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 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.