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Accessing vs sourcing knowledge: A comparative study of R&D internationalization between emerging and advanced economy firms

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Abstract

Research and development (R&D) internationalization is on the rise for advanced economy multinationals (AMNEs) as well as emerging economy multinationals (EMNEs). We study EMNE R&D internationalization by comparing it to that by AMNEs in the context of an emerging, knowledge-intensive industry. We find that these two are fundamentally different processes. While the internationalization of AMNEs’ R&D activities can largely be explained in terms of the twin strategies of competence exploitation and competence creation, EMNE R&D internationalization is rooted in the firms’ overall catch up strategy to get on par with industry leaders. An in-depth comparison of knowledge flows reveals that within AMNEs, headquarters often serves the primary source of knowledge for R&D subsidiaries. In contrast, within EMNEs, headquarters accesses knowledge from R&D subsidiaries in advanced economies for innovation catch-up. Within this dichotomy, the innovative capabilities of EMNE headquarters develop more slowly and with greater difficulty than those of AMNE subsidiaries.

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Notes

  1. Following Hoskisson, Eden, Lau, and Wright (2000: 249), emerging economies are characterized as “low-income, rapid growth countries using economic liberalization as their primary engine of growth.” Advanced economies, in contrast, are characterized by their high level of gross domestic product per capita and degree of industrialization. See also International Monetary Fund (2014) for similar definitions and lists of emerging and advanced economies.

  2. Knowledge management literature uses the term “sourcing” for both when source initiates the flow and when the target initiates the flow. For example, Almeida (1996) uses sourcing for both learning (target initiated) as well as contribution (source initiated) by foreign MNEs. Song and Shin (2008) use it to indicate knowledge transfer from host country initiated by MNE (the target). The latter use of the term is similar to the component sourcing literature (Murray & Kotabe, 1999). However, we think that these studies do not need to identify and differentiate between the flow’s initiator. Our study clarifies this ambiguity at the outset.

  3. This type of bargaining power exercised by acquisition candidates over EMNEs is not unusual. For example, a similar situation occurred in the acquisition of Volvo Cars by the Chinese car manufacturer Geely Automobile (see Conklin & Cadieux, 2010), where Volvo post-acquisition managed, among other things, to maintain its own management team, board of directors, and headquarters in Gothenburg, Sweden.

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Correspondence to Ram Mudambi.

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Accepted by Mary Yoko Brannen, Deputy Editor, 17 June 2014. This article has been with the authors for two revisions.

APPENDIX

APPENDIX

Semi-Structured Interview Guide

Research synopsis – We study firm strategies in emerging industries such as the rapidly growing wind industry. We have found that these industries are marked by quickly changing technology regime, strong firm focus on R&D, several mergers and acquisitions, and fast catch-up by follower firms. We also observe other interesting industry trends such as internationalization of R&D to tap into geographically scattered knowledge sources, collaborative R&D with firms in other industries and universities. With this interview, we hope to get more insights into the wind industry.

Innovation geography of the industry:

  • How is the knowledge of wind technologies dispersed globally? In other words, where are the knowledge clusters with respect to wind industry?

  • How are the acquisition or collaboration targets for R&D identified in terms of

    • ° Geography – Locating in a cluster to gain from spillovers

    • ° Technology – Targeting specific technologies over others

    • ° People – Tapping into key scientists/engineers

  • To what extent does the company collaborate globally with other wind firms or those in other industries or with universities?

Technological discussion:

  • Where do you see the industry going, in terms of onshore vs offshore?

    • ° What trends do you see in the offshore turbine market in terms of demand, turbine design, size, and installation?

    • ° How different are the offshore turbines from the onshore ones? Would you say that the offshore trend has resulted in major – almost a discontinuous – technological change in the industry?

    • ° What according to you have been some of the major technological innovations in the industry?

    • ° What according to you are the core components of a turbine? What might be the peripheral components of the turbine?

      • – Has the R&D focus of industry and the company shifted over the years from core components to peripheral turbine components?

Company’s R&D:

  • How is the company’s R&D organized – spilt on the basis of product functionality or geographically scattered?

  • To what extent, according to you, is the company’s R&D internationalized?

    • ° How do your company’s headquarters operations support its foreign activities?

    • ° How does the collaboration with its foreign subsidiaries proceed?

    • ° How is the talent pool within the company mobilized across subsidiaries?

    • ° How is the talent pool outside the company accessed?

  • Please elaborate the company’s knowledge acquisition strategy.

    • ° Please elaborate the process involved in knowledge internalization and knowledge transfer within the company and its subsidiaries.

    • ° To what extent is the headquarters involved in designing subsidiary-level R&D strategies?

  • How has the company’s R&D strategy changed over the years?

Questions exploring Suzlon–REpower relationship:

  • How, according to you, has the association benefitted the two companies?

    • ° Please comment on knowledge transfer (both higher end R&D and lower end manufacturing knowledge) involved in this association.

Additional questions asked to industry experts:

  • Please elaborate your understanding of the competitive landscape of this industry.

    • ° How do you perceive Vestas and Suzlon on this landscape?

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Awate, S., Larsen, M. & Mudambi, R. Accessing vs sourcing knowledge: A comparative study of R&D internationalization between emerging and advanced economy firms. J Int Bus Stud 46, 63–86 (2015). https://doi.org/10.1057/jibs.2014.46

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