Chapter Overview
The first chapter of this study presents an introduction into the research. The background, problem statement, purpose of the research, research questions, significance of the study, and delimitation and limitation will be presented to the readers. Lastly, this chapter will present definitions and terms, which might be not familiar to readers due to country specialty. This chapter will assist readers to have a logical and comprehensive understating of the present research study.
Background of the Study
For any business to survive and compete in today‟s globally competitive market place, the concept of knowledge creation and transfer must be understood and embraced across the organizations. The development and implementation of an effective knowledge management strategy is an absolute necessity (McLaughlin, 2007). Research has shown that knowledge management is positively related to the reductions in production costs, faster completion of new product development projects, team performance, firm innovation capabilities, and firm performance including sales growth and revenue from the new products and services (Arthur &
Huntley, 2005). With regard to knowledge, the issue of transferability is important, not only between organizations, but, even more critically, with the organizations (Grant, 1996). There are different ways to transfer knowledge. The use of international assignments has become one of the integral parts of the headquarters in order to transfer business strategy and organization culture. Expatriates act as a link between headquarters and host organizations. Thus, a significant amount of information and knowledge moves through their hands, particularly in the case of tacit knowledge. Expatriates are the basic mechanism, by which tacit knowledge is transferred in organization (Bonanche &Brewester,2001).
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After reviewing a number of literatures related to the expatriate‟s role on knowledge management, the researcher identified that there has not been very much researches focusing on the role of expatriates in knowledge transfer. Particularly, there are no researches related to expatriates in Mongolia and their role in Mongolian mining organizations. It is important for Mongolian mining companies to identify the role of the expatriates, in order to utilize and take advantage of the knowledge and experience of expatriates. Mongolia‟s mining industry is the basic resource of the country‟s economy, and currently mining sector is in the developing phase, which requires the experience and knowledge of expatriates.
Statement of the Problem
In recent years, the Mongolian economy has been booming due to vast exploration of the mining fields. Foreign direct investment, especially in the mining sector, has triggered large foreign exchange inflows and international reserves are at an all-time high (IFM report, 2010).
Multinational mining companies, who own shares, are expanding their activity by expatriates‟
assignments. Oyu Tolgoi project, sponsored by the Mongolian Government, Ivanhoe Mines and Rio Tinto, are expected to generate substantial economic benefits for the people of Mongolia.
Ivanhoe Mines and Rio Tinto proposed to invest 5 billion USD, over the first five years of the project. Oyu Tolgoi would then produce 500,000 tons of copper and 330,000 ounces of gold a year for the next 45 years, making it one of the largest mines in the world. Over the life of the project, the companies propose to invest a total of 7.5 billion USD real terms (World Growth International Report, 2009). Investment and development will require highly skilled expatriates‟
professionals of all level in all sectors. Expatriates have a vital role to smoothen and activate operation of Multinational companies in their host countries (Welch & Shuler, 1999).
Mongolia is one of the recently opened countries to the foreign market, Mongolians lack of experience in terms of running large scale and international business in different fields (Fiscor, 2007). Additionally, during the transition period, many highly educated middle age Mongolians, who graduated from Former Soviet Union countries, left Mongolia to find better working conditions and higher salaries in developed countries like the US, Great Britain, Japan, Australia, Korea etc. Approximately 200,000 Mongolians are living and working in 60 different countries (National Statistical Office of Mongolia, 2010).According to the Atlantic Research Technologies L.L.C, Senior Management Executive Search and Recruitment World Wide positions that will
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be in demand in Mongolia for Expatriates are: CEO's, COO's, CFO's, VP's, presidents, managing directors, general managers, country managers, sales and marketing directors, national sales managers, financial controllers, specialists, plant managers, manufacturing directors, supply chain directors, sourcing managers, and others. It is inventible that Mongolia will need high skill and knowledge of expatriates and their participation in all levels of industry and business. It is also obvious that Mongolian HR practitioners must recruit large amount of expatriates from different countries. Therefore, it is important to identify what is the role of expatriates on the knowledge transfer process in the organizations. However, knowledge management and expatriate issues are relatively new research fields, in terms of Mongolian organizations. There are almost no related previous researches on that topic. Therefore, it is necessary to address above issues as a research topic.
Earlier expatriates were only associated with the ethnocentric approach and indicated the practice of using parent-country nationals for staffing key positions in foreign-owned subsidiaries. Consequently, the primary goal of expatriates‟ parent organizations has been able to exert control and achieve global integration across subsidiaries (Black, 1988; Shuler 1993; Tung, 1993). Although over the last decade or so, the nature of the expatriate assignment has gradually changed. The old approach of expatriate “just get the job done”–is no longer relevant. Today, expatriates are expected to engage in local staff development and improvement of skill by transferring different type of knowledge. Research reveals various possible strategic targets for expatriates in that area (Minbaeva & Michailova, 2010). To be practical and successful with expatriates in the future, it is important to figure out the current situation and analyze expatriates experiences on knowledge management, specifically on the knowledge transfer issue.
Additionally, the researcher assumes that result of the study will have a positive effect on the expatriate‟s reputation in Mongolia. Currently, majority of Mongolians have inappropriate stereotypes that expatriates are taking local employees‟ positions and getting higher salary comparing to local employees. Thus, it is important to provide concrete facts about expatriates‟
contribution to the host country and organizations.
Purposes of the Study
This study will identify the role of expatriates on knowledge transfer in mining companies of Mongolia and what type of knowledge transferred by them. It will also identify
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main factors and obstacles, which are impacting expatriates‟ in order to transfer knowledge.
Based on the research results, mining companies will be possible to improve or change certain conditions, which are negatively impacting the transfer process in order to achieve a competitive advantage additionally findings will reveal where is the gap and weakness of Mongolian employees in mining sector.
Research Questions
To identify the role of the expatriates on the knowledge transfer process, the following questions will be used as the main inquiry of this study:
1. What is the role of expatriates on knowledge transfer process in mining companies of Mongolia?
2. What type of knowledge is transferred by the expatriates to Mongolian mining companies?
3. What are the main factors and obstacles affecting expatriates during the knowledge transfer process?
Significance of the Study
Due to the globalization needs, core competencies have to be effectively transferred across units and borders. It has been proven by many studies that expatriates play a vital role on strengthening core competencies of the organizations (Conn & Yup, 1997). According to the resource-based view, a firm performs well over time because it develops a distinctive strategic competence that allows it to overcome its competitors (Dunphy, Turner & Crawford, 1997).
Without managing the valuable knowledge of expatriates, it will be impractical to strengthen core competence in host organizations. Therefore, it is important to identify the role of the expatriates on knowledge transfer in the mining companies of Mongolia. To support knowledge transfer in organizations, it is necessary to identify and analyze what type of knowledge transferred, what factors and obstacles are affecting the knowledge transfer process.
Currently Mongolia is under the new stage of economic growth (IMF report, 2010).
Mining companies are leading the rapid growth of the economy. Therefore, for those organizations, it is important to utilize all the resources of the organization without littering.
Particularly, human resource is fundamental for the organization‟s competitive advantage.
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Expatriates play a vital role in strengthening the competitive advantage in the organization, by transferring valuable knowledge and supporting local employees on new skills and knowledge development. Expatriate managers not only transfer technical or managerial knowledge, but also culture and information (Dowes & Thomas, 2000). The flow of the knowledge between subsidiaries, and from subsidiaries to home office, from individuals to individuals is important because of the increasing independence of foreign subsidiaries (Harzing, 1999). In such a case, it is important for Mongolian mining organizations to clearly identify the role of the expatriates and their contribution to the organizations in order to increase competency. In this research, the target is to identify the role of the expatriates on knowledge transfer and to try to answer what type of knowledge is transferred to the host organization. It is significant to mining companies to identify above aspects because result of the study will assist them to have a clear picture on the current utilization of the expatriate‟s knowledge. In the existing literature, the lack of awareness concerning links between knowledge management and HRM is surprising (MacNeil, 2003).
Especially there are a limited number of references and literatures on expatriates, knowledge management and human resource issues related to Mongolia, particularly to the Mongolian mining industry. This study is one of the groundbreaking studies, for the related fields and contribution to the Mongolian HR field literature.
Delimitation and Limitation
Delimitation
This study will analyze the role of the expatriates on knowledge transfer in the Mongolian mining company. Study not concerned with the exchange of the knowledge between host country nationals. Role of the expatriates on knowledge transfer will be reflected from the perspective of expatriates by themself. Study excludes host country nations contribution to knowledge transfer and their standpoints towards to expatriates role. Study will only reflect expatriates standpoints and experience. Result of the study will be drawn from the self-evaluation of the expatriates.
Limitation
This study has several limitations. In the implementing phase of this thesis study, the researcher encountered some difficulties in trying to conduct interviews via the internet with expatriates. Second limitation of this study is shortage of the literature related to Mongolian HR
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field and mining industry of Mongolia. Additionally as mentioned above link between knowledge management and HRM is lacking, comparing to the other fields of HRM this subject is relatively new.
Definitions of the Terms
Expatriate
- refers to any person temporarily working outside of the country for which he or she holds passport on international assignments for “a period exceeding 6 months per period cover”(Guo, 2007).
Mining Industry
–the complex of the branches of production engaged in the exploration for deposits of minerals and in the extraction from the earth and primary processing (concentration) of these minerals (thefreedictionary, 2011).Mining Company
- Company that owns and manages mines (wikipedia, 2011).Knowledge Management
- Knowledge management is the process of identifying, capturing, organizing and disseminating the intellectual assets that are critical to the organization‟s long term performance (Debowski, 2006).Knowledge Transfer
– the process through which one unit (group, department or division) is affected by the experience of another additionally it can be observed through changes in the knowledge or performance of recipient units (Argote & Ingram, 2000).Mongolian
-landlocked country in Central Asia. Mongolia bordered with Russia to the north and China to the south, east and west. Ulaanbaatar is the capital and largest city, is home about 45% of the population (wikipedia , 2011).Oyu Tolgoi
- gold copper project is locked in the South Gobi Desert, about 550 km due south of Ulaanbaatar and 80 km north of the Chinese-Mongolia border. Oyu Tolgoi deposit may be one of the richest copper-gold ever discovered. When it‟s fully developed, many believe that it will rank alongside great mines, such as Grasberg or Escondido (Fiscor, 2007).Tavan Tolgoi
- is the 10th biggest recourses of the coal in the World. Enrichment of coked coal of 6th layer is 66. 9%, in other words one of the best qualities of the coking coal (Tavantolgoi, 2011).7