MMRCDISCUSSION PAPER SERIES

MMRC-F-15

Exploration through Exploitation in theInternationalization of Product Development Teams:
The Case of Japanese Automakers in the Mid-1990s
Graduate School of Economics, Kyoto University
Yasuo SUGIYAMA
Faculty of Economics, Shinshu University
Daniel Arturo HELLER
December 2004

21COE, University of Tokyo

MMRC Discussion Paper No. 15

Exploration through Exploitationin the Internationalization of
Product Development Teams:
The Case of Japanese Automakers in the Mid-1990s
Graduate School of Economics, Kyoto University
Yasuo SUGIYAMA

Faculty of Economics, Shinshu University
Daniel Arturo HELLER
December 2004
Abstract
Based on quantitative and qualitative analyses of eight development projects, the present paper suggests thattransferring organizational routines to a local development center to utilize home-country knowledge (i.e.,
exploitation) and the acquisition of local knowledge (i.e., exploration) are not necessarily mutually exclusive
activities. We suggest that a mechanism may exist by which the discovery of knowledge occurs to the extent
that routines are transferred. Our hypothesis may be summarized as follows. (1) There is a complementary
relationship between the transfer of organizational patterns and routines from a home country to a local country
and the exploration and acquisition of local knowledge. (2) Complementary interaction is driven as a firm
engages in new local-capability-building modeled on home-country capabilities. (3) Appropriate goals for theinternational distribution of development teams may need to include the setting of learning opportunities withdue consideration given to the ex-post stickiness of local capabilities.
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Sugiyama and Heller

Keywords
internationalization, R&D, multinational corporation (MNC), product-development teams, development
projects, auto parts

I. Introduction1
The purpose of this paper is to investigate the mechanism by which decisions are made regarding the spatial
distribution of product development teams. The paper also analyzes the relationship between the geographicalallocation of product development projects and the overseas capability building of a firm. In particular, thepaper suggests that the utilization of home-country knowledge (i.e., exploitation) by transferring organizationalroutines to a local entity and the acquisition of local knowledge (i.e., exploration) are not necessarily mutually
exclusive activities. Rather, this paper shows that a mechanism may exist by which the discovery of knowledge
occurs to the extent that routines are transferred.
In the product development process, a wide variety of knowledge and information (e.g., newly developed
technology, customer tastes, production methods at the place of production, supplier’s technology andproduction methods, etc.) is searched for and utilized for problem solving (Clark and Fujimoto, 1991). When
products target multiple markets around the world or product development centers have been globalized, thisknowledge and information will necessarily be internationally dispersed. In such cases, the development ofmeans to transfer and deploy such knowledge and information becomes an important managerial concern(Subramaniam and Venkatraman, 2001).
One mechanism that is used to pursue the transfer and deployment of knowledge and information is an1

This discussion paper is a manuscript in its draft form and should only be cited with permission. Please direct
inquiries and comments to <<daniel@econ.shinshu-u.ac.jp>>. The authors would like to express theirappreciation to the various firms and managers that cooperated with the research upon which this paper is based.
This present paper is a revised version of a paper presented on August 29, 2004, at the Mitsubishi Bank
Foundation Conference held at the Toray Human Resource Development Center in Mishima (Shizuoka
Prefecture, Japan) where many helpful comments were received.

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Exploration through Exploitation in the Internationalization of Product Development Teamsinternational product-development team comprised of members, often of different nationalities, who areassigned work in geographically separate development centers. These team members work together to solve
problems and attempt to introduce internationally dispersed difficult-to-transfer knowledge into the productdevelopment process. Globalization of the product-development activities of MNCs, such as through the use of
product-development teams, has been the subject of much research (e.g., Bartlett and Ghoshal, 1989;
Kuemmerle, 1999; Subramaniam and Venkatraman, 2001). The decision on how to distribute internationally themembers of a development team has become an important issue in the strategic allocation of a firm’s resources.
This issue, however, has not been adequately addressed in the literature. With the exception of a few studies
that have examined development projects or development teams (e.g., Subramaniam and Venkatraman, 2001)2,
research on factors that influence the international distribution of R&D resources has tended to use the industry
or firm as the level of analysis. We may summarize the factors that this stream of research has found to
influence R&D distribution into the following four items: (1) linkage of R&D with overseas markets; (2)linkage of R&D with overseas manufacturing facilities; (3) linkage of R&D with overseas universities andother technology sources; and (4) the benefit centralizing R&D in a single location (negative effect) (cf.,Mansfield et al., 1979; Hirschey and Caves, 1981; Pearce, 1989; Odagiri and Yasuda, 1996; Florida, 1997)3.

2

Subramaniam and Venkatraman (2001) view cross-national development teams as a rich media of informationexchange and analyze the relationship between such teams and the tacitness of overseas information. Theyshow that when there is ‘fit’ between these two factors higher product development performance results. Apartfrom this work, the authors have found no other notable studies on this topic.
3
In their seminal work on the determining factors of R&D globalization, Mansfield et al. (1979) showed that theratio of R&D conducted overseas by an American firm had a positive effect on the firm’s overseas sales,
specifically on the sales of overseas subsidiaries. Hirschey and Caves (1981) found that R&D globalization is
influenced by factors such as the ratio of local production in overseas sales, the presence of economies of scale
in R&D (negative effect), and the degree to which it is necessary for a product to be adapted to a local market.
They also found that overseas and domestic R&D have a complementary relationship, and that domestic R&D isgenerally selected when basic research is relatively important or when major changes to a product are needed.
Pearce (1989) investigated the relationship between a firm’s level of local production and its local R&D
expenditure.
More recent work has broadly verified that overseas R&D is used as a means to acquire new technologicalknowledge and capabilities. Various studies have found that the local technological level functions as adetermining factor for the globalization of R&D. For example, in his survey of the U.S. research centers of foreigncompanies, Florida (1997) verified that technological orientations (e.g., development of new products, the3

Sugiyama and Heller
These studies have analyzed the internationalization of R&D as cumulative average values, and have not beenable to investigate the actual influence exerted by each factor. The studies have also not examined more microlevels of analysis, such as a development team, where actual decisions on how to distribute or allocate specifichuman resource are generally carried out.
In an effort to address this hole in the literature, the present paper investigates the international distributionof the development activities of various product-development projects executed by Japanese automakers in the
mid-1990s. Data on auto part units (i.e., part systems) that were developed within a project are first used toinfer where team members were internationally situated based on where the development activities for that part
unit were performed. The data are then used to determine which aspects of the part units and their development
processes influence the international distribution of development activities.
By analyzing the international distribution of development teams at the part systems level, it becomes
possible to consider more clearly identify the factors that influence the international distribution of R&D and
how these factors actually exert their influence. The study allows us to consider the effects of such factors as
the selection of a part unit’s internal layout, the parts connection with the eternal environment, and an
automaker’s relationship with a supplier. The aim of this research is to provide a more micro-level
understanding as an empirical foundation to the current industry- and corporate-level analyses of theinternational division of R&D labor.
To achieve this aim, the paper uses quantitative data to search for factors that influence the international
distribution of development teams. Next, qualitative data largely based on interviews conducted by the firstauthor are used to explore the mechanism by which the factors exert their influence.4 The paper is organized asacquisition of science and technology information) were strong motivations for such centers. Odagiri and Yasuda(1996) showed that many of the above relationships also held for Japanese firms.
4Interviews were conducted between 1997 and 2002 with 29 individuals from a total of 6 firms. Most

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Exploration through Exploitation in the Internationalization of Product Development Teams
follows. The next section reviews the relevant literature on the globalization of product development and theconcepts of exploitation and exploration. The following section briefly explains the paper’s data, its source,
how it has been quantitatively analyzed, and the results that have been obtained. An analysis based on thequalitative data is then introduced. Finally, the paper closes with a discussion of the overall findings of thisresearch and the implications.

II. Internationalization of Product Development, Exploration, and Exploitation
The existing literature on the motivation to internationalize product development approaches the issue fromthe perspective of the function and responsibilities of overseas development centers. We may divide the body ofresearch

into

two

groups.

For

example,Dunning(1988,

1998)

employsthe

traditional

company-specific-advantages perspective to suggest that one motivation for an overseas R&D center is to adapt
home-country advantages to a local country, and uses the traditional location-specific perspective to suggestthat another motivation is to acquire local specific knowledge to be used in the building up of a firm’s
advantages.
Bartlett and Ghoshal (1989) state that the fundamentally different roles of R&D centers establishedto transfer/adapt technology and those established to acquire technology will cause substantial differences inthe source of knowledge that centers need to acquire and posses. Kuemmerle (1999) finds that different
functions of overseas R&D centers, namely either exploiting or augmenting home-base advantages, influence
the factors that determine the international distribution of firm’s development resources. Each of theseresearches are based on the thinking that the function and organization of an overseas subsidiary must be madeto fit with the environment or capabilities of a host country. They implicitly assume that exploiting existing

interviewees were either project managers or managers in a research center.

5Sugiyama and Heller
knowledge or capabilities and searching for new knowledge are mutually exclusive activities.
This implicit assumption of mutual exclusivity is supported by March (1991), which introduced theconcept of an adaptive system (e.g., a firm) switching between two behavioral modes: exploiting existingorganizational routines and searching for new routines. In the implementation of existing routines, firms have atendency to search in the vicinity of existing routines until a satisficing alternative is achieved. However, if
local search does not yield solutions that can sufficiently achieve targets, firms will widen their search foralternatives and the simultaneous experimentation with multiple alternatives may be pursued.5 March (1991)
called the former behavioral mode “exploitation” and the latter “exploration.”
Exploitation refers to the refinement and extension of existing capabilities, technologies, andparadigms. Exploration refers to experimentation with new alternatives. Different levels of standardization oforganizational behavior are required for exploitation and exploration. This difference in the required level ofstandardization connects to the logic that an R&D center’s function and responsibilities should be decided
based on the environment and capabilities of a host country and that the purpose for transferring advantages
and searching for new knowledge will be different for each of a company’s overseas R&D centers.
On the other hand, a limited number of studies focus on the learning that may be accumulated insideof a firm and suggest that the function and responsibilities of an overseas R&D center may evolve over time
(Rondstadt, 1978; Hakanson and Nobel, 1993; Malnight, 1995). If the function and responsibilities of an
overseas R&D center may change through ongoing firm learning, then the relationship between exploitationand exploration becomes ambiguous. These two concepts, while distinct, do not necessarily have to be
5

To increase the rigor of this discussion the distinction between local and non-local must be made clear. The
research stream on the boundaries of search behaviors is related to the issue of routinized search, and it is clearthat choosing a standard for distinguishing between local and non-local is a non-trivial task. For example, a firm’s
technological search behavior may occur even inside of a firm, and it may extend beyond firm boundaries evenwhen technological regions are the same (Rosenkoph and Nerkar, 2001). For the purposes of this paper,
however, we provisionally set aside this issue as an area for future research.

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Exploration through Exploitation in the Internationalization of Product Development Teams
mutually exclusive. It is possible a complementary relationship may exist between them, such as exploration
occurring as exploitation is pursued.
Recent research on changes in organizational routines indirectly supports the contention that there
may be a complementary relationship between exploration and exploitation. Stuart and Podolny (1996) findthat even search in the vicinity of local capabilities and knowledge resulted in changes in organizationalroutines, as search outcomes are reflected in the rewriting of routines. Some researchers view organizationalroutines as containing within them opportunities for change to be introduced (Pentland and Rueter, 1994;
Feldman, 2000).
Pentland and Rueter (1994) consider organizational routines to be the processes by whichorganizational behavior is chosen from a set of possibilities that have been produced by the “grammar” thatguides personal action. In other words, they define a routine not as mindless repetitive work, but rather as“effortful accomplishment.” Feldman (2000) concurs with this description of organizational routines andexamines the feedback effect of the outcomes of organizational routines. From such feedback an organization
can assess the sufficiency of an idea and obtain opportunities to produce new resources, among other benefits.
If, as this research stream suggest, there are many ways in which opportunities for change may be introduced asorganizational routines are executed, then it is possible that new knowledge may be obtainable through the
exploitation of these routines. As such, it is conceivable that exploitation and exploration may becomplementary.
In this paper, we show such exploration through exploitation does indeed exist by identifying the
motivations and mechanisms of the internationalization of product development teams. The remainder of thepaper illustrates that the exploitation of organizational routines through the transfer of knowledge to a local

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Sugiyama and Hellercountry and the acquisition of knowledge in a local country are not necessarily mutually exclusive. Rather, weshow that mechanism may exist where the acquisition and use of local knowledge occurs to the extent thatroutines are transferred to a local country.

III. International Distribution of Development Team Activities and Its
Determinants
1. Research setting and data
This paper investigates the international product-development projects of Japanese automakers in the
mid-1990s. An automobile typically is made up of some 40,000 to 50,000 individual parts, and thus is a highly
complex product to develop. In order to reduce complexity in such complex product development, design andengineering activities within an automaker are generally conducted by various departments that specialize in aparticular function, such as engine, body, electrical systems, etc. However, to enhance the competitiveness of a
product, it is necessary to achieve a high level of product integrity through the integration of these functions(Clark and Fujimoto, 1990).
Typically product development organizations in automakers are organized in a matrix form, where
functional departments are crossed with development projects with one project usually corresponding to one
model (Clark and Fujimoto, 1991; Cusumano and Nobeoka, 1998). With the aim of producing a fully consistentproduct, each development project integrates and packages the knowledge possessed by many different
functional departments and suppliers into the final version of a new vehicle. This research is concerned with
development projects in which members were located in Japan and another country other than Japan.
The development activities that are considered in this research are contained within the development cycleof: design, prototyping, testing, and evaluation. In order to reduce complexity in our analysis, we have left out

8Exploration through Exploitation in the Internationalization of Product Development Teamsother important development activities, such as product concept generation, product planning, production
process engineering, etc. Thus, our consideration of development activities is narrower than what is found in
Clark and Fujimoto (1991).
The broad-based globalization of the product development activities of Japanese automakers began in the
1990s, shortly after these companies began the large-scale globalization of their production activities in the
1980s. For example, the number of people assigned to the North American R&D centers of Japanese
automakers increased dramatically throughout the 1990s (Figure 1). Looking in detail at the case of Honda, inthe late 1980s the company began by using its U.S. development center in a supporting role of its new productdevelopment. The first product led by the U.S. side was introduced to the market in 1996. This product was
highly evaluated as a North American-specific model. Toyota and Nissan also increased their development
centers near Detroit in the 1990s (Table 1), and around this time these facilities began to take responsibility forsome of the North American-specific models of these firms.

<<Figure 1>><<Table 1>>

As mentioned earlier, this paper first utilizes a quantitative approach to reveal the phenomenon in question.
The data used in this analysis was gathered through a questionnaire survey distributed in 1997 and 1998 to six
automakers which were asked to select a representative development project (or projects) that met thefollowing three conditions: (1) the primary market targeted by the vehicle was a first-world country/region

9Sugiyama and Heller
other than Japan, (2) the vehicle was to be produced (assembled) in a manufacturing facility located in thetarget country/region, (3) the target country/region participated in some way in the vehicle’s productdevelopment activities.
In order to reduce any effects due to differences in the period in which the development activities
were conducted, the project population was limited to those projects that developed a vehicle model that was
introduced into the market between 1995 and 1997. To further reduce sampling bias, companies that selected
multiple projects were asked to choose projects that targeted different countries/regions.
Four automakers returned completed questionnaires for a single project, and two automakers
returned completed questionnaires for two separate projects. So, responses were obtained for a total of 8
projects from 6 automakers. In each case, the project manager who had been in charge of the entire projectcompleted the questionnaire.
Detailed data was obtained for 14 different part units in each project, for a total of 112 part units
covered.6 The part units that were surveyed were selected during a pilot study. The questionnaire also inquired
about the extent to which product development activities for each part unit were conducted in Japan oroverseas.
Both before and after the survey was distributed, numerous research visits were made to theautomakers' headquarters, Japanese R&D centers, and overseas R&D centers to interview managers andengineers in the relevant departments. A pilot study was conducted before the questionnaire was written to
determine the appropriate level of analysis for the study and to investigate what would constitute appropriate

6

The 14 part units were: engine, underbody (front), underbody (middle), underbody (rear),transmission/transaxle, suspension (front), suspension (rear), steering, braking, engine control, external
upper-body, interior/trim, seats, instrument panel. Theses part units, while not an inclusive list of all parts of avehicle, cover the most important functions and provide the fundamental basis for product differentiation in theauto industry.

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Exploration through Exploitation in the Internationalization of Product Development Teams
survey methodology. The pilot study also sought to inquire as to how the special characteristics of the auto
industry might influence the spatial distribution of development project activity. Follow-up interviews
conducted after the survey was distributed were used to investigate the process by which determining factors
exerted influence and to explore the underlying mechanism by which this influence was exerted.

2. Specification of variablesMultiple regression analysis was conducted. The extent to which a part unit's development activities wereconducted in Japan or overseas was set as the dependant variable. The distributed location of development
activity can be considered a proxy for the international distribution of a development team. The total number ofengineering processes (steps) that were required to develop a part unit was used as the basis for determining theextent to which a part unit was developed in Japan or overseas. The project manager was asked to circle theappropriate number from 1 to 5 for each part unit: 1 if all of the process steps were carried out in Japan, 3 if
half of the process steps were carried out in Japan and half in the local country, and 5 if all of the process steps
were carried out in the local country.
Factors related to the part units that could influence the international distribution of development activities
in the Japanese auto industry were determined based on a literature review and the pilot study. Six variables
were ultimately selected: design for local adaptation, local production, production outsourcing, supplierparticipation, advanced engineering, and concurrent development. These were used as explanatory variables(dummy variables) and listed on the questionnaire as yes/no questions.7 The following paragraphs describe
each variable and explain how it was operationalized.
7

Only one question was used for each variable. However, each question simply inquired about a specific factual
item. A project manager from one company verified that the question syntax accurately reflected the question
intent. As such, it was deemed that there would not be any significant problems with construct validity.

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Sugiyama and Heller
The design for local adaptation variable captured whether knowledge related to the local market was
actively utilized in the part unit’s development.8 It represents a factor that is frequently cited in the literature asa determinant of the international distribution of development activities. There is a deep relationship between
this factor and a product’s fit with customer needs. Local market needs are met in the auto industry throughdesign changes or new designs being created for the purpose of meeting local needs.
It is important to recognize that local adaptation is ultimately a concept that is based on acompany's perception of local customers. Development activities that are performed in response such
perceptions are generally viewed as “local adaptation.” However, we cannot exclude the possibility that a local
adaptation might sometimes be an unintended but realized result, that is, an emergent phenomenon (Sugiyama,
2001b). As such, specifying the “adaptation” concept is an inherently difficult endeavor. Nevertheless, for thesake of expediency, in this paper we specify local adaptation as an intended design activity. In detail, therespondent was first asked the reason why a design change or new design was executed. If the respondent
answered that there was the intent to adapt to meet customer needs, then the design for local adaptation
variable was set at 1. If the design change or new design was executed without the explicit intent to adapt tomeet local customer needs, then this dummy variable was set at 0.
The local production variable captured the connection between the place where a part unit would
be manufactured and spatial distribution of the development team. In the product development of recent years,
designs that are easy to manufacture (“design for manufacturing”) is very important for realizing production
efficiency and high quality (Clark and Fujimoto, 1991). To achieve this, it is necessary to have frequent
communication between part designers and the production department that will manufacture (assemble) the8

The design for local adaptation variable is the only variable that is related to the product market. The reason forthis is that the act of designing for local needs requires that many different types of market information be
integrated.

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Exploration through Exploitation in the Internationalization of Product Development Teams
part. The place where a part unit would be manufactured was used to verify if the place of part-unit production
was located near to where development activities was performed. If the part unit was produced overseas, thenthe local production variable was set at 1. If the part unit was produced in Japan, then this dummy variable wasset at 0.
The production outsourcing and supplier participation (i.e., development outsourcing) variables
represent factors that are often cited in the literature as determinants of the spatial distribution of development
activities. The issue of the boundary of the firm has been the subject of much attention in recent years. It has
been shown that outsourcing decisions have an important relationship with firm competitiveness (Nishiguchi,
1994; Takeishi, 2002). As such, it was deemed necessary to verify if the production of a part unit was done
in-house or by a supplier. If a supplier produced the part unit, then the production outsourcing variable was set
at 1. If the automaker produced the part unit in-house, then this dummy variable was set at 0.
The relatively high level of development participation of suppliers has been identified as a sourceof the competitiveness of Japanese automakers in particular, and more generally, the effect of supplierparticipation on development performance has been supported by the literature (Clark and Fujimoto, 1991). If a
supplier participated in the development of a part unit by performing the detailed drawing of the part’s design,
the supplier participation variable was set at 1. If the detailed design work was performed by the automaker,
then this variable was set at 0.
The advanced engineering and concurrent development variables were used to represent thepresence of economies of scale provided by a consolidated R&D centers. The concentrated development ofadvanced technology is considered a benefit of having a consolidated R&D center. With few exceptions, theadvanced engineering development centers of Japanese firms, including Japanese suppliers, are located in their

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research centers in Japan. It was expected that this factor would influence the international distribution ofdevelopment teams toward Japan.9 If the advanced engineering development work of an automaker or supplier
was utilized in the part unit, then the advanced engineering variable was set at 1. If no advanced engineering
work was utilized, then this dummy variable was set at 0.
The influence of concurrent development was assessed with the second variable that represented
the benefit of doing consolidated R&D. In particular, the mid-1990s was a period in which many Japanese
automakers promoted inter-project coordination and integration to commonize designs and to achieve otherpurposes. The benefit of concurrent development among development projects has been empirically verified(Cusumano and Nobeoka, 1998). As such, we deemed it important to verify this factor in our study. If the part
unit was common with that of another model being concurrently developed, then the concurrent development
variable was set to 1. If the part unit was not common, then this dummy variable was set to 0.10
The statistical overviews of each project are show in Table 2.11 From this chart is clear that there
are large differences in the international distributions of the development activities of these overseas production
models of Japanese automaker in the mid-1990s. The projects that were covered in this survey each had adifferent role to fulfill in the context of the automaker’s larger product development context, and it is possiblethat these different project roles influenced the distribution of development activity. To check for
project-specific differences, we introduced project dummy variables into our analysis.

9

The literature highlights the importance of the connection between local development and local universities andother technological centers. However, at the time this survey was conducted, there were very few cases where
automakers perceived the need to form a connection with local universities or other technological centers. As
such, this factor was not included in this survey.
10
Concurrent development is defined here as the existence of overlap between the development periods ofseparate projects.
11
Since the amount of development activities (i.e., the number of process steps) was different for each part unit,
simple averages are not the most appropriate measure. However, in the absence of a valid weighting standard
that could be used in place of simple averages, they are used for expediency.

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Exploration through Exploitation in the Internationalization of Product Development Teams<<Table 2>>

3. Results
Model 1 assesses the influence of the project dummy variables only. Model 2 contains all of thevariables. The correlation matrix of the variables in Model 2 is shown in Table 3. The regression results of bothModels 1 and 2 are shown in Table 4.

<<Table 3>><<Table 4>>

The F value for Model 1 is significant at the 1% level, verifying the overall influence of the project
dummy variables. The adjusted R2 for Model 1 is 0.387 indicating that the project dummies explain much of
the variation among projects. This suggests that even for relatively similar development projects (e.g., overseas
market targeted, overseas production), firm differences among automakers and differences in project strategies
have a rather large influence on the international distribution of development activities.
This large effect of firm and project strategy differences may be caused by differences in thecapability levels of overseas development centers and in the scope of the target markets. Even if projects are
similar, wide differences in the capability levels of local development centers may make it such that some
automakers were simply unable to perform some development activities abroad. In addition, although thesurvey covered models that were all targeted primarily at a local market, some of them were closer tolocal-market-specific models, while others were also positioned to target global markets. For Firm Z such a15

Sugiyama and Heller
difference in the targeted markets of its products seems to have strongly influenced the international
distribution of the development activities of each project. For the model that would be assembled globally, ahigher proportion of development activities were executed in Japan even though a local market was targeted as
the primarily market.
We would only expect the project dummies to show any significant effect, however, if development
teams were organized and functioned at least to some degree at the project level. However, the characteristics
of an automobile’s integral product architecture tend to drive such project level management (Clark andFujimoto, 1990, 1991; Fujimoto, 2002). The core parts of an automobile have a high level of interdependency,
and are thus usually developed together and a whole. It is relatively difficult to insert new technologicalelements as independent "modules" into an existing automobile design. New core parts, in particular, need to be
developed to a certain extent as parts of a whole, rather than as independent parts (Henderson and Clark, 1990).
Turning to Model 2, we can see that the adjusted R2 has increased to 0.627 from the 0.387 value ofModel 1. Thus, the fit of the second model is greatly improved over the first. At the individual variable level,
local production and supplier participation are significant at the 1% level. Design for local adaptation andadvanced engineering are significant at the 5% level. The model did not verify any significant explanatory
power for the concurrent development and production outsourcing variables.
The validity of the local production variable verifies that the location or nationality of the
production source exerted an influence on the international distribution of development activities at the part
unit level. The lack of significance for the production outsourcing variable suggests that the firm boundary may
not exert much influence on the international distribution of development work. On the other hand, theinfluence of local supplier participation was verified, even after controlling for local production. The

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Exploration through Exploitation in the Internationalization of Product Development Teams
significance of the design for local adaptation variable verifies the influence of the active utilization local
market knowledge in a part unit’s development.
For the two variables that captured the scale effect of consolidated R&D, the results verified that there is astrong tendency to locate development activity in Japan if advanced engineering is used in a part unit. However,the significance of concurrent development could not be verified. The lack of significance of the concurrent
development variable may suggest an improvement in the capability of development teams to share designs
even when coordination across development teams must be done over spatial distances. At one company,
design work could be managed overseas from the point when advanced engineering had been completed, whichis generally still considered a relatively low level of technological maturity. In the initial years when thecompanies had little experience performing overseas R&D, local development centers were only able toperform development work on relatively mature technologies. However, this limitation appears to be lessening
as the development capabilities of overseas development centers improve.
The quantitative analysis described above verifies the factors that influence the international distribution ofdevelopment work of Japanese automakers in the 1990s. This result shows the influences of the various factors
on the distribution of development work; however, it does not explain the mechanism by which these factors
exert their influences. The following section primarily uses interview data to consider how the formative
processes by which the relationships between the various factors and development activity distribution are
created.

IV. The Mechanism Behind the Revealed Distribution
1. Capability in Japan as the base for utilizing local knowledge
An interview survey was conducted between 1998 and 2002 to illuminate the mechanism by which

17Sugiyama and Heller
influence is exerted by the variables that the quantitative analysis found to be significant in explaining theinternational distribution of development activities. Very interesting results were obtained. Initially, the authors
expected that the observed phenomenon could be explained based on the establishment of appropriate
communication channels according to the stickiness of local knowledge and information. However, theinterview findings did not support this way of thinking. Rather, it was found that local knowledge wasdiscovered through the stimulation caused by the penetration of home-country organizational patterns into a
local development center. Subsequent utilization of this knowledge in development work established a dynamic
relationship between the influencing factors and the distribution of development activities.
The influences of two of the three variables that the previous analysis found to push the localizationof development activities, design for local adaptation and supplier participation, are described next. In doing
so, we seek to explain the relationship between these variables and the transfer of home-country capabilities toa local development center in order to acquire local knowledge.

Design for local adaptation and knowledge about customer needs
Interview results confirmed the findings of the quantitative analysis regarding the positive effect of design
work for local adaptation on the international distribution of development activities. For example, in multiple
projects part units that are more easily influenced by local driving conditions or local customer tastes (i.e.,
suspension, parts related to external and internal styling, etc.), development work was frequently done locally.
One reason that was frequently cited for locating development team members in local development centers
was to incorporate local standards of evaluation into the part unit's design. One manager in a U.S. development
center described these evaluation standards as the “wisdom of daily life” possessed by engineers who lived in18

Exploration through Exploitation in the Internationalization of Product Development Teamsthe local environment. This knowledge possessed by those who live in a particular locale is knowledge orinformation based on first-hand experience and is difficult to suppress.
For example, people in Japan can roughly imagine what it is like to live in artic regions, such as
those found in Alaska or Finland, but few have actual experience living in such an environment. Due to thislack of first-hand experience, an automobile developer from Japan will tend to underestimate or take too lightly
the effects such a harsh environment can have on vehicle performance or durability. Similarly, an engineer in an
automaker's growing U.S. R&D center explained how difficult it was to try to convince Japanese engineers inJapan how people in the U.S. regard the locking of a car's doors and trunk. Differences in the general personal
security conditions of Japan and the U.S. made it very difficult for the U.S. side to explain convincingly how
often Americans tend to lock their cars and how being able to control the locking and unlocking of a car byremote control could be an important feature to local users. At the time, the members of the U.S. R&D center
were ultimately largely unable to communicate this knowledge to the firm’s Japanese engineers in Japan.12
Nevertheless, viewing a local R&D center simply as a means by which to acquire local “wisdom”
appears to fall short in explaining the observed reality. While interviewees did indeed seek to acquire such local
knowledge and information through overseas R&D centers, they sought another, more important, goal at thesame time. This second pursuit was of a phenomenon that can be likened to a “chemical reaction,” which is
explained below.
An interviewee in one of the companies surveyed described the job of a Japanese engineer
dispatched to an overseas R&D center as getting the local designers in charge of styling to understand a
project’s technical limitations.13 During the period when a local R&D center only had a design department
12

Source: Interview with Ron D’Amico of the Nissan Technology Center North America (August 9, 2000).
A designer as described in this paper is generally an industrial designer who is responsible for the whole orsome part of a vehicle’s exterior styling or interior design.
13

19

Sugiyama and Heller
without much engineering capacity, designers would present various advanced concepts. However, often these
proposals would lack sufficient technical design consideration, requiring major revisions when the development
work reached the detailed technical design stage.
By establishing a local design department that could present product concepts, automakers
succeeded in picking up emerging local market needs. However, problems existed in realizing these concepts inthe downstream product development processes. By subsequently locating more product engineers in a local
development center, technical limitations could be communicated more accurately and timely to local designers.
This resulted in the creation of concepts that better took into account technical limitations and ultimately
improved design proposals that could lead to products in which local needs and sensibilities were more directlyreflected.
Another example that illustrates how local development capability can become a base for the generation of
local knowledge is the interpretative process by which a brand image is incorporated into a product as it isdesigned and engineered. A Japanese manager who spent a long time in charge of an automaker's design andengineering management in its U.S. development center described this process as follows.

In short, the kind of capability that is produced by local execution of a project is that people in
the local development center become able to understand what "producing a car" (kuruma
tsukuri) means to that automaker. Which requirements must be met? Where the envelope shouldbe pushed? Or why does a firm put such an emphasis on some particular standard in someparticular area? These kinds of questions get answered as work is being performed. As people
in the local development center experience the cycle of releasing a model into the market andhaving it evaluated there, they become able to share the values and internal standards of product20

Exploration through Exploitation in the Internationalization of Product Development Teams
evaluation of the firm. They become able to share these values not based on understanding
derived from some manual, but rather through intuition. Such knowledge leads to more
forward-looking or positive types of discussions on how to improve product appeal and quality.
These kinds of discussions would occur even when only Americans were participating, that is,
without the presence of any Japanese people.

For local R&D members to understand the relationship between brand image in a local market andproduct engineering, it is necessary for their judgments, which are based on massive amounts ofcontext-specific background knowledge, to be subjected to the objective screening process of market evaluation.
It is true that one of the reasons for performing development activities abroad is to utilize the interpretative
capability of local engineers with their "wisdom of daily living" regarding local market needs. However, it is
not a matter of simply "interpreting" local needs but also of utilizing, verifying, and linking such information
with the accumulated knowledge stored up in an automaker, all done in the appropriate local context.
It would not be accurate to say that the knowledge that exists in the local country simply isequivocal and thus difficult to make explicit. Rather, it is only after knowledge that a company has accumulated
in its home country has been transferred to the local country and reinterpreted by the local side, that sticky local
knowledge is generated and reflected in a project. Thus we may say that local market knowledge is not "sitting
there" simply waiting to be picked up, but rather is "produced" as existing development routines are performedin the context of the local environment.

Local supplier knowledge and supplier participation
In order to utilize the knowledge possessed by local suppliers, an important key was the degree of21

Sugiyama and Heller
penetration of an automaker's organizational routines and inter-organizational patterns that were transferred to
the local country. This was similar to the design for local adaptation case described above.
Local suppliers possess knowledge about part technology and production techniques that appeal tothe unique customer tastes of a country or region. In developed countries and regions such as the U.S. or
Europe, where automakers already have an established history, market tastes are frequently different fromJapan for part units that are highly design-orientated, such as external upper-body and interior. For productsthat are aimed at overseas markets it is necessary for these differences to be properly reflected in productdesigns. Since local supplier tend to have long histories of producing parts that meet local tastes, they often
have extensive accumulated technological know-how on parts that work well in a local market. A project
manager from one automaker described this as follows.

The technology of American suppliers, such as for assembly methods or selection of materials,
is subtly different from that of Japanese suppliers. For example, for door side protection in
Japan push molding is used, but in the U.S. it's done by heat forming. One of the reasons weseek increased development in the U.S. is to grasp this (type of technological difference).

In order to utilize the knowledge of local suppliers, Japanese automakers need to transfer to the local country
the organizational patterns and inter-organizational routines related to the high level of supplier participation in
their vehicle development done in Japan. As is the case in Japan, it is better if this participation of local
suppliers occurs from the early stages of a development project.
Early participation by suppliers allows them to acquire information about the automaker's productat an early stage. This permits the supplier to join with the automaker in solving problems related to producttechnology trends, production issues, or in other areas. Many Japanese automakers make extensive use of early22

Exploration through Exploitation in the Internationalization of Product Development Teamsparticipation of suppliers, sometimes bringing "guest engineers" from a supplier into an R&D center to work
closely together with an automaker's engineers. Solving problems earlier in the development process reduces
developmental costs and lead time (Thomke and Fujimoto, 2000).
One surveyed automaker acquired advanced technological information of local suppliers by hosting
suppler exhibitions inside of its local R&D center and by requiring suppliers to submit 5-year development
plans. This allowed the automaker to understand the technological capabilities of local suppliers and better
incorporate their leading technologies into developmental cycles. By routinizing such activities, an automakercan pursue product development that better takes into account future cost and functional changes, while
suppliers can proceed with technological development that more closely reflects directions in which an
automaker is heading.
The examples described above show how improving the local capabilities of an automaker may
enhance the potential to acquire local knowledge. Built-up local capabilities can be understood to be bundles ofroutines and knowledge that have been reinterpreted within the local environment (von Krogh, Ichijo, andNonaka, 2000; Asakawa, 2001) and may be viewed as a foundational base for acquiring local sticky knowledge.
In other words, we can say that there is a complementary relationship between the capability level that has been
built up locally and the potential to acquire local knowledge.

2. Capability-building process
How then can these local capabilities be built? This section discusses the capability building
process in the case of supplier participation in the North America as revealed in the interviews.
The process by which routines and patterns of high supplier participation were transferred by
Japanese automakers to North America began with the search for local suppliers who would be willing to23

Sugiyama and Heller
participate in product development in this way. Japanese automakers started to build up their North American
development centers in the 1980s. At the time, it was typically the case that even for those types of parts that
had been developed in Japan with a high level of supplier participation, the U.S. Big Three (GM, Ford, andChrysler) would tend to source such parts from American suppliers only after the detailed design work had
been completed internally by the automaker. As a result, it was often the case that few U.S. suppliers were able
to handle the supplier participation requests of the Japanese automakers. Frequently the best Japanese
automakers could do was to choose suppliers that seemed to hold the potential to be able to handle this kind ofwork one day, and then go through the laborious process of assisting these suppliers in building up theirdevelopmental capabilities.
For many of the surveyed automakers, initially the principal work of their local productdevelopment organizations was simply to find suppliers that would be able to produce parts that met therequired quality standards. In this early phase when local development centers were being established andautomakers had only limited experience operating them, generally an automaker would lend already completed
drawings to a local supplier. The local supplier would then manufacture the part. In such cases, it was
impossible for the local knowledge possessed by the supplier to be reflected in the drawings since the drawings
were already finished. The most promising of these local suppliers were retained and after quality and costissues were addressed, organizational and inter-organizational routines related to supplier participation were
subsequently transferred to these suppliers. For these routines to be transferred, it was necessary for an
automaker and a local supplier to iterate problem-solving cycles and routinize the inter-organizational solvingof problems. This could only be done after the automaker had found local suppliers that would be capable ofbuilding up such a capability.

24Exploration through Exploitation in the Internationalization of Product Development Teams
To further explore these issues, we considered the cases where parts were procured from a Japanesesupplier with operations in a local market as compared to purely local suppliers14. Differences were revealed in
the relationships of each group to some of the explanatory variables. As is shown in Tables 5 and 6, the local
operations of the Japanese suppliers were much more likely to have engaged in supplier participation andworked on parts that involved advanced engineering.

<<Table 5>><<Table 6>>

We may interpret these results in the following way. To be able to perform activities that required ahigher technological level (e.g., engage in supplier participation, handle advanced engineering parts), a supplierneeded to possess more complex organizational routines. However, since most local suppliers had not yet fully
established such routines, there was a strong tendency for automakers to select Japanese suppliers that alreadypossessed these routines. In this way, the quantitative data can also been understood as suggesting that it takes
time for routines related to supplier participation and the handling of advanced engineering parts to betransferred overseas.
The various obstacles to the transfer of these routines can be categorized into two types. First, there
are the obstacles that exist inside the automaker. Since routinized behaviors and perceptive frameworks of an
automaker had largely become implicit parts of an automakers way of doing business, it was often difficult for

14

To test this argument, we limited the data used in Section III to only those samples representing part units thatwere manufactured by a supplier.

25

Sugiyama and Heller
an automaker to grasp the relationship of these behaviors and frameworks to its competitive advantages. Thus,
there were even instances where the side that was responsible for transferring the routines did not understandtheir structural composition or importance to competitiveness.
In the process of preparing to transfer overseas its routines related to supplier participation, one
automaker discovered that there were many tacit assumptions shared between the automaker and its suppliers.
An automaker engineer in charge of increasing ratio of parts procured locally described this as follows.

"We would ask (a local supplier) to build a prototype part, and we would discover that the part
did not come out the way the design blueprint said it should. The reason for this was that inJapan even if one of our internal engineers didn't draw in all of the part details, the supplierwould fill in the details and build the part just right. So, (after we started working with local
suppliers) we had to start to once again draw (part designs) in fine detail."

Another example of a shared assumption was the expectation regarding how a supplier would
participate in parts development. It was typical for a Japanese supplier to naturally engage in active
participation in the development process, expressing opinions and making numerous suggestions. Automakers
and suppliers in Japan had become used to such systematic patterned behavior and felt it to be completely
ordinary. American suppliers, on the other hand, would typically participate in parts development only when
specifically asked to do so. Furthermore, the participation of the American supplier would usually only result inan opinion or suggestion when very precise requests were made. Thus, Japanese automakers had to put much
effort into building up a pro-active structural capacity in local suppliers.
The second category of obstacles to the transfer of complex supplier management routines to local
suppliers are those that are caused by the difficulty of convincing local suppliers of the advantages of these26

Exploration through Exploitation in the Internationalization of Product Development Teams
routines. For example, one automaker experienced such a problem with a U.S. supplier of resin parts. The
automaker was aware of the logic behind the advantages of its supplier management routines. Nevertheless, thecompany was unable to overcome the routinized behavioral tendencies of the local supplier.
This local supplier had typically done business with the Big Three, which would generally procureparts with extremely detailed standards. It was not uncommon for such requirements to explicitly specify theexact manufacturer and product name of the material to be used in making the part. The Japanese automaker on
the other hand would generally only give basic specifications to a supplier and would evaluate the supplierbased on the supplier's ability to meet the performance targets. A supplier would search on its own for the
optimal choice of part materials in order to achieve these performance targets. The Japanese automaker needed
to convince the local resin supplier of the advantages of this method of procurement, but ultimately was unable
to do so. A manager from the automaker described the situation as follows.

Our way of thinking was that as long as the quality and cost requirements were met, whatever
method was fine with us. Even in cases that did not involve 'black box' parts, where we did thedetailed designing of the part, the selection of materials was left to the supplier. Because thisstyle of development was the norm in Japan, suppliers came to be equipped with the capabilityof delivering high quality (parts). In a way, you could say that we (automakers) were dependant
to a degree (on our suppliers) in our product development. In the U.S., where this style ofdevelopment was not the norm and suppliers lacked this capability. In the end (the supplier)couldn't accept this style (of parts procurement).

As can be seen in this episode there are many steps involved in the transfer of routines related tosupplier management to a local country. As an automaker searches for transferable knowledge, it must first27

Sugiyama and Heller
perceive the existence of key organizational routines. The automaker must also accurately grasp and judge
difference between suppliers in Japan and those in the local country. Finally, the automaker must be able toconvince local suppliers of the advantages of its style of part procurement.
One effective way of overcoming these obstacles was to utilize relationships that were embedded in
the local country's social structure. Many Japanese suppliers hired away American engineers from various
American manufacturing companies. Of these American engineers, especially those who had previously
worked in an auto parts supplier usually had a good understanding of supplier technology and production
capabilities. Since these engineers deeply comprehended how to evaluate and assess suppliers, their opinions
were generally very highly regarded by Japanese automakers. The personal networks of these individuals werealso quite important. Through their contacts, and often through their personal introductions, automakers could
get in touch with reliable suppliers that might have the potential to work well within the inter-organizationalroutines that the automakers sought to transfer to the local country. The supplier management routines that
gradually began to emerge once the local social structure had been taken into account were somewhat different
from the Japanese routines in Japan that had been their template. As such, it is not surprising that various
differences in the resultant capabilities also emerged.
As has been described above, the transfer of organizational routines that form the basis of organizational
capabilities is made up of many sub-processes, including: reworking search activities, becoming aware once
again of tacit internal routines, verifying competitive advantages by making comparisons, persuading people tochange, and incorporating local social structures. The capability to stimulate the knowledge activities of a
supplier would seem to be a capability that is built up in steps by going through various processes from local
search activities to the routinization of inter-firm behaviors. Through the presence of different participants

28

Exploration through Exploitation in the Internationalization of Product Development Teams
across the supplier-automaker interface routines are repeatedly re-worked and re-rountinized. Knowledge androutines that are acquired through problem solving become the base for subsequent problem solving. Local
product development capabilities can be understood as being built up as they are used for engaging in searchand problem-solving activities over and over again with each new product development project.

3. The ex-post stickiness of capabilities and appropriate learning opportunities
The foregoing discussion suggests that it may be better to view the reason for establishing a local
development center not solely as a means to acquire local knowledge that "exists there," but also to develop anunderstanding that emphasizes the importance of building a strong base to acquire this knowledge by
promoting interaction between a local development center and local knowledge. As such, the goal of local
development would include creating appropriate opportunities for capability building.
Behind this capability-building purpose lies the logic that suggests that capabilities once they are built up
will be sticky, that is, difficult to transfer outside of the local development organization. As mentioned before,
product development capabilities are built up as past problem solving is routinized. Thus, the output of problem
solving is not only part designs. Secondary by-products are the capabilities that are produced by the individualinternalization of knowledge and the generation of organizational routines. The knowledge and experience thatare acquired by performing problem solving are internalized and rationalized within an organization (orbetween organizations) and may only be transferred with difficulty. In this way, iterating problem solving
cycles may produce sticky capabilities that are difficult to transfer after the fact.
Capabilities that are acquired by engaging in local product development are capabilities that have been
re-routinized locally and that include local participants and local social structures. As a result, not only do suchcapabilities become a base for future problem solving, but also a base for interactions that may produce new29

Sugiyama and Heller
knowledge. If it is the case that engaging in local product development can produce capabilities that may be
used in future product development, then it may be reasonable to perform some types of development work
locally even if the particular project would not necessarily require the work to be done locally.
There were some actual cases where projects were selected to utilize local development centers in order tocreate appropriate learning opportunities, which required that various project requirements be set aside. For
example, in one case Honda explicitly selected a model to be developed locally that was well suited forcapability building. In deciding which body type of the 1990 Accord to develop in the U.S., Honda chose thetechnically more difficult wagon over the coupe. This choice was made to give the U.S. development center achallenge that would fit well with Honda's capability development purposes. This can be understood as an
example of a company taking into consideration the local capability level, but at the same time giving a slightly
higher development challenge.
At another automaker, upper management decided in the middle of a project to involve an overseas
development center. In this case, after the product plan had already been fixed, the vice president in charge oftechnology suggested that the U.S. development center be allowed to do the rest of the development work. His
reasoning included the clear desire to grow the capabilities of the automaker's North American development
center.
In this way, each of these firms did not seek to minimize knowledge-transfer costs based solely on the degreeof knowledge stickiness they sought to acquire in the local country, but rather they also took into consideration
the knowledge that would be utilized after the routines were transferred and made decisions based in part on theappropriateness of the learning opportunities that would be created. In this way, minimizing knowledge-transfer
costs at the single project level was not pursued.

30

Exploration through Exploitation in the Internationalization of Product Development Teams

V. Conclusion
By examining the internationalization of product development activities by Japanese automakers, this paper
examined which development factors influenced a development team’s international distribution for eight
actual product development distributions observed in the real world. Based on this finding, we developed ahypothesis about the mechanism by which the factors exerted their influence. Our hypothesis may besummarized as follows. (1) There is a complementary relationship between the transfer of organizational
patterns and routines from a home country to a local country and the exploration and acquisition of local
knowledge. (2) Complementary interaction is driven as a firm engages in new local capability building
modeled on home-country capabilities. (3) Goals for the international distribution of development teams
include the setting of appropriate learning opportunities with due consideration given to the ex-post stickinessof local capabilities.
The existing literature has made the implicit assumption that organizational attributes such ascommunication structures should be set in relation to the cost of knowledge transfer (i.e., the level ofknowledge stickiness caused by knowledge attributes such as tacit-ness and complexity). That is, organizational
attributes should be adjusted to match knowledge attributes. This way of thinking assumes that knowledge
attributes are caused by exogenous factors and are fixed. As such, an organization should achieve the necessarylevel of fit by changing that which is less costly to control. Once this level of fit is set, product development
should be managed accordingly. In short, this perspective claims that the higher the level of fit the greater the
possibility for effective product development. Such a logic in none other than the “fit” of contingency theory.
In contrast to this dominant view, this paper has used a case-based approach to demonstrate an alternate
logic, that is, one of dynamic enactment. The paper has described how, in order to take advantage of sticky
31

Sugiyama and Heller
knowledge, routines may be transplanted overseas and that the act of doing this transfer may create
opportunities for discovering new knowledge. Firm behavior made based on this alternative way of thinking
may appear to result in poor fit when viewed from the dominant perspective of matching firm behavior with theenvironment. However, if the emphasis is on capability building, a firm may choose to develop a productlocally even when doing so will create such an imbalance.
A superior product cannot be developed simply by having a good understanding of local conditions. Only
after a local organization has sufficiently mastered the distinctive organizational routines of a firm, is it possible
for local knowledge to be strongly reflected in a product. The logic of dynamism says that raising the internal
capability level of a firm will cause change in the external environment and that this change will drive
subsequent learning. Contained within this way of thinking is the idea of making positive use of interactions
with the external environment. Rather than the view a firm as going abroad to acquire resources that already“exist” in a local country, it may be more appropriate to see overseas expansion as “creating” the very resourcesthat a firm desires.

32

Exploration through Exploitation in the Internationalization of Product Development Teams

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Exploration through Exploitation in the Internationalization of Product Development Teams
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Figure 1

Growth in the number of employee at the North American R&D centers of Japanese
automakers

3000

2500

2000

1500

1000

500

0
1987

88

89

90

91

92

93

94

95

96

97

98

99

2000

2001

Source: Compiled by the authors from Japan Automobile Manufacturers Association yearbooks (Nihon no
jidousha kougyou [The Motor Industry of Japan])38

Exploration through Exploitation in the Internationalization of Product Development Teams

Table 1 Number of employees at North American R&D centers (by automaker)
1991

1995

1999

Toyota

323

410

583

Nissan

470

508

568

Honda

420

680

1100

Mitsubishi

120

133

113

Mazda

220

146

135

Isuzu

90

40

50

Fuji Heavy (Subaru)

15

35

40

Source: Compiled by the authors from Japan Automobile Manufacturers Association yearbooks (Nihon no
jidousha kougyou [The Motor Industry of Japan])39

Sugiyama and Heller

Table 2 Outline of Surveyed Projects

Model

AutoMaker

Year
IntroducedPrimary

Type

Marketto Market

International Division of
Development Activities
AverageStandard Deviation

A

U

1996

Sedan

N. Am

1.79

1.26

B

V

1997

Sedan

N. Am

1.79

0.41

C

V

1996

Sedan

Global

2.36

0.71

D

W

1997

Sedan

N. Am

1.86

0.83

E

X

1995

Sedan

Europe

1.64

1.23

F

Y

1997

SUV

Global

1.71

0.45

G

Z

1997

Sedan

N. Am

1.71

0.45

H

Z

1996

Coupe

N. Am

4.14

1.35

40

Exploration through Exploitation in the Internationalization of Product Development Teams
Table 3 Correlation matrix
Variable1

1. development
2. design for local

5

6

−

0.243*

0.043−

0.273**

0.130

0.581**−

0.294**

0.156

0.065

0.279**−-0.077-0.0730.304**

0.318**

0.167−-0.231*-0.202*-0.230*0.023-0.085

0.092

3. supplierparticipation

5. local production

40.205*

adaptation

outsourcing

3

7

−

distribution

4. production

2

6. advanced
engineering
7. concurrent
development*: p<0.05, **: p<0.0141−

Sugiyama and Heller

Table 4Multiple-regression analysis of distribution of product development activities

Constant
Project (dummy)
Designfor

local

Model 1Model 22.125*

0.995**(23.62)(4.362)significant

significant−

0.415*

adaptation
Supplier(2.530)−participation
Production(3.445)−outsourcing
Local production

0.740**-0.117(-0.523)−

0.932**(3.784)

Advanced−engineering
Concurrent-0.686*(-2.529)−

development-0.071(-0.266)

Adjusted R2

0.387

0.627

F-value

11.02**

14.72***: p<0.05, **: p<0.01（ ）contain the t-values

42Exploration through Exploitation in the Internationalization of Product Development Teams
Table 5 Relationship between supply nationality and supplier participation
Suppler Participation
Total

Local

Supplier
nationality

Total

Japanese

No

Yes

24

18

42

(32.4%)(24.3%)(56.7%)

8

24

32(10.8%)(32.5%)(43.3%)

32

42

74

(43.2%)(56.8%)2

χ =7.877 p=0.005

43

Sugiyama and Heller
Table 6 Relationship between supplier nationality and advanced engineering
Advanced Engineering
Total

Local

Supplier
Nationality

Total

Japanese

No

Yes

40

2

42

(54.0%)(2.7%)(56.7%)

17

15

32

(23.0%)(20.3%)(43.3%)

57

17

74

(77.0%)(23.0%)

2

χ =19.447 p<0.001

44

Exploration through Exploitation in the Internationalization of Product Development Teams

45

Sugiyama and Heller

46Exploration through Exploitation in the Internationalization of Product Development Teams47