Ivo zander

research policy
ELSEVIER Research Policy 26 (1997) 209-227

Technological diversification in the multinational corporation historical evolution and future prospects
Ivo Zander l
Institute of International Business, Stockholm School of Economics, Box 6501, S-113 83 Stockholm, Sweden

Abstract
The article analyses the postwar evolution of technological diversification in the multinationalcorporation. Longitudinal data on 24 Swedish multinationals suggest that technological diversification has become a significant characteristic of the multinational corporation, and show that units located outside the country of origin have assumed a dominant role in an increasing proportion of all advanced technological capabilities. The discussion puts forward two interpretations of how this haschanged the nature of innovation in the multinational corporation: one emphasizing the continued importance of local innovation processes and one based on the development of an organizational capital which allows the firm to integrate technological activity across geographically dispersed units. It is hypothesized that units in foreign locations are becoming increasingly engaged in the localintegration of several related technologies. This solution recognizes some of the difficulties involved in international knowledge exchange, and suggests that foreign units develop world mandates for groups of technologies in which they have proved their technological excellence. © 1997 Elsevier Science B.V.
Keywords: Multinational corporations;Technologicaldiversification;Foreigntechnologicalcapabilities

I. Introduction

While literature on the sequential advantages of multinationality has emphasized how the multinational corporation can acquire and transfer innovation within its geographically dispersed organization, recent contributions have focused on the beneficial effects of continuous combining and re-combining of technology within the multinational network. The ability to combineand re-combine technology on an international scale appears to have become particularly important with the fusion of previously separated technologies and international technological specialization or agglomeration of technological activity in certain geographical locations. The present article examines the extent to which the multinational corporation has developed the pre-conditions forcombining and re-combining technology within the multinational network. It employs an entropy measure to identify longitudinal trends in the technological diversification of 24 leading Swedish multinational finns, and examines the extent to which their foreign units have acquired the unique technological capabilities

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required to combine and re-combine technology on an international scale. The empirical findings suggest that technological diversification over the postwar period has become a significant characteristic of the sample firms, and show that units located outsidethe country of origin have taken on a dominant role in an increasing proportion of all advanced technological capabilities. These findings confirm improved pre-conditions for combining and re-combining diverse technologies on an international scale, which could be used as a new and unique advantage from muitinationality. The discussion puts forward two interpretations of how the geographicaldispersion of advanced technological capabilities influences the nature of the innovation process in the multinational corporation. One interpretation emphasizes the continued dependence on local exchange of technological knowledge and the establishment of multi-center structures within the multinational network, while the other emphasizes the creation of an organizational capital that allows for the...