Capabilities in Developing Countries
3.2.2 Factors shaping technological learning
(a) Learning and individuals:
Individuals are the leading actors in technological learning. Independently of whether learning refers to the use, adaptation, imitation or creation of technology, it takes place first at the individual level and then at the organisational level. However, learning by the firm is not just an aggregation of individual learning. It comprises at least the processes of knowledge assimilation and distribution across the organisation, and its integration into the strategy and management of the organisation. Individual learning is an indispensable condition for learning by firms, but cannot be the sufficient condition (Kim, 1998; Figueiredo, 1999).
In particular, knowledge intensive services firms rely heavily on expert knowledge (Salter and Tether, 2006). Hence understanding how these experts acquire and upgrade their knowledge bases and experience as part of developing their career paths is a key element for understanding the development of KIMS firms. This feature is barely addressed in the literature but is examined in this research.
(b) The role of key events in shifting learning orientation:
The literature recognises the importance of key events that, if used proactively, can significantly increase the intensity of learning, shifting its orientation from one level or stage of technological capability to another. These events can be the consequence of deliberately created internal crises that are generated by management as a means to intensify learning efforts and orientations (Kim, 1995, 1997, 1998). Alternatively, they may arise more „naturally‟ in the course of a firms operations and growth. In either form they can be used as important
learning opportunities that may lead to important shifts in the level of technological capabilities accumulated. For instance, investment projects are particularly important in this way in the heavy process industries such as the mining industry. During the execution of such projects important learning opportunities can emerge (Bell and Van Dijk, 2003). In addition investment projects also open up significant training opportunities centred on acquiring the capabilities to manage complex projects. Consequently the higher the frequency of investment projects the more opportunities there are to sustain and speed up learning, and differences in the rate of growth of industries may have important implications for the rate of learning that is possible.
This research aims to contribute to understanding the types of event used as learning opportunities by KIMS firms, with a particular emphasis on the role of investment projects. But that is an issue about only the opportunities for learning. The key issue is about the intensity with which those opportunities are actively exploited by firms. Hence the question about opportunities and the rate or learning actually achieved also involves the issue discussed earlier – the intensity of firms‟ learning efforts.
(c) User-producer interaction:
The literature also recognises that learning is a network phenomenon; it does not take place in isolation, but in a web of relationships and interactions between suppliers, customers, experts, technology centres and educational institutes (Lall, 1993). In particular, in the services sector there might be a high level of interaction since the delivery of services in general requires that producers and buyers meet physically (Henten and Vad, 2003).
However, not all interactions have the same level of impact on learning and innovation. For instance, market-based interactions, which are concerned basically with market transactions of goods and services may on their own have lower impacts on learning, than knowledge-based interactions involving knowledge flows between the parties or collaborative processes of knowledge creation (Ariffin, 2000).
The interaction between large users and smaller knowledge-intensive services suppliers became a significant component for the development of the KIMS supply sector (Segal, 2000). However, there have not been studies about how this interaction evolves over time as KIMS suppliers become more complex organisations with higher levels of technological capability accumulated.
(d) External incentives and supports:
As stressed earlier in Section 3.2.1, the intensity of learning achieved by firms depends on a deliberate and strong commitment together with a significant effort and investment. However, firms require a setting that provides incentives and supporting mechanisms to overcome the constraints of risk and cost on learning, in particular the risk of imperfect appropriability of the returns to investment in knowledge assets – both those that are disembodied and those that are embodied in mobile human capital. These features of the context for learning are likely to be particularly important in shaping the extent to which firms engage in long-term learning and innovation arrangements in order to precede with stable and strong processes of technological capability upgrading and accumulation (Humphrey and Schmitz, 2002; Lall, 1993, 1994; Viotti, 2002).
Commonly discussed incentive and support systems for innovation and learning include: i) adequate access to technological information and infrastructure; ii) availability of skilled labour; iii) tax incentives or financial support for training and, R&D investment; iv) trade and investment attraction regimes; and v) supports and encouragements to user firms to allow suppliers to test new or adapted products and services in their operation.
Given that the level of technological capabilities in developing countries is lower than in developed ones, the nature of learning and innovation challenges differs from the first group of countries to the latter. Accordingly, the incentives and support system in developing countries might be focused on supporting learning processes that lead to building higher level of technological capabilities, rather than on stimulating original innovation activities (Viotti, 2002).
(e) Industry structure and organisation:
Learning paths are influenced by the structure and organisation of industry (Lall, 1987). In particular the geographical spread of firms‟ operations and investment, and the functional integration between internationally dispersed activities, shape the extent to which firms actually use opportunities for learning and innovation that are opened up by the growth of industries and the challenges generated by the expansion of their production.
As commonly stressed, the progress of globalisation has brought an increase in the flow of worldwide investment by multinational firms. This has two implications for learning. On the one hand, these foreign investments can stimulate learning and innovation through supplier-client linkages and knowledge and technology spill over. But on the other hand, they can also crowd out local actors through mergers and acquisitions; they may strip proprietary knowledge from local firms; and they may generate market-distorting practices with negative effects for local technological development. In addition, factors like the required volume of purchases, knowledge barriers and the long term and global nature of contracts may become huge barriers to entry for potential newcomers and for the survival of local independent suppliers (Mytelka, 1999).
As outlined earlier, major changes in the degree of vertical integration of the industry had important implications for the development of a distinct KIMS supplier sector and its learning-related linkages. But learning opportunities for supplier firms in global industries may also be influenced by trends in the degree and form of horizontal integration. This may be particularly important in heavy process industries, perhaps especially for their knowledge-intensive services sectors for which increased horizontal integration may increase barriers to entry for newcomers and the risks faced by small local suppliers. For instance, engineering services for large-scale projects in many process industries have become highly concentrated in a small number of large companies operating on a global basis. This global concentration of the supply industry may restrict access to project-based learning opportunities, particularly because major supplier firms typically incorporate in their project
implementation networks large numbers of established suppliers of equipment and services with which they operate o a global basis (Bell and Van Dijk, 2003). Thus, as often stressed in the literature, globalisation goes beyond the mere geographic spread of economic activities – the phenomenon of, internationalisation that has been important since at least the 17th century. It also involves functional integration between internationally dispersed activities, creating a growing level of interconnectedness, which shapes the way firms learn, innovate and compete (Dicken, 1998). In particular, knowledge intensive services are increasingly acquiring a global knowledge network organisational structure (Salter and Tether, 2006). Consequently, analysing the factors that shape the learning dynamics of competitive services suppliers requires going beyond national boundaries.
This research contributes to understanding how changes on the structure and globalisation of the mining industry have shaped the way knowledge based services firms have been able to participate in learning and innovation opportunities that have been opened-up by the global mining industry over recent decades.