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Dirk M. Boehe Federal University of Rio Grande do Sul, School of Management Porto Alegre, Brazil ea.ufrgs.br - PowerPoint PPT Presentation


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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. Boehe Federal University of Rio Grande do Sul, School of Management Porto Alegre, Brazil www.ea.ufrgs.br Survey

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Globelix Academy, Lisbon 2004Interaction between TNC subsidiaries and the Host Country Innovation SystemThe case of TNC subsidiaries located in Brazil

Dirk M. Boehe

Federal University of Rio Grande do Sul,

School of Management

Porto Alegre, Brazil

www.ea.ufrgs.br


Content l.jpg

  • Survey

  • Specific objectives

  • Research Framework

  • Methodological aspects

Content

  • Research Interest

  • General objective

  • Some definitions

  • Context

Part I

  • Exploratory Study

  • Specific objectives

  • Methodological aspects

  • Results

Part II

Part III


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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 X2) Different types of roles which TNC subsidiaries may play in their TNC’s product development activities


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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


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Why is this important?

Why ‘interaction’ / ‘links’ with local institutions?

  • Interaction  cooperation  learning (Lundvall)

  • Local links might be important for diffusing knowledge to the host country innovation system

  • 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’?

  • Global roles tend to be related with high technological capabilities (Birkinshaw & Hood, 1998).

  • High (innovative) technological capabilities tend to be related to strong local links (Lall, 1992; Bell & Pavitt, 1995; Figueiredo, 2002)

  • Specific types of global roles tend to be related to strong local links (Anderson et al, 2001; Frost et al, 2002)

  • 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.


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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)


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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


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Framework

Universities and R&D Institutes

TNC Network

Local Science Links

Global Science Links

Foreign R&D Unit

as an “interface” between innovation systems

Global

Technology Links

Local Technology Links

Local Suppliers and Buyers

TNC Network, foreign Suppliers and Buyers


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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

  • 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 l.jpg
    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


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    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 costscompared to sister subsidiaries in other countries seems to explain why the focal TNC subsidiary has a global R&D role.


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    Exploratory Study - Results

    Proposed Typology of TNC subsidiaries with global R&D roles

    Local Science Links

    Strong Weak

    • Strong

  • Local Technology Links

    • Weak

  • Local

    S&T

    Integration

    Local Technology Integration

    Absence of Local Integration

    Local Science Integration


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    Survey Research

    Objectives:

    1. Generalisation of case study findings

    2. 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).


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    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


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    Web Survey Research – Methodological Aspects

    • 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



  • The context cooperative links of tnc subsidiaries in brazil l.jpg

    TNC subsidiaries located in Brazil

    1,00

    0,90

    0,80

    0,70

    % of innovating and cooperating

    subsidiaries

    0,60

    0,50

    0,40

    0,30

    0,20

    0,10

    0,00

    Clients

    Suppliers

    MNC

    Universities

    Categories of Cooperation Partners

    The 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 l.jpg
    Case 1 (Siemens) - Local S&T Integration

    Universities and R&D Institutes

    TNC Network

    Local Science Links

    Global Science Links

    Foreign R&D Unit with global role

    Global

    Technology Links

    Local Technology Links

    Local Suppliers and Buyers

    TNC Network, foreign Suppliers and Buyers


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    Case 2 (Ericsson) Local Science Integration

    Local-Global Science Links

    TNC

    Network and foreign R&D institutes

    Universities and R&D Institutes

    Foreign R&D Unit with global responsibilities

    No Local Technology Links

    TNC

    Network of software development centres

    Global Technology Links

    Specialized Suppliers and Buyers


    Case 3 international engines south america local technology integration l.jpg
    Case 3 (International Engines South America) - Local Technology Integration

    Universities and R&D Institutes

    Foreign R&D institutes (headquarters)

    Global Science Links

    No Local Science Links

    Foreign R&D Unit with global responsibilities

    Local Technology Links

    Global Technology Links

    Specialized Suppliers and Buyers

    Foreign Suppliers and Buyers


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    Case 4 (SpringerCarrier) – Absence of Local Integration

    TNC

    Network and foreign R&D institutes

    Universities and R&D Institutes

    Global Science Links

    No Local Science Links

    Foreign R&D Unit with global responsibilities

    No Local Technology Links

    TNC

    Network and foreign Suppliers and Buyers

    Global Technology Links

    Specialized Suppliers and Buyers


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    Survey Research – Preliminary results

    http://143.54.105.220:3610/dmbohe/pesquisa_ea_ufrgs/questionario.htm

    SBU-code of subsidiary: 185C7


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    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


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