globelix academy, lisbon 2004 interaction between tnc subsidiaries and the host country innovation...
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Globelix Academy, Lisbon 2004
Interaction between TNC subsidiaries and the Host Country Innovation System
The case of TNC subsidiaries located in Brazil
Dirk M. BoeheFederal University of Rio Grande do Sul,
School of ManagementPorto Alegre, Brazil
www.ea.ufrgs.br
Content• Research Interest• General objective• Some definitions• Context
Survey • Specific objectives • Research Framework• Methodological aspects
Exploratory Study• Specific objectives• Methodological aspects• Results
Part I
Part II
Part III
Research Interest & General Objective
• Research interest: to understand to what extend TNC subsidiaries located in latecomer countries may contribute to the host country innovation system.
• The general objective is to identify and discuss relationships between...
1) Different types of interaction between TNC subsidiaries and host country partner organisations in product development
X
2) Different types of roles which TNC subsidiaries may play in their TNC’s product development activities
Definitions• What means ‘interaction’?
– Cooperation– Outsourcing – Use of equipments at external partners– Consulting– Information Source
• What means ‘subsidiary role’ / ‘R&D role’?– Geographic scope:
Product development for local or global markets– Activity related scope:
Takes into account different activities of the product development process
Why is this important?Why ‘interaction’ / ‘links’ with local institutions?
1. Interaction cooperation learning (Lundvall)2. Local links might be important for diffusing knowledge to the host country
innovation system3. Thus, TNC subsidiaries may constitute an interface between the host country
innovation system and other countries’ innovation systems.
Why ‘subsidiary role’ or ‘R&D role’?1. Global roles tend to be related with high technological capabilities (Birkinshaw
& Hood, 1998).2. High (innovative) technological capabilities tend to be related to strong local
links (Lall, 1992; Bell & Pavitt, 1995; Figueiredo, 2002)3. Specific types of global roles tend to be related to strong local links (Anderson
et al, 2001; Frost et al, 2002) 4. Yesterday’s lecture: increasing outsourcing / offshoring also in R&D (Soete)
Hence, if we want to understand to what extent and why TNC subsidiaries’ R&D activities may interact with institutions of the host country innovation system, then we need to focus on its R&D role.
Exploratory Case Study Specific objectives
• Find out, what factors are (really) important for developing local links
• Develop a research model to be operationalised by a large scale survey (see part III)
Exploratory Case Study – Methodological Aspects
– More than 20 subsidiaries from several industries, but– focusing on a group of 6 subsidiaries located in Brazil
which have global R&D roles– open-ended interviews using interview guide with
questions about: • corporate environment (Role of R&D, relationships with other
R&D units and headquarters of the TNC) • Institutional environment (impacts of incentives, government
regulations, macro-economic factors on R&D activities) • local and global links with suppliers, clients, universities, etc.
– Conceptual framework
Framework
Global Science Links
Global Technology LinksLocal Technology
Links
Local Science Links
TNC Network
Universities and R&D Institutes
Local Suppliers
and Buyers
TNC Network, foreign Suppliers
and Buyers
Foreign R&D Unitas an “interface”
between innovation systems
Exploratory Case Study - Results
Factors which seem to be associated with different forms of interaction:
A. Technological and Institutional Factors– Tax incentives scheme (“Informatics Law”)– Maturity of technology– Industrial Sector– Globalisation of technological standards
B. TNC subsidiary– Decision-making autonomy – Relationships with other TNC subsidiaries / Headquarters – Employment of PhDs by R&D unit– Availability of resources (time and $) in order to build up cooperative links – Evolution of internal headcounts– Commitment to S&T policy of host country government
Exploratory Study - Results
C. Host country• Specificity of local demands (buyers)• Specificity of local supply• Availability of engineers and scientists• Perception of ‘cultural divide’ between University and TNC • Technological specialisation of the host country
- availability of specific know-how at universities; - availability of highly specialised R&D equipment at host country partner organisations (cost and scale reasons)- existence of a local value chain with high innovative capabilities
Exploratory Study - Results
Relationship between Role in R&D and Local Links• Contradiction to previous academic research
focused on industrialised countries:
Several TNC subsidiaries have no local cooperative links but a global role in R&D.
• In these cases, high performance in terms of R&D costs compared to sister subsidiaries in other countries seems to explain why the focal TNC subsidiary has a global R&D role.
Exploratory Study - Results
Proposed Typology of TNC subsidiaries with global R&D roles
Local Science Links
Strong Weak
Local S&T
Integration
Absence of Local
Integration
Local Science
Integration
Local Technology Integration
Strong
Local Technology Links
Weak
Survey Research
Objectives:1. Generalisation of case study findings2. Testing propositions of research model
a. Find out whether there is a relationship between the strength of cooperative links with host country partner institutions and the role of subsidiaries’ R&D units. b. Find out whether there is a relationship between the impact of relative costs and the strategic role of subsidiaries’ R&D units. (alternative hypothesis).
Web Survey Research – Methodological Aspects
• Unit of analysis: product development unit of strategic business units in subsidiaries of foreign owned TNCs located in Brazil
• Definition of the questionaire • Cooperative Links
– Contribution of link to learning / technological capabilities in R&D– Modification of product technology (Andersson & Forsgren, 2000)
• Outsourcing activities of the product development process• Role in Product Development• Headquarters’ mechanisms of project assignment in product
development• Relative costs
– Perceived competitiveness of R&D unit– Relative cost position of R&D unit compared to sister units abroad
• Procedure • Use of Likert scales (1-5) for most variables• Personal interviews: pre-tests• Final tests using web survey (phone, e-mail, www)
• Check for differences regarding• Industrial sectors (focus on 2 sectors) • Accumulated experience measured in years • Origin of capital• Size of product development unit
Web Survey Research – Methodological Aspects
Annex
TNC subsidiaries located in Brazil
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
1,00
Clients Suppliers MNC Universities
Categories of Cooperation Partners
% o
f in
no
va
tin
g a
nd
co
op
era
tin
g
su
bs
idia
rie
sThe context – Cooperative Links of
TNC subsidiaries in Brazil
Nutrition and Beverages Industry
Chemical Industry
Electronic Machines and Equipment Industry
Electronic and Communications Equipment Industry
Automobiles and Transport Equipment Industry
Data Source: IBGE, 2002
Case 1 (Siemens) - Local S&T Integration
Global Science Links
Global Technology LinksLocal Technology
Links
Local Science Links
TNC Network
Universities and R&D Institutes
Local Suppliers
and Buyers
TNC Network, foreign Suppliers
and Buyers
Foreign R&D Unit with global role
Case 2 (Ericsson) Local Science Integration
Local-Global Science Links
Global Technology
Links
No Local Technology
Links
TNCNetwork
and foreign R&D
institutes
Universities and R&D Institutes
Specialized Suppliers
and Buyers
Foreign R&D Unit with global
responsibilities
TNCNetwork of software
development centres
Case 3 (International Engines South America) - Local Technology Integration
Global Science
Links
Global Technology
Links
Local Technology
Links
No Local Science
Links
Foreign R&D institutes
(headquarters)
Universities and R&D Institutes
Specialized Suppliers
and Buyers
Foreign R&D Unit with global responsibilities
Foreign Suppliers
and Buyers
Case 4 (SpringerCarrier) – Absence of Local Integration
Global Science
Links
Global Technology
Links
No Local Technology
Links
No Local Science
Links
TNCNetwork
and foreign R&D
institutes
Universities and R&D Institutes
Specialized Suppliers
and Buyers
Foreign R&D Unit with global responsibilities
TNCNetwork
and foreign Suppliers
and Buyers
http://143.54.105.220:3610/dmbohe/pesquisa_ea_ufrgs/questionario.htm
SBU-code of subsidiary: 185C7
Survey Research – Preliminary results
Survey Research – Preliminary results
• n= 41• Preliminary analyses: simple regressions; frequencies• Cooperative Links with university / research institutes are least
relevant; cooperative links with buyers most relevant
• Product Development for global markets & Cooperative Links with local partnersr = 0,37; r2=0,14; sig < 0,05
• Product Development for global markets & Outsourcing Links with local partnersr = 0,30; r2=0,08 ; sig= 0,06
• Special Case: Local Outsourcing of Particular Product Development Activities & Ordered by other MNC unitsr=0,40; r2=0,16; sig < 0,01