External technology acquisition; Catching-up; Innovation performance; Chinese auto firms
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Table 5 Characteristics of the technological capability accumulation
 Deconstruction  
Figure 1 Technological catching-up process of GEELY 4.2. External technology acquisition strategies of GEELY Cooperative R&D In 2002, GEELY cooperated with Italian Auto Group to learn complete vehicle development process from design drawings to prototype with all IP rights. In 2003, GEELY reached another cooperation agreement with Germany Luc to absorb creative shaping and engineering feasibility analysis. Following this, Daewoo helped GEELY to complete design and develop stamping molds, weld lines, and practice concurrent engineering, Wooshin helped to improve manufacturing process, and Ta Metal transformed appearance of GEELY car more attractive. When introducing London Taxi TX4 to Hong Kong, GEELY developed LPG engine and supply system with Hong Kong Productivity Promotion Bureau (HKPPB), which reduced R&D cost by large-scale utilizing personnel, equipment and experience of HKPPB. GEELY accessed to cutting-edge technology through communication with research institutes, such as GEELY-Tongji Automotive Engineering Research Institute was established in 2007 to help GEELY in personnel training, product design, key components and vehicles development and test. As Conghui An, CEO of GEELY, said, “We want to make all-round cooperation in various forms with MNEs on basis of cultivating self-brand." GEELY learned standardized R&D process and completed design, development and manufacturing work of Beauty Leopard and Freeship, chassis optimization of Ulio.
On the backdrop of international financial crisis, value of many companies are seriously underestimated, consequently M&A strategy can access to brand, core technology and marketing channels at a lower cost. In 2006, GEELY purchased Manganese Bronze Holdings, a company with hundred year’s history in taxi and production of body for Rolls-Royce, which helped GEELY accumulate experience in global operations of subsequent acquisitions. In 2009, GEELY made a wholly-owned acquisition of DSI, to fill the blank of high-end AT in China. GEELY restored supply to Ford firstly, and then introduced DSI products to provide Chinese auto companies, also provided financial support in new product development to further enrich product line. After acquiring Volvo Cars in 2010, GEELY and Volvo Cars announced that GEELY will use advanced technology authorized by Volvo to raise quality of GEELY cars and build high-end self-brand. The two sides actively promoted collaborative development of small-displacement, high-performance and green engine, environment-friendly small car platform, as well as electric, hybrid, plug-in hybrid and other new energy technology. This technology transfer from Volvo to GEELY is the first time for MNEs transferring advanced technology to Chinese local firms.
GEELY implemented "1+1+1" operation platform creatively, which uses local suppliers advantages, combined with technology and quality advantages of international suppliers, plus GEELY’s support. At this point, GEELY has established almost 20 auto parts JVs with Faurecia, Mando, Yazaki, Tachi, Shun Cheong, and Yanfeng Visteon in interior, exterior, chassis, electrical areas. GEELY Emgrand, which can meet up with European standards, couldn’t make a great success without important support of outstanding parts supply system. For example, mature technology of Faurecia could achieve rapid matching with GEELY through Zhejiang Limin, one of the JV partners, who have supplied GEELY for several years and is familiar with GEELY’s products and culture. “GEELY occupies a certain proportion of shares”, said Shufu Li, the president of GEELY Auto, which means GEELY is a go-between to express cooperation sincerity. On one hand, this combination of advanced technology and management advantages of foreign parts manufacturers with cost and labor advantages of local parts manufacturers, make GEELY access to better performance and quality of non-key components at lower price; on the other hand GEELY concentrates on core competitiveness of key components as engine and transmission. Talents hunting GEELY not only hunted a large number of experienced talents, also invested in training professionals itself, such as GEELY Technician College, GEELY Automobile Industry School, Beijing GEELY University, and Hainan Sanya Collage, which have cultivated 25% of technical staff for GEELY. Table 6 shows experts GEELY hunted from other companies or institutions in the past few years. Table 6 Several experts hunted from outside
GEELY has accumulated technological capability step by step through different source of technology acquisition (showed in Table 7), and these strategies make GEELY more experienced in acquiring technology from an open environment and utilizing them appropriately. Table 7 Technology Acquisition Strategy of GEELY
By contrast, traditional SOEs in China have been on the road of technology acquisition for more than twenty years, most of which are still struggling with lack of development technology and self-brand competitiveness. One of them is SAIC, the biggest auto group in China, who has set up JVs with VW and GM, acquired SsangYong, and directly purchased technology licenses from Rover. SAIC got familiar with modern management of production during products localization process through establishing JVs with MNEs, and R&D centers of JVs helped train a number of experienced engineers by offering design, engineering and test for SAIC and other Chinese auto companies, still SAIC didn’t grasp development capability completely without corresponding absorptive internal R&D efforts. The original intention of purchasing SsangYong is to acquire related technology to build product development capability for SAIC, meanwhile expanding global market channels. But this attempt also ended up in failure due to lack of overseas M&A experience in transnational management and cultural diversity. After this, SAIC purchased platforms and engine technology directly from Rover to develop vehicle platforms and powertrain. In 2006, SAIC formally launched its first self-brand car Roewe 750 based on inheritance of Rover platform. Later with Roewe 550 launched, SAIC began to emerge from the shadow of Rover, and embarked on the road of independent innovation. From comparative analysis above, we can draw a different technology acquisition patterns between these two auto companies in China (see Table 8). Table 8 Differences of technology acquisition between GEELY and SAIC
4.3. Impact of external technology acquisition on technological innovation performance of GEELY Previous studies suggest that using external technology has strategic benefits, such as avoiding high cost of internal development (Noori, 1990), achieving fast growth (Capon and Glazer, 1987; Granstrand et al., 1992). The extent to which external technology acquisition affects innovation performance may also depend on internal R&D efforts (Cohen and Levinthal, 1990; Girma, 2005; Newey and Shulman, 2004; Sen and Rubenstein, 1990). Furthermore, empirical evidence suggests that a higher level of R&D effort improves ability to convert external technological knowledge into innovation (Mowery et al., 1996; Song et al., 2005; Tsai and Wang, 2008). Based on these studies, we collected GEELY’s data of internal R&D activities and technological innovation achievement during catching-up process. Internal R&D efforts are evaluated with R&D investment, while patent granted data is used to measure technological innovation performance. Table 9 shows during recent five years, GEELY has reached 6.7% on R&D intensity above average level of Chinese auto firms. In addition, R&D human capital occupies 7.8% of total employees in GEELY. By the end of 2011, total patents obtained by GEELY are 4,079, more than 75% of which are concentrated in utility category (see Table 10).
R&D investment of GEELY from 2006 to 2010
Table 10 Obtained patents of GEELY by the end of 2011
Source: SIPO GEELY’s technological catching-up practice shows that external technology acquisition does not necessarily lead to technological innovation. If firms don’t translate acquired technology into technology assets through its own R&D activities, then technology acquisition is meaningless. Technology acquisition is no substitutes for R&D activities correspondingly, and actual development process (design, experimenting, and testing) also must be conducted completely, which needs financial investment and talents input. By accumulating internal R&D investment over time, firms can expand technological capability (Cohen and Levinthal, 1990; Duysters and Hagedoorn, 2000) and enhance effectiveness of external technology utilization. GEELY spends fewer years to implement technological innovation, and proves that positive impact of external technology acquisition on technological innovation performance increases with the level of internal R&D efforts.
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