Managing learning in the refrigerator industry: evidence from a firm-level study in Brazil.

SUMMARY

This paper focuses on some of the implications of intra-firm learning processes for the manner of firm-level technological capability accumulation in the context of an industrializing--or latecomer--economy. This relationship is empirically examined in a refrigerator maker firm--a subsidiary of a large trans-national group--during the 1980-2003 period. Despite the profusion of studies on these two issues, there still is a small number of firm-level empirical studies that explore the relationship between them on a long-term and in-depth basis, particularly in the latecomer context. Based on a single-case study design, this study draws from first-hand empirical evidence gathered through multiple sources over one-year fieldwork. The tailored framework for capability accumulation identifies two technological functions: process and production organisation and product-centred activities. The framework for learning identifies four learning processes (external and internal knowledge acquisition, knowledge sharing and knowledge codification), examined in the light of three features: variety, intensity, and functioning. This study contributes to deepening the understanding of how various learning processes influence the manner of technological capability-accumulation paths within the latecomer firm. Additionally, in terms of methodological contribution, this paper applies innovative and comprehensive frameworks to measure technological capabilities and the role of the underlying learning processes. Finally, the evidence in this study contradicts certain common generalizations relative to technological development in the industry in Brazil.

KEYWORDS

capability building; learning processes; latecomer firm; refrigerator industry

1. INTRODUCTION

From the early-1990s, manufacturing firms in industrialising countries, particularly in Latin America, began to face up to the pressures from foreign competition. This derived from opening-up and deregulation of the previously protected market and the end of the import substitution (IS) policy, leading to an intense industrial restructuring. The introduction of production organisational innovations and new managerial techniques were then studied as part of that restructuring process (see Humphrey, 1995). All these changes reflected policy adjustments to strengthen the framework conditions for industries to operate in a competitive and globalised/ glocalised world (Goncenc, 1994).

However, it has been argued that this new set of institutional and economic conditions is associated with negative implications for technological capability development, particularly in Latin America. For instance, it has been argued that globalisation has led to a dual pattern of production organisation in which research and development (R&D) and engineering efforts are increasingly carried out by mature industrial countries, while Latin America economies tend to specialize in the production of industrial 'commodities' and 'in-bond' assembly industries (see, for instance, Cimoli and Katz, 2003). Additionally, some studies have suggested that subsidiaries of trans-national corporations (TNCs) in Brazil have not accumulated technological capability beyond the basic production level (see, for instance, Costa & Queiroz, 2002).

Thus, an empirical notion of what is taking place inside firms in terms of innovative capability building in certain industrial sectors in a large industrialising country like Brazil is badly needed. It is particularly important to study the issue of capability building in firms of industries that have been operating on global basis such as the household appliance industry. Since the mid-1990s this industry has been operating as a truly international industry.

The issue of technological learning in the domestic appliance industry has barely been studied, particularly in the latecomer context. However, there are notable exceptions. For instance, from a industry-level perspective, Ariffin and Bell (1999) argued against common generalisations relative to technological capability development in subsidiaries of TNCs in Malaysia by examining how parent-subsidiary links have contributed to innovative capability building in a sample of 53 electro-electronics firms--including refrigerators and washing-machine makers. Arvanitis and Wei (2003) focused on six companies from diverse industrial sectors in Southern China--one of them a washing machine maker--in order to examine the different ways in which they interact with their clients to acquire new technological knowledge. However, studies that examine the intricacies of intra-firm learning process in the household appliance industry, particularly in TNCs subsidiaries are still scarce. (1) This paper takes up the task of putting a refrigerator maker under the microscope in order to examine whether and how the firm has built up innovative technological capabilities over the long term. Drawing on a single-case study design, the subsidiary of the Swedish Electrolux group in Southern Brazil has been selected as an information-rich empirical setting for this study. The study covers the 1980-2003 period.

Why is it important to examine the issue of capability building in this type of firm? It is important because this industry passed through a series of changes during the 1990s in Brazil. Today, the household appliance industry in Brazil is entirely owned by TNCs: Whirpool and Electrolux are, respectively, the first and second largest groups in the domestic appliance sector in Brazil. However, little is known about what has really been taking place, with adequate level of depth and detail, in the industry in terms of innovative capability building, particularly from an intra-firm perspective. This is why this study is based on one-industry and one-firm design. (2)

Section 2 and 3 present the frameworks for technological capability building and the underlying intra-firm learning processes, respectively. Section 4 outlines the empirical context in which this study has been developed. The study methods are outlined in Section 5 and the empirical evidence is presented in Section 6. Finally, Section 7 outlines and discusses the conclusions.

2.FRAMEWORK FOR FIRM-LEVEL TECHNOLOGICAL CAPABILITY BUILDING

Technological capability is defined here as the resources needed to generate and manage technological change, including skills, knowledge, experience and organisational systems (Bell and Pavitt, 1995). Specifically, in the context of the refrigerator firm studied here, technological capability refers to the firm's abilities to carry out in-house technological activities--from basic operations to sophisticated innovative activities--in process and production organisation and products.

The technological capability-accumulation path in the case-study firm is examined in the light of the framework developed in Figueiredo (2001, 2003), (3) which has been adapted and validated here for the technological characteristics of the household appliance industry (see Table 1). The columns set out the technological capabilities by function; the rows, by level of difficulty. They are measured by the type of activity expressing the levels of technological capability, in other words, the type of activity the firm is able to do on its own at different points in time. (4)

The framework in Table 1 distinguishes between 'routine' and 'innovative capabilities'. 'Routine' capabilities are the capabilities to use the technology; they are defined as the resources to produce goods and services at a given level of efficiency, using a combination of factors: abilities, equipment, products and production specifications, organisational systems and methods. 'Innovative' capabilities are the capabilities to carry out technological change: the additional and distinct resources to generate and manage innovative technological activities. (5) The framework here consists of six levels of capability across two technological functions: 'process and production activities' and 'product-centred activities'. (6) For both functions, routine capability is disaggregated into Levels 1 to 2, while innovative capability is disaggregated into Levels 3 to 6.

3. FRAMEWORK FOR THE INTRA-FIRM LEARNING PROCESSES

'Learning' in this paper is understood as the various processes by which additional technical skills and knowledge are acquired by individuals and, through them, by the organisation in other words, the processes and mechanisms by which individual learning is converted into organisational learning--or into the firm's capabilities. Learning processes and mechanisms permit the firm to accumulate its technological capabilities (Bell, 1984; Kim, 1997; Dutrenit, 2000; Figueiredo, 2001, 2003).

This paper makes use of the analytical framework developed in Figueiredo (2001) to examine the role of key features of the underlying learning mechanisms in influencing the technological capability-accumulation path in the case-study firm (see Table 2). The framework consists of four learning processes (the rows in Table 2) disaggregated in knowledge-acquisition processes (internal and external), knowledge-sharing (or socialization) and knowledge-codification processes. Each of these processes contains different mechanisms. Key features of the intra-firm learning processes (the columns in Table 2) are variety, intensity, functioning. (7) The criteria to operationalize these three definitions are outlined later in this paper (Section 5). (8)