Structuring technology strategy and interfirm collaboration : empirical study on Korean high-tech small firms in telecommunications industry

• Main Author: Ryoo, Joohan
• Published: London School of Economics and Political Science (University of London) 2006
• Subjects: 338.761384095195
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.427991

Inter-firm collaboration as a technology-sourcing decision of Korean high-tech small firms receives great attention as its strategic importance to the technological innovation and economic growth of Korean economy is growing immensely. However, there exists no extensive data and in-depth analysis of under what conditions the decision-makers actually choose technology alliance, or vice versa. This question remains unanswered because existing studies fail to specify cases under which technology-sourcing decision is employed as well as the scope of technological collaboration. This study is the first attempt to tackle these problems by providing a comprehensive framework to guide decision-makers in making appropriate technology strategy. As a first step, this study investigated how and whether the existing decision-makers would have a clear set of decision rules between in-house development and technology alliance and equity alliance and non-equity alliance. To achieve this, extensive literature reviews were undertaken and some consultation from industry experts was carried out. Then, this study developed a two-staged contingency model which denotes that the decision-makers are likely to go through two sequential and contiguous steps until they reach their final decision. Drawing on the decision-makers' perception of their firms' internal condition, external environment and technology projects, 11 factors and 5 factors were identified as determinants in stage One and in stage Two respectively. The result shows that, in the first stage of decision-making, in-house development was preferred when the firms perceived that their technological capability was strong; while technology alliance was preferred when they perceived that they were more entrepreneurially-oriented, when the projects required specialised asset investment and the technology project was highly risky. In addition, the pressure for social legitimacy influenced their decision to undertake technology alliance. In the second stage of decision-making, equity alliance was preferred what the firms perceived that the scope of the cooperative project was wider, while non-equity alliance was preferred when they perceived some degree of mutual trust with potential partners. Apart from identifying the determinants, this study found that technology cooperation is not widely adopted as a technology-sourcing method compared to in-house development; only one in five responding firms is adopting it. That is because, unless the responding firms perceive that they are technologically far less capable, inter-firm, collaboration is not an attractive option for them even if their technology development projects are in a condition that is favourable for adopting inter-firm collaboration. This study suggests that studies on small firm's inter-firm collaboration and technology-sourcing decision should be led into a new direction. First, they should be based on the careful selection of sample firms and scope of technological collaboration. Second, theoretical integration is essential to understand the complex nature of their technology-sourcing decision. Third, unlike in other studies, the transaction cost (TC) perspective is still powerful in explaining the antecedents; economising is still the most important consideration in a small firm's technology-sourcing decision. Finally, a normative and rationalised approach to the alliance studies has been the major methodology in alliance studies, however, the qualitative approach is becoming more important as the use of formal collaboration is less frequent and the firms exchange relevant information through informal relationships that may exist within their industrial clusters, whose phenomenon can be hard to grasp through statistical analysis.