All the workers participate in kaizen activity which is in the form of small group activity. The factory director (expatriate) commented positively on the level of suggestions made by employees.
B2 B3
B4
B5
M1
M2
M3 M4
between induction courses and the more traditional forms of OfJT. The induction course is provided when a worker enters a company. The purpose of the induction course is to familiarise the worker with the company and the job. This “training” is distinguished from others because the course occurs only once in their working life in the company, and the focus is on the worker’s integration to the firm rather than knowledge and skill acquisition. The way induction courses are used by each firm differs widely. The most common form of induction course, which is utilised by six firms among the nine, is just to give short familiarisation lectures. The common topics are company policy and philosophy, the rules of the company, security issues, and quality. Although only three firms included OJT as a part of the induction course, the authors observed that every new worker receives OJT; which is to say that he/she works under the supervision of an experienced worker until he/she becomes familiar with the task. B5 and M4 provide longer induction courses in a similar manner; in these firms new workers work only a half day and another half day is used for OfJT. In both cases this training goes beyond informative sessions; workers actually learn about conceptual issues like quality control, basic statistical analysis, problem solving methods and so on.
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Seven out of nine firms provide OfJT of some sort. The popular topics taught through OfJT by these firms are quality control, machine maintenance (including TPM) and production operation. But the duration and the number of workers involved in the training differ considerably. While B1 is the keenest provider of training, B2, B4, B5, M1, M3 and M4 make sure that all the workers have basic technical understanding in the operation and that they are given an opportunity to upgrade their skills while B3 and M2 provide virtually no training. The analysis of HRM practices of the cases demonstrated that the firms employ a wide range of HRM strategy, although all the firms achieved the desired result in the form of knowledge assimilation. The patterns are not always obvious. The analysis identified six patterns —some positive and some negative. The pattern that best fits the theory of human capital is B1 — high education, high wage and low turnover rate and it provides both OJT and OfJT (Fig. 3). The firm explained that it requires a relatively high level of education from those who enter the company because it expects higher skill levels than the average firm. It compensates by paying a higher wage. Workers are in turn highly motivated, enthusiastic and loyal to the firm, which is reflected in the low turnover rate. Given the environment, firm B1 provides training without fear of losing the benefit. That helps to increase both the level of skill and the motivation among workers. B2 is an interesting case that has achieved a very low turnover rate while providing a low wage level and active training (Fig. 4). It was observed during the factory visit that the employees were highly motivated and proactive in this firm. The creation of an interesting and amicable environment may have had some impact in lowering the labour turnover rate. In this firm, training had the function of changing organisational culture as well as supporting skill acquisition. By bringing about a positive learning environment within the firm, training had a synergistic effect. B4 shows a pattern in which HRM strategy is used effectively to influence training in a positive manner (Fig. 5). The firm pays a high wage although the average level
Fig. 3.
Role model HRM, Case B1.
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Fig. 4.
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Cost effective HRM approach, Case B2.
Fig. 5.
Positive HRM cycle, Case B4.
of education achieved by the employees is relatively low. This combination helps it to achieve a relatively low turnover rate as employee retention is influenced by the wage level. Because of the low turnover rate, the firm can provide OfJT without fear of losing its investment. The above cases demonstrate patterns in which firms created an environment conducive to human resource development. Yet, as seen above, firms can employ different patterns of HRM in achieving the same objectives. However, in some cases, firms may not provide training as a deliberate choice, and they co-ordinate HRM accordingly. M2, for example, chooses workers with a lower level of education
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Fig. 6. Safe HRM approach, Case M2.
because it does not expect any complex tasks to be performed (Fig. 6). The firm pointed out that its operation is labour intensive and simple. High skills are not required. Hence the firm provides neither monitored OJT nor OfJT. Yet the firm does not seem to suffer from de-motivation of workers — turnover rate is kept low, explained in part by a higher level of wages. Unlike the aforementioned patterns, some firms are trapped in a vicious circle (Fig. 7). They failed to create an environment where training can be provided effectively. And since training is not provided, given the circumstance, the environment
Fig. 7.
Minimalist HRM approach, Case B3.
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does not improve. B3 recruits relatively highly educated workers with a low wage. Subsequently, turnover rate is high and is used as a reason for not providing any training. Hence the firm is trapped in a vicious circle. An interesting finding is that although B3 does not have a favourable HRM practice, it still managed to assimilate knowledge among shop-floor workers. Both M2 and B3 are active in providing QC circles and TPM, which are shop-floor management techniques but also used as a tool for educating workers. Through the introduction and encouragement of these shop-floor activities, these firms successfully educated workers to participate in knowledge assimilation and improve their working environment. The introduction of an activity such as kaizen is itself an effort of HRD. It teaches workers, through doing, the explicit knowledge that helps to operationalise learning (Kilmann, 1996). Whether it alone can be an effective tool for HRD or not depends on the way a firm utilises it. All the firms described above have a combination of HRM practices which at least saves them from losing investment in human capital. M3, on the other hand, is losing investment (Fig. 8). M3 has reduced its level of training since it does not pay; the turnover rate remains high. However, the firm continues to believe that a certain level of training is an absolute necessity to maintain the level of production quality. In order to resolve the dilemma, increasing the level of wages may be part of the solution.
4. Conclusion The theory of human capital supports the use of closely monitored training as the best way to assimilate knowledge transfer. Our findings are inconclusive as to the relative merits of OJT and OfJT, certainly with respect to the formal monitoring of such activities. Whilst all firms claimed to provide OJT, only four closely monitored
Fig. 8.
Investment draining HRM, Case M3.
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the training and these firms paid similar attention to the results of OfJT. On a simple headcount one could conclude that it is OfJT that has the major impact on knowledge transfer. The evidence is insufficiently robust to support such a conclusion. A safer conclusion, evidenced strongly in seven out of nine cases where knowledge assimilation and creation took place, is that close monitoring of OJT and/or OfJT provides a set of HRD practices which are most likely to enhance the transfer of knowledge. The two cases which demonstrated that active knowledge assimilation occurred without close monitoring of the training provided are evaluated contextually below. The difficulty of linking HRD practices and successful knowledge assimilation is largely due to the complexity of overall HRM practices. HRD often does not yield expected results because other HRM practices fail to create an environment in which the benefit of HRD is secured. The analysis identified several patterns of HRM, some of which have a positive impact on knowledge assimilation, while others have a negative impact. Although B5, M1 and M4 did not demonstrate strongly identifiable patterns, the remaining cases showed that a variety of HRM strategies could be employed to achieve the same goal. As seen in the case of M3, the firm could have made more out of the active HRD it provides, but in order to do so, it needs to rationalise HRM practices first. On the other hand, coherent HRM practices may help to overcome the lack of HRD, as seen in the cases of B3 and M2. Content analysis revealed that firms that provide training on problem solving and teaching “why” rather than just “how” are the firms that are more successful in knowledge assimilation. TPM, QC and kaizen induce learning by involving workers to “do” it. Such “doing-based-learning” is a mechanism to augment a firm’s capability. Through experience, workers acquire tacit knowledge or, as Hu (1995) puts it, “the ability to cope with complexity”. The two firms that managed to assimilate knowledge among shop-floor workers without the provision of monitored training are active in providing QC circles and TPM. QC circles, TPM programmes, kaizen have a potentially crucial function to create a culture where workers are encouraged by being introduced to an environment where they are expected to think, absorb and assimilate knowledge. As Richter and Vettel (1985) put it, Behavioural corporate knowledge includes mind structures co-ordinating the social interaction of individuals and organisations. This knowledge is always rooted in the social and cultural background, beyond simple transferability from one organisation to the other. (p. 38) Moreover, knowledge transfer and the learning that occurs subsequently is a continuous process. In other words the organisational culture itself is the carrier of tacit knowledge because the tacit knowledge is given its form through organisation routines (Tucker et al., 1996). As Seely Brown (1998) pointed out, “learning is becoming a practitioner not learning about practice”. The HRM patterns introduced here shed light on a very important fact in assessing the relationship between human resource development and knowledge transfer. That is, there are a number of HRM patterns that a firm can employ in order to enhance
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knowledge transfer. The patterns to be chosen depend on the type of production operation and business strategy the firm adopts. The analysis demonstrates that there are obvious patterns to be avoided if a firm desires to secure the maximum benefits from its HRD efforts. But from there onwards, the firm still has to make a choice as to which HRM practices would best support its own HRD. The study did not find striking differences between firms in Brazil and Mexico for their HRD practices despite the fact that Japanese firms may invest in these two countries for quite different reasons. The patterns of HRM practices suggested in this article may provide some templates for future analysis in this field. References Ballon, R. J. (1992). Foreign competition in Japan: human resource strategies. London: Routledge. Bell, R. M., & Hill, S. C. (1978). Research on technology transfer and innovation. In F. Bradbury, P. Jervis, R. Johnston, & A. Pearson, Transfer processes in technical change (pp. 225–273). Alphen aan den Rijn, The Netherlands: Sijthoff and Noordhoff. Bird, A., & Beechler, S. (1995). Links between business strategy and human resource management strategy in US based Japanese subsidiaries: An empirical investigation. Journal of International Business Studies, 26 (1), 23–46. Carvell, F. (1970). Human relations in business. Toronto: Macmillan Company. Cole, R. (1994). Different quality paradigms and their implications for organizational learning. In M. Aoki, & R. Dore, The Japanese firm: the sources of competitive strength (pp. 66–83). Oxford: Oxford University Press. Drucker, P. F. (1998). The coming of the new organisation. In Harvard Business Review on Knowledge Management. Boston, MA: Harvard Business School Press. Fisher, C. D., Schoenfeldt, L. F., & Shaw, J. B. (1993). Human Resource Management. Boston: Houghton Mifflin. Foley, P., & Watts, D. (1994). Skills shortages and training: A forgotten dimension in new technology. R&D Management, 24 (3), 279–289. Fransman, M., & King, K. (1984). Technological capability in the third world. London: Macmillan. Garvin, D.A. (1993). Building a learning organization. Harvard Business Review, July-August, 78-91. Gruber, W., & Marquis, D. (1969). Research on the human factor in the transfer of technology. In W. Gruber, & D. Marquis, Factors in the transfer of technology (pp. 255–282). Cambridge, MA: MIT Press. Hewitt, T., Johnson, H., & Wield, D. (1992). Industrialisation and development. Oxford: Oxford University Press. Hong, J.-C. (1994). Technology transfer and human resource development. Industrial and Commercial Training, 26 (11), 17–21. Hu, Y.-S. (1995). The international transferability of the firm’s advantages. California Management Review, 37 (4), 73–88. Kenny, M., & Florida, R. (1993). Beyond mass production: the Japanese system and its transfer to the US. New York: Oxford University Press. Kilmann, R. H. (1996). Management learning organizations: Enhancing business education for the 21st century. Management Learning, 27 (2), 203–237. Koike, K. (1990). Intellectual skill and the role of employees as constituent members of large firms in contemporary Japan. In M. Aoki, B. Gustafsson, & O. E. Williamson, The firm as a nexus of treaties (pp. 185–208). London: Sage Publications. Koike, K. (1994). Learning and incentive systems in Japanese industry. In M. Aoki, & R. Dore, The Japanese firm: the sources of competitive strength (pp. 41–65). Oxford: Oxford University Press. Kydd, C., & Oppenheim, L. (1990). Using human resource management to enhance competitiveness: Lessons from four excellent companies. Human Resource Management, 29 (2), 145–166.
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Knowledge transfer and human resource development practices: Japanese firms in Brazil and Mexico John R. Sparkes a
1,a,*
, Maiko Miyake
b
Management Centre, University of Bradford, Emm Lane, Bradford, West Yorkshire BD9 4JL, UK b OECD, 2 rue Andre´ Pascal, 75016, Paris, France
Abstract This paper is based on case studies from the subsidiaries of Japanese manufacturing firms in Brazil and Mexico. It presents empirical findings on the influence of human resource development (HRD) in knowledge transfer, using the case studies in an attempt to delineate appropriate emphases in HRD practices that enhance the transfer of knowledge. The paper examines the proposition that the provision of both on-the-job and off-the-job training constitutes best practice to enhance knowledge transfer. The findings are related to the theory of human capital as a basis for refining the research framework. 2000 Elsevier Science Ltd. All rights reserved. Keywords: Knowledge transfer; Human resource development; Japanese manufacturing subsidiaries; Brazil; Mexico
1. Introduction This paper presents the findings of a study of the influence of human resource development (HRD) in knowledge transfer as observed in the experience of Japanese affiliates in Brazil and Mexico. The importance of human resource development in successful knowledge transfer is widely recognised but little empirical evidence has been put forward to delineate the appropriate emphases in HRD practices. The * Corresponding author. Tel.: +44-1274-234379. E-mail address: [email protected] (J.R. Sparkes). 1 John Sparkes is Professor of Business Economics at the University of Bradford Management Centre. 0969-5931/00/$ - see front matter 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 9 - 5 9 3 1 ( 0 0 ) 0 0 0 2 1 - 4
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authors’ intention in this paper is to examine the HRD practices of firms which are successful in knowledge transfer in an attempt to discover a set of practices which enhances the transfer of knowledge. The fundamental importance of HRD is found in the theory of human capital. The main assertion of the theory is that people possess skills, experience and knowledge that have economic value to firms. The theory was originally developed in the context of the economic value of education, measured by expenditure and return on investment. Empirical work has consistently indicated a positive relationship between the two (World Bank, 1998). Not only is this so in the obvious economic sense, but the importance of investment in human capital is also stressed in more subtle ways: Some of the value is added directly by transforming the firm’s product, but much of it is less tangible consisting of solving problems, co-ordinating the work of departments, and exercising judgement in novel situations. (Snell & Dean, 1992: 469) The theory of human capital has led many authors to argue the importance of HRD as a strategy to enhance the competitive advantage of a firm (Kydd & Oppenheim, 1990; Martell & Carroll, 1995; Leonard-Barton, 1992; Tayeb, 1995). It has been applied to selection, training, compensation, in other words, human resource management (HRM) practices in general. More specific to the interest of this article, various researchers have emphasised the importance of HRM as a way to improve the transfer of knowledge, especially in the form of technological know-how (Teece, 1977; Foley & Watts, 1994; MacDuffie & Krafcik, 1992; Hong, 1994; Fransman & King, 1984; Gruber & Marquis, 1969; UNCTAD, 1995; Zander & Kogut, 1995). HRD in the context of knowledge transfer is often treated as building the capability to absorb and utilise knowledge (Lall, 1994). This notion is very closely associated with learning (Bell & Hill, 1978). Learning occurs as a result of the accumulation of knowledge. Developing an organisation which is capable of knowledge creation requires learning. Hence the study of knowledge transfer derives much inspiration from the literature on the learning organisation. Numerous studies on the learning organisation emphasise the structure of the firm is an important feature to bring about the learning organisation (Nonaka & Takeuchi, 1996; Garvin, 1993; Tucker, Meyer & Westerman, 1996). In particular, the way people are managed — selected, trained, rewarded and retained — is crucial to create a learning organisation (Drucker, 1998; Seely Brown, 1998). The definition of knowledge can itself be a source of lengthy discussion. For the purposes of this study, the authors adopt the broad definition of “what people know about the production operation”. This paper is based on case studies from the subsidiaries of Japanese manufacturing firms in Brazil and Mexico. In considering the transfer of knowledge among Japanese manufacturing firms, the importance of HRM is evident for various reasons. First of all, some of the issues associated with manufacturing technique are closely linked with human resource management practices (Ballon, 1992; Bird & Beechler, 1995). Secondly, human resource development is the core activity of building
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capacity to absorb knowledge (Fransman & King, 1984; Gruber & Marquis, 1969; Hong, 1994). Thirdly, human resource management is inseparable from the study of knowledge transfer, because tacit knowledge is embedded in people. In other words, HRM is indirectly managing tacit knowledge. In essence, the creation, management and transfer of knowledge is inseparable from the influence of the HRM practices of a firm. Fig. 1 depicts the research framework which tackles the proposition that HRD practices have a positive impact on knowledge transfer. Within this schema, HRD is interpreted as a training programme offered by a subsidiary. Training is defined as “attempts to develop any combination of physical and cognitive skills in order to achieve new or more effective ways of behaving” (Taylor, 1989: 143). It includes the development of technical skills as well as the managerial skills of planning, decision making, and control. It also involves the need for organisational development or “team building”. The two main forms of training are on-the-job training (OJT) and off-the-job training (OfJT). OJT is the most common training method utilised by firms (Taylor, 1989; Fisher, Schoenfeldt & Shaw, 1993). It is seen as the most effective method of learning as the theory of learning suggests that “the further removed from the work place, the greater the problem of ‘transference’” (Molander & Winterton, 1994: 81). After a thorough investigation of the in-firm training of Japanese firms, Koike (1990, 1994) concluded that the principal mechanism for workers to acquire knowledge is OJT. Similar emphasis on the importance of OJT has been put forward by others (Cole, 1994; Sako, 1994). OJT helps in the acquisition not only of a task-related skill in one workshop but also other jobs which are closely related in technique. Of course OJT is not always problem-free. There can be a fine line between learning-by-doing and OJT as Fisher et al. (1993) have pointed out:
Fig. 1.
Research framework.
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What many organisations call OJT is really no training at all. Employees are abandoned on the job and expected to pick up necessary skills as best they can. (p. 386) More structured OJT involves guidance and counselling so that learning is constantly monitored. It may include planned job rotation to learn various tasks within a defined period of time. Carvell (1970) argued that the more carefully structured OJT, the greater the impact on learning. OfJT takes place outside the workplace and includes familiar methods such as lectures, group discussions, role playing, assigned reading, case studies, videotapes and computer based training. OfJT is often seen as more costly than OJT, which makes many firms reluctant to use it. Another drawback of OfJT is that the learning can be remote from real life, unless learning materials are closely related to the actual physical and mental work activity (Carvell, 1970). Thus it may be more difficult to reflect the learning experience in real life so as to yield visible outcomes. However, OfJT offers a great opportunity to understand the “why” of the process rather than just the “how”. The two methods of training are complementary. While OJT assists the learning of everyday operations and the understanding of basic concepts, OfJT supplements the development of intellectual skills. Based on the above, we examine the proposition that, rather than using a single training mechanism, the provision of both OJT and OfJT is the best practice to enhance knowledge transfer. The HRD practice may be highly influenced by other human resource management (HRM) factors. This article will also take into account several HRM factors, such as turnover rate, education level of workers and remuneration level in order to explain the effectiveness of HRD (see Fig. 2). Provision of training is not a stand-alone issue. A firm’s decision to provide or not to provide training is often conditioned by the creation of an environment where a sufficient return can be expected. Furthermore, the success of training itself may
Fig. 2.
Interrelation of factors in human resource management.
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depend on other human resource related issues. Turnover rate is often the factor that influences the decision on HRD as a high turnover rate means an immediate loss of investment. A firm feels that its investment in human capital does not yield an adequate return when the turnover rate is high and therefore shows less interest in providing training. The level of wage is often a determinant of the turnover rate. It also influences workers’ motivation and loyalty. Motivation and loyalty may influence the way employees learn and create knowledge. The level of wage is often determined by the educational level of workers employed and vice versa. A firm may prefer to recruit highly educated workers, although expensive, because the kind of operation requires workers who can handle complex tasks. Highly educated workers may also be perceived to be more easily trainable because of their understanding in fundamentals.
2. Methodology The authors’ interests are to examine the kind of training offered by firms that are successfully transferring knowledge and how the training influences the process of knowledge transfer. Nine case studies of Japanese firms in Brazil (B) and Mexico (M) are examined in this paper. The cases are chosen from a sample of twenty-three firms interviewed in the two countries between February and October 1996. The nine firms demonstrated a high degree of knowledge transfer, a judgement based on the following criteria. In a subsidiary, workers absorb the knowledge flows from a parent firm. As a result of this “learning” experience, workers become able to assimilate and develop the existing knowledge. A similar understanding is widely discussed in the context of technology transfer (Lall, 1985, 1994; Hewitt, Johnson & Wield, 1992). The development of creative capacity does not necessarily mean an R&D capacity. A number of minor modifications made on the shop-floor either to product design or the production system indicates the development of indigenous knowledge at a different level. In fact, design modification or new product launch only capture a partial picture of knowledge assimilation. Therefore the authors looked for evidence of knowledge assimilation and creation at shop-floor level as an indicator of successful knowledge transfer. In Japanese firms, knowledge assimilating activities are often enhanced through the use of small group activities. The reason for using small group activities is to give greater autonomy to shop-floor workers and stimulate their intellectual capacity. Instead of small group activity, some firms call their autonomous working groups quality control (QC) circles or kaizen groups. Despite the wide range of names given, the nature of the group and tasks designated are similar: it is an autonomous group which works on improvement. Kaizen in Japanese means continuous improvement and what it represents is a philosophy or an attitude rather than a specific technique. Reflecting this, the main objective of the kaizen activity is to improve product quality and productivity. Taking into consideration the possible variety of company situations, the objective can be
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achieved in various forms. As a result, kaizen activity may be undertaken in the form of group activity in one firm while in other firms it is delegated to a smaller number of workers. The use of a suggestion system is a mechanism to activate workers’ creative capacity. A suggestion system usually asks individuals to submit their ideas to improve shop-floor practice. For Kenny and Florida (1993), a suggestion system is an individual form of kaizen. While the above mentioned mechanisms are widely cited in literature on Japanese management and HRM, “Total Productivity Maintenance” (TPM) is quite a foreign concept. However, the authors discovered that it is often a great promoter of knowledge assimilation. Its main feature is to involve all shop floor operatives in machine maintenance and thereby reduce the division of labour between maintenance and operation. The underlying logic is still that by keeping machines in a good condition, they can achieve maximum productivity but TPM also has the synergistic effect of raising the awareness of each machine operator. Through the TPM programme, workers are taught and encouraged to modify machines in order to improve their operation. After thorough evaluation of each case’s knowledge assimilation experience, the authors judged that nine firms among the twenty-three interviewed are successful. Table 1 summarises the main features of their knowledge assimilation activity. Case analysis necessarily involves interpretation of individual case experience. Here we confine ourselves to a summary of cross-case analysis. Case study analysis relies heavily on two dimensions: search for patterns and replication of theory. The search for meaning often is a search for patterns, for consistency, for consistency within certain conditions . . . sometimes we will find significant meaning in a single instance, but usually the important meanings will come from reappearance over and over. (Stake, 1995: 78) Thus, if there is any consistent pattern of HRD practices, the case is strengthened. Another important dimension is to relate findings to the theory discussed earlier in order to confirm and possibly refine the research propositions.
3. Analysis of HRD practices All the firms claimed to provide OJT; however, as discussed earlier, the form of OJT differs from firm to firm. Only four firms actually monitor in a formal way the process of OJT. The methods of monitor and control utilised by the four firms (B1, B2, M3 and M4) have an important common element. The operational procedure is meticulously divided into small segments, so that the acquisition of a skill is easily judged by a supervisor’s observation of a worker’s ability to perform the task. This systematic sequencing of skill acquisition offered by a firm enables each supervisor to know what is to be expected of his/her subordinates. The provision of OfJT identified in the nine cases makes it sensible to distinguish
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Table 1 Knowledge assimilation effort Firms
Main features of activity
B1
By the introduction of a lean production programme, workers are empowered and motivated to perform active kaizen activities. The factory layout was considerably changed during the course of interview visits. A keen pursuer of TPM activity. Numerous modifications made to equipment were witnessed. The firm incorporates knowledge assimilation activity with TPM. Various improvements in the factory were suggested by employees and identified during the visits. TPM has already become a routine rather than a special programme or event. The firm encourages the suggestion system. The expatriates identified improvements in productivity and efficiency which came from workers. The firm is keen on the use of small group activities. There was evidence of improvements which came from workers. The firm sends a group to participate in the small group activity competition organised by the parent firm. QC circle is actively operated in this firm and is rated satisfactory by expatriates. A group which wins a competition in the firm is sent to Japan to attend the grand contest at the parent firm, and has been successful. Apart from kaizen small group activity, each work section is given an objective regarding quality. There is a “day of quality” once a month for workers to present the results of their activity. Another vigorous use of TPM. The modifications to equipment were visible. The firm also makes active use of kaizen small group activity. All the workers participate in kaizen activity which is in the form of small group activity. The factory director (expatriate) commented positively on the level of suggestions made by employees.
B2 B3
B4
B5
M1
M2
M3 M4
between induction courses and the more traditional forms of OfJT. The induction course is provided when a worker enters a company. The purpose of the induction course is to familiarise the worker with the company and the job. This “training” is distinguished from others because the course occurs only once in their working life in the company, and the focus is on the worker’s integration to the firm rather than knowledge and skill acquisition. The way induction courses are used by each firm differs widely. The most common form of induction course, which is utilised by six firms among the nine, is just to give short familiarisation lectures. The common topics are company policy and philosophy, the rules of the company, security issues, and quality. Although only three firms included OJT as a part of the induction course, the authors observed that every new worker receives OJT; which is to say that he/she works under the supervision of an experienced worker until he/she becomes familiar with the task. B5 and M4 provide longer induction courses in a similar manner; in these firms new workers work only a half day and another half day is used for OfJT. In both cases this training goes beyond informative sessions; workers actually learn about conceptual issues like quality control, basic statistical analysis, problem solving methods and so on.
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Seven out of nine firms provide OfJT of some sort. The popular topics taught through OfJT by these firms are quality control, machine maintenance (including TPM) and production operation. But the duration and the number of workers involved in the training differ considerably. While B1 is the keenest provider of training, B2, B4, B5, M1, M3 and M4 make sure that all the workers have basic technical understanding in the operation and that they are given an opportunity to upgrade their skills while B3 and M2 provide virtually no training. The analysis of HRM practices of the cases demonstrated that the firms employ a wide range of HRM strategy, although all the firms achieved the desired result in the form of knowledge assimilation. The patterns are not always obvious. The analysis identified six patterns —some positive and some negative. The pattern that best fits the theory of human capital is B1 — high education, high wage and low turnover rate and it provides both OJT and OfJT (Fig. 3). The firm explained that it requires a relatively high level of education from those who enter the company because it expects higher skill levels than the average firm. It compensates by paying a higher wage. Workers are in turn highly motivated, enthusiastic and loyal to the firm, which is reflected in the low turnover rate. Given the environment, firm B1 provides training without fear of losing the benefit. That helps to increase both the level of skill and the motivation among workers. B2 is an interesting case that has achieved a very low turnover rate while providing a low wage level and active training (Fig. 4). It was observed during the factory visit that the employees were highly motivated and proactive in this firm. The creation of an interesting and amicable environment may have had some impact in lowering the labour turnover rate. In this firm, training had the function of changing organisational culture as well as supporting skill acquisition. By bringing about a positive learning environment within the firm, training had a synergistic effect. B4 shows a pattern in which HRM strategy is used effectively to influence training in a positive manner (Fig. 5). The firm pays a high wage although the average level
Fig. 3.
Role model HRM, Case B1.
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Fig. 4.
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Cost effective HRM approach, Case B2.
Fig. 5.
Positive HRM cycle, Case B4.
of education achieved by the employees is relatively low. This combination helps it to achieve a relatively low turnover rate as employee retention is influenced by the wage level. Because of the low turnover rate, the firm can provide OfJT without fear of losing its investment. The above cases demonstrate patterns in which firms created an environment conducive to human resource development. Yet, as seen above, firms can employ different patterns of HRM in achieving the same objectives. However, in some cases, firms may not provide training as a deliberate choice, and they co-ordinate HRM accordingly. M2, for example, chooses workers with a lower level of education
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Fig. 6. Safe HRM approach, Case M2.
because it does not expect any complex tasks to be performed (Fig. 6). The firm pointed out that its operation is labour intensive and simple. High skills are not required. Hence the firm provides neither monitored OJT nor OfJT. Yet the firm does not seem to suffer from de-motivation of workers — turnover rate is kept low, explained in part by a higher level of wages. Unlike the aforementioned patterns, some firms are trapped in a vicious circle (Fig. 7). They failed to create an environment where training can be provided effectively. And since training is not provided, given the circumstance, the environment
Fig. 7.
Minimalist HRM approach, Case B3.
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does not improve. B3 recruits relatively highly educated workers with a low wage. Subsequently, turnover rate is high and is used as a reason for not providing any training. Hence the firm is trapped in a vicious circle. An interesting finding is that although B3 does not have a favourable HRM practice, it still managed to assimilate knowledge among shop-floor workers. Both M2 and B3 are active in providing QC circles and TPM, which are shop-floor management techniques but also used as a tool for educating workers. Through the introduction and encouragement of these shop-floor activities, these firms successfully educated workers to participate in knowledge assimilation and improve their working environment. The introduction of an activity such as kaizen is itself an effort of HRD. It teaches workers, through doing, the explicit knowledge that helps to operationalise learning (Kilmann, 1996). Whether it alone can be an effective tool for HRD or not depends on the way a firm utilises it. All the firms described above have a combination of HRM practices which at least saves them from losing investment in human capital. M3, on the other hand, is losing investment (Fig. 8). M3 has reduced its level of training since it does not pay; the turnover rate remains high. However, the firm continues to believe that a certain level of training is an absolute necessity to maintain the level of production quality. In order to resolve the dilemma, increasing the level of wages may be part of the solution.
4. Conclusion The theory of human capital supports the use of closely monitored training as the best way to assimilate knowledge transfer. Our findings are inconclusive as to the relative merits of OJT and OfJT, certainly with respect to the formal monitoring of such activities. Whilst all firms claimed to provide OJT, only four closely monitored
Fig. 8.
Investment draining HRM, Case M3.
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the training and these firms paid similar attention to the results of OfJT. On a simple headcount one could conclude that it is OfJT that has the major impact on knowledge transfer. The evidence is insufficiently robust to support such a conclusion. A safer conclusion, evidenced strongly in seven out of nine cases where knowledge assimilation and creation took place, is that close monitoring of OJT and/or OfJT provides a set of HRD practices which are most likely to enhance the transfer of knowledge. The two cases which demonstrated that active knowledge assimilation occurred without close monitoring of the training provided are evaluated contextually below. The difficulty of linking HRD practices and successful knowledge assimilation is largely due to the complexity of overall HRM practices. HRD often does not yield expected results because other HRM practices fail to create an environment in which the benefit of HRD is secured. The analysis identified several patterns of HRM, some of which have a positive impact on knowledge assimilation, while others have a negative impact. Although B5, M1 and M4 did not demonstrate strongly identifiable patterns, the remaining cases showed that a variety of HRM strategies could be employed to achieve the same goal. As seen in the case of M3, the firm could have made more out of the active HRD it provides, but in order to do so, it needs to rationalise HRM practices first. On the other hand, coherent HRM practices may help to overcome the lack of HRD, as seen in the cases of B3 and M2. Content analysis revealed that firms that provide training on problem solving and teaching “why” rather than just “how” are the firms that are more successful in knowledge assimilation. TPM, QC and kaizen induce learning by involving workers to “do” it. Such “doing-based-learning” is a mechanism to augment a firm’s capability. Through experience, workers acquire tacit knowledge or, as Hu (1995) puts it, “the ability to cope with complexity”. The two firms that managed to assimilate knowledge among shop-floor workers without the provision of monitored training are active in providing QC circles and TPM. QC circles, TPM programmes, kaizen have a potentially crucial function to create a culture where workers are encouraged by being introduced to an environment where they are expected to think, absorb and assimilate knowledge. As Richter and Vettel (1985) put it, Behavioural corporate knowledge includes mind structures co-ordinating the social interaction of individuals and organisations. This knowledge is always rooted in the social and cultural background, beyond simple transferability from one organisation to the other. (p. 38) Moreover, knowledge transfer and the learning that occurs subsequently is a continuous process. In other words the organisational culture itself is the carrier of tacit knowledge because the tacit knowledge is given its form through organisation routines (Tucker et al., 1996). As Seely Brown (1998) pointed out, “learning is becoming a practitioner not learning about practice”. The HRM patterns introduced here shed light on a very important fact in assessing the relationship between human resource development and knowledge transfer. That is, there are a number of HRM patterns that a firm can employ in order to enhance
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