From family firm to Japanese OEM in tacit knowledge innovation: a case study of Sin Kwang plastic resources in Malaysia

PurposeAlthough it is a well-known notion that “a family firm does not survive beyond the third generation”, owing to the ineffective tacit knowledge transfer, studies investigating the relationship between generational evolution and knowledge innovation is scarce. Thus, this case study revolving Sin Kwang Plastic Resources Berhad (SKP) seeks to address this gap in literature.Design/methodology/approachTo assess the development of family business, a longitudinal case study was performed by documenting the entire evolutionary process starting from its establishment until now. The historical profiles for SKP were obtained from the previous annual reports submitted to the government's Companies Commission (SSM). Secondary materials from the Federation of Malaysian Manufacturers (FMM) and the edge newspaper and articles on the company were also gathered. Throughout the in-depth interviews, the author can see how the next generation of this family firm innovates and implements tacit knowledge innovation in original equipment manufacturing (OEM) by adhering to the Japanese industrial standards.FindingsFindings show that the second generation utilized the company's extensive knowledge in plastic contract manufacturing in SKP for tacit knowledge conversion, triggers the birth of STS Tecnic Berhad, a subsidiary company that manufactures plastic parts for the industrial packaging and automotive industry. To simplify the process of managing the complex business, SKP opted to “prune the family tree” by dividing the business, involving fewer managers and restricting the number of family shareholders.Practical implicationsThis case study traces how Gan's family's tacit knowledge in plastic contract manufacturing have been acquired from the experience of contract manufacturing with the Japanese multinational corporations (MNCs) by further commercializing the tacit knowledge into different companies for different plants. SKP promotes tacit knowledge innovation in the learning organization, thus responding to the firm's sustainability.Originality/valueThis study demonstrates that knowledge transformation plays vital roles in product development and gaining competitive advantage. The success of this business is founded by the building of shared values, norms and technical understanding in plastic contract manufacturing among the Japanese MNCs in Malaysia.