Transition within Innovative Capabilities Development

Differently from the “pattern of technological capabilities” area, the transition phase is still a grey area, as deliberately represented in a rough way in both parts of Figure 3.2.

This also needs further elaboration. Generically, transition means “the passage from an earlier to a later stage of development or formation” (OED, 1973:2347), and therefore it can be inferred that it occurs along all the process of technological capabilities development. Notwithstanding, this research draws on the idea initially approached by Dutrénit (2000), and further stressed later by Hobday et al. (2004) and Dutrénit (2007), to define the boundaries and scope of analysis of this transition issue within the BVI.

The essence of the transition process approached by both Dutrénit and Hobday et al. is similar, but as they approach the issue in a different way there are some slight differences in the boundaries, characteristics and constraints in both approaches. Rather than divergent, however, these differences are considered here as complementary and as a useful parameter for the analysis of the transition phase of BVI.

88 The idea of rigid stages or sequences in technological accumulation may be misleading due to the diversity found in different firms and industries, as noted by Bell and Pavitt (1995:88).

The characteristics of the transition process raised by Dutrénit came about mainly from the empirical findings of two works.⁸⁹ According to her:

Those firms (that are undertaking a transition process) have accumulated the minimum essential knowledge base, have developed R&D activities and have acquired advanced innovative TC in certain technical functions. They have different challenges and types of problems from those observed in firms that are still in the process of building-up basic and intermediate innovative TC.

(Dutrénit, 2007:130 - sentence between parentheses added)

The embryonic strategic capabilities, as she named this phase, seems to be located somewhere between the upper intermediate capabilities level (when firms have built the minimum essential knowledge), and the lower strategic level (when firms have already built some of the capabilities which will distinguish them competitively). This minimum essential knowledge base is described as the one built by the firm to survive in the market, a long process that lasted from the early 1900s to 1970 in her first case study. It examined a kind of routine production capability, and basic to intermediate innovative technological capability (Dutrénit, 2000:107). The development of embryonic strategic capabilities – the transition process – explained the undertaking of more complex activities based on the increasing importance of internal and external new sources of knowledge, particularly R&D, and on some knowledge management capabilities. However, by the time of the case study conducted by the author, the transition process had already lasted around 25 years and had not been completed by the firm.

In a different fashion Hobday et al. (2004) used a predefined set of capabilities’

characteristics to select firms within a technological capability level they elected as of interest for the purpose of analyzing transition. They applied an audit tool in a sample of 25 Korean firms looking for those that had achieved the Type C – “strategic” – capability level defined in this audit tool.⁹⁰ The empirical findings confirmed that 19 firms were at the strategic level described in the audit tool, and that they were not yet contributing to move the world technology frontier. It also confirmed that these 19 firms

89 Dutrénit (2000) is a case study of the Glass Container Division of the Mexican Vitro Group. Later on the concept of transition was applied in case studies of two large Mexican firms and a subsidiary of multinational company located in Mexico (Dutrénit, 2007).

90 The audit tool developed by Bessant et al. (2001) was stressed to some extent in Sub-section 2.3.5 (pg.

37-38) of the previous chapter.

were not uniformly distributed within the strategic category but rather they had different levels of strategic capabilities.⁹¹

In Hobday et al.’s study, therefore, it is implicit that firms that succeed in overcoming the weaknesses of their capabilities within this level are approaching the innovation frontier, and are supposedly in a transition stage to reach the Type D – “creative” level, the highest level in the scale of the audit tool. Firms categorized as creative are those able to move the international technological frontier forward. Furthermore, firms failing to overcome their weaknesses tend to lose capabilities and become Type B – “reactive”.

The different terminologies across the stages of technological capabilities adopted in the works of Dutrénit, Hobday et al. and in this research, and the correspondence amongst them, are represented in Table 3.2. The description of the boundaries, characteristics and constraints to the transition process approached in the works of these authors are summarized in Table 3.3.

Table 3.2: Technological Capabilities Levels – different terminologies adopted and transition boundaries

91 The firms were spread around the lower, middle and upper band of the strategic level.

Basic Innovative;

currently in a transition process within the development of innovative capabilities. The real constraints and drivers to the development of this industry’s advanced innovative capabilities are unknown, as are the boundaries and level of the transition phase. These are the issues raised by research question 2, propositions 3 and 4. This idea is explained in more detail within the Analytical Framework in the next Section.

Table 3.3: Firms in Technological Capabilities Transition Process – Boundaries, Characteristics and Constraints

Dutrénit Hobday et al.

Boundaries

. from the lower advanced innovative capabilities, when minimum essential knowledge base was already built, to the building of some strategic capabilities (which distinguish the firm competitively);

. firms that have overcome the reactive approach to technology strategy and are building strategic capabilities to reach the creative capability level, and that are able to compete in/contribute to the world technological frontier;

Characteristics (not exhaustive)

. minimum essential knowledge base already built (capabilities to achieve more efficient levels of production, improve the quality, upgrade equipments);

. accumulation of routine production capabilities;

. intermediate innovative technological capabilities in some technical functions and advanced in others;

. increasing importance of internal sources of knowledge (especially R&D – applied research, product and process development and minor improvement activities);

. integration of knowledge located in different organizational units;

. learning from competitors and external sources of knowledge;

. acquisition of technology (engineering and know-how to manufacture equipment);

. development of innovative capabilities to adapt and keep in operation the technology acquired abroad;

. capability to develop linkages with suppliers;

. well-developed awareness of the need for technological change;

. highly capable in implementing new projects and taking a strategic approach to the process of continuous innovation;

. clear idea of priorities and of resources needed;

. strong internal capabilities in both technical and managerial areas;

. can implement changes with skill and speed;

. consciously develop a strategic framework in terms of search, acquisition, implementation and improvement of technology;

. overall strong in-house capabilities, including R&D;

. strategic thinking about technology in the medium and long term;

. tends to lack the capabilities to re-define or create new market opportunities through new types of technology;

. tends to compete within the boundaries of an existing industry, despite having exploited technology efficiently;

. sometimes limited in knowing where and how to acquire new technologies beyond the boundaries of their traditional business;

. face difficulties to challenging existing business models;

Table 3.3 (cont.): Firms in Technological Capabilities Transition Process – Boundaries, Characteristics and Constraints

Dutrénit Hobday et al.

Characteristics (cont.)

. strengthening of capabilities in knowledge management (sharing of internal knowledge and use of external sources of knowledge), process engineering, and investment project management;

. in their own fields they may be at the international technology frontier;

. more extensive partnerships with foreign firms;

. may benefit from new networks of technology providers and from links with universities;

. tends to follow a mixed corporate strategy towards technology;

. small and medium size firms tend to seek niche markets and not to seek international leadership positions;

Constraints to complete transition

. difficulties in the knowledge management processes, especially:

. conversion of individual into organizational learning;

. coordination of the leaning strategies;

. knowledge integration and knowledge creation;

. unevenness of the knowledge bases – embryonic strategic capabilities in some areas and lack of knowledge in others;

. embryonic strategic capabilities that did not become strategic capabilities:

. investment project management;

. job changes;

. electronic control systems and glass composition;

. coupling equipment technology;

. imbalance between science and technology capabilities in the national context.

. external shocks (economic crisis) can arrest the pace of change as firms move for shorter-term R&D;

. government policies and competitors’ strategies, especially in changing circumstances;

. own history, cultures and strategies and lack of a strategic mindset;

. dependence of foreign capital goods technology and suppliers;

. international brand recognition;

. stronger market capabilities;

. control of foreign distribution channels;

. need for a strategic mindset, quite different from that of a firm in catch-up mode;

. need for more organizational flexibility (e.g. flatter organizational structures and fast moving project-based organizational structures);

Source: Own elaboration based on Dutrénit (2000, 2007), Bessant et al. (2001); Hobday et al. (2004) and Rush et al. (2007).