The Emergence of Corporate International Networks for the Accumulation of Dispersed Technological Capabilities

Introduction Recent research using the framework of the competence-based approach to the multinational firm has attempted to trace out the technological evolution of large multinational corporations (MNCs) over time as a path-dependent learning process (Cantwell 1989, 1993, 1994). In the course of this process, MNCs move into new technological fields (they become technologically diversified), and they establish innovative activities in multiple geographical sites (their technological activity is internationalised). Some studies have now suggested that in an internationally integrated or 'globalised' MNC, the geographical dispersion of innovation may come to facilitate the technological development of the firm, since the MNC can tap into alternative streams of innovation in different centres, and establish favourable cross-border interactions between them (Cantwell 1995, Zander 1997, Dunning 1996). In this event, the internationalisation of technological activity will go more substantially beyond the role of facilitating the local exploitation of the MNC's core capabilities, and will instead become a more central part of the process by which its capabilities are developed and extended. Elsewhere, we have shown that in fact the causality between the internationalisation and diversification of corporate technology runs in both directions (Cantwell/Piscitello 1997a). That is, the extent to which a firm has diversified its portfolio of technological capabilities influences (as well as being influenced by) the extent to which those capabilities are internationalised, and the linkage running in this other direction has been discussed especially by Granstrand (1998). However, the nature of this relationship has changed historically over time. Until quite recently, diversification and internationalisation could be seen as potential substitutes for one another. Up to the 1960s, increases in corporate competence were associated with either the greater diversification, or the greater internationalisation of technology, but not necessarily both (Cantwell/Piscitello 1997b). The individual firm at any point in time was confronted to some degree with a choice between these two possible strategies for growth and internal development, given that its resources were limited. Today, instead, at least for some corporate technology leaders, these strategies have become essentially complementary to one another, given that the firm's international network has matured sufficiently to provide it with the capacity needed to draw upon the new opportunities in the current international environment for the global or regional integration of activity. Increases in competence, together with its greater dispersion across fields of activity and across geographical sites, are likelier now to be combined, and to mutually reinforce one another. In this paper, we focus on how the emergence of corporate international networks for technological development has led to the diversification or evolution of firm-specific competences into new fields of activity, through a restructuring of innovation across geographical sites to better access the local capabilities of each host country. Thus, we examine how the internationalisation and diversification of corporate technology have currently become more often positively related parts of a common process, rather than alternative ways in which competences might be developed (as it seems that they were in general in the past). While in our earlier studies we relied on a cross-firm statistical investigation over time, using panel data techniques, in this paper we explore the underlying data more closely, to examine at the level of individual firms the variety of associations between internationalisation and diversification that have emerged, today and in the past. We are particularly keen to identify those firms which are in some sense representative of the wider change in average behaviour, and in which a geographical dispersion of activity is now positively associated with a shift into new technological fields. …