Academic journal article Journal of Business Economics and Management

International Spillovers, Knowledge Acquisition and Transfer among Japanese Firms in the United States

Academic journal article Journal of Business Economics and Management

International Spillovers, Knowledge Acquisition and Transfer among Japanese Firms in the United States

Article excerpt

1. Introduction

How firms acquire and transfer knowledge as well as technology has attracted attention among economists and management scholars studying innovation (Vega-Jurado et al. 2009; Phene, Almeida 2008). The literature identifies spillovers as a major mechanism through which firms transfer and acquire knowledge. Theories of endogenous technological change (Grossman, Helpman 1994) demonstrate that since knowledge and technology are partially public, then knowledge can be acquired or produced by another firm without incurring large additional costs. Such spillover effects have attracted much attention but are typically studied using secondary data (e.g. Anselin et al. 1997; Botazzi, Peri 2003). These studies also tend to focus on localized geographical spillovers. In this paper, we propose that international spillovers are becoming significant channels for Japanese multinational enterprises (MNEs) seeking to build their knowledge stock. Such spillovers are achieved through the international sourcing activities of subsidiaries. As such, our first objective is to examine Japanese subsidiaries' knowledge and technology acquisition behavior in the United States (US). Second, MNE's knowledge stock increases if subsidiaries are able to transfer sourced technology back to parent companies in the home country. Yet there are few empirical studies of reverse intra-firm knowledge flows. Our second objective is to examine if modes of knowledge acquired by Japanese subsidiaries in the US have been successfully transferred to parent firms. The paper draws from a survey of 185 subsidiaries undertaken by the authors. Most studies on Japanese MNCs in the US are based on surveys conducted by Japan's Ministry of Trade and Industry surveys (e.g. Iwasa, Odagiri 2004; Todo, Shimizutani 2008). Hence our dataset represents one of the few primary datasets outside of institutional-oriented data.

Early economic studies note that parent firms first develop at home, and then transfer technology to their subsidiaries abroad (Mansfield, Romeo 1980). Studies of the internationalization of innovation in the past have been centered on the nature of knowledge flows from home to host countries. The work of Belderbos and his colleagues (2008) on the internationalization of Japanese R&D, for instance, captures this body of work that emphasizes intra-firm parent to subsidiary transfer of technology. More recently, the business and management literature has found that when oversea subsidiaries are given significant levels of autonomy from their parent companies, and when intra-firm governance structures are less hierarchical, reverse knowledge transfers from subsidiaries to other firms within the MNC network can be significant (Cumings, Teng 2003). The acquisition of international technology is thus concerned with how MNCs successfully source, augment and increase their knowledge stock. We go one step further to determine not only the sources of knowledge spillovers internationally in the US, but the effect of such knowledge on the transfer of product design and R&D capability back to parent firms in Japan.

While Japanese MNCs are one of the most internationalized and innovative among industrialized countries (Porter, Sakakibara 2004), their investment to the US has been motivated by technological concerns: Japanese firms are attracted to US industries that are technology intensive (Kogut, Chang 1991; Jaffe, Trajtenberg 1998). A main reason for this is that international knowledge and technological spillovers from the US contribute significantly to firms' productivity in Japan (Todo, Shimizutani 2008). Compared to American and European firms, the international share of Japanese R&D is still quite low (Cantwell, Zhang 2006). But Japanese firms are also one of the largest R&D investors in the US, that is, they are well ahead of firms from Germany and the United Kingdom (National Science Board 2002). Our focus on Japanese subsidiary activities in the US should therefore shed light on the role of international spillovers on technology acquisition, and intra-firm knowledge transfers among MNCs. …

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