Acquiring foreign technology and achieving sustainable local innovation capability: case studies from the Sri Lankan manufacturing industry

Type Thesis or Dissertation - Doctor of Philosophy
Title Acquiring foreign technology and achieving sustainable local innovation capability: case studies from the Sri Lankan manufacturing industry
Publication (Day/Month/Year) 2010
Developing economies promote foreign direct investment (FDI) expecting to
benefit from foreign technology transfers and long-term technology spillovers
to domestic industries. Much FDI does bring in foreign technology; however,
not all host economies have succeeded in leveraging FDI for realizing
domestic technological benefits. Although much is known about technological
effects and absorptive capacities in industrial developed economies far less
is known about how foreign partnerships are managed in firms in less
developed economies.
This thesis investigates the role of technology management practices in
technological development and the technology learning process in local
partner firms in Sri Lanka. The objective is to understand how local partner
firms manage the introduction of foreign technology and develop local
innovation capabilities for sustained technological development. The
research was designed to reveal how international investment partnerships
support technological development, how local partner firms gain
technological benefits from these foreign partnerships, and how local
managers use foreign technology to generate on-going technological
development in their firms.
This study deviates from the norm of using R&D expenditure and number of
patents in analysing absorptive capacity of firms and instead uses the human
capital dimension of absorptive capacity. The research study was designed in
two phases: an initial questionnaire survey followed by a set of case studies.
The first quantitative phase informed the second phase by establishing some
critical issues for deeper exploration. The second phase was designed to
learn from the experiences of successful Sri Lankan firms operating in the
rubber products and garment accessories industries. The case study data
were analysed using a multi-tiered approach that investigated the research
questions within each case study and cross-case analysis for both industries.
The central argument developed from the findings of this study is that the
acquisition of foreign technology from foreign partners provides a base for
innovation to occur in local partner firms but sustained technological
development requires firms to have innovation management capabilities well
embedded in their management practices. The partnerships provide learning
opportunity to develop this capability. Local technology managers of the local
partner firms need to recognize the status of development of their firms and
match partnership activities appropriately according to each firm‟s skills and
capabilities and organisational dominance of the foreign partner firm in the
partnership, clarity of roles in the partnership, and the potential technological
contribution from the foreign partner firm. A consequence is that partnership
strategies need to evolve strategically as local partner firms build innovation
This research contributes to the literature on technology management and
innovation capability by explaining how technology management strategies
should respond to the progression of international partnerships through a
partnership life cycle. The analysis shows how firms dynamically adopt
different management strategies as they progress. It also contributes to the
limited empirical literature in innovation studies on less developed economies
by revealing the forms, the nature, and the importance of innovation
capabilities of firms operating in those economies. The findings of this study
have implications for management practices of local firms with foreign
investments and also inform the policy process that seeks to support spillover
of innovative capabilities to the local industry.

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