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Technovation 23 (2003) 333347

www.elsevier.com/locate/technovation

Integration model of technology internalization modes and learning


strategy: globally late starter Samsungs successful practices in
South Korea
Y. Gil1, S. Bong, J. Lee

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.

ied this subject so extensively that there exists abundant


material on the subject (Hamel and Prahalad, 1994;
Utterback, 1994). However, most of the previous contributions to this subject lack applicability to late starters
since these researches rely much on experiences of firms
in the technologically advanced countries such as Europe, U.S., and Japan.
There have been some researches on the technology
development in Southeast Asian countries for example,
Korea (Lee et al., 1988; Hobday 1994, 1995; Kim 1997,
1998; Sung and Hong, 1999). Researches on technology
development in a developing country indicate that the
technology development processes has been in the
opposite direction to that of advanced countries. According to these studies, the typical mechanisms followed by

0166-4972/02/$ - see front matter 2002 Elsevier Science Ltd. All rights reserved.
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Y. Gil et al. / Technovation 23 (2003) 333347

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

Y. Gil et al. / Technovation 23 (2003) 333347

technology by the degree of technological learning.


Also, they divide the internalization stage into two
phases more specifically. The first phase is where
plant/process technology and the design technology of
product and process are mastered depending on the level
of acquired technology. The second phase is where R&
D/innovation technology is mastered through the
accumulation of R&D capacity. After learning technologies and then experiencing both the phases, a company
in a developing country is going to build its own R&D
capacity as much as an advanced country has done,
which leads the company to the generation stage whereby it can develop its own unique product.
2.2. Determinants of technology internalization
Technology internalization depends on the selection
of the right technology, and the selection and the
implementation of the right innovation strategy (Marcy,
1979; Dahlman and Westphal, 1981; Bae, 1987; Lee et
al., 1994). It is essential to understand the dynamic process of a firms technology internalization since technological change is localized at the firm level. On the basis
of literature review, the process of technology internalization is significantly influenced by the following: market
and technology environment, government policy, sociocultural variables, educational and learning system, and
the organizational and managerial factors of firm.
Especially, there are market, technological, and competitive factors around a firm, which are important environmental factors for the examination of the internalization
mechanism of late starter. Moreover, the factors occurring in the internalization process itself, for example, the
characteristic of the target technology being internalized,
the possibility of sourcing external technology, and
internalization capabilities must be examined. Also, the
internalization mechanism can be varied by a selection
of innovation strategy. Therefore, some types of internalization modes are likely to co-exist within the same firm,
according to which different strategies and resource
capacity are demanded.
There have been lots of researches on the factors that
influence these types of technology acquisition, and
internalization in the research area of new product development, technological learning and technological
cooperation. These influencing factors are technological
characteristics, market characteristics, corporate characteristics, and the characteristics of acquisition process,
etc. The existing researches on the influencing factors of
technology
internalization
with
corresponding
researchers are summarized below in Table 1.
The researches explain that the variables such as the
characteristic of technology and market, the characteristic of its corresponding product, organizational capabilities like R&D capacity, development cost, required
time for development, and risk have a main effect on

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the selection of the type of technology acquisition.


Besides, the characteristics of organization (the ability
of searching information and networking and so on),
autonomy of team members, frequent mutual interaction,
etc. influence technology development process and the
effectiveness of the information acquired in the various
sources. To summarize existing researches on the process of technology internalization, the internalization of
a firms target technology requires adequate development strategy selected and effective development process performed in compliance with technology and market characteristics.
As a result, the success of the late starters internalization is determined by the dynamics of external conditions, internal capability, and the strategy and the
actions of players. In the context of late starters, the process of the late starters internalization is how to buy
some of the external technologies and give priority to
their selection strategically. At the same time, it places
a strategic focus on how the firm internalizes purchased
technologies, what technologies should be made and
how they should be. Figuring out this technology internalization mechanism, we would be able to build up the
expert system for the successful internalization of late
starters. We introduce the strategic guidance model as a
research framework and several propositions to support
the decision making of successful internalization of late
starters in the next section.

3. Research framework and methodology of the


study
3.1. Research framework and propositions
As stated previously, this study examines the process
of technology internalization focused on decision-making and implementation process more specifically. On
the side of late starters who do not acquire core technologies, the complexity and the availability of the target
technology should be identified exactly and precisely so
that appropriate technology planning can be made and
mechanism for technology acquisition can be established. Specifically speaking, the complete understanding of the complexity of technology makes it possible
for late starters to set up the budget for R&D and to
constitute R&D personnel adequately. Also, the identification of technological availability is a critical variable
in the process of deciding the type of technology acquisition method in the modern technological environment
where there is a high possibility to buy the technology
externally such as by contract R&D, licensing, and technological cooperation. The higher technological availability is, the better technology internalization is achieved when internalization is implemented through the
buy type of technology acquisition method because the

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Y. Gil et al. / Technovation 23 (2003) 333347

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

Veugelers and Cassiman (1999)


Veugelers and Cassiman (1999)
Pisano et al. (1988), Mowery and Rosenberg (1989), Teece (1996)
and Veugelers and Cassiman (1999)
Veugelers and Cassiman (1999)
Kurokawa (1997)
Porter (1985), Randor (1991) and Kurokawa (1997)

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

buy type of technology acquisition method reduces the


time of internalization rather than through the make
type of technology acquisition method. And, the more
complex technology late starters are involved in, the better achievement of internalization they can obtain when
the development team structure for technology acquisition is formed with researchers have various research
backgrounds, that is, the multi-specialty of the development team is high. In summary, the mode of the internalization of target technology depends on the complexity
and the availability of technology.
If the mode of technology internalization is decided,
it will enhance the performance of technology internalization that the internalization process fit to the mode of
technology internalization is executed. We examine the
technology internalization process specifically with
learning perspective. Late starters are clearly imitators

Powell (1990), Zucker (1991) and Liebeskind et al. (1996)


Veugelers and Cassiman (1999)
Nonaka (1990), Grant (1996) and Madhaven and Grover (1998)
Meyers and Wilemon (1989) and Hedlund and Nonaka (1993)
Hamel (1991) and Nonaka (1994)
Nonaka (1994) and Morgan (1986)
Takeuchi and Nonaka (1986), Brown and Eisenhardt (1995) and
Souder and Song (1998)
Murphy (1991), Atuahene-Gima and Patterson (1993), Kurokawa
(1997) and Veugelers and Cassiman (1999)
Lieberman and Montgomery (1988), Lowe and Taylor (1998),
Murphy (1991), Kurokawa (1997) and Veugelers and Cassiman
(1999)
Roberts and Meyers (1991), Kurokawa (1997) and Veugelers and
Cassiman (1999)

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-

Y. Gil et al. / Technovation 23 (2003) 333347

nology and if the technology is not available, how to


find and obtain relevant fundamental technology needed.
Also, the more technology internalization is
implemented through make type of technology acquisition method, the better achievement of internalization
they can obtain when learning diversity is satisfied.
Learning diversity means searching and learning activity
is made actively in various technology sources other
firms, university, research institute, expertise, consultant,
academic society, etc. Learning initiative in which considering who should initiate and lead learning activities
is one of the key factors in the learning perspective. The
top management should be able to mobilize more
resources and build up large learning mass and the project leader should be able to drive out actual learning
and search for target technology through various channels actively. In this context, the higher the multi-specialty of the development team, the better achievement
internalization they can obtain when the top management
is involved. Also, the more technology internalization is
implemented through make type of technology acquisition method, the better the achievement of internalization that can be obtained when the project leader drives
out the overall project. In summary, the relationship
between learning strategy and the performance of technology internalization is contingent on the mode of technology internalization.
Based on this reasoning, we propose and test the following research framework linking characteristics of
technology, technology internalization mode, and learning strategy to internalization performance. Our research
framework of technology internalization process is
shown in Fig. 1.
Suggested below as shown in the research framework
in Fig. 1 are the tentative propositions on the selection
of appropriate internalization mode and the process of
technology internalization for a firm to internalize technology in accordance with the above model. Propositions
are theoretically derived with the integration of the pre-

Fig. 1.

Research framework of technology internalization process.

337

vious studies and even with the empirical knowledge


learned in the management of technology jobs of the
authors for a long time.
Proposition 1. There is a positive relationship
between the performance of technology internalization and fit of technological characteristics and the
mode of technology internalization.
Proposition 2. The mode of technology internalization varies the relationship between learning strategy
and the performance of technology internalization.

3.2. Case study procedure


We investigate Samsungs 16 technology development projects because Samsung is widely renowned as
the most technologically advanced company in Korea.
The investigation of successful technology development
projects in the unit technology level, as data of this
study, was carried out in two stages taking into account
the suggestion of Yin (1993) and Eisenhardt (1989)
about case study research methodology. In the first stage,
prior information about the 16 technology development
projects selected was collected and additional information was further consolidated after achieving a general understanding of data. The authors analyzed Samsungs internal documents and collected information on
the developers original motivations, the midterm processes and the final results. The authors also carried out
interviews with Samsungs strategic planners and engineers engaged in each of the technology development projects to deduce the strategic relevance of each project.
In the second stage, intensive interviews were carried
out with core developers of each case. The interview was
carried out by making the key person of the development
project like the project manager detail the whole technological innovation on the basis of key events and by
making the researchers ask any additional questions
necessary. Each interview lasted an average of 3 h each.
The result of the interview was distilled into a document
between 1020 pages in length, in conjunction with the
material from the first stage of analysis.
To test propositions and analyze the behavior and the
process of technology internalization in a firm, we
arranged 16 technology development projects in a matrix
form table and compared results of technology development project arrangements. A realistic concept of technology internalization in the unit technology level was
defined during the process of investigating and analyzing
the 16 technology development projects. This definition
led to the differentiation between two levels of technology internalization. These two levels of technology
internalization were found to be in use by the developers
themselves, being used not only by the technology
development personnel but also by those establishing

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Y. Gil et al. / Technovation 23 (2003) 333347

technology strategy as well. The authors were also able


to verify with personnel directly involved in the internalization process, the relevance of the definition of internalization as provided here. Furthermore, the internalization level of each technology development project was
decided on the basis of the advice of a panel composed
of Samsungs technological specialist, its upper management and its core developers of each technology.
There are levels of peripheral technology internalization, in which the ability to make basic designs are
beyond the grasp of the developer, and the level of core
technology internalization, in which the ability to make
basic designs are within the grasp of the developers.
Table 2 contains specific explanation on the level of
internalization in the unit technology level, and shows
that there is a slight difference in the definition of internalization among the different technology types. In short,
the definition of core technology internalization differed
according to whether the technology in question was a
set, a device/component or a material.

4. Case analysis and research findings


4.1. Outlook of Samsung: the successful late starter
Samsung was founded in 1938 by Chairman, Mr Lee
Byung Chul (currently deceased). In the 1980s, it successfully developed the Magnetron, a VCR component,
and the 4M D-RAM chip, thereby successfully advancing into the new high-tech industry. In the 1990s, it
became the first in the world to develop the 64M DRAM chip. The sales revenue for 1998 was KRW
406,523 (in one hundred million), which was 7.5 times
higher than that for 1987. In the same year, it was the
largest company in Korea comprising 17% of Koreas
GNP.
Although there may have been several reasons for
Samsungs rapid growth, the most important reason was
its drive for development of technology and its willingness to make continued investments in its R&D efforts.

In 1998 alone, a total of KRW 18,738 (one hundred


million), approximately 4.6% of its revenue, was allocated for this purpose. In the point of number of patents
registered abroad, it was ranked as the sixth in the world
with a total of 1304 patents to its credit in 1998. This
was a marked increase over a nevertheless impressive
rank of sixteenth in 1997 with a total of 582 patents to
its credit (IFI, 1998; US PTO, 1998). Table 3 shows
some important statistics of R&D activity in Samsung.
Samsungs efforts in the 1990s to increase its technological capability resulted from an ambitious companywide strategy to change from a late starter to a technology leader. Under its World Best Product campaign,
by current Chairman Kun-Hee Lee, the number of Samsung products that are ranked within the top five currently is 18, and of these, 12 products are ranked as number one.
4.2. Case description
This study targets late starters in its unit technology
level, and the data selected are representative cases of
Samsungs technology development activities. Every
year, Samsung grants the Chairmans Annual Technology Awards in appraisal of technological superiority
and commercial potential. Among the subjects granted
with the Technology Awards, the authors selected the
representative cases with various types of technology. A
total of 16 technology development projects, as an
example either showing reduction of technology gap or
containing important ramifications from the perspective
of technological learning were chosen.
A general description of the 16 technology development projects is outlined in Table 4. Technology development projects such as DRAM, MW Oven, CRT, and
CDMA are worth noting in their ability to generate
meaningful next generation products and their ability to
maintain a high rate of market share. Technology development projects like MLCC, PC/ABS, and HIPP are
worth noting, in that, their sales revenue has increased
every year since their initial introduction into the market

Table 2
Definition of technology internalization level
Level of technology internalization

Set

Peripheral technology internalization Able to independently improve


components and technology other
than the core component/technology
while developing the current set
Core technology internalization
Able to independently design the
current sets system design and the
so called black box of the set, such
as software or core component

Device/component
Able to process material and
manufacture components
according to a given parameter

Materials

Able to understand characteristics


of material and its manufacturing
process and able to manufacture
it
Able to understand the inherent Able to understand the complex
logic of component design and
relationship among characteristics
structure and able to improve the of material, parameters of
performance of this component production, etc and able to attain
the quality level of a leading
company

Y. Gil et al. / Technovation 23 (2003) 333347

339

Table 3
Important statistics of R&D activity in the Samsung Group (source: Samsung 60th Anniversary Annual, 1998; Samsung Annual Report 1999, 2000)

Total sales (W 100


million)
R&D investment
(W 100 million)
Foreign patent
applications
Foreign patents
granted

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

in 1990. In other cases, the CD-R technology was


developed and sold to foreign companies into profit and
the Gyroscope and the Pd-PPF are the next generation
technologies developed for future applications. The case
of MPEG was selected in recognition of Samsungs significant role in the international standardization group,
regarding the future visual format and the likelihood of
its large royalty income upon the commercialization of
this strategic technology.
Table 5 lists the general characteristics and research
results of the 16 technology development projects,
including the internalization level acquired, characteristics of technology, and learning activities related to
technology internalization, etc. The internalization level

acquired through technology development projects,


which measured as performance of technology internalization, is at the level of peripheral technology internalization or at the level of core technology internalization.
In some technology development projects, the core technology was internalized over a long period of time while
in some cases, peripheral and core technology was
internalized almost simultaneously and within a short
period of time. However, there are also technology
development projects for which extensive claims were
made as valid cases of independent technology development projects but were later found to be short of actual
internalization of core technology.
The performance of technology internalization is not

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Y. Gil et al. / Technovation 23 (2003) 333347

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

Top and PLb L

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

H means high and L means low.


Top means top management and PL means project leader.
S means satisfactory compared with project schedule and U means unsatisfactory compared with project schedule.

satisfactory individually in MR-Head, HP-W/S, DVD,


Gyroscope, and Wire-Bonder and remaining 11 technology development projects are all successful in the
technology internalization.
4.3. Analysis and proposition test
To test proposition 1, we introduce two 22 matrices
as shown in Fig. 2. One, characteristics of the technology
matrix, is the matrix with the dimension of technological

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

Y. Gil et al. / Technovation 23 (2003) 333347

341

Fig. 2. Fitness between characteristics of technology and mode of technology internalization.

availability), HCLA (high complexity and low


availability), LCHA (low complexity and high
availability), and LCLA (low complexity and low
availability) along two dimensions of the characteristics
of technology. Also, the mode of technology internalization matrix is classified into four cells core technology buy mode with mid-entry strategy, hereafter,
mid-entry strategy mode (high multi-specialty in development team structure and buy type of technology
acquisition method), full-scale in-house R&D mode
(high multi-specialty in development team structure and
make type of technology acquisition method), effective
reverse engineering mode (low multi-specialty in development team structure and buy type of technology
acquisition method), and full-fledged but focused inhouse R&D mode, hereafter focused in-house R&D
mode, (low multi-specialty in development team structure and make type of technology acquisition method)
along two dimensions of the mode of technology internalization.
Among the mode of technology internalization matrix,
the terminology which is mid-entry strategy mode is
quoted by Chung and Lee (1999)s mid-entry technology
strategy because the basic logic of mid-entry strategy is
same when compared with our rationale of term of
mode high multi-specialty in development team structure and buy type of technology acquisition method. In
the study of Chung and Lee (1999), they developed a
typology of technology strategy based on the timing of
entry in R&D activities. Mid-entry strategy is that where
the R&D agent chose mid stage as an entry point in the
technology evolution curve in order to develop a technology. It is based on using research results already produced by someone else, but not yet commercially

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

Y. Gil et al. / Technovation 23 (2003) 333347

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

enough mass to this core technology in DVD. Also, the


project leaders role was weak and the learning mass
was not enough in Wire-Bonder. This results in failure
in the performance of technology internalization in each
technology development project.
The summary of these research findings in the learning strategy is shown in Table 6. Using this result, we
suggest that the mode of technological innovation varies
the relationship between learning strategy and the performance of technological innovation. Also, this result
says that we cannot reject proposition 2 temporarily.
In the previous section, we suggested the research
framework and two tentative propositions for the selection of appropriate modes of technology internalization
and efficient learning strategy to improve the performance of technology internalization. Based on these
research findings, our research results suggest that we
cannot reject these two tentative propositions about
decision making for the planning and implementation of
the technology internalization process temporarily.
4.4. Research findings and managerial implications
This paper investigates the process of technology
internalization by investigating 16 technology development projects on Samsungs technological innovation.
According to these results of investigation, the performance of technology internalization depends on characteristics of technology, its selected internalization mode,
and its learning strategy.
Most of all, the characteristics of target technology
determine the most appropriate mode of technology
internalization. As a result, the selection of inappropriate
modes makes the result of internalization unsuccessful.
After the appropriate mode of technology internalization
is selected, the effective implementation of technology
internalization fitting to its mode of technology internalization is crucial to the performance of technology
internalization. Also, this study points out that in order to
internalize technically complex technologies, resources
should be largely invested in technological learning and

Table 6
Important factors in the learning strategy for each internalization mode
Acquisition method of core technology

Multi-specialty

Buy

Make

High

Mid-entry strategy mode


Learning mass
Initiative of top management

Low

Effective reverse engineering mode


Learning mass
Initiative of project leader

Full-scale in-house R&D mode


Learning mass
Learning diversity
Initiative of top management and project
leader
Focused in-house R&D mode
Learning diversity
Initiative of project leader

Y. Gil et al. / Technovation 23 (2003) 333347

that the top management should have an endeavor in


systematic resource deployment with a sense of strategic
intent. Also, less complex technologies can be internalized by intensive effort in favor of the personnel directly
involved in the development of these technologies. Furthermore, in the case of the high availability of external
technology, it is crucial to absorb external technology
within a short period of time, since the technology is
clearly verified and the directions of technology are equally clear. On the other hand, in the case of the low
availability of external technology, strengthening independent learning skills is important because target technology may still be unfinished or may be prohibited from
being externally released. The summary of these
research findings is shown in Table 7.
Based on these research findings, we introduce some
managerial guidelines for decision-making in accordance
with the technological characteristics, the internalization
mode, and the learning strategy. It will be one of the
building blocks of the Expert system to organize
implementing mechanisms of technology internalization.
When the late starters make a decision on the internalization of technology, they can make systematic analysis
of the target technologys level of complexity and its
external availability and make appropriate decisions on

343

needed strategy and implementation activity using this


managerial guideline.
A graphic representation of these managerial guidelines on the mechanism of technology internalization by
late starters is specified in Fig. 3.
As illustrated in Fig. 3, when the mid-entry strategy
mode is selected and learning strategy, which requires
certain amount of learning mass and top managements
initiative to learning and mobilize critical learning mass
is implemented for the technologies in the HCHA cell,
performance of technology internalization in each technology is successful. This learning strategy fit to midentry strategy mode is named as top initiated rapid learning by authors because it contains corporate supported
resource investment, systematic resource deployment,
and learning by doing characteristics in learning. And
when full-scale in-house R&D mode which is the most
difficult mode is selected and learning strategy, which
requires certain large amount of learning mass, certain
level of learning diversity, and top managements initiative to mobilize learning mass and involves support learning diversity with the project leader is implemented for
the technology in the HCLA cell, the performance of
technology internalization in each technology is successful. This learning strategy fit to full-scale in-house

Table 7
Summary of research findings
Cell 1 (HCHA)

Cell 2 (HCLA)

Cell 3 (LCHA)

Cell 4 (LCLA)

Mode of internalization

Mid-entry strategy mode

Full-scale in-house R&D


mode

Effective reverse
engineering mode

Focused in-house R&D


mode

Learning strategy

Top initiated rapid learning

Aggregate exploration
learning

Rapid apprentice learning Creative team learning

Tops role and strategy

Top-led business and


technology development
strategy
Establishment of technology
development objectives after
study of commercial
feasibility
Survey/selection of
technology partner

Top-led business and


technology development
strategy
Self-analysis through
benchmarking
Awareness of the
competitors direction of
technology development
through trend monitoring

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

Y. Gil et al. / Technovation 23 (2003) 333347

Fig. 3.

Managerial guideline on the mechanism of technology internalization.

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

in a internalization stage taking into account the decision


making perspective on the process of technological innovation and the unit technology level as a unit of analysis.
Based on these research findings, we can say that technology internalization strategy as the organizer of technology management system and the strategist of technology acquisition is not only to solve a problem which
selects make or buy type of technology acquisition
methods but also to give a commitment to critical mass
and adequate involvement of team management for
internalization in late starters as well. Also we can say
that it is the core of technology internalization strategy
to design the path and the structure of learning to link
buy some for speedy learning to make lot to fully
own R&D.
Another contribution of this study is that technology
development success guided by these research findings
enhances the firms technological capability and also
technological capability influences the characteristics of
target technology to be developed in the future perceived level of technological complexity and technological availability. As a result, there is interdependent
influence between technology development success and
technological capability. In other words, there is synergy
effect between technology development success and
technological capability definitely. What is important is
the fact that the accumulated technological capability of
a firm changes the characteristics of target technology
even if it is the boundary condition. Technological complexity is defined as perceived level of the technology
to be developed in a firm. The abilities to analyze and
decompose the core of target technology, to understand
the individual functions and their interactions, and to
make the technology tree of target technology can
change the perceived level of technological complexity
systematically. Also, the availability of external tech-

Y. Gil et al. / Technovation 23 (2003) 333347

nology is determined by the firms ability of networking


and ability of gathering important information about
technology from external specialists, that is, knowwhere. Therefore, the manager as system organizer
should be able to identify the firms analyzability of core
technology and the organizations ability of networking
and to systematize and to institutionalize the process of
analyzing the characteristics of target technology.
Additionally, he/she should be able to educate members
of an organization for necessary technology analyzing
techniques, and work out the scheme to enlarge the network. All of these abilities can be identified as a part of
absorptive capacity (Cohen and Levinthal, 1990), which
is accumulated through the firms own active R&D effort
during initiation and internalization stage. Therefore,
developing and accumulating these capabilities can be
the cornerstone of deciding the optimal technological
innovation strategy. Related to this issue, Lee et al.
(1988) say that the absorptive capacity of technology is
one of the most important capacities in a developing
country and internalizing developed countries technology and generating new technology result from
enhancing absorptive capacity through its indigenous
R&D effort.
After analyzing characteristics of target technology
with the guidance of established technological capability, the optimal mode of technology internalization
and appropriate learning strategy for development success in each technology can be decided automatically
by research findings of this study. Also, this success of
technology development has a positive effect to extend
the technological capabilities like absorptive capacity
and vice versa. As s result, analyzability of technological
characteristics and the ability of networking are
increased further as the activities of technology development continue as shown in Fig. 4.
Despite these contributions in this study, the study
using one large company in Korea restricts its general
applicability because of its limitation in small sample
size and in exploratory case study design. Therefore,
there are some issues that future research must address.
First, future research will attempt to increase the sample
size and will expand the study to other firms in hightech industries. More importantly, investigation of technology development projects for similarly positioned
companies with Samsung in other countries and more
quantitatively verifiable research methods such as questionnaire surveys using large sample sizes are required
for the general applicability of this study. Second, this
study has just scratched the surface of the research area,
i.e. late starters technological strategy striving to grow
into a technology leader and indicate that there is a rich
area for theory and research to improve innovation and
enhance new product success rates. To deepen understanding of technological innovation strategies for successful late starters, future research has to clarify and

345

Fig. 4. Co-evolutionary relationship between technological capabilities and technology development process.

refine measures of variables related to this research area,


explore the underlying theoretical logic, and more elaborated research hypothesis must be developed and tested
finally. For example, a hypothesis related to variables
shown in Table 8 relationship between mode of technology internalization variable and learning strategy
variable can be developed and tested more specifically.

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

Y. Gil et al. / Technovation 23 (2003) 333347

Table 8
Hypothesis on the mode of technology internalization and learning strategy

Learning mass
Diversity of learning channel
Top management involvement

Mid-entry strategy mode

Full-scale in-house R&D


mode

Effective reverse
engineering mode

Focused in-house R&D


mode

H
L
H

H
H
H

H
L
L

L
H
L

internalization and of learning are found out according to


the characteristics of technology. These results provide
important suggestions for other late starting companies
striving to grow into a technology leader, showing the
ways that help formulate technological innovation strategy and strengthen technological capabilities.
Incidentally, it is conceded that the results of technology internalization in Samsung only limit the authors
from generalizing research findings. The authors further
agree that the experiences in a single company may not
fully cover those that could have been made in other
Korean companies. However, it is expected that Samsungs success in implementing technology development
as a late starter spread several meaningful ramifications
to those interested and the results of this work give useful implications in this respect. There are some of fierce
environmental changes, namely the technology leaders
growing reluctance to transfer of technology, the emergence of various standardization groups, the shortening
of technology/product life cycles and the phenomena of
technology fusion. By illuminating how a Korean company facing a changing global environment was able to
accumulate its relatively advanced technological capabilities in a short period of time, this paper seeks to provide useful insights and lessons to companies of other
developing countries.

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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.