Impacts of incoming knowledge on product innovation: technology transfer in auto-related industries in developing economies

Abstract

This paper studies two questions on the role of networked sources of knowledge influential to product innovation. First, what is the extent of technology transferred through vertical linkages and public–private alliances, including university–industry linkages, in the phase of product improvement and development? Second, what types of knowledge are transferred from external technology sources? In a sample of ASEAN firms' self-reported partner data restricted to automotive-related industries, we found that direct linkages with multinational corporation (MNC) customers in foreign countries resulted in a lower propensity of product innovation. Indeed, incoming knowledge from MNC customers relating to the management of quality of existing products especially explained the lower propensity of product innovation. We also found that production linkages with MNC suppliers in foreign countries resulted in a higher propensity of product innovation. Incoming knowledge from MNC suppliers about quality controls explained a lower propensity of product innovation. These findings empirically indicate that networked sources of knowledge have a significant influence trade-off between maintaining existing operations and developing new products. The impacts of public–private alliances on innovation are sizable compared with the impacts of vertical linkages. Public–private alliances and vertical linkages offer knowledge with different effects on product innovation.

Keywords:

• innovation
• technology transfer
• incoming knowledge
• supply chains
• alliance

Acknowledgements

The authors are especially grateful for the numerous inputs from, and discussions with, Markus Berliant, Christian Fons-Rosen, Mai Fujita, Masahisa Fujita, Patarapong Intarakumnerd, Fukunari Kimura, Satoru Kumagai, Jacques Mairesse, Yukichi Mano, Pierre Mohnen, Dionisius Ardiyanto Narjoko, Keijiro Otsuka, Sothea Oum, Rajah Rasiah, Yuri Sato, Hiro Tatsumoto, Masatsugu Tsuji, Tsuyoshi Tsuru, So Umezaki, Mariko Watanabe, and Tatsufumi Yamagata in the early stages of this project. It could not have been carried out without cooperation from the Center for Strategic and International Studies (CSIS) of Indonesia, the Philippine Institute for Development Studies (PIDS), National Statistical Office (NSO), the Sirindhorn International Institute of Technology (SIIT), Thammasat University of Thailand, and the Institute for Industry Policy and Strategy (IPSI), Ministry of Industry and Trade of Vietnam. We are responsible for any errors that may remain.

Notes

In the setting of the agricultural household model in development economics, Conley and Udry (2010) establish a farmer's self-reported informational neighbour dataset to detect direct and indirect information flows among farmers.

The literature on global value chains (GVCs) has argued that in the context of upstream and downstream relationships in developing economies, downstream MNCs, or so called ‘lead firms’, are likely to organize global supply chains and control knowledge spillovers from them to local suppliers (see Intarakumnerd and Fujita 2008).

An exceptional case is found in Hortacsu and Syverson (2008) which infers the existence of managerial knowledge transfer across two plants based on a shipment database.

See Salter and Martin (2001), Monjon and Waelbroeck (2003), Laursen and Salter (2004), Bekkers and Freitas (2008), Kroll and Liefner (2008), and Eom and Lee (2010).

Additional information

Notes on contributors

Tomohiro Machikita

Tomohiro Machikita is now also affiliated with Asia Research Centre, Copenhagen Business School (CBS), Porcelaenshaven 24B, DK-2000, Frederiksberg, Denmark.

Yasushi Ueki

Yasushi Ueki is now affiliated with the Institute of Developing Economies, Inter-disciplinary Studies Center, Japan External Trade Organization (IDE-JETRO), Mihama Wakaba Chiba, Japan.