Trans-specialization understanding & mobile alliances

Trans-specialization understanding
in international technology alliances:
The influence of cultural distance
Lew, Yong Kyu, Rudolf R. Sinkovics, Mo Yamin, and Zaheer Khan (2016),
"Trans-specialization understanding in international technology
alliances: The influence of cultural distance," Journal of International
Business Studies, 47 (5), 577-594. (DOI: 10.1057/jibs.2016.10).
http://dx.doi.org/10.1057/jibs.2016.10
Lew et al. 2016 - http://dx.doi.org/10.1057/jibs.2016.10 1

Authors

Authors — Lew, Sinkovics, Yamin, Khan
• Dr Yong Kyu Lew
» Assistant Professor of International Business
Hankuk University of Foreign Studies, Seoul, Republic of Korea
yklew@hufs.ac.kr
yklew01.wix.com/yklew
• Prof Rudolf R. Sinkovics
» Professor of International Business
The University of Manchester, Alliance Manchester Business School
Rudolf.Sinkovics@manchester.ac.uk
www.manchester.ac.uk/research/rudolf.sinkovics
• Prof Mo Yamin
» Professor of International Business
The University of Manchester, Alliance Manchester Business School
Mo.Yamin@manchester.ac.uk
www.manchester.ac.uk/research/mo.yamin
• Dr Zaheer Khan
» Assistant Professor in Strategy & International Business
The University of Sheffield, Sheffield University Management School
Z.khan@sheffield.ac.uk
www.sheffield.ac.uk/management/staff/zkhan

Agenda
 Framing problems
 Research questions
 Modularity, relational governance, and CD and cooperation costs
 Hypotheses and conceptual model
 Methods
 Findings
 Discussion
 Implications
 Future research
 References
 Appendix
5Lew et al. 2016 - http://dx.doi.org/10.1057/jibs.2016.10

Challenges in the mobile devices
sector

Specialized
Knowledge
Specialized
Knowledge
Firm A Firm B
Framing the problem
• In the mobile devices sector, hardware and software firms represent very different
islands of knowledge attributes and specialties.
• An important aspect of the evolution of international business is that capabilities are
increasingly relationship- and network-based rather than solely firm-specific (Cantwell et
al., 2010).
• Important to overcome cultural and institutional differences between partners in
international alliances, and understanding specialization of potential partner.
• Considering the knowledge specialization of a potential partner, it is important how to
develop trans-specialized knowledge that partners mutually understand each other, i.e.,
trans-specialized understanding (TSU).

Motivation and research problem

Framing in this paper
• TSU can be conceptualized as:
» being a limited degree of knowledge sharing  islands of shared
knowledge in a sea of mutual ignorance (Hoopes & Postrel, 1999;
Postrel 2002).
» enabling effective combination of respective specialization to achieve a
mutually desired outcome  enabling partners to work together, but
does not necessarily entail ‘internalization’ of each other’s capabilities.
• In the MNC literature, there has been far more interest in
unidirectional knowledge transfer –
» very little research in international business has explicitly focused on a
knowledge combination issue in MNCs (Buckley & Carter, 2004).
• The literature on international alliances has paid much more
attention to knowledge acquisition and organizational learning.

Research questions
• Knowledge accessing & combination may be a main rationale for many non-
equity based international technology alliances (ITAs).
» although the literature on strategic alliance has paid much more attention to
knowledge acquisition and organizational learning rather than on knowledge
combination.
• Value co-creation in ITAs hinges on the development of TSU.
• Understanding the drivers and antecedent of knowledge sharing (and hence TSU)
in ITAs, and its impact on performance is a useful addition to international
business knowledge.
10
• How can different specializations be combined effectively in
a cross-border setting?
• Does cultural distance (CD) undermine the effectiveness of
knowledge combination in ITAs?
Research question
Lew et al. 2016 - http://dx.doi.org/10.1057/jibs.2016.10

Concepts

Modularity
• International business academics have investigated modularity in the context of
global sourcing and global production network - they focus on MNCs’ location
and lead firms’ relationships with modular suppliers in the vertical context.
• What is modularity?
 ‘An attribute of […] designing structures based on minimizing interdependence
between modules and maximizing interdependence within them that can be
mixed and matched to obtain new conﬁgurations without loss of the system’s
functionality’ (Campagnolo & Camuffo, 2010: 259).
 Physical/logical component separablility and re-combinability (Baldwin &
Clark, 1997).

Modularity
• Benefits of modularity
 Contribution to the value co-creation in terms of separable and re-combinable characters
 increase the visibility of the product development process and thus facilitate
collaboration (Jacobides et al., 2006).
 Reducing product design complexity  enhancing product development speed whilst
decreasing new product development cost (Ethiraj et al., 2008)  reducing technological
adaptation and learning costs, thus facilitating collaboration at a network level.
• It may not be necessary to understand an entire set of the partner’s knowledge.
 TSU may suffice, and it helps avoid ‘technological glitches’ in the alliance (Hoopes & Postrel,
1999).
 Product modularity makes it easier to develop shared knowledge that partners can mutually
understand.

Relational governance
• Inter-firm governance mechanisms are premised on an appropriate socialization
process, social interaction, and ties which help generate trust and commitment to
partners (Heiman & Nickerson, 2004).
• Some alliances have an organizational learning rationale, whereby partners seek to
learn and acquire capabilities from each other (Grant & Baden-fuller, 2004).
 Alliances that are more intent on the combination of existing knowledge base of
partners will be less vulnerable to opportunism.
 In knowledge-combining alliances, long-term cooperation is perceived as less risky;
partners are not in a “race” to learn faster than each other and hence will be less
anxious that their specialist capabilities may be captured or internalized by their partners.
• As long as knowledge sharing is perceived to generate net benefits for the partners,
they will provide resources and support the nurturing of the relational norms and
socialization necessary for knowledge sharing.

CD and cooperation costs
• CD complicates the process of organizational learning, inter-partner knowledge
transfer, and value creation.
• The impact of CD through its impact on the cost of inter-firm cooperation costs
‘arising from the need to collaborate with a partner’ (White, 2005). Cooperation
costs have two components arising from:
 Task-related coordination needs (e.g., hardware and software engineers) to undertake
joint problem solving to enable the effective combination of partners’ specialization.
 Those costs arising from inter-firm diversity such as CD.
• CD reduces the propensity of individual specialists to seek knowledge from each
other.
• Reluctance to seek knowledge from someone with a different culture can render
knowledge sharing more cumbersome and hence complicate the development of
TSU.

CD and cooperation costs
• CD can affect TSU development indirectly, through an impact on the cost of
cooperation arising from partners’ diversities.
 High CD may make it harder for supportive relational norms to develop (Buckley &
Carter, 2004).
 At high levels of CD, the maintenance of a cooperative inter-partner relationship may
be more resource-intensive, in turn rendering the generation of TSU more costly.
• Modular product design can reduce technology transaction-related hazards and
costs through the integration of knowledge within modules.
 Modular product design in ITAs between specialists facilitates the achievement of
mutually agreed goals for the alliance.
 Product modularity facilitates knowledge combination in ITA, and reduces the need
for intensive interaction between the partnering firms.
 CD between partners (inter-partner diversity) won’t significantly impair the
development of the necessary level of TSU.

Hypotheses and conceptual model

Hypotheses
• Hypothesis 1: There is a positive relationship between relational governance and
TSU development in ITAs.
• Hypothesis 2: The higher the degree of product modularity, the easier it is for ITA
partners to develop TSU.
• Hypothesis 3a: CD negatively affects the development of TSU in ITAs.
• Hypothesis 3b: CD negatively moderates the relationship between relational
governance and TSU.
• Hypothesis 3c: The relationship between product modularity and TSU is not
affected by CD.
• Hypothesis 4: There is a positive relationship between the level of TSU and each
partner’s firm performance.

Conceptual model
19
Trust
Commit-
Social
governance
Relational
Governance
Firm
Performance
ment
H4
Trans-
Specialization
Understanding
H2
Product
Modularity H3b
H1
H3c
Cultural
Distance
H3a

Methods

Methods
• Sampling frame: 879 HW (n=350) and SW (n=529) firms in the mobile computing
industry.
• 110 valid responses – 110 non-equity based ITAs (52 SW and 58 HW firms).
• Non-response bias tests.
• Common method bias test.
• Construct reliability, discriminant and convergent validity tests.
• Latent construct’ s predictive relevance test.
• Partial least structural (PLS) structural equation modeling.
21

Findings

Findings
23
• The results of structural equation modelling support for H1, H2, and H4.
• Relational governance as a viable vehicle for the development of TSU.
• Product modularity facilitates TSU.
• TSU positively affects each partner’s performance.

Findings
24
• CD negatively moderates the relationship between relational governance and TSU.
• No moderating effect of CD on the relationship between product modularity and TSU while the
association between product modularity and TSU is still significant.

Discussion

Discussion
• As different specializations create boundaries across which dialogue and
communication is difficult, TSU needs the nurturing of collaborative interface to
motivate knowledge exchange despite differing specialization.
• An importance of relational governance mechanism for generation of TSU in ITAs.
 Stringent mechanisms for controlling of knowledge protection may not be a major
concern in partnerships aiming to combine disparate specializations.
 CD increases the costs of cooperation between partners, thus CD discourages the
development of TSU.
• Product modularity reduces the complexity of technological interfaces.
 Regardless of CD, challenges in knowledge combinations are eased when product
design and development benefit from modular connectivity between the
specializations.
26

Implications
• The social and technological antecedents and performance consequences of TSU
in the context of international alliances between specialists, and the role of CD
in such context.
• Highly codified scientific and engineering knowledge is not significantly affected
by CD.
• High level of CD is not necessarily lead to significant friction in the
(technological) working relationships between partners in ITAs (Shenkar et al.,
2008).
• Product modularity as having a potential for functioning as a governance
mechanism for specialized knowledge combination in ITAs.
• Product modularity can substitute relational governance when strong relational
norms are not well developed in ITAs.

Future Research
• Worthwhile to investigate the model in a different industry context (e.g.,
automotive manufacturing or aerospace engineering)
• Further studies can expand on CD to include a broader conceptualization, for
instance the CAGE framework or institutional distance.
• The inclusion of control mechanisms (the costs of control) in the model to test a
complete set of interfirm governance mechanisms from economic, social and
technological perspectives.
• Conceptualization of product modularity, e.g. interfacing protocols between
modules.

Resources

Appendix: Country distributions of ITA partners
30
Focal firm country Partner country frequency Focal firm country Partner country frequency
Taiwan USA 23 Japan Taiwan 1
China Taiwan 12 Japan USA 1
Korea USA 8 Korea Canada 1
UK USA 5 Norway USA 1
USA UK 5 Sweden USA 1
Taiwan India 4 Taiwan Germany 1
France USA 2 USA Netherlands 1
Japan Taiwan 2 USA Japan 1
Korea Taiwan 2 USA Canada 1
Taiwan UK 2 USA Taiwan 1
Taiwan USA 2 China USA 1
USA Korea 2 Korea China 1
Ireland USA 2 Morroco USA 1
USA China 2 Taiwan Malaysia 1
Canada USA 1 Taiwan Russia 1
Canada Taiwan 1 UK China 1
China Hong Kong 1 USA Bulgaria 1
Finland USA 1 USA Vietnam 1
Finland Korea 1 USA Russia 1
France Taiwan 1 USA no answer 5
India Japan 1 Finland no answer 1
India Netherlands 1 India no answer 1
India USA 1 Korea no answer 1
Israel Korea 1 110Total

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