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The purpose of this paper is to examine knowledge processes in an international IT outsourcing project between two countries when knowledge is transferred from one country to the other due to business situations. A theoretical model is presented regarding knowledge processes in international projects which explains emergence of international common understanding as one of the solutions for knowledge-related challenges in international projects.

The empirical study was conducted at the headquarters of a chemical company in Japan and its subsidiary in Singapore. The study employed a qualitative analysis method. Interviews were conducted in these companies and the results were analyzed according to grounded theory.

The authors propose ARC Model of Knowledge Management in International IT Outsourcing Projects, which is a new theoretical model of project knowledge management in international settings, with a view of localization into knowledge processes. International common understanding will emerge from an understanding of thinking of each locale that brings a project to a successful conclusion.

This research might be subject to limitations regarding the data and results. Data were collected from particular companies, thus reducing the ability to generalize the results. Further research is required to verify the model with an additional empirical study.

Project managers and other managers utilize the theoretical model as a base theory for the implementation of high quality localization that is managed by the locals themselves with common knowledge.

The study proposes the theoretical model with the empirical analysis of the international project, which synthesizes project knowledge management and cross-cultural knowledge management in a novel way and expands the role of knowledge management.