Joint ventures or independence? Alternative ways of R&D capability building at emerging economy firms

Abstract

Studies of the rapid economic development in East Asia suggest several factors which influence how industries inlatecomer economies can utilize external knowledge to upgrade from low-end manufacturing to full-blown productdevelopment capabilities. A main aspect in this process is the learning and capability development at the level of firms.However, there are few studies of the innovation journey of specific latecomer firms and the challenges, managerialefforts and uncertainties involved in accessing and learning from international knowledge centers. Specifically, thevarious ways to acquire knowledge for innovation suggested in the literature need to be examined.This paper analyzes the strategic options confronting latecomer firms which aspire to succeed in global competition.Based on in-depth studies in two Turkish industries, white goods and automotive, the paper details the combination ofefforts and investments required to move up the technology ladder from license-based domestic businesses tointernationally competitive capabilities. Two principal ways of acquiring innovation proficiency are compared:independent capability building versus international joint ventures. The paper shows the power of the former, but alsoindicates the difficulty of fostering brand value commensurate with technological achievements. Further the analysisreveals the reasons for and the limits of the alternative way, joint venture agreements, where MNEs tend to retainexclusive control of core technologies. The discussion section suggests that in sectors where independent capabilitybuilding is implausible; it might be possible to position local firms as global niche centers of excellence withinmultinational configurations, if private and government efforts are skilfully coordinated