Strategic & managerial issues behind technological diversification

Transcription

1 Strategic & managerial issues behind technological diversification Felicia Fai DIMETIC, April 2011 Fai, DIMETIC, April

2 Introduction Earlier, considered notion of core competences, & applied concept to technology. The industry to which firms belong are strongly identifiable by the technological competences the firm holds. These profiles exist for long periods of time (assuming institutional stability). But also experience technological diversification which extend the trajectory in a competenceenhancing manner. Fai, DIMETIC, April

3 Granstrand et al (1997). Question notion of core technological competences. Idea of Core Products is not paralleled in Technologies (next slide) Find that firms are active in many technologies, but that not all technologies are equal inside the firm Fai, DIMETIC, April

4 Fai, DIMETIC, April

5 Classification for corporate technological profiles (Granstrand et al, 1997) PS3% =1/34 tech fields RTA>2.0 = high, <2.0=low Fai, DIMETIC, April

6 Measuring (corporate) technological competence Revealed technological advantage (RTA) The intra-industry RTA relates a firm s technological advantage in a spectrum of technological activity to that of other firms in the same industry. RTA index is defined as: RTA ij = (P ij / j P ij )/( i P ij / ij P ij ) Where: i = technology, j = firm, P= no. of patents

7 It shows the firm s share of US patents granted to all companies in the same industrial group, in a technology, relative to the firm s overall share of all US patents assigned to all firms in the industry in question. The index varies around unity. RTA>=1 is sign of relative advantage.

8 inter-sectoral differences in the propensity to patent are normalised in the numerator of the RTA index, and inter-firm differences normalised in the denominator. Possibility of intra-firm and intra-sectoral differences in the propensity to patent remain (likely that the respective variances of these two factors are systematically lower than the inter-firm and inter-sectoral differences). Can apply also RTA measure to regions & nations

9 Classification for corporate technological profiles (Granstrand et al, 1997) PS3% =1/34 tech fields RTA>2.0 = high, <2.0=low Fai, DIMETIC, April

10 Fai, DIMETIC, April

11 Granstrand et al, present 3 companies: Bayer (chemical) 90% of tech. Resources concentrated in 9/34 fields, 76% in distinctive fields Hitachi (electrical) 90% in 14 fields, 40% in distinctive fields, 24% in background Ford (automotive) 90% in 16 fields, 19% in distinctive, 43% in background Fai, DIMETIC, April

12 Technological Competences are Distributed, not Core Across large & increasing no. of fields Across the organisation corporate R&D, subsidiary R&D, production engineering etc. Across strategic objectives of corporation (base, emerging, pacing, generic etc) Fai, DIMETIC, April

13 Distributed technological diversity: Facilitates corporate growth Drives up R&D investment Enables diversification (through technological relatedness) into new businesses Facilitates new organisational linkages to be developed Threat of competence destroying discontinuity potentially mitigated by firm à managerial and organisational challenges Fai, DIMETIC, April

14 Technological diversity implies: Complexity of products (numerous, technological differentiated components) Complexity of process (batchà massà leanà flexible) Complexity of knowledge Limited resources to deal with complexity How to cope? Managerial issue. Fai, DIMETIC, April

15 Managerial Issues Behind Technological Diversification Transaction cost approaches consider boundary of the firm in terms of the physical, not the cognitive issues à make/buy choice Technological knowledge is not product, nor is it the physical act of production (obviously input into & output of both) Can separate knowledge production from knowledge use in production for components & end products Fai, DIMETIC, April

16 Brusoni et al, 2001 Recognise single organisation Firm, does not need to do it all. Can use networks of production involving external partners. Production boundaries can be distinct, whilst knowledge boundaries can overlap. Used aircraft engine case-study to generate typology of organisational systems based on the interdependency of specialised knowledge held within, and integration between, organizational subunits. Fai, DIMETIC, April

17 Personal computers Automotives Hard Disk Drives Mobile phone systems Fai, DIMETIC, April

18 Typologies Market- arms length contracts Systems integration contract (licensing), JV s, SA s, systems integrator firms Vertical integration internalised departments/divisions/functions Overtime, as the importance of certain technologies & its interdependence with others evolves, firms can shift between quadrants Fai, DIMETIC, April

19 Experience with networks/ loose coupling structures à consideration of their use beyond manufacture of specific products Networks useful for search activity in technological space for future opportunities Fai, DIMETIC, April

20 Laursen & Salter (2006) Internal search tends to be within existing technological trajectory Open innovation external networks help achieve and sustain innovation beyond that attainable from internal search, especially in areas of high opportunity (new routines required) Is all external search equally valuable? i.e. impact on firm performance/growth Analysed subset of 2707 manufacturing firms in UK innovation survey Two concepts in external search: BREADTH and DEPTH Fai, DIMETIC, April

21 Breadth Comes from exploring different search channels e.g. suppliers, users, universities = number & type of exchanges firm has with broader institutional environment May require different methods of engagement e.g. corporate sponsorship of PhD s on university based project versus, joint product development with key suppliers. Greater search breadth could impact on firm s innovative performance, but is there an optimal degree of breadth of search? Can firms over-search? Fai, DIMETIC, April

22 Over-search may: => information overload, too much choice (limited cognitive ability in firm) Lead to ideas being untimely e.g. before its time, to be exploited appropriately/ fully Mean no ideas are fully considered/ taken seriously by management Breath-innovative performance relationship may be inverted U-shaped Fai, DIMETIC, April

23 Depth Extent to which firms draw deeply from the external search channels Internally, firms can use same knowledge base repeatedly to different products product diversity built on technological depth in particular fields of activity Similarly firms may find some external sources/ channels more useful than others and so draw upon their expertise repeatedly à depth in the external search Depth of relationship with external agent could à more innovation Fai, DIMETIC, April

24 In too-deep? Over reliance on deep relationships with numerous external agents can lower innovation, again, because of limited managerial attention Depth-innovative performance relationship may be inverted U-shaped Fai, DIMETIC, April

25 Laursen & Salter also hypothesise Radical innovations draw less upon search breadth Radical innovation draw more upon search depth Internal R&D intensity is complemented by external search (breadth & depth) and à improved innovative performance Fai, DIMETIC, April

26 Fai, DIMETIC, April

27 Fai, DIMETIC, April

28 Predicted relationship between innovative performance and the breadth of search through external sources of innovation Increasing returns to search breadth Decreasing returns to search breadth Fai, DIMETIC, April

29 Predicted relationship between innovative performance and the depth of search through external sources of innovation Increasing returns to search breadth Decreasing returns to search breadth Fai, DIMETIC, April

30 Also confirm that radical innovations draw less on search breadth and more on search depth Find that internal R&D is a substitute for external search both because of NIH and limited of managerial attention to devote efforts to both simultaneously Fai, DIMETIC, April

31 Strategic issues for tech div 1. to extend life of existing products. Marginal/ incremental vs. generally pervasive technologies 2. to develop new products 3. to be aware of emerging technological challengesà threats Challenge is appropriate organisational embodiment to maintain organisational coherence Link between products, technologies & organisational forms complex Fai, DIMETIC, April

32 Organisations can use loose-coupling devices to deal with complexity by separating knowledge from the physical acts of production Diversity of technological knowledge maintained with limited resources Organisations can also use loose-coupling devices for new search Search may be broad or deep, both impact positively upon innovative performance, but within limits. Radical innovations, may require v. different technologies, therefore depth of search better more useful Fai, DIMETIC, April