Faculty & Research -Operating business in Iran: Learning for incoming multinational companies and for local Iranian firms

Operating business in Iran: Learning for incoming multinational companies and for local Iranian firms

We investigate the collaboration between an Iranian and a French company in a joint venture aimed at developing radical innovation in the construction sector. We identify the challenges involved, the barriers to technological change, and the difficulties of transferring knowledge related to absorptive capacity. Our findings indicate that radical innovation is characterized by safety, quality, and planning challenges which engender delays, non-conformity to specifications, and additional costs.

Freyssinet was unsuccessful in transferring explicit and tacit knowledge because Azaran suffered from poor organizational absorptive capacity.  Its high absorptive capacity allowed Freyssinet to adapt its operations to Azaran’s tacit knowledge routines. Our research is meaningful to the construction sector, an economically and socially significant sector in Iran that faces serious issues. Our study has practical implications for Iranian firms and for foreign firms operating in Iran. We contribute to strengthen the understanding of Iranian technology development by focusing on radical innovation standards, joint venture specific learning dyads, and complex knowledge transfer.

Underpinning research

  • Proposition 1: Firms intending to work on projects in Iran should study the nation’s technological development, be aware of the commonly accepted local standards in terms of quality, safety, and planning, and select the appropriate degree of technology radicalness.
  • Proposition 2: Firms seeking to work on projects in Iran should carefully select the partners they will be working with and the type of strategic alliance that best suits their needs and circumstances. A selection process of this kind requires, among others, a preliminary study on the engineering standards and habits in the host country’s industry.
  • Proposition 3: Iranian individuals and organizations were not prepared to handle the newness of the design, the small tolerances, and the precise sequencing, which led to planning, quality and safety issues.
  • Proposition 4: Prior to knowledge transfer, both organizations need to assess that their knowledge bases are similar in term of tacit and explicit knowledge.
  • Proposition 5: When the firm that receives knowledge does not have a good balance between tacit and explicit knowledge, knowledge transfer may not occur and the learning dyad may fail.
  • Proposition 6: The lack of the technological capability to integrate tacit knowledge, the intuitive nature and imprecision of tacit knowledge, the lack of attention to written documents, and resistance to internalizing knowledge will hinder knowledge transfer.
  • Proposition 7: Facing an unsuccessful learning dyad, the teacher should adapt to the student by implementing a reverse learning dyad to best identify the main weaknesses and the common mistakes that need to be addressed.
  • Proposition 8: Planning uncertainty, design uncertainty, and profitability uncertainty are likely to be greater in developing countries than in developed countries.
  • Proposition 9: Radical and modular innovation are likely to be associated with extensive time delays, design modifications, and extra costs due to safety, quality, and planning issues, and because of unsuccessful knowledge transfers.
  • Proposition 10: The choice of the joint venture as a specific strategic alliance did not ensure the good absorption of technological knowledge.
  • Proposition 11: The accumulation of experience in Iran and the familiarity between partners should not prevent foreign firms from conducting studies assessing the risks related to the uniqueness and requirements of a project – especially when this project presents technological radicalness – and from carefully examining the partners’ knowledge bases and absorptive capacity levels.
  • Proposition 12: A heterogeneous degree of absorptive capacity between knowledge senders and receivers hinders technological change and does not offer locked out firms the possibility of entering new activities outside their existing knowledge bases.
  • Proposition 13: Firms’ knowledge bases, their absorptive capacity levels, past experiences, and investment in individual training, condition their organizational capabilities to perceive the importance of learning new technologies, developing knowledge-sharing routines, and assimilating new knowledge.

References to the research

Scaringella, L. and Burtschell, F. (2017), “The Challenges of radical innovation in Iran: Knowledge transfer and absorptive capacity highlights – Evidence from a joint venture in the construction sector”, Technological Forecasting and Social Change – Special Issue on the Development of Science and Technology in Iran: The Challenges of Innovation and Commercialization, 122C, 151-169

Details of the impact

Mahmoud Goudarzi, Iranian Minister of Youth Affairs and Sports during a visit to the Imam Reza Stadium, May 2015 declared that “I am positively impressed by the design of the roof added to the Imam Reza Stadium in Mashhad. If this technology is now available in Iran, it would be great if we reuse such technology to build the roof to the Azadi stadium in Tehran.”

Based on the 13 propositions made in this study, a summary has been made available for international companies willing to operate in Iran. Also, a similar note has been translated into Farsi to be sent to Iranian companies before starting collaborating with international partners.

Bruno Le Maire, French Minister of economy, finance, and industrial and digital sovereignty sent the letter MEFI-D23-06511 on June 1st, 2023, a letter to the authors, declaring the following “Dear doctor, You have been kind enough to send me your article for which you are the author or co-author, and which have been published in renowned specialized scientific journals. Your work notably focuses on innovation and knowledge management, as well as organizational design. In your study, you question and analyze the rationale and utility of investments in research infrastructure. I am most grateful to you for this. Please rest assured that I have reviewed this publication with great interest. I kindly request you to believe, Doctor, in the assurance of my highest consideration.”

Sources to corroborate the impact

Goudarzi, M. (2015), public declaration in Mashad
Le Maire, B. (2023) Letter MEFI-D23-06511
Scaringella, L. and Burtschell, F. (2017) Learning for incoming multinational companies
Scaringella, L. and Burtschell, F. (2017) آموزش برای شرکت‌های محلی ایرانی

Research Centre: RTO
Dr Laurent Scaringella, Associate professor, Rennes School of Business
François Burtschell, Civil engineer, Poma
Period when the impact occurred: November 2013 – June 2023