Creating Worldwide Innovation and Learning

Part I from chapter 5, Creating Worldwide Innovation and Learning: Exploring Cross‐Border Knowledge Management:

1. Define arbitrage factor costs.

According to the Encarta Dictionary, arbitrage means: “the simultaneous buying and selling of the same negotiable financial instruments or commodities in different markets in

order to make an immediate profit without risk”. So, in order to relate this to MNEs’ arbitrage factor cost, it is the utilization of differences between regional or national markets, usually allocating separate parts of the supply chain in different places.

2. “Today’s challenge is to build transnational organizations that can sense an emerging consumer trend in one country, link it to a new technology or capability it has in another, develop a creative new product or service in a third, then diffuse that innovation rapidly around the world”.  With this in mind, identify a company who has demonstrated this ability including a brief description of each step they took. (see pages 408 and 409 as a starting point)

A good example of a firm who demonstrated the ability of managing central, local and transnational innovation is P&G. First of all, the company needed to take the market intelligence and developed in one part of the organization. As a result, P&G wanted to launch an improved liquid laundry detergent, it drew on the diverse technological capabilities it has developed in Europe, Japan, and the US.

Secondly, the company needed to link it to specialized expertise located in a second entity and a scare resource in a third. Because laundry in Japan is often done in cold water, researchers in that country had developed a more robust surfactant, the ingredient that removes greasy stains. Meanwhile, the Europeans had been working on a liquid detergent with bleach substitutes, water softeners and enzymes that would work in their high temperature frontloading washers. These innovations were combined with a new generations of...