Professional Documents
Culture Documents
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/
info/about/policies/terms.jsp
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content
in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship.
For more information about JSTOR, please contact support@jstor.org.
Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve and extend access to Journal of International
Business Studies.
http://www.jstor.org
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFERIN SERVICES
RobertGrosse*
American GraduateSchool of International Management
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
782
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
783
CHARACTERISTICSOF SERVICESECTORS
Service industriescan be categorized as producerservices,where users are
primarilyother firms- for example,accountingand managementconsulting,
advertising, and engineering, and consumerservices - such as hospitals, hotels
and retail stores. Some of these industries are quite high-tech- such as
computersoftwareand telecommunications,while others are decidedlylowtech - such as insuranceand publicutility provision(though even these often
have high-tech segments). And some of the industriescross the boundary
betweenconsumerand producerservices- such as commercialbanking and
hotels.
Even this fairlyneat distinctionbetweenconsumerand producerservicesfails
to capturethe essentialcomplexityof definingserviceindustries.5Much of the
service provided by these industries includes physical products as well as
'service'. It is easy to see that airline flights provide a service to the user,
namely, transportation from one place to another. It is much more
complicatedto draw the line in computer software.The software itself is a
product,typicallyrecordedon an electronicmediumsuch as a disk or a tape;
however,the adaptation of that software to a client's particularneeds is a
servicethat involvesinteractionbetweenthe sellerand the buyer,and may be
intangible(i.e., trainingin the use of a computerprogram).6
Giventhe difficultyin separatingservicefromproductin manyinstances,let us
defineservicesin a simplemannerfor use as a basictermof reference.A service
is an intangible item that depends to some extent on interaction between the
buyer and the seller for its provision. A product or good, on the other hand, is
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
784
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
785
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
786
TABLE1
Characteristics of Firms in the Five Industries
Measure
Number of firms
Average number of
employees
Officers/staff ratio
Percent of global
business done
in Latin America
Median ownership
Average year of
establishment
Key technology
Advertising
Commercial
Banking
Computer
Software
Hotels
Management
Consulting
14
16
16
10
17
142
172
138
658
245
1/1.1
1/2
1/5
1/17
1/4
10%
100%
11%
100%
14%
100%
16%
100%
17%
100%
1970
1954
Experience
Experience
Mgmt skills
Creativity
Methodology Fin skills
1968
Experience
Mgmt skills
Comp skill
1972
1956
Experience Experience
Methodology
Service
Tech Info
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
787
TABLE2
Key Technology Ranking through the Value-Added Chain
Stage Purchasing
Production
1.
Knowledge/
experience
(28%)
Training(17%)
Knowledge/
experience
(29%)
Methodology
(11%)
3.
Computer
systems (11%)
4.
Technical
information
(9%)
Financial/
forecasting
skills (6%)
Technical
information
(9%)
Financial
skills (9%)
2.
5.
Creativity(8%)
Selling
After-Sale
Service
Market
knowledge,
research (24%)
Contacts/
relationships
(20%)
Company image
(9%)
Contacts/
relationships
(18%)
Market
knowledge/
research (18%)
After-sale
research (9%)
Selling skills
(9%)
Knowledgeof
clients (9%)
Knowledgeof
clients (7%)
Technical
information
(7%)
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
788
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
789
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
790
Means of Technology
*
*
.
.
*
*
*
Transfer
Hardware (machinery)
Software
People transfer
People training
Documentation
Communication
Agreements (permissions)
These means are not mutually exclusive,of course. They may be used in
varying combinationsin differentindustriesand at different stages of the
value-addedchain. In the empiricalsurvey,the mechanismsused to transfer
technology from the home office and other affiliatesto the Latin American
affiliatesweretypicallymultiple,includingin descendingorderof importance:
trainingprograms,manuals,visits by experts,and employmentof expatriates.
Physical machinerywas seldom noted as being important in the transfer
process,nor were formalagreementsbetweenhome officeand affiliate.There
wereno significantdifferencesin rankingsof servicetransfermeansamongthe
industries studied, nor were there differencesat different stages along the
value-addedchain.12
A noteworthyaspect of all of these servicesectorsis that the full servicewas
largelyproducedlocally in each affiliate.That is, the productionprocesswas
not segmentedto put only final processingor assemblyin the local affiliate.
This is largelydue, of course, to the reality that servicesgenerallymust be
provided at the point of sale, rather than 'imported' from elsewhere.
Nevertheless,this means that technologytransferis largelyhorizontalin these
services,passing from one location of full-serviceactivity to another. This
contrastswith manymanufacturingsituations,wherethe value-addedchain is
more dividedacrossaffiliatesof the firm.13
Vehicles or Arrangements14 for Technology
Transfer
The arrangementsfor carrying out the transfer range very broadly from
externalizedforms to those that require some degree of parent-company
equitypresencein the host country.The main vehiclesare listed below:
Vehicles for Technology
.
*
*
*
*
*
Transfer
.
*
*
*
.
.
Exporting
Franchising
Management contract
R&Dcontract
Co-production agreement
Subcontracting
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
791
TABLE3
Organizational Forms Used by TNC Service Firms in Latin America
*
*
*
*
*
*
*
*
(47%)
(13%)
(10%)
(8%)
(7%)
(6%)
(4%)
(5%)
service production or firm specificity as officers/staff- since more officerintensivefirmswerethose that claimedgreateruse of multiple-personteamsin
producingtheirservices- a similarmodel showeda highlysignificant,positive
coefficient (p = .0006) for the independentvariable (officers/staff)and an
R2 = .18 (F= 13.13, p = .001). With both measures,greaterdegree of firm
specificitywas correlatedwith greaterownershippercentagein the affiliate.
ResearchQuestion3: How and why do technology and its transfer
differacrossfirms,industriesand countries?
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
792
It was expected that both technology and transfer methods would differ
betweenfirms with differentcharacteristicsand possibly also betweencountries with differenteconomic and legal characteristics.The primaryemphasis
was placedon examininginter-firmdifferences.
The key technologyitselfwas expectedto differfor firmsin differentindustries.
This turnedout to be true only to the extentthat all sectorsrated'experience'
as the most importanttechnology,whileadvertisingand consultingfirmsrated
'methodology'as the next most importanttechnology,and the others rated
varioustechnologiesin theirorderings.No statisticalinferencesweredrawnon
this point.
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
793
b4 (JOINT) + b5 (COUNTRY),
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
794
TABLE4
Model Results, Determinants of Technology Transfer in Services
\
~~Dependent
\Variable
Indepeindent \Training
\Officers
Variables
Age of affiliate
Internationality of the firm
Percent ownership by TNC
Country of affiliate
Firm specificity
Adj. R2
F-value (prob.)
Number of obs.
-0.563***
(-3.00)
0.430***
(2.75)
-0.381*
(-1.92)
0.195
(1.47)
0.028
(0.22)
0.55
12.87
(0.000)
51
Training
Staff
Visits by
ExpertSa
-0.628***
(-3.25)
0.308*
(1.84)
-0.108
(-0.50)
0.072
(0.50)
-0.213
(-1.57)
0.50
10.45
(0.000)
49
-0.248
(-1.09)
0.186
(1.08)
0.171
(0.76)
0.124
(0.86)
0.048
(0.33)
0.41
7.97
(0.000)
52
aThe model of technology transfer based on 'visits by experts' has produced very weak results. While
the model has a significant F-statistic, the individual factors have insignificant coefficients. This is not
due to multicollinearity since the highest correlation between independent variables is 0.38. The result
is probably due to the fact that 'visits by experts' is a weak measure of technology transfer, and thus
does not model well.
*significant at .10 level; **significant at .05 level; ***significantat .01 level
Coefficients are presented as standardized estimates.
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
795
model using the numberof visits by expertsfrom other affiliatesof the firm
showed reasonable explanatory power, but none of the coefficients were
significant.19
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
796
provided(embeddedin teams of people within the firm). That is, each firm
developsits own global information-processing
systemand methodologiesfor
carryingout its work that link affiliatesworldwideand that tie users to that
firm'ssystem.Advertisementdesignand developmentare not identicalamong
ad agencies, and informationabout each firm'sprocess is possessed by its
professionalsand guarded internally.The methodology for carryingout a
particularmanagementconsultinganalysisis tied to the computersoftwareof
the TNC firm and to expertsin variouslocationsof the firmwho can provide
advicein usingthe givenmethodology.Eventhe methodologyfor clientservice
in an ad agencyis tied to the agency,throughproceduresthat requirein-house
expertisefor computerizeddesignsand even for conductingrelationswith the
mediawhereads areplaced.Acrossthe fiveindustrysectors,the importanceof
methodology for producingand/or deliveringa service was greaterfor the
sectors that rely more on joint provision of the service between the local
affiliateand the home office(or otheraffiliates).
The meansfor transferringkey technologieswerevaried,emphasizingpeopletransfers,that is, trainingprograms,visits by expertsand the employmentof
expatriates.The vehicles or arrangementsfor transferringtechnologyprincipally involvedthe use of wholly owned affiliates,though other arrangements
such as joint venturesand managementcontractswerealso found.The sectors
characterizedby morejoint provisionof their servicesweremore disposedto
use wholly ownedaffiliates.
In the attempt to identify factors that contribute to a greater degree of
technologytransfer,it was found that a more internationalfirm, a largerhost
country, and a more recentlyestablishedaffiliatewere positively correlated
with the transfer of technology. Surprisingly,the lower the percentageof
parent-companyownership,the greaterthe transferof technology.This last
point contrastsnotablywith the experienceof manufacturingindustries,and it
may be due to the need for servicefirmsto bettercontrolor indoctrinatecontractuallylinked(not wholly owned)affiliatesin the global firm'stechnology.
These service-sector results contrast in a number of ways with the
characteristicsof manufacturingand extractiveindustries.Technologyin the
case of servicesis much more often soft, ratherthan embodied in physical
goods. The technologyis most often transferredhorizontallyin servicesectors,
sincemost affiliatesproducemost of the servicelocallyratherthan segmenting
the production process across affiliates as occurs with some frequencyin
manufacturing.Greatertechnologytransfertakesplacebetweenaffiliateswith
lower parent-companyownershipin services,while the opposite is found in
manufacturingstudies.Similaritiesdo exist:for example,the key technologies
in both kinds of industriestend to be divisibleinto product(service),process
and managerialcategories,and people-embodiedtechnologiesseemto be most
importantin both cases.
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
797
8. The head of the local TNC affiliatewas contactedby phone to arrangethe interview,and
eitherthat person or a designeeansweredthe questions.All questionnaireswere writtenand
answered in Spanish, except those translated into Portuguese and used in Brazil. The
questionnaireis availablefrom the authorupon request.
9. Any firm'sbusinessactivitycan be dividedinto the componentsthat comprisethe process
betweenthe purchaseof necessaryinputs to the provisionof the final product or service.A
commercial bank, for instance, buys office equipment, rents or buys office space, hires
personnel,and obtains a variety of other inputs to its business.A bank producesfinancial
services such as depository instrumentsand loans, plus a range of other services such as
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
798
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
INTERNATIONALTECHNOLOGYTRANSFER IN SERVICES
799
REFERENCES
Badaracco,Joseph. 1991. The knowledge link: How firms compete through strategic alliances.
Boston, Mass.:HarvardBusinessSchoolPress.
Baranson,Jack.1978. Technologyand the multinationals. Lexington,Mass.:LexingtonBooks.
Behrman,Jack N. & Harvey Wallender.1976. Transfers of manufacturing technology within
multinational enterprises. Cambridge,Mass.:Ballinger.
Boddewyn, Jean J., M.B. Halbrich & A.C. Perry. 1986. Service multinationals:
measurement,and theory.Journalof InternationalBusiness Studies, 17(3):
Conceptualization,
41-57.
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions
800
This content downloaded from 14.139.237.34 on Sun, 26 Jul 2015 05:21:40 UTC
All use subject to JSTOR Terms and Conditions