Choice of International Technology Transfer Mode: A Resource-Based View

If a firm wants to transfer its technology to a foreign country, which mode of transfer will it adopt? Voluminous studies have been conducted on the choice of foreign market entry mode (e.g. Erramilli/Rao 1993, Goodnow/Hansz 1972, Woodcock/Beamish/Makino 1994). Several models of entry mode choice have been constructed for explaining entry behavior (Agarwal/Ramaswami 1992, Anderson/Gatignon 1986, Hill/Hwang/Kim 1990). Many of these studies are biased towards the marketing discipline with emphasis on product and market analysis. Technology transfer is often part of a foreign market entry deal. However, if the major strategic intent of a firm is to transfer its technology across borders, it is doubtful how far the models of market entry are relevant. For example, acquisition of a local company in a foreign country is a rather commonly used strategy of entering into the foreign market, but it is rarely an option for technology transfer. On the contrary, buying a foreign company may be motivated by technology acquisition. According to the Uppsala internationalization model, there are four successive stages of entering a foreign market with increasing resource commitments - irregular export activities, export via independent agents, establishment of an overseas sales subsidiary and overseas production units (Johanson/Wiedersheim-Paul 1975). If a firm intends to transfer a cutting edge technology overseas, as discussed later in the article, it has little choice but uses a transfer mode that demands heavy resource commitments. Thus the model is not applicable in this case. In short, despite some overlaps, the factors influencing international technology transfer are more specific and quite different from those determining foreign market entry. A separate treatment is therefore required. Technology transfer is an important research area. Conceptual models have been developed for examining influences on the effectiveness of technology transfer across nations (Kedia/Bhagat 1988, Tung 1994). Godkin (1988) produces a long list of factors which foster or hinder technology transfer. Tsang (1994) builds up a normative framework for recommending strategies for transferring technology to China. Rather surprisingly, little has been done on constructing a positive model for explaining the selection of technology transfer mode by the transferor. This article is an attempt to fill this literature gap. By using the resource-based perspective, rather than the well established transaction cost approach, it is hoped that the analysis would yield fresh insights. Much of the existing resource-based literature focuses on discussing the sustainability of a firm's competitive advantage (e.g. Amit/Schoemaker 1993, Grant 1991, Peteraf 1993, Reed/DeFillippi 1990). This article shows that the resource-based theory is equally applicable to analyzing a firm's other strategic concerns. The next section examines the nature of technology treating it as one form of firm resources. The resource commitments of different modes of international technology transfer are then discussed. Next, taking into account the major factors influencing the choice of transfer mode, a unified model is constructed. The model is dynamic in the sense that experience learned from a transfer mode has feedback effects on the firm's resources and affects its future transfer mode choice. At the same time, theoretical propositions are formulated in the model. Finally, a few concluding remarks are drawn. Technology as Firm Resources Penrose's (1959) seminal work was published a few decades ago, but only recently have researchers begun to focus on the exploitation of firm-specific resources as the foundation for formulating strategy. Broadly speaking, a firm's resources consist of all its assets, knowledge, employees, information systems, organizational structure, rules, procedures and so forth that are controlled by the firm. There are a number of ways of classifying firm resources. …