Case studies of tacit knowledge for business benefit (part 4): The importance of relational capital in leveraging tacit knowledge
This article is part 4 of a series of case studies of tacit knowledge for business benefit.
The first article in this series introduces “tacit knowledge,” an important type of knowledge that can bring very big benefits to business. The first, second, and third articles then present case studies of success and failure highlighting not only proven ways of engaging tacit knowledge to deliver those benefits, but also the serious financial, reputational, and legal consequences of not doing so.
This fourth article presents three further case studies, one of failure and two of success, highlighting how relational capital and relational capabilities are essential in being able to leverage tacit knowledge for successful international business cooperation.
Drawing on an analysis of a collaboration between Japanese and British firms, Alice Lam alerts in a paper1 in the academic journal Organization Studies that the socially embedded nature of knowledge can impede cross-border collaborative work and knowledge transfer.
Then, in a paper2 in the Journal of Engineering and Technology Management, Jamie D. Collins and Michael A. Hitt explain how firms can use relational capabilities to build relational capital with partners. This in turn overcomes the socially embedded nature of knowledge, facilitating the transfer of tacit knowledge between collaborating partners.
Through an examination of both the research knowledge base and a series of case studies, Collins and Hitt find that frequent communications, on-site meetings, and partner visits are necessary to build relational capital and are particularly valuable tools in tacit knowledge transfer efforts. Their observations include that:
- The tacitness of a firm’s knowledge stocks is positively related to the potential for creating a competitive advantage within its inter-firm partnerships.
- Firms with well-developed relational capabilities are more likely to be able to effectively leverage tacit knowledge stocks and thereby create a competitive advantage within inter-firm partnerships than firms with under-developed relational capabilities.
- The level of trust between partner firms affects the relationship between parent firms’ tacit knowledge stocks and the value of this knowledge within firm-to-firm partnerships. The greater the interpersonal contact between key employees of knowledge-transfer partners, the greater the level of trust that will develop between their firms.
- Cultural differences between partner firms negatively affects the relationship between parent firms’ tacit knowledge stocks and the ability to transfer this knowledge within firm-to-firm partnerships. Cross-cultural transfer of tacit knowledge requires even greater amounts of relational capital than intra-cultural transfers of such knowledge.
Research and practice in sectors other than business also confirms these findings, for example my own work with tacit knowledge in natural resource management (NRM)3.
Case study 8, tacit knowledge failure – DaimlerChrysler
- Daimler-Benz. Formerly Daimler-Benz, Germany’s Mercedes-Benz Group4 is one of the world’s leading automobile manufacturers.
- Chrysler. Formerly Chrysler, Stellantis North America5 is one of the “big three” automobile manufacturers in the United States.
- DaimlerChrysler. In 1998, the merger of Daimler-Benz and Chrysler was announced6, forming DaimlerChrysler with the intention of safeguarding long-term competitiveness. The merger occurred at a time when the global automotive industry was undergoing substantial transformations. The primary objectives7 of the merger were to establish economies of scale, capitalize on complementary strengths, and strengthen the company’s position in the global market. It was viewed as a chance for Daimler-Benz to enter the lucrative American market, while Chrysler would gain access to Daimler-Benz’s advanced technologies and global reach.
- Merger failure. The merger was a failure, with the anticipated benefits not realised, particularly for Chrysler which experienced significant financial losses. In May 2007, Daimler-Benz sold off8 an 80.1% stake in Chrysler and its related financial services business, and in April 2009 reached a deal9 to dispose of its remaining 19.9% stake. That Chrysler could be sold off in this way after a decade of supposedly being merged with Daimler-Benz highlights the extent to which the merger wasn’t.
- Cultural clash. In a paper10 in Revista de Administração da UFSM, Julia Hollmann, Aletéia de Moura Carpes, and Thiago Antonio Beuron Corrêa de Barros conclude that the key factor in the merger failure was a clash of organizational cultures rooted in different national cultures. Considering Hofstede’s national culture dimensions11, Americans live in a society characterized by equality with a small power distance, and also individualism with less reliance on groups or teams. Additionally, they are short-term oriented so more willing to take risks and show more flexibility. In contrast, there is a greater power distance in German businesses. Germans are less individualistic and their thinking is more team-oriented. Hierarchies play an important role in negotiations and are based on authority.
- No building of relational capital. Despite the significant cultural differences, little effort was made to build relational capital between the Daimler-Benz and Chrysler workforces. This flies directly in the face of the findings of Collins and Hitt’s research and practice analysis referenced in the introductory part of this article above. Instead, Daimler-Benz tried to administer12 the Chrysler division as if it was a German company. This approach was destined to fail right from day one.
Case study 9, tacit knowledge success – African and Chinese businesses
- Relational capital in African and Chinese business collaboration. There is a large and continually growing amount of collaboration between African and Chinese business. In contrast to the DaimlerChrysler case study above, the following London School of Economics and Political Science (LSE) article13 “How African and Chinese businesses overcome their differences to collaborate” reveals how relational capital is being built to help ensure that this collaboration is successful.
Case study 10, tacit knowledge success – Lynk & Co
- Acquisition of Volvo by Geely. Volvo14 is a Swedish multinational manufacturer of luxury vehicles, and Geely15 is a Chinese multinational automotive conglomerate. Geely acquired Volvo in 2010.
- Initial cultural clash. Initially, there was cultural clash between Volvo and Geely, just as there had been in the DaimlerChrysler case study above. A key aspect of this was Volvo employees not wanting to work with Geely because they viewed its products as being inferior16.
- Lynk & Co joint venture. The response of management to this cultural clash was not to ignore it. Rather, they established the new innovative automaker Lynk & Co17 in 2016 as a Geely-Volvo gap-bridging joint venture. Other joint ventures between Geely and Volvo have also been established.
- Joint ventures. A joint venture18 is where two or more companies form a strategic partnership for a specific project or goal. In contrast to a merger, a joint venture allows each business to retain its independence while at the same time pooling resources including knowledge to achieve shared objectives.
- Success of Lynk & Co. As well as this focused action helping to bridge the cultural gap, Lynk & Co is very successful in its own right19.
Header image: A Chinese expert instructs a local farmer on planting peppers in Caldeiras Village of Sao Tome Island, Sao Tome and Principe, on 15 July 2023. Source: ©Xinhua.
References:
- Lam, A. (1997). Embedded Firms, Embedded Knowledge: Problems of Collaboration and Knowledge Transfer in Global Cooperative Ventures. Organization Studies, 18(6), 973-996. ↩
- Collins, J. D., & Hitt, M. A. (2006). Leveraging tacit knowledge in alliances: The importance of using relational capabilities to build and leverage relational capital. Journal of Engineering and Technology Management, 23(3), 147-167. ↩
- Boyes, B. (2023, November 28). Case studies in complexity (part 6): Tacit knowledge transfer and deliberative conversations in the Helidon Hills. RealKM Magazine. ↩
- Wikipedia, CC BY-SA 4.0. ↩
- Wikipedia, CC BY-SA 4.0. ↩
- Mercedes-Benz Group. (n.d.). “World Corp.” vision 1995 – 2007. Mercedes-Benz Group. ↩
- Noghrehkar, N. (2023, October 4). Hindsight or Foresight: Reassessing the DaimlerChrysler Deal as Merger of Equals or Acquisition. Institute for Mergers, Acquisitions & Alliances Blog. ↩
- The Associated Press. (2007, May 14). Chrysler Group to be sold for $7.4 billion. NBC News. ↩
- ABC News. (2009, April 28). Daimler reaches deal on final split from Chrysler. ABC News. ↩
- Hollmann, J., de Moura Carpes, A., & de Barros, T. A. B. C. (2010). The DaimlerChrysler merger–a cultural mismatch?. Revista de Administração da UFSM, 3(3), 431-440. ↩
- Hofstede, G. (n.d.). The 6-D model of national culture. ↩
- Hollmann, J., de Moura Carpes, A., & de Barros, T. A. B. C. (2010). The DaimlerChrysler merger–a cultural mismatch?. Revista de Administração da UFSM, 3(3), 431-440. ↩
- Prashantham, S. (2025, July 31). How African and Chinese businesses overcome their differences to collaborate. LSE Business Review. ↩
- Wikipedia, CC BY-SA 4.0. ↩
- Wikipedia, CC BY-SA 4.0. ↩
- Personal communication, 2019, John Fenton-James, former Vice-President of Quality, Lynk & Co. ↩
- Wikipedia, CC BY-SA 4.0. ↩
- Nalley, S. (2024, December 2). Harnessing The Power Of Joint Ventures: A Guide To Success. Forbes. ↩
- Lynk & Co. (2025, January). Lynk & Co Honors Exceptional Global Achievements in 2024. Lynk & Co Newsroom. ↩
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