Global Management 7
- 1. Global Management: knowledge, technology and innovation Main topics Understand the importance of global knowledge Distinguish between technology and innovation Outline the main considerations in the development and transfer of technology across borders Explore innovation in MNEs and smaller companies
- 2. Understand the importance of global knowledge-1 “ Knowledge is a fluid mix of framed experience, values, contextual information and expert insight that provides a framework ofr evaluating and incorporating new experiences and information.” - Davenport and Prusack Knowledge is more than data or information The most useful knowledge is often the most difficult to understand, codify and replicate: it is this knowledge that delivers sustainable competitive advantage Global issue : how to collect and share such knowledge on a global scale - companies now beginning to use intranet systems, but still difficult See Lynch Ch 7
- 3. Understand the importance of global knowledge-2 Tacit knowledge : difficult to specify, fuzzy, perhaps complex and often unrecorded Explicit knowledge : carefully analysed, often defined precisely, often written down Both types can provide sustainable competitive advantage Tacit because it is more difficult for competitors to copy what remains only partially known Explicit because it may be exclusive to the organisation, such as a patent. Global issue : tacit knowledge particularly difficult to communicate globally: MNEs have set up internal company web structures (intra-nets) to attempt this task
- 4. Understand the importance of global knowledge-3 Knowledge creation: the development and circulation of new knowledge May generate new strategic opportunities for the organisation The process is unclear but has at least three elements: Organisational learning mechanisms Knowledge creation and acquisition process Knowledge transfer process Global issue : knowledge creation involves management teams and styles alongside the sharing of knowledge but difficult globally Implies that, on a global basis, need more than a company intranet for success - regular face-to-face contact such as project meetings, innovation fairs and other international joint activities. See Lynch Ch 7
- 5. Distinguish between technology and innovation Technology : “Technology is a perishable resource comprising knowledge, skills and the means for using and controlling factors of production for the purpose of producing, delivering to users, and maintaining goods and service, for which there is an economic and/or social demand.” Robock and Simmonds Innovation : “The generation and exploitation of new ideas. The process moves products and services, human and capital resources, markets and production processes beyond their current boundaries and capabilities.” Lynch Innovation may involve technology but is a broader concept that will encompass every part of the organisation See Lynch Ch 7
- 6. Development and transfer of technology-1 MNEs and smaller companies need to scan their technology skills base and classify the results into three areas: Base : common to many companies Core : different, possibly unique. Will include patents and special skills possessed by company Peripheral : not mainstream to the organisation Core areas are most likely to deliver sustainable competitive advantage and therefore most likely to be the basis of international skills transfer Core areas need to be explored for: speed of imitation scope for global exploitation Too often the costs of technology transfer and adaptation are underestimated: Teece 1976
- 7. Development and transfer of technology-2 Modes of technology transfer may include: Company’s Value chain FDI Turnkey project: all-inclusive deal Sale of goods Transfer of personnel Sale of R&D Training of suppliers and other groups Source: developed from Dunning
- 8. Development and transfer of technology-3 Main strategic issues for all companies include: Foreign technology acquisitions : some companies have made important advances through buying or developing jointly technology from companies with whom they do not directly compete Maintaining the technology advantage : with rapid advances, particularly in electronics, there is some risk that MNEs will be overtaken by competitors Locating R&D facilities outside home country : may be important where other countries have technology edge or subsidiaries have come to champion product developments for MNE. But rarely done by MNEs on any scale: Dunning p 301 Pricing of technology transfer : difficult because of the many possible methods of payment Information technology and telecommunications : if knowledge has become important for strategic development, then it follows that this area is vital for sustainable competitive advantage Attitudes of host governments: perhaps government will offer tax incentive
- 9. Development and transfer of technology-4 Attitudes and strategies of host foreign governments can be important in influencing MNE and small company strategy. Country strategies include: Limit on certain product sectors to domestic ownership Limit on the amount of inward investment Specify performance requirements for companies Restrictive clauses against companies on foreign technology transfer Influence terms and conditions of technology transfer Encourage home technology development Encourage cross-border technology collaboration Buy technology on open market Can prove problem for companies attempting to enter many countries, e.g. India, China, Brazil, Iran Source: developed from Dunning
- 10. Innovation in MNEs and smaller companies-1 Two major processes: prescriptive and emergent Two major drivers for innovation: Innovation Technology push Market pull The development of new initiatives in technology The analysis of customer needs MNEs have particular problems because of size and geographical distance in coping with both processes and drivers – smaller companies easier Source: Lynch Chapter 7
- 11. Innovation in MNEs and smaller companies-2 Innovation is related to the concept of Corporate Entrepreneurship in large and smaller companies: Stopford and Baden-Fuller 1994 Five common attributes: Pro-activeness aspirations beyond current capability team-orientation capability to resolve dilemmas learning capability Developments in these areas governed by organisational culture, leadership, age, size, technologies, products, competitors and the balance of power within the company: usually slow to change
- 12. Innovation in MNEs and smaller companies-3 Innovation is not confined to MNEs but may be a particularly important aspect of MNE strategy: e.g. Bartlett and Ghoshal Chapter 7 Traditionally, two innovation processes: central : new opportunity sensed in home country local : national subsidiaries use own resources and capabilities to respond to local needs Suggest MNEs need to consider two additional areas: locally leveraged : use world-wide resources but focus located within specific country subsidiary globally linked : several subsidiaries or regional development of new innovation Matsushita (Japan) and Philips (Netherlands) were identified as being particularly good at central and local innovation respectively
- 13. Innovation in MNEs and smaller companies-4 Some guidelines in the search for innovation: Question the present business strategies and market definitions Consider carefully the purpose served by current products Explore external timing and market opportunities Seek out competitors’ weaknesses Deliver new and better value for money Search far and wide Seek to challenge conventional wisdom Source: Lynch Ch 7
- 14. Innovation in MNEs and smaller companies-5 For all companies, useful to distinguish between process* and product developments: Dunning Chapter 11 Process developments : MNEs are able to select production and organisational techniques to take advantage of size and scope economies Not only hard technologies, e.g. new plant, but also soft processes, e.g. purchasing, inventory control, work organisation, budgetary control Two implications: MNEs may undertake some functions differently from current practice in host countries MNEs may prefer to standardise their processes, even if these are different from local host countries and against local wishes Product developments: main considerations covered in earlier sessions *Note: Dunning uses the word ‘process’ in a different sense from its use in the various editions of Lynch’s Corporate Strategy and Strategic Management
- 15. Innovation in MNEs and smaller companies-6 Forces guiding the location of R&D in MNEs Centralisation forces Need for critical mass Presence of supporting industries Need to be adjacent to downstream operations Availability of resources, e.g. skills, people Accumulated experience of R&D know-how and organisation of innovating, generating activities Avoidance of cross-border communications issues Decentralising forces Need to cater for local market needs Differences in local materials, climate or other conditions Need to be near cluster of local R&D cutting-edge skills Scan and monitor R&D activities of local firms Satisfy host government pressures Raise quality or other strategy in subsidiaries Source: Dunning (1993) p 310