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Keywords:

  • knowledge transfer;
  • adaptation;
  • quasi-experiment;
  • international;
  • franchise

Abstract

Adaptation almost invariably accompanies the cross-border transfer of firm-specific practices. The existing literature contains two conflicting approaches to adaptation. The first, more traditional approach, following institutional, motivational, and pragmatic efficiency considerations, presumes that a modified practice can be fine tuned, stabilized, and institutionalized without consulting a working example and that practices should thus be adapted as quickly as possible to create fit with the local environment. The second approach argues, instead, for the need to maintain the diagnostic value of the original practice by adapting cautiously and gradually. In this paper, we report an in-depth field investigation of the relationship between presumptive adaptation, adaptation that removes the diagnostic value of the original practice, and transfer effectiveness. The setting is the transfer of franchising knowledge across borders. We investigate how adherence to recommended practices affects the rate of network growth in the host country. We find that presumptive adaptation stalls network growth while a conservative approach to adaptation, which basically entails close adherence to the original practice, results in remarkably rapid network growth. We conclude that presumptive adaptation of knowledge assets could be detrimental to performance. Copyright © 2006 John Wiley & Sons, Ltd.