Roles of Japanese Assemblers in Transferring
Engineering and Production Management
Capabilities Technology: A case of Toyota
Kriengkrai Techakanont
Faculty of Economics, Thammasat University
17 December 2007
Why?



MNCs view their global production as a
network or GPN
Lack of understanding of the impacts of
being a global production network on
technology transfer
GPN will create new opportunities for host
economies to upgrade their industrial
sectors and promote technological
capabilities
Aims of this research
1.
2.
To study the roles of automobile
assemblers in promoting Thailand as
part of GPN and in transferring
technology
To draw lessons for local parts firms
and policy recommendations for
policy makers to promote the
industry
Thailand’s Automobile Industry
The government had specific and clear
goal to promote the industry
Reliance on foreign firms to promote
supporting industries
Relatively short historical development
Export orientation industry
Integrated into part of global production
network of many firms
Thai Automobile Industry
Sales
Production
Export
Production capacity was
1.57 mil.units in 2006
1,400,000
1,176,840
1,200,000
1,000,000
800,000
682,693
589,126
600,000
539,206
400,000
200,000
14,020
158,130
0
1961
1971
1981
1985
1991
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Car exports by brand (1997-2005)
Mitsubishi Motor
GM
AAT
Toyota
Honda
Isuzu
Nissan
Others
Total
1997
40,072
1,563
570
42,205
1998
63,797
1,213
1,819
2,910
20
48
69,807
1999
60,986
42,785
12,151
6,361
516
1,912
380
125,091
2000
63,541
6,283
49,977
16,031
6,183
5,689
4,590
541
152,835
2002
75,581
33,276
47,333
11,882
10,371
1,348
555
n.a.
180,553
2004
88,033
45,248
73,842
52,682
44,564
26,954
301
n.a.
332,053
2005
88,152
83,836
77,551
151,824
45,216
42,938
829
n.a.
440,715
Production and Export in 2005
Company
Toyota
Mitsubishi
Auto Alliance
(Ford & Mazda)
Isuzu
GM
Year of announcement
to use Thailand as export base
2002
1990s
Annual production
capacity (units)
450,000
208,000
1996
2001
Export in 2005
Main export market
151,824
88,152
Asia, Australia, New Zealand, Ocenea
155,000
77,551
EU , Australia, New Zealand, Ocenea
200,000
160,000
42,938
83,836
Middle East and EU
EU, Africa, Middle East
Australia, New Zealand, and Asia
Data collection (2005-2006)
Visits assemblers (in Japan and
Thailand)
In-depth interview with Toyota staff in
Thailand and Japan
Visits part suppliers
Technology Transfer as a
Knowledge Conversion Process
(Nonaka and Takeuchi 1995, McKelvey 1998)
Codified and
tacit knowledge
of the
Technology
owner
Transferor
Internalization
of knowledge
by the recipient
Codified and
tacit knowledge
of the
Technology
recipient
Recipient
Model of Knowledge Conversion
Nonaka and Takeuchi (1995) proposed SECI model
to analyze knowledge creation process
– Socialization (Tacit-to-Tacit) : Share of tacit knowledge
among individuals
– Externalization (Tacit-to-Explicit) : Articulation of tacit
knowledge to explicit format
– Combination (Explicit-to-Explicit) : Combining of discrete
pieces of explicit knowledge to make a new whole
– Internalization (Explicit-to-Tacit) : Internalization of new
explicit knowledge into individual tacit knowledge
Intra-firm Technology Transfer and
Knowledge Conversion
Headquarter (Assembler in Japan)
Affiliate (Assembler in Thailand)
Explicit knowledge
Explicit knowledge
-Machines
-Product and process design
-Part specification
-Working instruction
-Quality control and standard
-Written documents
Combination
tion
iza
l
a
ern
Ext
Int
e
rna
liza
tion
Tacit knowledge
-Skill of engineering personnel
-Skill of managerial personnel
-Embedded production and
management systems
-Organizational culture
-Other tacit elements
-Machines
-Localized product and process
design
-Localized working instruction
and working standard
Quality control and standard
-Written documents
Internal Internalization
and Externalization
Tacit knowledge
Socialization
-Skill of engineering personnel
-Wkill of managerial personnel
-Production and management
systems
-Organizational culture
-Other tacit elements
Inter-firm Technology Transfer and
Local Capability Formation
Automobile assemblers
Explicit knowledge
Tacit knowledge
Explicit Knowledge
Tacit Knowledge
Socialization
on
ati
liz
na
ter
In
Ex
ter
na
liz
ati
on
Combination
Local suppliers
Explicit knowledge
Tacit knowledge
Explicit Knowledge
Internal internalization
and externalization
Tacit Knowledge
Internal Socialization
Internal Combination
Absorptive Capacity
Intensity of effort
Knowledge base
IMV project
Country
Production model
Start of production
Annual production capacity
Export market
Pickup trucks
August 2004
350,000 (in 2007)
EU, Asia, Oceania, Middle East,
SUV
November 2004
(152,000 export)
and others.
Thai
100,000
Indonesia
Minivan
Asia and Middle East
September 2004
(12,000 export)
120,000 (in 2007)
South Africa
Pickup trucks/SUV
Regions including Europe and Africa
April 2005
(60,000 export)
65,000
Argentina
Pickup trucks/SUV
February 2005
(45,000 export)
Central and South America
Stages of Toyota’s Global
Production
Toyota’s Production and Supply
Network (IMV project)
Processes that are Likely to be
Transferred to Thailand
Process Stages
Individual processes
Product
Development
Concept generation
Product Planning
Product Engineering
Engineering change for local
specification
Process engineering
Production stage
In-house production management
Supplier management
Before
2002
J
J
J
2002
onwards
J
J
J/T
J
J/T
J/T
T
T
T
T
T
Source: Adapted from Mori (2002); Fig. 2, pp. 33, and from interviews with manufacturers.
Toyota’s Roles
Necessity:
– Competition in the world market
– Advance in IT and computer technology
– Pressure to shorten time-to-market
Toyota tries to promote
– More efficient product development
– More efficient production management
Technology transfer is necessary
Toyota’s roles in transferring…
Product engineering and design technology
– Establishment of TTCAP-TH
– Investment 2,700 m.baht
– Train engineers in Japan (more than 200
persons) through “Inter-Company Transfer”
(ICT) Program
– Technology : Toyota Development System
(TDS), V-Comm (Virtual & Visual
Communication), digital mock-up
Toyota’s roles in transferring…
Process engineering and manufacturing
technology
– Train local staff in Japan
– Dispatch Japanese expert to Thailand
Establishment of Global Production Center
– Visual manual
– Lower training cost
– Lower technical support to overseas plant
Establishment of AP-GPC in August 2006
Establishment of TMAP-EM in April 2007
Visual Manual
Training steps
Target of GPC
Toyota’s roles in transferring
technology
Management technology (Toyota Production
System: TPS)
Establishment of “Toyota Academy” in 2004
– In-house training (production skills)
– Train suppliers, dealers, and affiliates (conceptual and
managerial skills)
Diffuse TPS concept to suppliers through
“Toyota Cooperation Club”
Key Successes of Knowledge-sharing
Network
– (1) motivate members to participate and openly share
knowledge (2) prevent free rider problem (3)
efficiently transfer knowledge.
Toyota’s roles in transferring…
Production management technology to
suppliers
– Toyota Cooperation Club
– TPS Activity
– Jishuken activity
Set up a “TPS Promotion Team”
– Provide consultant service to suppliers
– Rove experts to suppliers
Knowledge-sharing Network in Quality Assurance
(QA), Toyota Production System (TPS), and
Quality Control Circle (QCC)
Number of Firms Participated in
TPS Activities
Year
2000
2001
Firms participated
8
12
Leader
2
2
2002
2003
22
40
3
6
2004
2005
2006
44
60
78
8
8
n.a.
TPS Promotion Activity Concept
1) Level up TPS
leaders with TMC
support
2) Each TPS Leader
provide jishuken
training to members
3) Each member do
jisuhken by making a
TPS model line
4) TPS final
presentation
Implications to Local Suppliers
Heighten quality and capacity requirement.
Automakers require design capability
QCD + E + M
Local firms lack of “process engineering”
and “design” capability so they have
limitation to be a part of supplier network
Acquiring foreign technology may be
possible means to sustain business
Support from public sector is necessity
End of Presentation
Questions and comments are
welcome