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This research provides some important theoretical implications. The analysis of technological transitions contributes new theoretical insights to how a technological regime is the result of firms‟ strategies. The examination of latecomer resource acquisition strategies provides implications to the resource-based view, changing value systems, as well as latecomer catch-up theories. Meanwhile, the case study on TSMC contributes to the theory of vision construction, path dependence, organizational absorptive capacity, as well as coevolutionary lock-in of firms and industry.

6.3.1 Technological Transitions

The first analytical framework has advanced the existing theories on technological regime. Each of the identified dimensions affects the different relationships between the downstream and the upstream firms in the industry in different ways, leading to changing driving forces in the industry. Firms respond to these dynamic changes by making strategic decisions for their organizational boundaries accordingly. The changing network boundaries lead to different ways of value chain coordination that promotes different learning opportunities for firms. Firms‟ coordination of their external linkages over time disturb the industry‟s status quo and lead to new technological regime under which firms will subsequently revise their strategies for organizational boundaries.

This study has also incorporated the transition process of an industry shifting its characteristics between Schumpeter Mark I and Schumpeter Mark II. Examining the transition process allows us to identify specific dimensions of a technological regime that are appropriate for latecomer firms to strategize for catching up in a Schumpeter Mark I environment. Under a Schumpeter Mark II environment, greater economies of scale, lower technological opportunities and higher technological appropriability provide a promising environment for latecomers - who have successfully caught up - to strategize and leapfrog the large incumbents in order to become industry leaders.

This study provides a more comprehensive view of the systemic mechanisms between technological regimes and choices of organizational boundaries. It explored the mechanisms of the industry‟s endogenous transition to a new technological regime, including identifying the critical factors and examining their causal relationships in the transition process. The need for knowledge integration across the downstream and the

171 upstream firms gave rise to the virtual vertically integrated value chains, of which firms in the industry act as networked modular organizations. It is a flexible organizational system that incorporates the merits of modularity and convergence, which provide new learning gateways for latecomers.

6.3.2 Latecomer Resource Acquisitions

Examining how latecomers catch up in a dynamic industrial structure with changing value systems bring several theoretical implications. Most of the existing literature of resource-based view has sought to address the changing perspective of organizational core-competency in large MNCs as a result of open innovation practices. The study modified this by changing the unit of analysis by examining how latecomer firms can source external knowledge under such changing environments.

By incorporating the evolving concepts for organizational core-competency, the study found that repeating the steps of resource acquisition as outlined in Mathew (2002, 2006) is not a sustainable catch-up strategy. This condition will not hold when the industry is transiting to Dimension III in the framework, where open innovation practices is more prominent than closed innovation and when large MNCs begin to form virtual vertically integrated chains with partners in their networked systems.

The study also seeks to characterize virtual vertical integration as an innovative organizational change and business model. Whereas the previous literature has informed us that each value constellation in an open innovation platform has a dominant firm to lead the coordination of value distribution (Normann & Ramirez, 1993; Vanhaverbeke & Cloodt, 2006), the findings in this study show that such a condition does not hold as the IC industry progressed further into Phase II. The findings show that the Taiwanese pure-play foundries do not rely on one single customer that governs the value

distributions. In fact, all the actors in the networked systems are highly interdependent with each other. Collectively, these firms form a value system that shapes virtual vertical integration, which allows them to source external knowledge from each other.

The study shows how Taiwanese latecomer firms have successfully moved from Dimension I to Dimension III(a). Among them, at least TSMC has arrived at Dimension IV(b), where its technological capabilities allow it to form interdependent relationship with its upstream customers. Through the development of virtual vertical integration and the evolving concept of value creating system, the Taiwanese latecomer does not require to undertake OBM in order to qualify itself as a technology frontier leader. Hence, the framework in this study offers an alternative view to latecomer technological catch-up.

The framework in this study also shows how the latecomer firms acquired resources at their point of insertion into the GVC, as a rational and careful strategy to secure a position in the global network of a high-tech industry. To conduct a greater scrutiny of how firms shape their business models to offer values to their networked systems, this study also extends the resource acquisition strategies outlined in Mathews (2002, 2006). In doing so, it provides greater precision in characterizing the latecomer strategies that complement the needs of the vertically integrated incumbents while fulfilling the needs of the specialized customers across different industry phases.

6.3.3 Organizational Capability Building

The organizational path dependence framework is extended to stretch beyond the boundary of organizations by integrating firm- and industry-level analysis. If the industry‟s feedback on the organization‟s endogenous forces is positive, the mutually reinforced mechanisms can disturb the status quo and lead to inter-path dependence.

173 Endogenous forces unleashed during the phase of organizational lock-in that leads to coevolutionary lock-in help the firm break away quickly from the internal (organizational) lock-in.

The second analytical framework in the study introduced the “visionary key” which allows industry leaders to virtually skip the entire organizational lock-in phase. Because the firm is able to generate impact, to shape and dictate the technical progress of the industry, the resulting coevolutionary lock-in opens up new technological opportunities for the firm.

This study also established a new framework to explain the mechanisms of firm-level generative process of endogenous forces and the formation process of coevolutionary lock-in. In previous studies, path dependence emphasizes how history carries through time in the genesis of novelty, but not so much the conceptualization of the actors‟ role in the generative process. This study sheds light on a leader‟s considerations in the generative process of de-locking from organizational path dependence.

Successful endogenous forces are well-planned strategies appropriated by firm leaders based on their ability to envision how the firm should be in the future by interpreting the external technological opportunities, the firm‟s existing knowledge base, and how the two can be synergized. Through higher intensity of R&D, endogenous forces should have also increased the firm‟s absorptive capacity that is cumulative and is continued through to the subsequent phases.

Nevertheless, vision reconstruction is needed if an endogenous force does not yield positive feedbacks from the industry that progress into productive outcomes. The frameworks provide an avenue for future studies that enrich the understanding of sources and processes associated with path breaking and path creation opportunities.