Technological innovation and emerging economy multinationals: the product cycle model revisited

Abstract

This paper assesses the continuing validity of three distinct propositions associated with the early versions of the product cycle model of Vernon (1966Vernon ( , 1979 or its extension to Third World Multinationals by Wells (1983Wells ( , 1986. This is in light of recent developments in the role of rapidly evolving technological capabilities in the competitive emergence and evolution of MNCs from emerging economies (EMNCs). The first product cycle proposition states that these firms have limited scope for innovation, which consists of imitation and adaptation of the innovative activities of the technologically leading companies as standardisation proceeds in the product life cycle. The current evidence rejects this proposition on the basis of the narrow scope of innovation it allows, which is inconsistent with the broad range of technological capabilities of EMNCs that result from their unique learning experience. The second product cycle proposition is that innovations are almost always located in the home country of national firms. This hypothesis remains generally valid in the case of EMNCs since the home country is the single most important site for their innovation. However, the product cycle model's focus on demand factors in the home country in determining innovation is a narrow view. Innovation generally relies on a firmspecific learning process that interacts with growth of demand, the peculiarities of domestic and foreign production conditions, and technological capabilities. Moreover, the home country is not the most significant site for their technologically sophisticated or knowledge intensive production which is in advanced economies, dominant centres or international centres of excellence. In the third product cycle proposition, the purpose of international operations is to exploit internationally their unique home country-derived technological advantages. This proposition would need to be broadened to consider competence exploration or the 'creative blending' of competence exploitation and competence exploration in the international expansion of EMNCs. The concepts of localised technological change and technological accumulation, therefore, assume increasing current relevance over the product cycle model in explaining innovation in EMNCs. These concepts will doubtless become more significant as EMNCs further evolve and follow firm-specific, cumulative and differentiated technological trajectories.

Transformation of firm innovation activities into brand effect

“…Process innovation refers to the firms' development of new products through new technology or new production systems (Manual, 2005). Previously, researchers at organizational level measured firm process innovation through the firm usage of new technologies and firm commitment to research and development (Tolentino, 2017). The official store environment is basically the design of a retail store that communicates brand value to customers, provides brand experience and efficiently guides customers through the space (Kumar and Kim, 2014;Mohan et al, 2013).…”

Firm innovation activities and consumer brand loyalty: A path to business sustainability in Asia

“…Previous research has examined process innovation in different environments. For example, Tolentino (2017) evaluated organizations’ process innovation based on their commitment and usage of new technology for research and development. Ganzer et al (2017) demonstrated that process innovation develops and improves the textile products manufactured and delivered in Brazil.…”

When firms go international: deliberate or random?

“…Choi et al (1996) challenge the traditional product life cycle model view that products are sold sequentially across the world, and introduce the type of business system of a country and the role of emerging countries in global competition, in breaking this pattern. Tolentino (2017) challenges three main propositions associated with the product life cycle model, namely, the scope for innovation, which the author thinks that nowadays is broader for multinational corporations from emerging economies; the location of innovation, which the original theory always places at the home country of the product, can now be conducted also in a developed country and not only in the home country of the product, as their markets are also sophisticated; and finally the role of technological change and accumulation in allowing emerging economies to participate in the innovation process, taking into consideration not only demand, but also supply side factors.…”