TECHNOLOGY UPGRADING
AND THE DEVELOPMENT OF
REGIONAL ECONOMIES
John W. Medcof, Ph.D.
The Michael G. DeGroote School of
Business
McMaster University
Hamilton, Canada
Technology Upgrading
1.0
2.0
3.0
4.0
5.0
Introduction
Manufacturing Context
International Business Studies
The Chinese Context
Conclusions
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1.0 Introduction
Technology Upgrading
Technology upgrading is the use of increasingly
complex technologies in products and
processes, and the development of the
increasingly sophisticated managerial and
organizational capabilities needed to leverage
those technologies for competitive advantage.
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Technology Upgrading
Customer Technical Support
Manufacturing
Product and Process Adaptation
Product and Process Development
Basic Research
Product Mandate
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Clusters/Regions
“Clusters are geographic concentrations of
interconnected companies and institutions
in a particular field”
Porter (1998)
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Clusters/Regions
Silicon Valley
Automobile Cluster in Detroit
Hsinchu Industrial Park, Taiwan
IT Cluster, Bangalore, India
Zhongguancun Zone, Beijing
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Clusters/Regions
Governments foster the development of
clusters/regions for their positive economic
effects.
They attract:
Domestic Firms
Subsidiaries of MNC’s
New Start-ups
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Subsidiaries of MNC’s
Usually enter as low value-added
operations:
Basic Manufacturing
or
Sales
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Subsidiaries with Upgraded Technology
1. Contribute more economic value-added to
their clusters
2. Provide greater value-added technological
and managerial spillover to their clusters
3. Are less likely to be closed in difficult
economic times
4. Have positive spillover effects on sister
subsidiaries and their firms in general
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Technology Upgrading in MNC
Subsidiaries
What do we know?
How do you do it?
What are the policy implications?
Implications in the Chinese context?
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Technology Upgrading
1.0
2.0
3.0
4.0
5.0
Introduction
Manufacturing Context
International Business Studies
The Chinese Context
Conclusions
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2.0 Manufacturing Context
2.1
Taggart (1998)
2.2
Coughlan and Brady (1996)
2.3
Song (2002)
2.4
Ferdows (1997)
2.5
Noori (1998)
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3.0 International Business Studies
1.
Delaney (1998)
2.
Birkinshaw and Hood (1998)
3.
Birkinshaw (1998)
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4.0 The Chinese Context
1.0
2.0
3.0
4.0
Xie and Wu (2003)
Xie and White (2004)
Zhou and Xin (2003)
Humphrey and Schmitz (2002)
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5.0 Conclusions
1.
2.
3.
4.
5.
6.
7.
Subsidiaries evolve: mandates & capabilities change
Headquarters, subsidiary, host country roles
Technology upgrading can drive subsidiary evolution
Organizational and managerial capabilities as
important as the technology itself
Technology upgrades enhance the cluster
Manufacturing and other platforms for tech upgrade
Entrepreneurial subsidiary managers
continued……
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5.0 Conclusions
……continued
8.
9.
10.
11.
12.
13.
Lobbying at headquarters: credibility & support
Collaboration with suppliers: capabilities & support
Collaborating and lobbying sister subsidiaries
Domestic market important in China: subsidiary power
Subsidiary research in Europe and North America
Learning from subsidiaries important to Chinese
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5.0 Conclusions
Policy Implications
1.
2.
3.
4.
5.
6.
7.
Policy should foster subsidiary technology upgrading
Initial agreements for location should foster upgrading
Clearly articulate support for upgrading
Facilitate communication and travel for subsidiary
Facilitate collaboration with local suppliers
Facilitate accomplishment of initial mission
Facilitate spillover of managerial &organizational skills
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5.0 Conclusions
Research Implications
1.
2.
3.
4.
Lack of research on subsidiary technology upgrading
in China:
Does it occur?
Different from European/American?
Does current Chinese policy adequately foster
technology upgrading
Role of relationship building with government
Power relationships between domestic firms and
subsidiaries
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