Academic journal article Annals of Business Administrative Science

Mother Factory vs. Model Factory: Comparative Study of International Knowledge Transfer

Academic journal article Annals of Business Administrative Science

Mother Factory vs. Model Factory: Comparative Study of International Knowledge Transfer

Article excerpt

Introduction

The mother factory system is considered to be an organizational capability for transferring Japan's superior production systems overseas (Yamaguchi, 2006). Toyota Motor Corporation (Toyota) is one good example of this system although recently the functions of the system are exhibiting various changes. Conversely, there have been recent examples of Korean companies such as Hyundai Motor Company (Hyundai) that do not use the mother factory system. Rather, they use a different system for knowledge transfer (Jo, 2016; Suh, 2012a). This paper terms this the "model factory system." The main purpose of this study is to compare the mother factory system and the model factory system, as well as to identify their differences. To do so, this paper compares cases of knowledge transfer by Toyota and Hyundai because these two companies are representative in their use of the mother factory system and the model factory system, respectively. When comparing these companies in this analysis, production systems that each company has in the home country are regarded as knowledge.

This paper discusses previous research regarding the transfer of production systems. An analytical framework is derived on the basis of knowledge transfer theory. Using the cases of Toyota and Hyundai, the mother factory system and the model factory system are compared, and their differences are identified. Further, changes to the mother factory system are explained using this same framework.

Transferring the Production System

Multinational corporations (MNCs) have firm-specific advantages in their home countries. MNCs are believed to gain competitiveness overseas by transferring their advantages (Dunning, 1979; Hymer, 1976). Particularly in Japan, the unique management and production systems of Japanese companies are regarded as advantages. How those systems are transferred overseas is broadly discussed (Abo, Itagaki, Kamiyama, Kawamura, & Kumon, 1991; Liker, Fruin, & Adler, 1999; Yamaguchi, 2006). The Japanese production system has been researched for its high performance and productivity (Fukuzawa, 2015; Mukai, 2015), and the mother factory system has been used to transfer production systems overseas (Nakayama, 2003; Oki, 2011, 2015, 2016; Yamaguchi, 2006).

Nakayama (2003) defines the mother factory system (or mother plant system) as a technical support method. Engineers or workers of the mother factory in the home country are sent to overseas manufacturing subsidiaries. They support the technical aspects of manufacturing, including shop floor management.

Yamaguchi (2006) interpreted the mother factory as a system of transferring tacit knowledge from a domestic factory to foreign factory without codifying them. This transfer of tacit knowledge regarding mass production at the mother factory occurs when personnel from the mother factory are sent to overseas factories or when overseas factory workers or managers are sent to the mother factory in the home country for training. In addition, the mother factory coordinates with current organizational routines so that they can be matched to overseas factory environments and are employed effectively.

Oki (2011) focused on the phenomenon of the mother factory competing with overseas factories and its effect on the improvement of competitiveness of the mother factory. Here as well, the mother factory plays a guiding role in the process of improving the productivity of both domestic and overseas factories. In addition, even in a mother factory that does not have a mass-producing function in the home country, it could support overseas production (Oki, 2015).

In contrast, Suh (2012a) analyzed the case of the overseas factory in Hyundai Motor Company of Korea and its Chinese manufacturing subsidiary and identified the existence of a method of transferring production systems to the overseas factory that is different from the mother factory system. The purpose of this system is to transfer Korea's unique production systems overseas (Jo, 2016). …

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