Evolving subsidiary roles and regional economic integration in Europe

The focus of this paper is on the impact of regional economic integration on chaging roles and strategies of overseas subsidiaries. The literature has acknowledged the positive impact of regional economic integration on the investment attractiveness of member states perticipating a regional bloc and hence new inflows of foreign direct investment. Yet, the interplay between regional economic integration and evolution of already established foreign subsidiaries remains underresearched, as these two phenomena are often studied in isolation from each other. The paper aims to examine this link in the context of new EU member states, using a proprietary data base. We find evolution of subsidiary roles, towards more advanced ones. Further, we analyse drivers of such evolution and their importance. The paper provides managerial and policy implications

Determinants of alliance portfolio complexity and its effect on innovative performance of companies

Alliance formation is often described as a mechanism used by firms to increase voluntary knowledge transfers. Access to external knowledge has been increasingly recognized as a main source of a firm's innovativeness. In this paper we examine decisions to form alliance portfolios of foreign and domestic partners by three groups of firms: innovators (firms that are successful in introducing new products to the market), imitators (firms that are successful at introducing new products, which are not new to the market) and product non-innovators. We consider an alliance portfolio that includes different partnership types (competitor, customer, supplier, university/research center). We develop a measure of portfolio complexity which we define as the number and diversity of elements of the alliance portfolio with which a firm must interact. We then estimate models that explain portfolio complexity and its impact on firm's innovative performance. Using panel data on more than 1800 firms in the Netherlands we find that foremost innovators have a strong propensity to form portfolios consisting of international alliances. Being an innovator or imitator also increases the propensity to form a portfolio of domestic alliances, relative to non-innovators; but this propensity is not stronger for innovators. Innovators appear to derive benefit from both intensive (exploitative) and broad (explorative) use of external information sources. The former sourcing is more important for innovators, while the latter for imitators. Finally, alliance complexity is found to have an inverse U-shape relationship to innovative performance

Cohesive subgroup formation : enabling and constraining effects of social capital in strategic technology alliance networks

In this paper we will examine the role of embeddedness and social capital in the process of cohesive subgroup formation in strategic technology alliance networks. More in particular, we will investigate the social mechanisms that enable and enforce cohesive subgroup formation. We will argue that the enabling effects of social capital in the beginning of the group formation process can turn into paralyzing effects as the block formation process progresses. Through the formation of subsequent ties, firms in social systems tend to rely heavily on their direct and indirect contacts in forming new partnerships. This so-called local search enables firms to create trustworthy and preferential relations. Over time, those relations tend to develop into strong ties, as firms rely on the same partners by replicating their existing ties. This enabling effect of social capital at the group level can, however, turn into a paralyzing effect as actors become locked-in, as they only rely on partners in their closed social system. Then searching for or switching to partners outside of the cohesive subgroup is hard to rationalize, in particular when trustworthy partners are already available in this system. The firms in cohesive subgroups tend to become more similar over time as a result of contagion and replication of their existing ties. This so-called phenomenon of overembeddedness induced by the paralyzing effects of social capital at the group level can lead to decreasing opportunities for learning and innovation for blockmembers involved

Brokerage in SME networks

This study focuses on SME networks of design and high-tech companies in Southeast Netherlands. By highlighting the personal networks of members across design and high-tech industries, the study attempts to identify the main brokers in this dynamic environment. In addition, we investigate whether specific characteristics are associated with these brokers. The main contribution of the paper lies in the fact that, in contrast to most other work, it is of a quantitative nature and focuses on brokers identified in an actual network. Studying the phenomenon of brokerage provides us with clear insights into the concept of brokerage regarding SME networks in different fields. In particular we highlight how third parties contribute to the transfer and development of knowledge. Empirical results show, among others, that the most influential brokers are found in the non-profit and science sector and have a long track record in their branch

Understanding novelty creation in exploration networks - structural and relational embeddedness jointly considered

In exploration networks the key-organisational question is not how to organise a division of labour but instead how to create novelty. The aim of this paper is to develop an understanding of how such novelty in exploration networks is created. Based on an empirical analysis of the multimedia and biotechnology industries in the Netherlands, this paper shows that exploration networks face a trade-off between diversity and selection. Moreover, the findings indicate that depending on the type of exploration task, exploration networks need to make a combination of density and tie strength in such a way that diversity and selection are aligned. The paper concludes, among others, that the views of Burt, Coleman and Granovetter should not be seen as contradictory, but rather as proponents of complementary views

Knowledge base determinants of technology sourcing in clean development mechanism projects

The Clean Development Mechanism (CDM) is one of the three greenhouse gas emission reduction and trading instruments of the Kyoto Protocol (KP). The CDM allows governments and business entities from developed countries to offset their emissions liabilities by reducing or avoiding emissions in developing countries, where it is often cheaper to do so. Our results reveal that the majority of the CDM projects utilise local sources of technology. We attempt to explain technology sourcing patterns in CDM projects through the use of knowledge based determinants. Our empirical analysis indicates that in countries with a stronger knowledge base in climate friendly technologies, CDM project implementers tend to use local, as well as a combination of local and foreign technologies, more than foreign technologies

Chinese firms entering Europe : internationalization through acquisitions and strategic alliances

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External technology sourcing through alliances or acquisitions : an analysis of the Application-Specific Integrated Circuits (ASIC) industry

In today's turbulent business environment innovation is the result of the interplay between two distinct but related factors: endogenous R&D efforts and (quasi) external acquisition of technology and know-how. Given the increasing importance of innovation, it is vital to understand more about the alternative mechanism—such as alliances and acquisitions—that can be used to enhance the innovative performance of companies. Most of the literature has dealt with these alternatives as isolated issues. Companies, however, are constantly challenged to choose between acquisitions and strategic alliances, given the limited resources that can be spent on research and development. This paper contributes to the literature because it focuses on the choice between innovation-related alliances and acquisitions. We focus on the question of how the trade-off between strategic alliances and acquisitions is influenced by previous direct and indirect ties between firms in an industry network of interfirm alliances. We formulate hypotheses pertaining to the number of direct ties between two companies, their proximity in the overall alliance network, and their centrality in that network. In so doing, we distinguish between ties that connect firms from the same and from different industry segments, and those that connect firms from the same or from different world regions. These hypotheses are tested on a sample of strategic alliances and acquisitions in the application-specific integrated circuits (ASIC) industry. The findings show that a series of strategic alliances between two partners increases the probability that one will ultimately acquire the other. Whereas previous direct contacts tend to lead to an acquisition, this is not true of previous indirect contacts, which increase the probability that a link between the companies, once it is forged, takes the form of a strategic alliance. In the case of acquisitions, firms that are more centrally located in the network of interfirm alliances tend to be acquirers, and firms with a less central position tend to become acquired. These findings underscore the importance of taking previously formed interfirm linkages into account when explaining the choice between strategic alliances and acquisitions, as these existing links influence the transaction costs associated with both alternatives

Chinese firms entering Europe : internationalization through acquistitions and strategic alliances

Purpose – The purpose of this study is to examine specific use of strategic alliances and acquisitions for Chinese firms to catch-up technologically and to enhance their internationalization competence. Design/methodology/approach – The paper offers a conceptual analysis of internationalization through either FDI or strategic alliances. This is a novel approach, as most of the extant literature tends to view internationalization solely through the prism of FDI. The empirical evidence presented in the paper is twofold. First, it analyses empirical data on strategic alliances and acquisitions retrieved from Thomson SDC database, a premium business directory. Second, it also approaches the topic qualitatively, by offering a case study of Chery Automobile Co. Ltd, a Chinese company that has relied heavily on strategic alliances in its internationalization strategy. Findings – First, the study finds statistical evidence of a rising trend of formation of outward strategic alliances by Chinese firms. Second, the authors demonstrate the specific benefit of strategic alliances for Chinese firms to technically catch up and enhance internationalization competence. It is found that strategic alliances give Chinese firms opportunities to learn from front-runners in terms of gaining technological capabilities, and there are advantages in tagging developing and advanced markets. The main findings suggest that the internationalization of Chinese firms is in a process in which they gradually integrate technology and marketing/logistics alliances. This approach allows for sufficient time to learn and absorb new skills and technology. Moreover, Chery's case indicates that a series of successful international strategic alliances could also generate tremendous bargaining power for Chinese firms when undertaking subsequent international activities. Originality/value – This paper contributes to the small but growing body of literature on the internationalization of Chinese companies, their technological catching-up activities. Unlike previous studies that mainly focus on state-owned Chinese firms' internationalisation through outward FDI (such as M&A), the paper particularly contributes to the exploration of strategic alliances' effectiveness for private and latecomer firms' internationalization. Empirically, the data analysis and case study reflects the benefits for Chinese firms to enter into strategic alliances with European firms in order to enter into European market and to acquire technological capabilities