Technological Capability and Learning in Firms

Vietnamese Industries in Transition

Tran Ngoc Ca

• Publisher: Taylor & Francis
• Year: 2019
• Print ISBN: 9781138342743
• eBook ISBN: 9780429800429
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1999, this volume examines technology in developing countries with a focus on Vietnam. One of the world's poorest countries, Vietnam has begun rehabilitation following the Vietnam War. Tran Ngoc Ca had four aims for this study. First, exploration of the development of TC in Vietnamese industrial companies and looks at how the learning process is related to the accumulation of TC. Second to detail links between macro environment factors and micro internal actions of firms and their impact on TC. Third, addressing specific issues in comparison with other developing countries and transitional economies. Fourth and finally, to provide a background for the implementation of policy concerned with enhancing TC acquisition.

1 Introduction

1.1 Technology, technological capability and learning

The question of building up technological capabilities (TC) in developing countries has been addressed by development studies as the technology dimension has become a more visible and important issue. Economic theories based on traditional factors (labour and capital) do not fully explain the phenomena of how developing countries emerge as new actors in the international technological arena. Similarly, dependency theory fails to explain why some developing countries can catch up quite successfully with the industrialised world. For the development of advanced countries in general, and for the rise of newly industrialised countries (NICs) in particular, the role of technological change in economic development has been repeatedly confirmed. There is also much evidence that the need to accumulate TC is crucial for almost all developing countries seeking to achieve more technological and economic development. The original focus on technology transfer and technical choice in technology studies of developing countries has shifted with the recognition that TC acquisition is a pre-condition for successful technology transfer. Moreover, unlike some NICs in Asia and Latin America, not all developing countries have achieved success in the catching-up process. The issue of formulating TC is even more pressing for late-comers. In academic discourse and in the policy-making process, concerned actors are asking questions like: what is the technological capability required by developing countries? what role do these capabilities play in the process of late industrialisation of a poor country? and how can these capabilities be built up?

It is not by chance that the problems of technological capability are seen as pivotal. The question of why some countries are able to create TC that helps them to achieve positive economic performances while others are not, leads the discussion directly to the specific localised nature of each country in the learning process. For each country, in their specific given conditions, the path of development has evolved in a long and painful process of accumulating experience and incremental change. Another question arises: in the same given country, with similar macroeconomics and other political and social conditions, why are some firms productive and quite competitive both locally and internationally while others are not? Rephrasing the question, why are some firms able to learn how to adopt, absorb, adapt and assimilate the processes of external technology, regardless of whether the source is foreign or local? There must be something crucial happening 'behind the gate' of the firms.

These questions suggest important sets of research issues to be investigated in this area. The first is learning process and its aim - the accumulation of TC. To understand the determinants of TC accumulation for countries and firms, it is necessary to look at the learning process and TC acquisition at the firm level with the firm as the main actor in this process. The second set of research issues concerns the firm's interaction with its environment. The acquisition of TC is influenced both by the macro level factors of the environment in which firms operate, and by the specific actions of each firm in the form of its strategic plans and behaviours and its whole learning attitude. This micromacro interactive process is thus a central question to be examined in this book of learning and TC accumulation.

1.2 Vietnam’s context

As one of the poorest countries in the world, Vietnam has recently entered a rehabilitation period after successive wars. Alongside the many radical changes in the international political and economic situation, the country is also undergoing the process of transition from being a centrally planned economy to a market economy. At this turning point in its development, it seems clear that, among other things, technology could and should play a very important role. Again, the questions facing researchers and policy makers in Vietnam are how to build up the TC of the country and how to ensure that the local efforts of a sector or firm contribute significantly to this TC.

As both a developing country and an economy in transition, Vietnam has characteristics similar to both types of country. The combination of these different features may create additional specific conditions for Vietnam's technological development. Another important question, therefore, is how all these factors are related to the learning process and TC accumulation in Vietnamese industrial firms. Examination of this will surely contribute not only to our general understanding of knowledge on learning and TC development in general, but also to a stock of knowledge on developing countries in Southeast Asia, and of transitional economies in the Asian context.

This book seeks to address the problems which Vietnamese firms have to face in the process of building up their TC. Specifically, the book has focused on the learning process of the firms as a core activity for the creation of technological capabilities. The influences of macro- environmental factors on the learning process and the reaction of the firms to these influences have also been examined. On the basis of this analysis, the book suggests some policy implications about conducive environment conditions for learning and TC accumulation.

1.3 Aims and outline

I had four aims in writing this book: first, to examine the development of TC in Vietnamese industrial companies and to look at how the learning process is related to the accumulation of TC; second, to understand the link between macro environment factors and micro internal actions of firms in shaping learning and TC accumulation; third, to address more specific issues relevant to Vietnam's context in comparative perspective with other developing countries, or with transitional economies that may have similar features of technological learning; and finally, to provide a background for elaborating some policy implications and recommendations for those organisations within and outwith Vietnam which are concerned with enhancing TC acquisition in similar settings.

The book has following structure: Chapter 2 deals with the concept of technological capabilities, learning and its characteristics. Chapter 3 presents the research questions and methodologies adopted.

The empirical material of this book starts with Chapter 4 on the country background of Vietnam in its transition. Development of two industries is given in Chapter 5. Chapter 6 addresses the issue of TC accumulation in the Vietnamese firms, their sequence and patterns. The learning process used to acquire these TCs is examined in Chapter 7: patterns, dynamics and the contribution of different learning mechanisms to different TCs. Chapter 8 addresses questions about the reasons behind the patterns of TC accumulation and learning: the influence of external macro factors and firm-level micro factors on firms' learning activities. In Chapter 9, four firm case studies are presented so as to illustrate in more depth the processes of learning and TC acquisition in the context of firms as a whole.

Chapter 10 analyses the findings of this study in comparison to relevant literature, while Chapter 11 draws some conclusions and implications for policy-making, from both firm and country perspectives. This final chapter also suggests some issues for further research concerning TC accumulation and learning in the context of both developing countries and transitional economies.

2 Technological capability of firms, learning and macro environment context

2.1 Technological capabilities (TC): concept and taxonomies

In economics studies, technology has been known as a source of growth, development and wealth for rich nations. Technology is central to regional and economic change, job-creation and job-destruction (Malecki, 1991). In the context of developing countries, until the late 1970s, the agenda of development economics and technology studies had mostly been shaped by neoclassical approaches which emphasised the choice of appropriate technology and technology transfer (Enos, 1991; Fransman, 1985). But the purchase of machinery or capital goods from industrial countries by firms does not of itself contribute to economic development. There must be considerable efforts devoted to learning the new technology, to developing the capability to produce machinery and design capability (Chudnovsky, 1986; Enos & Park, 1988; Fransman, 1986b). As Lall (1987) noted, the efficient development of industry requires a broad range of TC which can be only acquired by a long process of learning.

By the mid 1980s, the above mentioned agenda was questioned and the shortcomings of the conventional concept was criticised in a search for new ways of conceptualising technology studies (Rosenberg, 1976; Nelson & Winter, 1982; Bell & Pavitt, 1992; Fransman, 1995). In this context, technological capabilities became a central question (Fransman & King, 1984, Westphal et al, 1985). Although technology transfer is still a relevant question, particularly in the initial stage of technological development, the need to pay more attention to technological capability has come into the viewfinder of technology studies (Fransman, 1986c & 1995) and as Clark (1985) observed, there has been an explosion of literature on the subject of TC.

According to many studies, TC plays the critical role in sustaining the competitiveness of nations and firms (Hewitt & Wield, 1996). It is the central and decisive factor in creating competitive positions (Ernst & O'Connor, 1989), a key source of competitive strength (Mytelka, 1993). Key TCs are needed for sustained growth, structural transformation and continuous adjustment (UNCTAD, 1990). Especially in conditions of accelerated globalisation of trade and investment, those firms and nations that fail to accumulate their TC cannot maintain the growth, performance and rising knowledge-intensity and change-intensity of industrial production (Dosi & Soete, 1991; Justman & Teubal, 1995; Bell & Pavitt, 1993).

As a result, the concept of TC has come into consideration with increased focus on the factors influencing the acquisition and assimilation of imported technologies, and attempts to achieve progress through mastering, adapting and improving these technologies. Moreover, the efforts of developing countries to introduce new elements in imported technologies has become a decisive factor in their ability to catch up, to seek and sustain a place in a global industry, to compete in the international market (Cooper, 1995).

The questions of TC creation have been dealt with in numerous empirical studies during the 1970s and the 1980s (Katz, 1987b; Lall, 1984). These studies comprise two main types: the large and comprehensive project sponsored by different international organisations, which cover many countries and many industries at the same time, and specific cases which cover certain country, industry and concrete companies in particular. More current works include some regional-based research on the production and technology networking of Japanese firms in Pacific Asia (Baba & Hatashima, 1995), and the technological dynamism and export performance of East and South East Asian economies (Ernst et al, 1997).

Next to these programmes, there are various country studies which have concentrated on the technological development of specific countries in Asia (Lall, 1987; Westphal et al, 1984b & 1985; Enos & Park, 1988; Amsden, 1989; Fransman, 1986a; Bell et al, 1982; Teubal et al, 1986) and many others.

Studies on Latin American countries have been done by Katz et al (1987b), Teitel & Sercovitch (1984), Teubal (1984), Dahlman (1984). In the meantime, Mytelka (1985 & 1992), Langdon (1982 & 1984), and Bennell (1984) have conducted research into some African countries. More recently, there have been noteworthy case studies on Asian NICs (Hobday, 1994, 1995a & 1995b; Ernst, 1995; Ernst et al, 1998).

The purpose of these studies is to look at the technological development of developing countries in general, and/or of most NICs in particular. Different and specific features of development have been considered: industrialisation (Amsden, 1989); the acquisition of TC (its forms, content, etc.) (Katz, 1987b; Lall, 1987; Fransman, 1986a); technological innovation and its contribution to economic performance as measured by export activities (Lall, 1984; Teubal et al, 1986; Ernst et al, 1997); and the adoption and diffusion of imported technology (Enos & Park, 1988).

Most of these empirical studies have provided evidence of the importance of TC (Amsden, 1989; Mytelka, 1985; Lall & Wignaraja, 1994; Hobday, 1993). In contrast, Bell et al (1984) have shown that the majority of nascent industries never achieve maturity in large measure because of a failure to build up adequate TCs. As Amsden (1989) points out in her study on the industrialisation of South Korea, the credo of successful firms is to invest in in-house technological capability. In the World Bank's study on the export of technology by NICs, Lall (1984) noted the significance of TC for export activity.

By the end of the 1980s, many studies suggested different definitions of TC. These definitions are mostly related to the context of developing countries in their effort to formulate a basis for technical change and economic growth.

The most simplified definition of TC is the general ability to undertake a broad range of technological tasks (Lall, 1987). Similarly, TC can be described as a set (or sub-set) of abilities relating to: the understanding of specified technology-related tasks or actions; the transforming of inputs into outputs; and the activities of buying, producing and selling (Fransman, 1986c). Many other studies go further than this definition in giving more detailed and concrete divisions of TC.

In looking at the experiences of South Korea in the acquisition of TC, Westphal et al (1985) identified technological capability as the ability to make effective use of technical knowledge. This inheres, they argue, not in the knowledge that is possessed but more in the use of that knowledge and in the proficiency of its use in production, investment and innovation. The focus of these production, investment and innovation capabilities, thus, is the application of knowledge. Lall (1990, 1992, 1993a, 1993b & 1994a) grouped TC into three main functions: investment, production and linkage within the economy with three degrees of complexity: basic, intermediary and advanced. Fransman (1984a), in his overview of TC in the Third World, suggests the following categories of technological capability:

• the search for available alternative technologies and the selection of the most appropriate technology;
• the mastering of the technology;
• the adaptation of the technology to suit specific production conditions;
• the further development of the technology as a result of minor innovation;
• the institutionalised search for more important innovation with the development of R&D facilities; and
• the conducting of basic research.

Similarly, technological capability is defined by Amsden & Kim (1986) as the ability, embodied in people, to select the appropriate technology, to implement it, to operate the production facilities, to adapt and improve those facilities, and to create new processes and products. Baranson and Roark (1985), in their studies on international technology transfer processes, distinguish different kinds of transfer imparting different capabilities: operational, duplicative and innovative.

Although these definitions adopt different terms and perspectives, they have much in common in the sense that all describe different levels of complexity of technological effort for the recipient (in technology transfer) or for the concerned actors. Also, all see these complexities as increasing with the evolution of technological mastery: from the use of existing technologies (in the broadest sense of use), to the change of existing technologies (through adaptation and assimilation) and, ultimately, to the creation of new technologies (through technological design and R&D).

There are some notable features among the different taxonomies on TC discussed above. These taxonomies have one thing in common: their divisions are all related to abilities to undertake certain functions of the firm. It is not so easy to separate all these taxonomies. It seems that they overlap and duplicate each other. For example, in order to operate (or produce) successfully it is necessary to master and adapt, or, if one wants to change, one should conduct researc...

Table of contents

• Cover
• Half Title
• Dedication
• Title Page
• Copyright Page
• Table of Contents
• Tables and figures
• Preface
• Abbreviations
• Map of Vietnam
• 1 Introduction
• 2 Technological capability of firms, learning and macro environment context
• 3 Research design and methodology
• 4 Historical milestones: Vietnam in transition
• 5 Development of two industries: textile/garment and electronics
• 6 Patterns of building technological capabilities in firms
• 7 Learning mechanisms and TC building
• 8 External factors and learning activities
• 9 Detailed case studies of four firms
• 10 Learning and technological capability in a developing and transitional economy
• 11 Conclusions
• List of appendices
• Bibliography
• Index