Nationality and international innovation management a cross national study at the MNC subsidiary level

NATIONALITY AND INTERNATIONAL INNOVATION MANAGEMENT: A CROSS-NATIONAL STUDY AT THE MNC SUBSIDIARY LEVEL ZHENG TINGJUN NATIONAL UNIVERSITY OF SINGAPORE 2003 NATIONALITY AND INTERNATIONAL INNOVATION MANAGEMENT: A CROSS-NATIONAL STUDY AT THE MNC SUBSIDIARY LEVEL ZHENG TINGJUN (BA, FUDAN UNIVERSITY) A THESIS SUBMITTED FOR THE DEGREE OF MASTER OF SCIENCE (MANAGEMENT) DEPARTMENT OF BUSINESS POLICY NATIONAL UNIVERSITY OF SINGAPORE 2003 ACKNOWLEDGEMENTS This thesis is my major rigorous academic training so far I would like to express my deepest appreciation to Professor Wong Poh Kam and Professor Lim Kwang Hui for being my academic supervisors, as well as for their endless support during my tenure as an MSc candidate at NUS Business School Working with Prof Wong and Dr Lim’s supervision makes my academic training a unique experience that could not have been gained in any other similar research program Whenever I was missing the direction, Prof Wong never failed to advise me where to go while Dr Lim always raised right questions at the right time for me to ponder upon I could not have benefited more from the complementary nature of their guidance I also would like to thank Professor Kulwant Singh, Professor Clement Wang and the two anonymous examiners for their insightful comments on this study I am also grateful to Professor Rachel Davis for her kindness to offer her valuable time to review this paper I am deeply indebted to Zilin who always encouraged me when I was disappointed with my slow progress, sharing me with his rich research experience His generosity and kindness are highly appreciated Thanks also go to Zhang Jing who helped me a lot to start my research when I first came to Singapore I also wish to thank my classmates here in Singapore whose existence makes this research process a wonderful experience Our joyful memory will always be shining there Thanks also go to the others who have directly or indirectly contributed to this paper In addition, I would like to emphasize that this paper could not have been finished without the kind scholarship from the National University of Singapore Finally and foremost, the love and support from my family is the ultimate source of my energy and my devotion to my best i TABLE OF CONTENTS ACKNOWLEDGEMENTS i TABLE OF CONTENTS ii SUMMARY iv LIST OF TABLES v LIST OF FIGURES vi CHAPTER INTRODUCTION 1.1 BACKGROUND OF THIS STUDY 1.2 OBJECTIVES OF THIS STUDY 1.3 STRUCTURE OF THIS PAPER CHAPTER LITERATURE REVIEW 2.1 KEY CONCEPTS 2.1.1 Innovation 2.1.2 Innovating Firms 2.2 NATIONAL SYSTEMS OF INNOVATION 2.2.1 Definition 2.2.2 The US, European and Japanese National Innovation System 2.3 MNC INNOVATION MANAGEMENT 2.3.1 Universal Innovation Management: An Illusion? 2.3.2 National Difference in Innovation Management 2.3.3 Innovation Management at the Subsidiary Le vel 2.3.4 Partnerships and Innovation 2.4 SUMMARY OF THE REVIEW 7 9 10 13 13 15 16 21 25 CHAPTER HYPOTHESES 3.1 FRAMEWORK OF THIS STUDY 27 3.2 NATIONALITY, HUMAN CAPITAL INTENSITY AND INTERNAL INNOVATION CLIMATE 29 3.3 HUMAN CAPITAL INTENSITY, INTERNAL INNOVATION CLIMATE AND INNOVATION MANAGEMENT BEHAVIOR 30 3.4 NATIONALITY AND INNOVATION MANAGEMENT BEHAVIOR 32 CHAPTER METHODOLOGY 4.1 DATA 4.1.1 The Empirical Setting 4.1.2 The Survey 4.2 MEASURES 4.2.1 Dependent Variables 4.2.2 Independent Variables 35 35 37 40 40 43 ii 4.2.3 Control Variables 4.3 STATISTICAL ANALYSIS 4.3.1 Model Development 4.3.2 Assessing Multicollinearity 4.3.3 Assessing Common Method Variance 4.3.4 Model Assumptions 44 47 47 49 50 50 CHAPTER DATA ANALYSIS AND RESEARCH FINDINGS 5.1 FACTOR ANALYSIS 5.2 DESCRIPTIVE STATISTICS 5.3 ONE-WAY ANOVA 5.4 MULTIPLE REGRESSION ANALYSIS 5.5 HIERARCHICAL MULTIPLE REGRESSION ANALYSIS 5.5.1 Human Capital Intensity 5.5.2 Internal Innovation Climate 5.5.3 Subsidiary Nationality 5.5.4 Control Variables 5.6 SUMMARY OF RESULTS 52 53 57 61 63 66 66 66 67 68 CHAPTER DISCUSSION AND IMPLICATIONS 6.1 DISCUSSION 6.1.1 The Effect of Human Capital Intensity 6.1.2 The Effect of Internal Innovation Climate 6.1.3 The Effect of Nationality 6.1.4 The Effect of Industry Sectors, Firm Age and Firm Size 6.2 LIMITATIONS OF THIS RESEARCH 6.3 IMPLICATIONS 6.3.1 Managerial Implications 6.3.2 Public Policy Implications 6.3.3 Research Implications 70 70 71 73 79 80 82 82 84 86 CHAPTER CONCLUSION 7.1 MAIN FINDINGS 7.2 FUTURE RESEARCH 7.3 CONCLUDING REMARKS 88 90 92 BIBLIOGRAPHY 94 APPENDIX CLASSIFICATION OF INDUSTRY CLUSTERS 107 APPENDIX DETAILED REGRESSION RESULTS FOR THE HIERARCHICAL REGRESSION 108 APPENDIX A SURVEY FORM 114 iii SUMMARY International business scholars have long been interested in understanding what affects MNC innovation management behavior Most of the research has investigated this strategically important issue at the national or corporate level; however, few look at this issue from a micro perspective This paper develops a model integrating strategic management, industrial organization theories and international business research to test hypotheses concerning the impact of human capital intensity, internal innovation climate and subsidiary nationality on innovation management behavior of MNC subsidiaries The hypotheses are tested using 86 subsidiaries from Singapore and Penang, Malaysia, representing electronics, chemical, precision/process engineering, transport engineering, food, textile and jewelry industries Results of multivariate and hierarchical regression analyses showed that: (1) The nationality of subsidiaries does not affect human capital intensity but has a substantial impact on internal innovation climate at the subsidiary level; (2) Internal innovation climate partially explains the difference in innovation management behavior while human capital intensity does not; (3) The nationality of subsidiaries plays an important role in explaining the differences in innovation mana gement after controlling for various firmspecific factors This residual effect, however, is not uniform in that subsidiary nationality does not explain all dimensions of innovation management behavior Implications for mangers, policy makers and academic researchers are drawn finally iv LIST OF TABLES Table 5.1 Factor Analysis of Internal Innovation Climate 53 Table 5.2 Descriptive Statistics and Correlation Matrix 54 Table 5.3 Cross-tab Result of Industry Cluster Classification 57 Table 5.4 ANOVA Result of Innovation Management Behavior Measures 59 Table 5.5.1 ANOVA Result of Explanatory Variables: Japan vs Europe vs US 60 Table 5.5.2 ANOVA Result of Explanatory Variables: Japan vs Non-Japan 60 Table 5.6 Multiple Regression Analysis Result on Human Capital Intensity 61 Table 5.7.1 Multiple Regression Analysis Result on Individual Attitudes between US, Japanese and European Subsidiaries 62 Table 5.7.2 Multip le Regression Analysis Result on Individual Attitudes between Japanese and Non-Japanese Subsidiaries 62 Table 5.8.1 Multiple Regression Analysis Result on Organizational Environment between US, Japanese and European Subsidiaries 63 Table 5.8.2 Multiple Regression Analysis Result on Organizational Environment between Japanese and Non-Japanese Subsidiaries 63 Table 5.9 Results of Hierarchical Regression Analys is for MNC Subsidiary Innovation Management Behavior (Summary) 65 Table 5.10 Summary of Results on Examining Hypotheses 69 v LIST OF FIGURES Figure 2.1 R&D Expenditure by Major Economies 11 Figure 3.1 Subsidiary Nationality and Innovation Management Behavior: A Framework for Analysis 28 Figure 4.1 Number of R&D Expenditure and Manpower from 1999-2001 (Singapore) 36 Figure 4.2 Number of Patents Applied/Awarded/Owned from 1999-2001 (Singapore) 37 vi CHAPTER INTRODUCTION The past decade has witnessed increasing interest in studying global innovative activities among the management scholarship Considerable attention has been paid to innovation management at the national level, for example, national innovation systems (NIS), as well as at the corporate level, of which multi-national corporations (MNCs) have always been the central concern Controlling a vast proportion of innovation power of the world, MNCs are recognized as the main driver for R&D globalization (Cantwell, 1996; Gerybadze and Reger, 1999; Nonaka and Takeuchi, 1995; Roberts, 1995a, b) While we already have a good knowledge on innovation management at the macro level as above-mentioned, few studies have fully explored this issue at less macro level such as at the subsidiary level This study attempts to combine the NIS literature, international business (IB) theories and strategic management studies to explain differences and determinants of MNC subsidiary-level innovation management behavior, using a questionnaire survey done in Singapore and Penang, Malaysia Besides studying human capital intensity and internal innovation climate, specific attention is directed to identify possible residual effects of subsidiary nationality This chapter begins with a brief description of the theoretical background of the present study, and a statement of main research objectives follows Finally, an overview of this study will be presented together with the organization of this paper 1.1 BACKGROUND OF THIS STUDY It is now an era of economic globalization led by MNCs rather than governments These international companies play a major role in our modern economic activities, with their worldwide subsidiaries achieving global presence and international competitiveness (Bartlett and Ghoshal, 1986) This development has paralleled an upsurge in theoretical efforts to explain the global innovation activities, since “success in the global marketplace increasingly requires that firms develop capabilities in innovation” (Quinn and Rivoli, 1991:323) While the literature is rapidly expanding, most studies of innovation management for MNCs have been done in the context of industrialized countries while eschewing empirical studies on less advanced economies According to the resource-based view (RBV) of the firm, sustainable competitive advantage for the firm has long been argued as supported by non-imitable resources and capabilities (Barney, 1991)1 This is especially true for MNCs facing a dynamic economy in the information age nowadays Clichéd but true, change is the only constant in a globalizing economy Innovation, the change a firm can initiate, is therefore key to sustainable competitive advantage (Bartlett and Ghoshal, 1990; Hadjimanolis, 2000; Hitt et al., 1996; Pearce, 1999) This explains why virtually every company is claiming embedded innovativeness in its products or services Firms are engaged in innovation not only to create new knowledge (Dosi, 1988), but to absorb and exploit existing knowledge For in-depth discussion, the vast resource-based view literature (e.g., Penrose, 1959, Wernerfelt, 1984; Barney, 1991; Peteraf, 1993; Mowery et al., 1998) offers good examples and detailed theoretical analysis Appendix APPENDIX CLASSIFICATION OF I ND UST R Y C L US T E R S (According to Singapore Standard Industrial Classification (SSIC) 2000) Cluster & SSIC code Chemical 23 24 251 252 26 304 35 Electronics 3305 309 31 32301 Description Manufacture of coke, refine petroleum products and nuclear fuel Manufacture of chemicals and chemical products Manufacture of rubber products (exclude 25193) Manufacture of plastic products (exclude 25214, 25215, 25216) Manufacture of non-metallic mineral products except products of petroleum and coals Manufacture of accumulators, primary cells and primary batteries Recycling Manufacture of electric lamps & lighting equipment Manufacture of other electrical equipment Manufacture of electronic products and components Manufacture of fully electronic watches and clocks Precision & process engineering 25193 Manufacture of industrial & mechanical rubber goods 25214 Manufacture of plastic bolds, boxes and containers (except for household use) 25215 Manufacture of plastic pipes and tubes 25216 Manufacture of plastic precision engineering parts 27 Manufacture of basic metals 28 Manufacture of fabricated metal products except machinery and equipment 29 Manufacture of machinery and equipment (exclude 29231, 29232) 301 Manufacture of electrical motors and generators 302 Manufacture of electricity distribution and control apparatus 303 Manufacture of insulated wire and cable 32 Manufacture of medical, precision and optical instruments, watches and clocks (exclude 32301) Transport engineering 29231 29232 33 Food, textile and others 15 16 17 18 Manufacture and repair of oil rigs Manufacture and repair of other oilfield and gasfield machinery and equipment Manufacture of transport equipment Manufacture of food products and beverages Manufacture of tobacco products Manufacture of textiles Manufacture of wearing apparel; dressing and dyeing of fur 107 Appendix A P P E N D I X D E TA I LE D R E G R E S S I O N R E S UL T S FOR THE H I E R A R CH I CA L R E G R E S S I O N TABLE 5.9.1 Results of Hierarchical Regression Analysis for Product Innovation Intensity Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B 5.134 1.451 2.173 083 843 -19.483 -16.283 -18.459 Model SE B 8.523 4.688 1.858 112 16.659 16.372 16.474 18.057 191 191 1.946† β 073 037 158 091 014 -.350 -.289 -.222 B 5.859 2.310 1.977 110 -.299 -19.764 -16.822 -18.334 0404 -5.114 2.513 Model SE B 9.430 5.064 1.892 121 17.621 16.933 17.038 18.594 176 4.523 4.914 208 017 448 β 084 059 144 120 -.005 -.355 -.298 -.220 028 -.164 081 B 3.698 -2.955 3.436 119 6.691 -14.981 -5.687 -4.083 091 -3.066 1.843 5.041 24.371 Model SE B 9.156 5.234 1.906 117 17.113 16.391 16.872 18.665 171 4.530 4.728 7.053 9.154 β 053 -.076 250† 130 113 -.269 -.101 -.049 063 -.098 059 095 389** 293 085 3.678* 108 Appendix TABLE 5.9.2 Results of Hierarchical Regression Analysis for Process Innovation Intensity Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B 806 -4.675 3.236 -.044 29.013 10.352 16.585 37.465 Model SE B 11.146 6.159 2.471 147 21.812 21.523 21.546 23.614 β 009 -.095 186 -.038 389 145 233 357 B -.645 -3.393 3.324 -.013 35.621 15.070 20.934 41.433 -.154 2.180 3.121 141 Model SE B 12.367 6.739 2.522 162 23.245 22.445 22.373 24.395 231 5.953 6.626 β -.007 -.069 191 -.011 478 211 294 395† -.084 055 078 B -3.006 -10.965 5.408 -.009 43.879 19.794 35.184 60.586 -.070 4.835 1.526 8.917 33.367 Model SE B 11.960 7.014 2.561 156 22.445 21.584 22.042 24.381 224 5.984 6.367 9.245 12.066 157 015 374 141 1.339 β -.034 -.223 311* -.007 588† 278 494 578* -.038 123 038 132 422*** 253 096 3.851* TABLE 5.9.3 Results of Hierarchical Regression Analysis for Product Innovation Collaboration Intensity Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B -.592 194 015 003 972 841 1.028 962 Model SE B 233 128 051 003 417 409 409 468 187 187 1.636 β -.343* 208 044 117 711* 624* 740* 447* B -.576 167 012 002 889 776 970 900 002 037 -.091 Model SE B 256 136 053 004 443 426 426 486 004 116 132 196 009 208 β -.334* 179 035 091 650* 576† 698* 418† 051 050 -.118 B -.595 137 041 003 893 845 1.040 790 001 095 -.077 -.368 029 Model SE B 251 144 055 004 436 417 426 500 004 117 128 197 244 266 β -.345* 147 119 101 653* 627* 748* 367 027 129 -.099 -.286† 020 070 2.464† 109 Appendix TABLE 5.9.4 Results of Hierarchical Regression Analysis for Process Innovation Collaboration Intensity Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B -.783 072 025 002 1.250 1.001 1.075 1.528 Model SE B 236 132 056 003 540 542 543 584 β -.466** 074 066 086 860* 656† 658† 732* B -.860 098 027 002 1.245 989 1.114 1.508 005 -.028 043 259 Model SE B 271 153 059 004 602 580 585 623 006 133 163 β -.512** 100 072 095 857* 649† 682† 722* 126 -.036 052 B -.934 044 045 001 1.252 1.023 1.110 1.423 002 059 036 -.488 -.028 275 016 329 259 2.098† Model SE B β 262 -.556*** 163 045 060 119 004 055 579 862* 557 671† 567 680† 612 682* 006 060 136 078 157 044 213 -.340* 277 -.017 363 088 2.977† TABLE 5.9.5 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity with R&D institutions/universities Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B 209 213 015 008 1.133 491 997 999 Model SE B 416 230 091 005 813 799 804 882 β 064 117 023 195 412 189 375 259 B 255 041 016 003 556 058 583 585 015 151 -.491 Model SE B 440 236 089 006 820 788 794 865 008 210 229 120 120 216 097 1.105 2.553* β 078 022 024 078 202 022 219 151 224† 104 -.338* B 165 095 019 002 514 137 537 261 012 245 -.457 -.815 -.460 Model SE B 431 246 090 006 805 771 794 879 008 213 223 336 433 287 070 β 051 053 030 049 187 053 202 067 172 169 -.315* -.329* -.158 2.945* 110 Appendix TABLE 5.9.6 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity with Parent/associate Company Overseas Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B 058 -.168 055 005 1.295 1.209 941 597 Model SE B 316 174 069 004 616 606 610 668 β 023 -.117 107 139 600* 594* 450 197 B -.190 -.011 057 008 1.662 1.430 1.196 838 002 -.161 439 180 180 261 081 1.788† 2.260† Model SE B 336 180 068 004 626 601 606 660 006 161 175 β -.074 -.008 112 239† 770* 702* 572† 276 041 -.142 384* B -.193 -.021 060 008 1.675 1.438 1.217 868 002 -.159 437 020 050 Model SE B 345 197 072 004 643 616 635 703 007 170 178 269 347 261 000 011 β -.076 -.015 118 240† 776* 706* 582† 286 044 -.140 383* 010 022 TABLE 5.9.7 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity with Customers Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B -.657 309 -.080 -.005 1.154 1.235 892 995 Model SE B 366 202 080 005 715 702 707 775 121 121 1.116 β -.229† 193 -.140 -.130 477 541† 381 293 B -.735 324 -.080 -.005 1.115 1.188 863 964 006 -.050 039 Model SE B 408 219 082 005 761 731 736 802 008 195 212 130 009 214 β -.257† 202 -.140 -.131 461 521 369 284 096 -.039 030 B -.766 275 -.064 -.005 1.182 1.243 970 1.085 006 -.022 034 -.011 213 Model SE B 418 239 087 005 780 747 769 852 008 206 216 326 420 β -.267† 172 -.113 -.132 489 545 414 319 101 -.017 027 -.005 083 135 005 172 111 Appendix TABLE 5.9.8 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity with Competitors Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B -1.060 089 037 -.002 1.015 1.024 1.259 920 Model SE B β 306 -.420*** 169 063 067 074 004 -.065 598 477† 588 510† 592 610* 649 307 B -1.147 062 045 -.003 1.018 990 1.250 882 003 167 -.080 Model SE B β 340 -.455*** 182 044 068 089 004 -.101 633 478 608 493 613 606* 668 295 006 059 162 149 177 -.071 206 223 206 2.113* 016 436 B -1.165 054 050 -.003 1.033 1.015 1.276 881 003 186 -.078 -.094 011 Model SE B β 348 -.462*** 199 039 073 099 004 -.105 650 485 622 505 641 619† 710 294 007 053 172 165 180 -.069 271 -.049 350 005 225 002 081 TABLE 5.9.9 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity at Pre-competition Stages Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B -.180 658 074 016 2.757 230 795 -1.470 Model SE B 1.349 743 295 018 2.633 2.588 2.606 2.856 141 141 1.334 β -.017 110 035 113 306 027 091 -.116 B -1.025 628 108 011 2.599 -.155 620 -1.787 045 481 -.117 Model SE B 1.472 790 296 019 2.744 2.637 2.657 2.896 028 704 766 184 043 1.094 β -.096 105 051 075 289 -.018 071 -.141 203 101 -.025 B -1.383 768 139 006 2.526 195 580 -2.817 033 856 -.002 -2.961 -1.414 Model SE B 1.430 816 299 018 2.668 2.555 2.632 2.914 027 706 738 1.114 1.437 271 087 3.566* β -.130 129 065 043 280 023 066 -.222 148 180 000 -.365** -.148 112 Appendix TABLE 5.9.10 Results of Hierarchical Regression Analysis for Innovation Collaboration Intensity at Near-market Stages Variable SPORE AGE SIZE EXPORT ELECT CHEM PREC TRANS HCINT INDATT ORGEN JAPAN EUROPE R2 R2 F Change B 162 495 -.039 002 546 -1.136 -.334 -1.391 Model SE B 918 506 201 012 1.793 1.762 1.774 1.944 088 088 788 β 023 126 -.028 024 092 -.202 -.058 -.166 B -.105 689 -.044 006 821 -.972 -.136 -1.181 008 -.388 542 Model SE B 1.017 546 205 013 1.896 1.822 1.836 2.001 019 487 529 108 020 458 β -.015 175 -.031 069 138 -.173 -.023 -.141 054 -.124 172 B -.226 643 -.013 005 909 -.815 022 -1.207 006 -.267 559 -.631 036 Model SE B 1.038 593 217 013 1.937 1.855 1.911 2.116 020 513 536 809 1.043 120 012 399 β -.032 163 -.009 058 153 -.145 004 -.144 040 -.085 177 -.118 006 113 Appendix A P P E N D I X A S UR V E Y F O R M PENANG STATE INNOVATION SURVEY A General Information Please indicate activities of your operation in Penang (√ where applicable): [ ] No [ ] Yes, to regional HQ in _ a) b) c) d) e) f) [ ] Yes, to world HQ in _ Manufacturing Regional HQ Operation R&D Procurement Sales/Marketing Customer Support [ [ [ [ [ [ ] ] ] ] ] ] c) d) e) Raw materials Intermediate goods/components Consumer goods Capital goods Systems solutions goods incl service) (capital [ [ ] ] [ [ [ ] ] ] e) [ ] Yes Year firm started operation at this site: 19 _ Wholly foreign-owned company (Nationality of largest owner: ) 50% or less locally owned company (Nationality of largest owner: ) 50% to 70% locally owned More than 70% locally owned company Wholly locally owned company Do you know of any start-up company by ex-employees of your firm in Penang in the last years ? No [ Please indicate your company’s ownership status: (Please √ one) c) d) No .and their respective locations: _ _ _ b) ] If yes, please indicate the number of those operations: _ Please name your main product or product group: a) Does your company have overseas manufacturing operations reporting to Penang? [ Which type of product contributes most significantly to your enterprise's turnover? (One tick only, please!) a) b) Does your company report to a parent company? [ ] [ ] [ [ ] ] [ ] ] Yes [ Please indicate following years: ], how many? your sales figures for the 1996 RM Million 1999 RM Million All information will be dealt with in strictest confidentiality 114 Appendix Total fixed assets of your company: [Fixed assets includes land, buildings and civil works, leasehold improvements, equipment and machinery (including installation costs)] a) b) c) d) e) f) Below RM10 million RM10 – RM25 million RM25.1 – RM100 million RM100.1 – RM200 million RM200.1 m – RM billion above RM1 billion [ [ [ [ [ [ 15 Please indicate the approximate % of your company’s sales according to the following categories: a) Products manufactured by your company according to design specifications provided by parent company or associate in the corporate group (“manufacturing arm of parent company”) _ % b) Products manufactured by your company according to design specifications provided by external buyers (“original equipment manufacturing” or OEM) _ % c) Products developed and designed by your company according to performance requirements of buyers (“original design manufacturing” or ODM) _ % d) Products developed and designed by your company and sold under your own brand (“original brand manufacturing” or OBM) _ % e) Others (please describe): _ _ _ % ] ] ] ] ] ] 10 Total employment (full-time equivalent) at the end of 1996 1999 Over the next three years, employment is expected to a) b) c) 11 increase remain unchanged decrease [ [ [ ] ] ] Expenditure on training as % of payroll _ % 12 Please indicate your company’s employment structure as of June 1999: a) b) c) d) e) 13 % % % % % 100 % What is the skill level of your production workers? (total workers = 100%) a) b) 14 University graduates Diploma holders Certificate holders Secondary school (incl A-levels) Primary school Total Employees skilled unskilled % % How was your turnover during the last business year distributed over the following regions ? a) b) c) d) e) f) g) Penang Rest of Malaysia Singapore Other ASEAN Other Asia Europe Other: _ % % % % % % % 100 % 100% 16 How important are the following characteristics for the sales success of your products? Little Influence a) b) c) d) e) f) g) h) i) Price Quality On time fulfillment Customer service Flexibility upon customer request Novelty of products Large Production Capacity Short delivery time Environmental acceptability Most Decisive 1 1 2 2 3 3 4 4 5 5 1 2 3 4 5 1 2 3 4 5 17 Has your enterprise qualified for the following certifications? (√ where applicable) a) b) c) d) ISO9001 ISO9002 ISO14000 Other: All information will be dealt with in strictest confidentiality [ [ [ [ ] ] ] ] 115 Appendix B Innovation Activities For this section please note the following definitions: Product innovation: Either substantial improvement of a current product (e.g components used, or performance/quality levels, product image or design), Or development and manufacture of a product which is new to the business a) b) c) d) Process innovation: Substantially improved or new production process through the introduction of new process equipment or re-engineering of operational process * No [ ] ] No [ to Q1 & Q2, Please indicate the approximate % of your total annual sales that consist of new/improved products introduced over the last years: Less than 10% 10% - 24% 25% - 49% 50% - 74% 75% and above [ [ [ [ [ Less than 10% 10% - 24% 25% - 49% 50% - 74% 75% and above [ [ [ [ [ ] ] ] ] ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Less than 2% 2% - 4.9% 5% - 9.9% 10% - 19.9% 20% - 39.9% 40% and above [ [ [ [ [ [ ] ] ] ] ] ] Less than 1% 1% - 2.9% 3% - 4.9% 5% - 9.9% 10% - 19.9% 20% and above [ [ [ [ [ [ ] ] ] ] ] ] and the number of employees engaged in R&D activities in Penang _ Please indicate the approximate % of your production volume using new/improved processes introduced over the last years: a) b) c) d) e) No [ ] [ ] If your enterprise has R&D operations in Penang, please indicate your R&D spending as a % of sales: a) b) c) d) e) f) ] ] ] ] ] R&D Acquisition of R&D services Acquisition of machinery, equipment & software linked to product & process innovation Licensing of external technology linked to product & process innovation Industrial design, market research & marketing expenses for product innovation Training directly linked to technological innovations Yes [ ] [ ] What is your estimated total expenditure for the above as a % of total sales ? a) b) c) d) e) f) ] If you answered “No” please go to Section E a) b) c) d) e) ] f) Over the last years, has your enterprise adopted any process innovation ? Yes [ e) Over the last years, has your enterprise introduced into the market any product innovation ? Yes [ Please indicate if your enterprise has been engaged in the following innovation activities in Penang during the last year: If you R&D elsewhere, please state the location(s) Please indicate the number of patents applied and obtained by your company in Penang over the last years: a) b) Malaysia Number applied Number approved All information will be dealt with in strictest confidentiality Other Countries 116 Appendix How long is the average period from innovation idea to full implementation ? a) b) c) d) e) f) Less than months – months – 12 months – years – years More than years [ [ [ [ [ [ 13 What % of your new products introduced over the last years were successful commercially ? ] ] ] ] ] ] a) b) c) d) Less than months – 12 months – years – years More than years [ [ [ [ [ ] ] ] ] ] a) b) c) d) 11 Did you receive any government assistance / support for innovation activities over the last years? Yes [ ] No [ [ ] No [ ] ] ] ] Below 25% 25% - 49% 50% - 74% 75% and above [ [ [ [ ] ] ] ] 15 What % of your innovation projects over the last years were implemented within the original budget ? ] a) b) c) d) 12 Did your enterprise receive venture capital or business angel investment over the last years ? Yes [ [ [ [ 14 What % of your innovation projects over the last years were completed on or earlier than scheduled ? 10 What is the estimated average payback period for your innovation projects? a) b) c) d) e) Below 25% 25% - 49% 50% - 74% 75% and above Below 25% 25% - 49% 50% - 74% 75% and above [ [ [ [ ] ] ] ] ] 16 Please indicate the degree of importance of the following as objectives for undertaking innovation projects in the last years a) b) c) d) e) f) g) h) i) j) k) l) m) Replace products being phased out Improved product quality Extend product range Open up new markets or increase market share Fulfill regulations & standards Improve cycle time Improve production flexibility Reduce production cost Reduce material consumption / improve yield Reduce energy consumption Reduce environment effects Improve work conditions for employees Others (Please elaborate: ) Not Relevant 0 0 Not Important 1 1 2 2 3 3 Very Important 5 5 0 0 1 1 2 2 3 3 4 4 5 5 0 0 1 1 2 2 3 3 4 4 5 5 17 Did you encounter any serious problems in your innovation project over the last years ? Yes [ ] No [ ] All information will be dealt with in strictest confidentiality 117 Appendix If yes, please indicate if this has resulted in the project (s) a) b) c) Not even started Seriously delayed Terminated Yes [ ] [ ] [ ] No [ ] [ ] [ ] If you answer yes for at least one of the above, please circle the relevant factors below a) b) c) d) e) f) g) h) i) j) k) Perceived risks too high Perceived cost too high Lack of access to financing Internal resistance to innovate Organizational rigidities Lack of qualified personnel Lack of information on technology Excessive government regulations Lack of information on markets Lack of customer interests in innovation Others (Please elaborate: _) Not Significant factor 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 Significant factor 5 5 5 5 5 C Internal Environment for Innovation Please characterize your internal environment for innovation in your organization I agree Strongly a) b) c) d) e) f) g) h) i) Our employees are very open to changes and new ideas Our compensation system is oriented towards rewarding employees for being innovative Our top management is highly supportive of innovation Our middle management constantly delivers innovative proposals to the top Our corporate performance measurement system closely monitors our innovation performance We encourage intrapreneurship among our employees Our management strongly advocates the use of IT in innovating our business processes We have in place a good process for managing innovation projects Our management tolerates failure and encourages our staff to learn from mistakes I disagree strongly 5 5 5 5 Has your company implemented an employee stock option / share ownership program? No [ ] Yes [ ] If yes, (a) for selected personnel only [ (b) for all employees regardless of ranks [ ] ] All information will be dealt with in strictest confidentiality 118 Appendix D External Co-operation in Innovation Where did you acquire information for innovation during the last three years? (please, one tick in each row) not used not important a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) 0 0 0 0 0 0 0 1 1 1 1 1 1 1 2 2 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4 4 4 4 4 How intensely you cooperate with any of the following external parties in your innovation activities? a) b) c) d) e) f) g) h) i) Sources within the enterprise Parent/associate companies Clients Locally-owned suppliers Foreign-owned suppliers Universities or other higher education institutes Government or private non-profit research institutes Business Service Providers (mgmt consultants, mkt research) Technical service providers Competitors Patent disclosures Fairs and exhibitions Professional conferences & meetings Specialist literature (journals, monographs etc.) Internet very important Customers, buyers Locally-owned suppliers Foreign-owned suppliers Parent/associate company overseas R&D institutes/ universities Business Service Providers (management consultants, market research, etc.) Technical Service Providers (engineering consultants, IT svc, etc.) Competitors Other firms Product Innovation not at all intense 4 4 5 5 Process Innovation not at all intense 4 4 5 5 5 5 1 2 3 4 5 1 2 3 4 5 Please indicate where your innovation collaboration partners are located regionally (Please √ only locations that are applicable, i.e only those who collaborate on innovation with you) Region a) b) c) d) e) f) g) h) i) Penang Other SingaMalaysia pore Other ASEAN Other Asia North Europe Rest of America World Customers, buyers Locally-owned suppliers Foreign-owned suppliers Parent/associate company R&D institutes/ universities Business Service Providers (mgmt consultants, market research, etc.) Technical Service Providers (e.g engineering consultants, IT services) Competitors Other firms 119 Appendix Please indicate which of the following collaboration partners are important for the following phases of innovation activities (Please √ all applicable for each innovation phase) General information exchange a) b) c) c) d) e) f) g) h) g) Prototype development Pilot application Market introduction Customers/buyers Locally-owned suppliers Foreign-owned suppliers Parent/associate co overseas R&D institutes/ universities Business services providers Technical service providers Competitors Others Share / reduce risk & cost Entering new technology fields Know-how transfer Faster time to market Pool Financial resources Establish long term strategic partnership Others (Please elaborate: _) Not Important 2 2 2 3 3 3 Very Important 5 5 5 In which form and how frequently you cultivate contacts to your most important co-operation partner? (One tick per line, please!) a) b) c) d) e) f) g) h) i) Conception/ Front-end development What reasons were central to your co-operation with other partners ? a) b) c) d) e) f) Generation of new ideas Contact by letter Email/Internet Contact by phone Conferences Visits Business lunches Common business trips Video-conferencing Private contacts daily [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] weekly [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] monthly [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] seldom [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] never [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] What problems, if any, did your enterprise have in collaborating with other external parties in innovation? a) b) c) d) e) f) g) h) i) j) Problem with project management Budgeted cost overrun Unintentional knowledge leakage Coordination difficulty Different capability Confidential relation/secrecy Intellectual property rights negotiation problems Loss of independence Inability to keep to original schedule Others (Please elaborate: _) Not Serious 1 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 4 Very Serious 5 5 5 5 5 120 Appendix E Innovation Environment of Penang How you assess the current business environment in Penang for innovation activities? a) bi) bii) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q) Availability of government incentives for innovation Availability of suitable manpower - in scientific-technical sector - in business sector Technological sophistication of local suppliers Consultancy support services Local university for technical support and R&D collaboration R&D institutions for technical support and R&D collaboration Availability of other technical supporting services Tolerance for failure (e.g please elaborate: _) Attitude of people towards innovation Openness of customers to innovation Openness of suppliers to innovation Openness of government departments & regulatory authorities to innovation Intellectual property protection Quality of telecoms & IT services for enabling innovation Availability of finance for innovation (e.g venture capital) Listing requirements on KL stock exchange Others (Please elaborate: ) Poor Good 4 1 2 3 4 5 5 5 1 2 3 4 5 5 1 1 2 2 3 3 4 4 5 5 What you think the government can to promote innovation activities in Penang? In order for us to send you a free copy of the Research Report, we kindly require you to furnish us with the following details in order for us to contact you A self-addressed stamped envelope has been enclosed for your convenience Alternatively, you can also fax your completed survey form to (604) 226-7042 If you have any queries regarding the survey form, not hesitate to phone Ms Tasha Merican or Mr Terence Too from the Socio-Economic Research Institute at (604) 228 3306 or email seripg@tm.net.my Name : Tel : _ Fax : Designation: Email : Name of Company: _ 121 [...]... Drawing on a survey collected from manufacturing firms in Singapore and Malaysia, which solicited responses from their top management on technological innovation characteristics, I deal with subsidiary- level innovation management behavior rather than investigating at the national or headquarter level The central thesis is to examine what similar innovation management practices these subsidiary companies... This chapter begins with a clear definition for innovation, innovating firms and the national innovation system Further, after portraying national systems of innovation in the US, Europe and Japan, it is pointed out that innovation is a complicated economic activity that deserves further study on its diverse management behavior The combination of culture, firm-specific factors and national innovation. .. essentially a knowledge-creating process (Nonaka and Takeuchi, 1995), and it can be either product innovation/ process innovation (Abernathy, 1978), or organizational innovation (managerial innovation) /technical innovation (Van de Ven, 1986) This empirical study focuses on technical innovations The components of innovation classification are complementary and intertwined According to industrial organization... provides a general overview of the relationships hypothesized in the study with a structural model The primary components explaining innovation management behavior in this model are subsidiary location, age, size, export intensity, industry sector, subsidiary human capital intensity, internal innovation climate and nationality 27 Figure 3.1 Subsidiary Nationality and Innovation Management Behavior: A Framework... environment at the business unit level 2.3 MNC INNOVATION MANAGEMENT The globalization of innovation has no longer been a new phenomenon (Florida and Kenney, 1994) Specially, since the latter part of last century, international companies came to realize that management of innovation and technology is essential for achieving sustainable competitive advantage (Barney, 1991; Bartlett and Ghoshal, 1986, 1998; Cantwell,... to adapt to local markets Though the literature largely deals with cross- cultural management at national or corporate headquarter level, these macro -level features can be partially carried on to and reflected at the subsidiary level 2.3.1 Universal Innovation Management: An Illusion? The keen competition in the knowledge economy and the rapid growth of global business in emerging markets put the innovation. .. includes national scientific and institutional infrastructure such as availability of venture capital for innovative activities (Bartholomew, 1997) Its wide-angle coverage makes it “multifaceted, ingrained and wide-ranging” (Shapira et al., 2001) In a word, the government acts as a catalyst with its national innovation system as the tool (Porter, 1980) 2.2.2 The US, European and Japanese National Innovation. .. organizational innovation is hardware and software (Urabe, 1988) Technical innovation often involves radical product innovation, but it cannot sustain long without new way or system towards technology and strategy, i.e., managerial innovation In contrast, a typical managerial innovation is commonly an incremental one 2.1.2 Innovating Firms According to the widely accepted Oslo Manual by the Organization... systems explain a substantial part in this process 25 In the second section, I review the difference in innovation management for MNCs with various national bases as well as the factors that distinguish an assortment of innovation behaviors from each other It is further shown that from the stand of international business, MNC subsidiaries are playing more roles in the creative process rather than simply... Negandhi, 1983) Recent advances in strategic management theory are represented by a remarkable volume of literature on how to manage international firms effectively (e.g., Hamel et al., 1989), among which transnational innovation management is a focus (e.g., Porter and Stern, 2001) With national innovation systems working at a high level, MNCs concurrently develop their own styles of deploying innovation ... NATIONALITY, HUMAN CAPITAL INTENSITY AND INTERNAL INNOVATION CLIMATE 29 3.3 HUMAN CAPITAL INTENSITY, INTERNAL INNOVATION CLIMATE AND INNOVATION MANAGEMENT BEHAVIOR 30 3.4 NATIONALITY AND INNOVATION. .. subsidiary- level innovation management behavior rather than investigating at the national or headquarter level The central thesis is to examine what similar innovation management practices these subsidiary. .. subsidiary human capital intensity, internal innovation climate and nationality 27 Figure 3.1 Subsidiary Nationality and Innovation Management Behavior: A Framework for Analysis CONTROL VARIABLES