The JGM BitBlog: Knowledge is the key to success, but we transfer it only one way – the onsite-offshore business model in Indian IT MNEs
Parth Patel, Australian Institute of Business, Australia
Hussain G. Rammal, University of Technology Sydney, Australia
João J. Ferreira, University of Beira Interior, Portugal
Verma Prikshat, Cardiff Metropolitan University, UK
Technology firms rely on the tacit knowledge held by their employees as it provides them with a competitive advantage. It is a given that multinational enterprises (MNEs) use globally distributed networks, including transnational teams spanning multiple geographical and cultural boundaries. However, less is known about how emerging market multinational enterprises (EMNEs) manage the knowledge in subsidiaries in developed countries. This issue is even more pertinent in information technology (IT) firms, which are knowledge-intensive. Tata Consulting Services and Infosys are some Indian IT firms that dominate the sector and have a global presence. Clearly, the ethnocentric view of knowledge being generated and transferred from developed countries no longer holds sway. This raises questions about how EMNEs remote and proximately manage, share, and disseminate knowledge in cross-national teams. What type of knowledge is being shared, and what role do expatriates play in this process?
The data from 16 Indian IT subsidiaries in Australia confirms that the onsite-offshore business model is integral to Indian firms’ ability to manage globally dispersed, cross-national teams. The business model enables the team members working on IT projects to be located between the home country (offshore) and the host country (onsite) to coordinate these projects and transfer knowledge between the headquarters and the subsidiaries. This provides Indian IT MNEs with significant cost advantage and enables them to compete with other players in the market to offer IT services at a cost-effective price and tailor their services to the needs of their customers and maintain an international competitive advantage. However, this relationship between headquarters and subsidiaries is not necessarily on an even keel. To support these firm-level advantages, much of the work is undertaken by experts in the headquarters. In addition, the physical presence of specialized expatriates who draw on the onsite-offshore relationship in host countries assures local responsiveness and data storage within the host country and under the local regulations. This results in a one-way transfer or forward diffusion of knowledge. Local staff is employed in functional and administrative roles in the subsidiaries, and their knowledge input is limited to help reduce the Indian firms’ liability of foreignness.
It is vital for EMNEs to remain innovative by developing two-way interaction between the headquarters and subsidiaries to create and exchange new knowledge.
To read the full article, please see the Journal of Global Mobility publication:
Patel, P., Rammal, H.G., Ferreira, J.J. and Prikshat, V. (2021), "Knowledge management, sharing and transfer in cross-national teams and the remote management of team members: the onsite-offshore phenomenon of service EMNEs", Journal of Global Mobility, Vol. 9 No. 4, pp. 574-590. https://doi.org/10.1108/JGM-03-2021-0020