El sistema de servicios de Ingeniería y Proyecto

The role of MNCs in enhancing the indigenous innovation capacity of China is clearly recognised by the central government of China (APCO, 2010). The Chinese government’s motivation for encouraging international collaboration between local

firms and MNCs is to allow local firms the opportunity to access and learn from MNCs’ technology and managerial knowledge in order to ultimately enhance their innovation capacity. In fact, accessing resources and establishing organisational learning are argued to be the main motivations for forming international collaborations with MNCs (Inkpen, 2000). In view of this, this section will focus on how the collaboration with MNCs can influence the indigenous innovation in China. 3.1.1. MNC’s Capacity to Influence the Innovation

It is recognised by the literature that working closely with MNCs increases the likelihood of generating innovation output (Zhao and Zhang, 2010). The current literature has found a number of features of MNCs that can facilitate innovation. To summarise from the literature, these key features are advanced managerial and marketing know-how, the capability of cutting-edge technology and R&D capability as well as a substantial supply of financial resources (Zahra et al., 2000; Fu et al., 2011; Lazonick, 2004).

As discussed before, the access to more input of resources by engaging in a collaborative innovation system improves the likelihood of generating innovation. In this respect, the highly advanced technology and R&D capability of MNCs seem to provide a feasible source of external resources and collaboration in the innovation activities. This is especially true considering that the main issue with the local firms is their lack of technological capabilities. In fact, a number of literature have found a positive relationship between technology/knowledge inflows and the innovation capability of local Chinese firms (Xu, 2011; Hou, 2011; Su et al., 2013). Wulf (2008) states that acquiring external knowledge and technology can provide the starting point of innovation activities to a firm with limited technological capabilities. Indeed, it is found that the Chinese firms rely on the acquired external technology in their own innovation process (Wulf, 2008). The integration of a firm’s own technology with the absorbed capability from MNCs creates innovation results (Su et al., 2013). Additionally, the entry of MNCs has also promoted growth in R&D alliances and collaboration in China (Minin and Zhang, 2010). This is because collaborative R&D development creates win-win opportunities for both MNCs and local firms which motivate the involved firms to innovate collaboratively (Minin and Zhang, 2010).

However, there can be intellectual property (IP) issues that obstruct collaborative innovation activities in international collaborations. The current literature suggests that IP protection plays an important role in collaborative innovation activities (Helpman, 1993; Fagerberg et al., 2005). A tightened IPR protection mechanism motivates the involved firm to engage in innovation activities and vise versa (Okawa, 2010). In this respect, there is evidence to suggest that China has been making progress in strengthening the laws to protect the IPR (Li, 2012). However, China’s IPR protection mechanism is still criticised as the enforcement of the laws has not been effective, especially when it comes to the conflict between local firms and foreign firms (Ju et al., 2013; Li, 2012). Consequently, there are cases when the MNCs’ IP are misused (e.g. Gong, 2004; Edmondson, 2007). Such an IPR issue in China is widely recognised by MNCs and hence, they are sensitive about bringing their IP into China (Ju et al., 2013), which can potentially limit the collaborative innovation activities in China.

On the other hand, the acquisition of resources from MNCs does not always happen on its own, but requires significant, well-directed efforts as well as the absorptive capacity (the ability to absorb and utilise knowledge/resources) of the receiving firm (Fu et al., 2011; Camison and Lopez, 2012). In this respect, the managerial experience and know-how of MNCs, including business operation, management, production techniques, and R&D process can also have positive impacts on the local firm’s organisational structure which improve the absorptive capacity. The current literature found a two-way impact on the organisational structure of the involved parties. The local firms learn from the highly efficient organisational structure that large MNCs use to deliver superior performance, while the MNCs adapt to the local business environment by making a change to the organisational structure (Wu and Pangarkar, 2006; Wen et al., 2010). In a collaboration, the local firms tend to learn from the organisational structure, including the management, the production, and R&D process that were well established by the foreign firms and adapt them with their substantial local knowledge (Liang, 2008). The opportunity of collaboration gives the local and foreign firm the mutual benefit of influencing and learning from each other and ultimately improves the organisational efficiency and absorptive

capacity of both parties (Li and Yue, 2005). As a consequence of this, the local firm can better absorb and utilise the inflow of resources and innovate better (Li and Yue, 2005).

3.1.2. Implications for this Research

The current literature supports the idea that the international collaboration with MNCs can enhance the indigenous innovation in China. This is because, firstly and most notably, in the collaboration with MNCs, the local firms can be exposed to the highly advanced technology and R&D process of MNCs. Considering the limited technological capability of some Chinese firms, the inflow of MNCs’ technological resources are significant to local firms, as it can give the local firms the starting point of innovation activities, which in turn benefits their independent innovation capacity. In fact, this can perfectly explain the reasons why the automotive MNCs that operate IJVs in China are required to transfer some of their technology to their IJV partners at a certain stage of the IJV operation. It was discussed in the previous chapter that the inflow of resources can influence the innovation performance of a firm (concluded as F2). In this sense, the suggestion that the collaboration with MNCs can enhance the indigenous innovation seems to perfectly align with the basic suggestions of some innovation theories, such as Open innovation theory. However, it is also speculated that the MNCs can have concerns over their IP in the collaboration due to China’s unsound IP protection mechanism, which limits their willingness to contribute certain resources to the IJVs that would be necessary for innovation activities.

On the other hand, it was established in the previous chapter that the actual process of innovation can also influence the innovation performance of a firm (concluded as F3). In this respect, the collaboration with MNCs can influence the organisational structure of the local firms and lead it towards a more efficient one. Such improved efficiency in the areas of business operation, including management, R&D as well as production process can positively impact the innovation performance, as innovation is a process from invention to exploitation. Therefore, the literature on international

collaboration and its effect on enhancing indigenous innovation seems to also align with innovation theories to some extent.

However, the literature does not seem to suggest that the collaboration with MNCs can have positive/negative impacts on the creation of an innovation-friendly environment (concluded as F1). Instead, the literature only seems to imply that the collaboration with MNCs can promote collaborative innovation activities, which benefit the involved parties. Hence, it cannot be concluded that collaborating with MNCs can/cannot create an innovation-friendly environment for local firms.

As a conclusion to this section, the collaboration with MNCs is suggested by the current literature as a means of enhancing indigenous innovation capacity in China. In fact, there can be a number of ways of establishing international collaborations with MNCs. The next section will focus on exploring IJVs as a means of driving indigenous innovation in China to understand the government’s IJV-innovation strategy.