Tang, "Tacit knowledge, transactional learning and contractual arrangement: A transactional analysis of knowledge acquisition in international technology transfer in China," 2000

Yongjian Bao, Ph.D.

Abstract (Summary)

To acquire tacit knowledge from Western companies, the Chinese government has encouraged international technology transfer by adopting a liberal policy on foreign equity involvement. Various preferential treatments for foreign joint ventures are good examples of the government's belief that hierarchical contracting facilitates tacit knowledge transmission.

This belief is consistent with opportunism-based transactional analysis, which argues that tacit knowledge transmission involves double-moral hazards and hold-up hazard, thus, incurs transaction costs. Only internalized control under hierarchical contracting can mitigate the contractual hazards.

Empirical analysis of this study found several defects in such a belief and analysis: (1) opportunism-based analysis fails to identify and measure tacit knowledge transmission as an important transactional performance for transferees; (2) the analysis ignores transferees' learning of tacit knowledge in transaction; (3) the analysis fails to recognize that hierarchical contracting has no significant impacts on tacit knowledge transmission.

To address these deficiencies, this study applies a knowledge-based transactional analysis to study transactional learning of tacit knowledge. The new analysis identifies several characteristics of tacit knowledge transmission: (1) it must be conducted through transactional learning, a special learning arrangement that requires interpersonal, experiential, and simultaneous interactions between instructors and learners; (2) to accommodate transactional learning, five learning-specific factors must be included in related contractual arrangements--the learning-specific context, relationship, method, incentive, and capability.

This study conducted survey on international technology projects of 167 Chinese companies, and interviewed 30 executives from 14 Chinese companies. The statistical results highlight some significant contractual designs that corroborate with major theoretical propositions from knowledge-based transactional analysis: (1) sophisticated technology transfer benefits tacit knowledge transmission; (2) compatible business relations contribute to tacit knowledge transmission; (3) expatriate coaching is useful in tacit knowledge transmission; (4) private commitment on intellectual property right protection encourages more tacit knowledge dissemination; (5) transferees' absorptive capability is positively related to tacit knowledge transmission.

These findings show that, in order to facilitate tacit knowledge acquisition in international technology transfer, the Chinese government must change its current equity-oriented policy to a learning-oriented one.

Advisor: Tang, S. Yan