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www.elsevier.com/locate/technovation
Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST), 207-43 Cheongryangri-dong, Dongdaemoon-gu,
Seoul 130-012, South Korea
Received 3 July 2001; accepted 31 October 2001
Abstract
This paper examines the mechanism of technology internalization of a technologically late starter or a globally late starter as
unit of analysis for the purpose of the paper, by investigating the process in which such a company successfully internalizes
advanced technologies globally despite of its inherent drawbacks as a late starter.
It exemplifies how such a company could eventually catch up with technology leaders globally at least in a certain number of
technologies. At first, we suggest two propositions with literature review of this research area and thoughtful insight induced by
experience of authors as practitioners in the field. Then, a comparative analysis is used along its constituents technological
characteristics, technological strategies and learning activities of Samsungs 16 technology development projects in Korea for testing
two propositions. Samsung was chosen on its merit of its relatively wide renown as the most technologically advanced company
in Korea. We also differentiate the performance of technology internalization into two levels the level of peripheral technology
internalization and the level of core technology internalization taking into consideration the learning level at which the technology
is being internalized.
As a result, the analysis categorizes the internalization mechanism as used by a globally late starter into four general types,
starting from analyzing the complexity and the external availability of the target technology. For each of four types, this paper
describes different internalization modes, learning strategy, and ways of how success is achieved at various levels. Also, this paper
tries to suggest the managerial guidelines on successful internalization for a globally late starter.
2002 Elsevier Science Ltd. All rights reserved.
Keywords: Technology internalization; Characteristics of technology; Mode of technology internalization; Technological learning; South Korea
1. Introduction
The importance of technological innovation as a core
element of corporate competitiveness becomes more and
more significant, which for corporate survival and
growth, necessitates everlasting R&D, the internalization
and the effective usage of new technology especially as
the one acquired externally. Many researchers have stud* Corresponding author: Tel.: +82-2-958-3688; fax: +82-2-9583675.
E-mail addresses: yjgil@sait.samsung.co.kr (Y. Gil), stajahn@kgsm.kaist.ac.kr (S. Bong), pearllee@kgsm.kaist.ac.kr (J. Lee).
1
A vice president at the CTO office in the Samsung Advanced
Institute of Technology.
0166-4972/02/$ - see front matter 2002 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0166-4972(01)00110-9
334
the late starting firms of the Southeast Asians are as follows. They start with OEM (original equipment
manufacture) operations and then grow into ODM (own
design and manufacture) operations before finally
developing into OBM (own brand manufacture) operations in their later maturity of product life cycle
(Hobday, 1995). They also mention that the developing
country sources formal or informal technology outside
of a firm and thus its technological innovation has progressed by acquiring matured technology in the
advanced country and at the same time increasing the
absorptive capacity of the technologies (Stewart, 1979;
Kim, 1980; Lall, 1980; Teitel, 1981; Dahlman and
Westphal, 1981; Ogawa, 1982; Moravcsik, 1983; Katz,
1984; Lee et al. 1988, 1994; Pirela et al., 1993). These
researches give us valuable insights that the mechanisms
of technological innovation at those of the late starters
differ markedly from leading companies. And they are
also useful, in that, they enable us to understand the
mechanism of technology internalization in underdeveloped countries. However, these works mostly concerned
with the mechanism of technology internalization at a
national or an industrial level. As a result, it leads to the
inadequate treatment of the related issues to the accumulation and the development of target technologies at a
firms level. Although the researches explain how firms
in developing countries have gone through technological
innovation their own way, they have yet to suggest the
specific themes such as the mechanisms on the understanding and the absorption of acquired technology and
the implementation of proper strategy with the dynamics
of decision making.
This paper intends to supplement these drawbacks by
studying the cases of technology development projects
of a certain late starting company in Korea. The focus
is on the process of technology internalization in the unit
technology level of late starters, especially on the mechanism of technology internalization. Korean companies
have contributed themselves to Koreas accelerated
economic growth with the technologies acquired in
advanced countries which is absorbed by formal and
informal technology transfer mechanisms available to
them and with the new products and the better productivity generated of these efforts. One of the interesting facts to note is that these Korean companies succeeded in technology internalization despite negative
changes in global technological environment. The facts
to be noted are the technology leaders growing reluctance to transfer technology, the emergence of standardization groups, shortened technology/product life
cycles, the phenomena of technology fusion, and so on.
This paper is able to provide useful insights and lessons to companies in other developing countries,
explaining how the Korean company facing the changing
global environment was able to accumulate its relatively
advanced technological capabilities within a short per-
iod. In this context, the documents of successful technology development projects in Samsung are analyzed
and case study research is done in order to show the
mechanism that a late starter used when it tried to achieve technology internalization. That is to illustrate how
its technological capability could be accumulated over a
certain period and to discuss the dynamic mechanism
of technology internalization and other relevant issues.
Samsung, which is the data source of this study, is one
of the front-runners in high-tech areas, particularly in the
communication and electronics industry.
2. Theoretical background
2.1. Definition and process of technology
internalization
The Webster dictionary defines internalization as
making others (esp. the prevailing, attitude, norms, ideas,
etc.) a part of ones own pattern or of thinking. Along
with the definition, the technology internalization can be
said to reach to the degree that the technology adopted
can be developed on its own by itself. Lee et al. (1988)
define technology internalization as the process of
obtaining technological capabilities as much as a leading
company retains, with the external technology that is
procured, modified, and utilized. In other words, the
technology internalization can be described as the technology introduced from an advanced country which is
digested, absorbed, and obtained through which a companys technological capabilities and learning as much
as corresponding technology can be developed completely by itself. In the course of technological innovation in a developing country, technological capabilities
are accumulated through digesting and absorbing the
technology of an advanced country in order to move forward to the generation stage from the internalization
stage.
Internalization in this paper means the process by
which acquisition, modification, and applications of the
technologies externally available increase a companys
technological capabilities. Eventually, those activities
make possible the companys independent production of
its self-designed product and the liquidation of its
relationship of technical dependency as has come to exist
with the technologically more advanced company (Lee
et al., 1988).
Technology internalization can be classified with the
technological level being acquired. Many scholars categorize technology based on the stage of technology development or the difference between the mastered technologies (Lee and Kim, 1979; Ogawa, 1982; Lee et al.,
1988). Otherwise, Lee et al. (1988) classify the technology into operations technology, equipment/process
technology, design technology and R&D/innovation
335
336
Table 1
Influencing factors of in technology internalization
Influencing factors
Related researches
Technological availability
Technological appropriateness
Technological specificity
Technological uncertainty
Technological relatedness
Technology life cycle
Characteristics of market
Market competition
Market protection
Demand uncertainty
Market growth
Kurokawa (1997)
Kurokawa (1997)
Veugelers and Cassiman (1999)
Veugelers and Cassiman (1999)
Characteristics of firm
R&D capability
Management capability
Complementary asset
Experience of technology
acquisition
Information scanning capability
(Detection of knowledge position
and the continuous monitoring)
Networking capability (building and
approaching knowledge network)
Kurokawa (1997)
Roberts and Berry (1985) and Kurokawa (1997)
Lowe and Taylor (1998)
Lowe and Crawford (1984), Kurokawa (1997), Lowe and Taylor
(1998) and Veugelers and Cassiman (1999)
Kim (1998)
Characteristics of technology
Characteristics of development
process
Ability to measurement of
innovation performance
Shared mental model of team
members
Frequent interaction between team
members
Learning intent of team
Autonomy of team members
Commitment of employee and CEO
to innovation
Development cost
Duration of development period
Development risk
and its technical progress is conceptualized as the learning process of major innovators technology. In this
study, we focus more on learning mass, learning diversity, and learning initiative among much of learning
related variables. At the point of mode of technology
internalization, the higher the multi-specialty of the
development team, the more is the learning mass
required. Learning mass means the critical mass in
which the amount of money and the number of people
to be invested to master technology within a specific
time should be ready. It is called massive learning but
by contrast small-scale learning is enough in the case
of low complexity of technology. And sourcing basic
technology is getting important in the buy of external
technology. In this context, it is important to commercialize technology in the buy type of technology acquisition method, how to find commercially proven tech-
Fig. 1.
337
338
Table 2
Definition of technology internalization level
Level of technology internalization
Set
Device/component
Able to process material and
manufacture components
according to a given parameter
Materials
339
Table 3
Important statistics of R&D activity in the Samsung Group (source: Samsung 60th Anniversary Annual, 1998; Samsung Annual Report 1999, 2000)
1987
1991
1992
1993
1994
1995
1996
1997
1998
54,826
126,093
135,906
164,046
214,195
271,471
334,222
366,142
406,523
1261
5422
5844
7054
9853
14,388
18,048
20,228
18,738
N.A.
1163
959
959
1067
2413
3129
3694
2377
N.A.
210
566
473
540
950
1259
1401
1546
Table 4
General description of 16 technology development projects
Project
Description of project
DRAM
During its development of the 4M chip, Samsungs technology level was equal to that of advanced
countries, and from the development of 64M chip, Samsung overtook the competitors and is now able to
develop next generation products well ahead of its competitors (ranked as number one in global market
share)
After initial importation of technology, independently designed models were developed and mass-produced.
Global market share is 20%
Core components were progressively developed. Number one in global market share for CPT, CDT, DY
Note worthy for use of Russian technology. 95% of components are manufactured internally. High value
product development pursued in cooperation with the environmental industry
Developed to supply semiconductor equipment in-house
Attempted to import technology for CPU and related system by establishing strategic relationship with High
Level Company
Became the first in the world to develop new technology MPD type CDR and sold this technology to
outside companies
Engaged in development of core component of HDD. Designed 1.5G bit/in.2
Ranked as Top five in its global market share. Core component for Mobile Phone
Unique design with MEMS technology, the most precise measurements in the world. A superior technology
under a great deal of attention from abroad
High quality PP has been mass-produced since 1995 without modifying prior equipment, contributing to
increases in sales revenue
Developed material that does not infringe upon existing patent
Became the first in the world to make electroplating technology available for alloy 42 line of Pd-PPF
Became the first in the world to develop CDMA based system and hand held phone. Largest one market
share in CDMA
Laser storage type DVD system developed in a time period similar to that of Japanese company
Leading standardization member for next generation moving pictures standard MPEG-4. Currently active as
a Patent Pool Member
MW Oven
CRT
E-Beam
Wire-Bonder
HP-W/S
CD-R
MR-Head
MLCC
Gyroscope
HIPP
PC/ABS
Pd-PPF
CDMA
DVD
MPEG
340
Table 5
Research results of 16 technology development projects
Characteristics of
technology
Case
Mode of technology
internalization
Learning strategy
Timing
Technology
Business
internalization outcome
level
Acquisition
method
Multispecialty
Initiative
Make
Ha
Uc
Peripheral
and delayed
core
Peripheral
and delayed
core
Peripheral
and core
Gyroscope
Make
PL
MLCC
Make
PL
DRAM
Buy lot
Top and PL H
Peripheral
and core
Worldwide top
market share
CRT
Buy lot
Top and PL H
CDMA
Buy lot
Top and PL H
HP-W/S
Buy lot
Top and PL H
MR-Head
Make
PL
Peripheral
and core
Peripheral
and core
Stop at
peripheral
Peripheral
and delayed
core
Worldwide top
market share
Worldwide top
market share
Project
terminated
Project
terminated
Low complexity
PC/ABS
and low availability
CD-R
Make
PL
Make
PL
PD-PPF
Make
PL
MPEG
Make
PL
Worldwide top
market share
New business
started
Successfully
commercialized
Global standard
HIPP
Make
PL
Peripheral
and core
Peripheral
and core
Peripheral
and core
Peripheral
and core
Peripheral
and core
MW Oven
Buy
Top
Peripheral
and core
Worldwide top
market share
E-Beam
Buy
PL
Wire-Bonder Buy
PL
Peripheral
No business yet
and core
Peripheral
Delayed start
and delayed
core
High complexity
DVD
and low availability
High complexity
and high
availability
Low complexity
and high
availability
a
b
c
Mass
Diversity
Business
growing
Delayed start
Worldwide No
3. market share
Successful
business
complexity and technological availability of each technology development project. The other, mode of technology internalization matrix, is the matrix with the
dimension of multi-specialty and acquisition method of
core technology. Fig. 2 shows the result that 16 technology development projects are arranged with the
characteristics of the technology matrix and mode of
technology internalization matrix.
Characteristics of the technology matrix are classified
into four cells HCHA (high complexity and high
341
exploited. Also, focuses on the assimilation and utilization of existing scientific and technological knowledge
and is necessary to make a license agreement in order
to obtain external technological knowledge sometimes.
The results of analysis shown in Fig. 2 say that when
the mid-entry strategy mode is selected for the technologies in the HCHA cell DRAM, CDMA, and CRT,
performance of technology internalization in each technology is successful. Also when full-scale in-house R&
D mode is selected for the technologies in the HCLA
cell MLCC, when effective reverse engineering mode
is selected for the technologies in the LCHA cell MW
Oven and E-Beam, and when focused in-house R&D
mode is selected for the technologies in the LCLA
cell CD-R, Pd-PPF, MPEG, HIPP, and PC/ABS, performance of technology internalization in each technology is successful. Only MR-Head and Gyroscope did
not fit to proper mode. And therefore, its performance
of technological innovation is not successful. Gyroscope
should have selected full-scale in-house R&D mode but
its selection of focused in-house R&D mode caused failure in the technology internalization. MR-Head should
have selected mid-entry strategy mode but its selection
of effective reverse engineering mode caused failure in
the technology internalization also. In this result, we suggest that there is a positive relationship between the performance of technology internalization and fit of characteristics of technology and the mode of technology
internalization. Also, this result says that we cannot
reject proposition 1 temporarily.
In Fig. 2, HP-W/S, DVD, and Wire-Bonder selected
proper technology internalization mode. But performance of technology internalization is not successful. It
means that to explain performance of technology intern-
342
alization, another variable must be introduced. We introduce the variable related to learning strategy to explain
the performance of technology internalization more
completely in the technology development project,
which selected proper technology internalization mode
but failed.
Generally speaking, it is obvious that greater the
learning mass, learning diversity, and initiative of top
managements are committed, the better the performance
is. Therefore, efficiency should be considered since
every factor does not have to be increased for every case.
To test proposition 2 which explains the relationship
among modes of technology internalization, learning
strategy, and the performance of technology internalization, we investigated the learning mass, learning diversity and the initiative of the top management and project
leaders of 16 technology development projects in
relation to one another. Result of this analysis is shown
in Table 5 and summarized in Table 6. As shown in
Tables 5 and 6, when certain large amounts of learning
mass and certain levels of learning diversity are invested
and the top management has the initiative to mobilize
learning mass and involve and support learning diversity
with the project leader in full-scale in-house R&D
mode MLCC, performance of technology internalization in each technology is successful. And when a certain amount of learning mass is invested and the top
management has initiative to learn and mobilize critical
learning mass in mid-entry strategy mode DRAM,
CDMA, and CRT, high learning diversity is invested and
the project leaders have the initiative to learn and motivate team members to experiment with autonomy in
focused in-house R&D mode CD-R, Pd-PPF, MPEG,
HIPP, and PC/ABS, and certain amount of learning mass
is invested in effective reverse engineering mode MW
Oven and E-Beam, performance of technology internalization in each technology is successful. But HP-W/S,
DVD, and Wire-Bonder are not successful. Learning
mass was not enough in HP-W/S and DVD. Especially,
the top management had overlooked the importance of
signal processing technology, and had not mobilized
Table 6
Important factors in the learning strategy for each internalization mode
Acquisition method of core technology
Multi-specialty
Buy
Make
High
Low
343
Table 7
Summary of research findings
Cell 1 (HCHA)
Cell 2 (HCLA)
Cell 3 (LCHA)
Cell 4 (LCLA)
Mode of internalization
Effective reverse
engineering mode
Learning strategy
Aggregate exploration
learning
Internalization activities
Tops commercialization
strategy and interest in
technology development
The technology developer
surveys possible
technology partner,
determines method of
technology acquisition and
establishes a technology
agreement
Large-scale internalization
Large-scale activities to
Small-scale internalization
activities
strengthen internal
activities
Commitment of extensive
technical capabilities
Speedy hiring of superior
resources capital and
Continued investment into foreign talents
personnel for maximized
resources and personnel
Sharing of information
technology learning
for technological learning between key developer
Focus on the effort to
Strengthening of internal and foreign personnel
internalize technology through learning activities among Strengthening of
technology import
multi team members
technological availability
Strengthen inter-divisional
Establishment of informal though increased interface
activities
relations with specialist
with clients
groups within the
advanced technology
leader
Tops interest in
technology development
Top delegates stability and
independence to the
development team
Understand the technology
trends in advanced
countries
Small-scale technical
capability activities
strengthened
Co-work with external
holder of related
technology
Participation in academic
organizations and other
institutes
Internal sharing of
knowledge
344
Fig. 3.
R&D mode is named as the aggregate exploration learning because it contains corporate supported resource
investment, systematic resource deployment, product
champion role of project leader and explorative characteristics in learning.
Also, when effective reverse engineering mode which
is the easiest situational mode is selected and learning
strategy, which requires certain amount of learning mass
is implemented for the technology in the LCLA cell, performance of technology internalization in each technology is successful. This learning strategy fit to effective reverse engineering mode is named as rapid
apprentice learning because it contains corporate supported resource investment and learning by doing
characteristics in learning. When focused in-house R&
D mode is selected and learning strategy, which requires
high learning diversity and project leaders commitment
to learning and to motivate members of teams to have
creative thinking is implemented for the technologies in
the LCHA cell, performance of technology internalization in each technology is successful. This learning
strategy fit to focused in-house R&D mode is named as
creative team learning because it contains the product
champion role of the project leader and explorative
characteristics in learning.
5. Discussion
Unlike advanced leaders, late starters develop technology mostly by the assimilation of external technology
rather than by indigenous R&D effort. Due to this difference, late starters need the technological strategy and the
methods that are different from those of advanced ones.
This study complements prior literature on the mechanism of acquiring the target technology of late starters
345
Fig. 4. Co-evolutionary relationship between technological capabilities and technology development process.
6. Conclusion
The model of technology development process in a
developing country is different from that in an advanced
country, which requires synthetic views (Kim, 1980; Lee
et al., 1988). The technology acquisition in a developing
country comes from technology development by external
technology acquisition rather than by R&D. That is a
different way of technology acquisition in an advanced
country. Because of this different way of acquiring technology, the technology accumulation in a developing
country has developed along a different technology
development stage from that in an advanced country.
This work has been surveyed the process of technological innovation in the unit technology level as used by
late starters. Differences in the strategy of technology
346
Table 8
Hypothesis on the mode of technology internalization and learning strategy
Learning mass
Diversity of learning channel
Top management involvement
Effective reverse
engineering mode
H
L
H
H
H
H
H
L
L
L
H
L
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Youngjoon Gil is a vice president of the CTO office in the Samsung
Advanced Institute of Technology and a doctoral candidate at the Graduate
School of Management, Korea Advanced Institute of Science and Technology (KAIST). He received a BS in Mechanical Engineering from Seoul
National University and a MS in Mechanical Engineering from KAIST.
His research interests focus on the management of innovation, technological learning, R&D organization, and science and technology policy.
Sun-Hark Bong is a doctoral candidate at the Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST).
He received a BS in Management Science from KAIST and a MS in
Industrial Management from KAIST. His research interests focus on the
new product development, technological capability, organizational learning, and knowledge management.
Dr Jinjoo Lee is a professor at the Graduate School of Management,
Korea Advanced Institute of Science and Technology (KAIST). He
received a BS in Mechanical Engineering from Seoul National University
and a PhD degree in Industrial Engineering and Management Science from
Northwestern University, Evanston, IL in 1975. His research interests
include innovation studies, Strategic use of Information Technology, and
science and technology policy. He has published a number of articles in
several journals including R&D Management, Research Policy, IEEE
Transactions on Engineering Management, World Development, Journal
of Product Innovation Management, and Technovation. He participates in
several advisory committees for the Ministry of Science and Technology
and the Ministry of Commerce, Industry and Energy, as well as civilian
industrial organizations.