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Int. J. of Automotive Technology and Management, Vol. 3, Nos. 1/2, 2003

Pooling capabilities abroad for global competitive advantage: Investigating Ford–Mazda cooperation in Southeast Asia Daniel Arturo Heller and Shinya Orihashi Graduate School of Economics, The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo, Japan E-mail: [email protected] E-mail: [email protected] Abstract: This paper empirically investigates the pooling of complementary capabilities in third countries by allied MNCs through an exploratory case study of collaboration between Ford and Mazda in two Southeast Asian countries. Findings revealed nine categories that seem to influence capability transfers by allied firms. A composite category termed ‘managerial participation’ is used to build a general matrix of possible types of thirdcountry collaboration and the expected level of capability pooling that will occur in each type. The paper argues that repeated capability pooling in countries around the world could be a source of global competitive advantage for allied firms. Keywords: strategic alliance; MNC; capability transfer; capability pooling; world auto industry; international management; globalization; case study; theory building. Reference to this paper should be made as follows: Heller, D.A. and Orihashi, S. (2003) ‘Pooling capabilities abroad for global competitive advantage: investigating Ford–Mazda cooperation in Southeast Asia’, International Journal of Automotive Technology and Management, Vol. 3, Nos. 1/2, pp. 122–143. Biographical notes: Daniel Arturo Heller is a full-time Lecturer in the Faculty of Economics at Shinshu University in Nagano, Japan. He is currently researching strategic alliances and organizational learning in the auto industry. Shinya Orihashi is a full-time Lecturer in the Faculty of Economics at Tohoku Gakuin University in Miyagi, Japan. His main research area is production systems in the auto industry.

1 Introduction Amidst the ongoing globalization and growing complexity of today’s markets, it is increasingly difficult for the existing firms to survive on their own. Consequently, international strategic alliances involving the pairing of firms with complementary resources and capabilities have become a common managerial tool [1–3]. Often alliances are formed as short-term project-based ‘relationships of convenience’. However, alliances can also be either formed as, or evolve into, longer-term symbiotic relationships. The world of auto industry is no exception. Many alliances have a relatively short duration of a few years and a focused area of cooperation. Examples include cooperation

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by Volkswagen–Ford in Latin America, Honda–Isuzu in the US, etc. However, various other alliances are broader and have lasted for 20 or more years. In cases where an alliance relationship is of this latter type, an interesting, and as yet largely untouched research question presents itself: How can existing alliance ties between MNCs, such as those frequently found between the large global automakers, be extended to third countries? Adopting a perspective that focuses on the transfer of complementary capabilities, the present paper seeks to address this research question by investigating possible types of third-country collaboration, and how capability pooling is likely to occur in these types. Investigation of these issues gives useful insights into how firms coordinate their competencies and knowledge, the theme of this special issue.

1.1 Methodology and paper outline The goal of this paper is to make some contribution to the building of new theory. An exploratory approach is taken, the basic theoretical groundings of which are outlined in Section 2. As an investigative tool, an embedded, single-case study approach is employed, requiring multiple units of analysis [4,5]. The primary unit of analysis corresponds to an allied pair of multinational corporations (MNCs) that have extended their alliance to third-countries. The secondary unit of analysis is embedded within the case study and consists of a specific example of third country collaboration. Case study results are presented in Section 3. In Section 4, case results are used to address the primary unit of analysis. Hypotheses on capability transfers by allied MNCs are generated and used to create a matrix that illustrates the types of third-country collaboration that are possible when allied firms decide to extend their relationship to the third-countries by transferring complementary capabilities. The expected level of pooling for each type of collaboration is shown. Finally, Section 5 summarizes the contributions and limitations of the paper.

2 Theoretical approach 2.1 Resource-based view As its starting point, this paper uses the resource-based view of the firm which holds that lasting sources of competitive advantage for a firm lie in its valuable, rare, and difficultto-imitate resources [6]. Complex organizational capabilities (hereafter, simply ‘capabilities’) may be considered as one type of such resources. Firms grow by applying their competitive capabilities in new ways, such as transferring them to new locations or to new products. One common target for capability transfers is overseas markets and industries.

2.2 Transferring capabilities Research on MNCs has tended to approach the issue of overseas growth of the firm by focusing on the transfer of the capabilities of a single firm (or the firms of an industry in a particular country) to host countries using an application/adaptation framework [7]. This approach has been useful in advancing the understanding of how a firm (or firms) can

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benefit by exploiting its (or their) internal advantages in a host-country environment. Such organizational behavior is consistent with the traditional overseas expansion model dating back to Vernon [8], where a firm seeks to apply its home-country competitive advantages to overseas markets to secure its advantages there. Capabilities can be defined as in Ref. [9], that is, they can be understood as being based on various interdependent routines (e.g., for problem-solving, etc.) The work of Kogut and Zander [10] provides a framework for further understanding the role of capability transfers in firm expansion. Investigating the ability of a firm to create and transfer knowledge efficiently, the authors introduce the concept of ‘combinative capabilities’ that allow a firm to integrate its knowledge and then apply it to new situations in order for a firm to grow. They propose that a firm’s capabilities largely reside in the higher-level organizing principles of a firm. As such, the effective transfer of these principles to new locations can be considered the key to a firm’s expansion. Extending Kogut and Zander’s line of reasoning, to measure whether a capability has been transferred, the presence of the relevant principles in a host location could be ascertained. Another means of measuring the transfer of capabilities is employed by Abo et al. [7], where the degree to which individual elements and characteristics of a capability are observed in a host location is used to determine the degree of transfer. However, a criticism of this approach is that it fails to capture whether or not the various elements actually function properly together as a system. Using both of the measurement methods described above, the present paper classifies capabilities as having been wholly, partially, or negligibly transferred, according to the degree to which a capability’s key organizing principles, routines, characteristics, and elements are observed to have been replicated in a new location.

2.3 Pooling capabilities A dictionary definition of pooling is generally some variation of ‘combine for a common interest’. The academic use of the term generally follows this usage, although precise definitions of the term are seldom found in the literature. First, usage of the term in the context of a single MNC is considered. Nohria and Ghoshal [11] describe the MNC as a ‘differentiated network’ made up of a firm’s headquarters and subsidiaries, each of which has its own unique identity, resources, and capabilities. Transfers of resources and capabilities flow not only from a firm’s headquarters to its subsidiaries, but also from subsidiaries to the headquarters and between subsidiaries themselves. They describe a ‘global-for-global’ innovation process whereby globally applicable solutions are achieved through the pooling of resources and capabilities of multiple organizational units throughout the MNC. In the context of allied firms, pooling has tended primarily to be used in reference to joint ventures (JVs), where separate firms combine resources and capabilities to form a separate entity, where they share control [12,13]. The complementarity of the resources of the firms has been viewed as the key source of value creation in alliances at least since Richardson [14]. Dyer and Singh [15] define complementary resource endowments as non-tradable and indivisible ‘distinctive resources of alliance partners that collectively generate greater rents that the sum of those obtained from the individual endowments of each partner (pp. 866–867)’. In this paper, capability pooling is said to have occurred


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when the respective complementary capabilities of the members of an allied pair of MNCs have been directly transferred to a third-country operation [16].

2.4 Summary The literature review undertaken in this section provides useful directions for the exploratory study of this paper. The effective extension of an alliance relationship between MNCs that possess complementary capabilities will likely involve the transfer of these capabilities to third countries so that they may then be pooled there. The present paper seeks to explore what factors enable this capability pooling to occur.

3 Case investigation 3.1 Case selection The world automobile industry offers a good fit with the methodological and theoretical approaches of this paper. The industry is populated with MNCs that actively engage in transferring their capabilities to third countries [7,17,18]. Furthermore, there exist various examples of alliances between MNCs with complementary capabilities, and some of these alliance relationships have been extended to third countries [19,20]. From among these, the authors have selected the alliance between the Ford Motor Company (Ford) and the Mazda Motor Corporation (Mazda) as their case study for the following reasons [21– 25]. First, the alliance contains multiple instances where the alliance relationship has been extended to third countries, allowing for a comparative study. Second, one of the authors has had extensive previous experience studying this alliance. Third, it was possible for the authors to obtain access to the sites needed to collect the required data.

3.2 Background of Ford–Mazda alliance Initial alliance ties between Ford and Mazda were formed in 1969 when a Ford/Mazda/ Nissan joint venture was established to manufacture automatic transmissions in Japan. Ford and Mazda subsequently engaged in various other project-level initiatives. In 1979, Ford acquired 25% of Mazda’s stock, becoming Mazda’s largest stockholder. As a result, cooperation between the firms broadened and deepened. Furthermore, since the 1980s Ford has learned production capabilities from Mazda, most notably in quality, engineering, and manufacturing [26–35]. After careful consideration of whether or not their alliance ties should be maintained, in late 1993, the firms announced their intention to strengthen their alliance relationship, and the level of Ford’s influence in Mazda increased. Subsequently, in April 1996 Ford increased its equity-stake in Mazda from 25% to 33.4%, and was given the authority to appoint Mazda’s president. In June 2002, the fourth consecutive Ford-dispatched executive assumed the presidency of Mazda. Beginning from about the time the Ford–Mazda alliance was strengthened in 1993, Mazda started to learn managerial capabilities from Ford, notably in strategy formulation, marketing, financial control, and planning [36].

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As is illustrated by the mutual learning that has occurred across the alliance, Ford and Mazda can be understood to possess complementary capabilities. Broadly speaking, Ford’s relative strengths can be said to lie in ‘managerial capabilities’. Mazda’s relative strengths can be said to lie in ‘productive capabilities’ [37].

3.3 Selection of examples of third-country collaboration: Taiwan and Thailand The authors sought to investigate the instances of third-country collaboration by Ford and Mazda that would offer a high potential to assist in the discovery of grounded theory [38]. Two examples of third-country collaboration by Ford and Mazda were selected, namely Taiwan and Thailand, that were each initiated shortly after major events in the evolution of the alliance had occurred [39]. Also, at the time the specific third-country alliance collaboration was initiated, Ford had an existing production operation in Taiwan and Mazda had one in Thailand. These two examples of third-country collaboration were studied to see if capability pooling has occurred, and if so, the degree to which and means by which it has occurred [40].

3.4 Collaboration in Taiwan Ford’s subsidiary in Taiwan, Ford Lio Ho (FLH), consists of a plant and administrative facility. It was established in 1972 and is located in Chung Li, an industrial city about 1 h by car from Taipei. Due to national laws at the time, the subsidiary was established as a 70/30% joint venture between Ford and an industrially diversified Taiwanese firm, Lio Ho. The local partner and Ford are both represented on the firm’s board of directors, with the local partner appointing the venture’s Chairman and Ford appointing the President. Interviews revealed that Lio Ho is largely passive in its relationship with FLH. It must first be noted that the long history of FLH was found to exert a limiting influence on recent capability transfers to the operation. Over the years, FLH has developed its own strong organizational identity and unique capabilities. Many of the core personnel at FLH have worked for the firm for a long time, with some having been employed for more than 20 years. It is natural for such individuals to possess their own established, and largely justified, ideas of what constitute effective productive capabilities and/or managerial capabilities for FLH. Many of these established ideas would likely have to be ‘un-learned’ before any new capabilities could be successfully adopted by the operation. 3.4.1 Historical milestones FLH’s initial products in the 1970s were KD kits sourced from Ford’s European operations. Beginning in 1980, however, product sourcing was gradually shifted to Mazda, which had at the time what was considered to be more competitive vehicles for the Taiwanese market. In fact, from the 1980s through today, the large majority of FLH’s locally assembled product volume has consisted of Mazda-developed vehicles. In the mid-1980s, Ford decided to upgrade the FLH production facility to make it into an export base. In 1986, plant capacity was more than doubled to over 100,000 units a year. Exports to Canada of the Laser, a Ford-badge version of the C-sized Mazda 323, were initiated but never exceeded 20,000 units/year. Export growth was hampered by the significant appreciation of the Taiwanese currency and the rapid growth of the domestic


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auto market in Taiwan from the mid to late 1980s. Both of these factors worked to make domestic sales a more attractive use of plant capacity. The fact that FLH’s production facility had been upgraded gave the operation a strong competitive position in the local market. High levels of production quality and capacity allowed FLH to capitalize on the rapid growth of the domestic market and FLH’s market share and profits grew rapidly. For 6 years straight, from 1988 to 1993, and then again in 1995, Ford occupied the top market share position in Taiwan. In the early 1990s, the decision was made to switch the sourcing of C/D-sized cars from Mazda to Ford’s European operations. Precipitating this switch was the unclear state of the future of alliance ties between Ford and Mazda. At the same time, Ford of Europe was developing a C/D-sized ‘world-car’, the Mondeo, which was the vehicle selected by FLH as to be its next locally assembled car in that class. From the mid-1990s, FLH’s market share position in Taiwan began to fall. A primary cause of the drop was a deteriorating competitiveness of the FLH product lineup. This decline in the relative market attractiveness of FLH products was due in part to increasingly severe market competition. However, the problem appears to have also been negatively affected by an apparent slowdown in the renewal of FLH products. This slowdown seems to have been largely caused by the uncertainty of the early 1990s regarding the future of the Ford–Mazda relationship, and the economic difficulties Mazda was facing at the time. Furthermore, poor reliability of Mondeo power trains after the car was introduced to the Taiwan market in 1997 also negatively affected FLH’s market performance and the local reputation of the Ford brand. In 1998, the scope of the Ford–Mazda relationship in Taiwan was broadened when it was decided that FLH would become Mazda’s local distributor in Taiwan, replacing Mazda’s longtime distributor for the Taiwan market [41]. This form of Ford–Mazda collaboration marked the first attempt of its kind, where the Ford and Mazda brands are managed and distributed by the same local organization. A dedicated team was created inside FLH to manage the Mazda brand, while sharing backroom support with those managing the Ford brand. Since 1998, the Mazda brand has been rapidly gaining market share in Taiwan, despite a depressed market [42]. 3.4.2 Production The older of FLH’s two final assembly plants was actually built by a JV between Toyota and Lio Ho in 1968 and was utilized for approximately 3 years until Toyota exited the Taiwan market in 1972 [43]. It was difficult to determine definitely the degree to which FLH’s production system was influenced by the fact that this plant was originally built by a Toyota JV. However, interviews indicated that the influence was minimal. Mazda has influenced the development of FLH’s production system, primarily due to the many different types of Mazda-developed vehicles that have been assembled at FLH since 1980. To facilitate the start-up of assembly of Mazda-developed vehicles, FLH engineers are sent to Mazda in Japan for training. Experienced Mazda engineers in Japan are also sent to FLH to assist in these new product launches. Over time learning has occurred on both sides and total numbers of personnel that are sent has decreased, as have the durations of the stays of the personnel. Due in part to these exchanges of personnel, there are some elements of FLH’s production system that are typical of what has been

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called the Japanese production system. Some examples of these elements are described next. First, standard operating charts for jobs on the line at FLH are made by group leaders. Second, operators on the line can stop the line in case of errors. Third, operators are encouraged to make line-side suggestions for improvements and to highlight line problems, and some examples of pokayoke suggestions that have been made by line workers are displayed within the plant. Fourth, there are quality control circles, which were first introduced to the plant in the mid-1980s. The authors’ limited observations of plant operations at FLH, however, indicated that some of the key principles of the Japanese production system, such as frequent line stops and strict adherence to First-InFirst-Out (FIFO) by line workers, were not always found to be present. In addition to the elements of the Japanese production system listed above, the current production system of Ford is also a prominent part of FLH’s production system. Notably, wide diffusion and utilization of statistics-based quality control was observed. For example, there is a six-sigma qualification system at FLH, for which, as of February 2002, approximately half of the employees had qualified. The goal was for all employees to qualify by the end of the year. Also, statistical targets, daily achievement results, and monthly averages of daily achievement results are prominently displayed at FLH plants. As is illustrated in the above description, the case investigation suggests that the current production model of FLH has been developed through multi-path systems emergence [44–46]. In other words, elements of Japanese, European, and US production systems were all found to be present and to have been introduced through a variety of different paths, that is to say, introductions of system elements do not appear to have occurred solely through the deliberate planning of managers. It must be pointed out again that a notable limiting influence on any recent attempts at the transfer of productive capabilities to FLH is the physical location of the facility, which is in the middle of the city of Chung-Li, within walking distance from the ChungLi train station. As a result, the facility is located in an area that has undergone much economic development. As long as the facility remains at its current location, it is virtually impossible for any major expansion of the plant to be done. As such, FLH is forced to ‘make do’ with its existing production buildings. This type of limitation can clearly be seen to be affecting, for example, FLH’s second final assembly plant which was built in the mid-1980s. A view inside of the plant reveals that numerous special processes have had to be introduced into the production process to cope with the narrow confines of the structure. Interviews revealed that FLH has created local innovations in small-volume/highvariety manufacturing that have been transferred to Ford outside of Taiwan. This can be taken to be evidence of the high productive capability of FLH. Further evidence of this high achievement level of FLH’s production system is revealed by the facility’s strong engineering function. For example, FLH engineers are able to engineer parts that have been designed locally for the Taiwanese market. They are also able to coordinate the local production of these parts with suppliers in Taiwan. FLH’s also has some local design capability. For example, FLH is able to locally design cosmetic changes to the interiors and exteriors of the vehicles that are assembled at FLH. The severe competition of the Taiwanese auto market requires local assemblers to release ‘major’ minor-changes to vehicles at least every 1.5–2 years. FLH is able to keep up with this high pace of product renewals. Furthermore, some FLH designers have


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also been sent to Europe to provide Taiwanese input on vehicles developed by Ford’s European operations that will also be sold in Taiwan. Mazda product development contribution to FLH is through the numerous products assembled at FLH that were developed by Mazda. Ford’s subsidiary in Japan also provides design assistance to FLH and when necessary acts as a liaison for FLH’s interaction with Mazda. 3.4.3 Management As of 2002, FLH has been a subsidiary of Ford for 30 years. Over this period of time, Ford has supported the development of managerial capabilities at FLH in a number of ways. For example, FLH managers sometimes attend training sessions outside of Taiwan that Ford has organized to build the individual abilities of people who work in a particular managerial function. Some managers at FLH have also spent long periods of time working at Ford operations outside of Taiwan as a means of building managerial capabilities. The present capacity of FLH to function without the assistance of a large contingent of executives and managers dispatched from Ford is shown by the fact that only there are only two long-term dispatchees regularly stationed at FLH. These Ford dispatchees head the finance and credit functions. Until recently, a dispatchee from Ford overseas served as the president of FLH, but now this post is occupied by a Taiwanese national. Interviewees indicated that since the mid-1980s Ford’s regional headquarters in Asia has actively helped FLH improve its marketing function. One means by which the marketing function at FLH has been built up has been the sending of FLH brand mangers to visit their counterparts in the US to see how particular vehicles that will also be sold in Taiwan are first marketed in the US. Lessons learned and new ideas gained on these trips are then brought back to Taiwan, modified, and creatively applied to marketing the vehicles locally. Marketing tools developed by Ford are also commonly used at FLH. These two methods provide ways in which marketing capabilities can be transferred from Ford to FLH. Since 1998, when FLH assumed distributional responsibilities of the Mazda brand in Taiwan, careful brand building and management has produced what FLH considers to be a positive rivalry between the Ford and Mazda brands within FLH. Although the brands are kept independent at the retail level, having the brands managed within the same facility seems to have forced managers to define better the positions of the brands in the market in order to minimize cannibalization. As such, the present product positioning of the two brands supplement each other, providing greater coverage of the market for the total FLH enterprise. Since FLH is a Ford subsidiary the facility participates in Ford’s global human resource management systems, such as comparisons of Ford’s productive operations worldwide. 3.4.4 Summary Interviews with FLH managers indicated that Ford evaluates highly what FLH has achieved in Taiwan. FLH also considers favorably the cooperative relations it has developed with Mazda, including the new form of cooperation that has existed since FLH

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assumed responsibility for distributing the Mazda brand in Taiwan. However, a possible resource strain within FLH, due to its managing both brands without having increased its overall staff, may be considered a latent problem. Resources that have been used for building the Mazda brand could not be directly deployed by FLH to help speed the recovery in the local market of the Ford brand. Nevertheless, at present, a turnaround for the Ford brand in Taiwan appears to be emerging seemingly due largely to the positive competitive relationship that has developed within FLH between the Ford and Mazda brands and an increased competitiveness of Ford’s local product lineup in recent years. Mazda also evaluates highly what FLH has achieved in Taiwan. Recently Mazda’s market share and market recognition in Taiwan have been growing rapidly, producing positive revenue and profits for Mazda at low investment costs. Mazda encourages other subsidiaries to learn from the Taiwan case. However, the presence of what might considered country-specific environmental factors (e.g., the severely competitive product development environment in Taiwan and the strong local capabilities of FLH) may limit the degree to which the lessons learned in Taiwan may be applied to other locations.

3.5 Collaboration in Thailand In Thailand, Ford and Mazda operate as equal partners [47] a large-scale assembly plant, AutoAlliance Thailand (AAT), which is located at a special industrial development area about 160 km southeast of Bangkok. Ford and Mazda, each dispatch four of the eight members of the operation’s board of directors. From Mazda, there are two part-time directors and two full-time directors, who are the Mazda-dispatched President and Vice President of AAT. From Ford, there is the Chairman of AAT (a part-time position), the President of Ford ASEAN, the Financial Director of Ford Asia Pacific, and the President of Ford Thailand (a Thai national). 3.5.1 Historical milestones In May 1994, Ford and Mazda first announced that they would jointly establish a largescale manufacturing venture in Southeast Asia. From the start, it was decided that the plant would produce for both domestic and export markets. The announcement of cooperation was one of the first concrete strategic decisions related to the December 1993 announcement of the strengthening of the Ford–Mazda alliance. For Ford, a major production facility in the region would allow the firm to strengthen its level of sales in the region, which contains numerous key emerging markets. For Mazda, a large-scale plant in the region would expand the firm’s overseas production ratio, which is very low compared to other automakers exposing Mazda to a high degree of currency risk. However, due to lack of financial resources, Mazda wanted to reduce the required capital investment as much as possible and a JV with Ford would help achieve that goal. In August 1995, Ford and Mazda announced that Thailand had been selected as the site of the new plant, which was to have a production capacity of 135,000 vehicles/year. The completed plant began production of one-ton pickup trucks for the domestic market in May 1998. Approximately 6 months later, the plant began to produce models for export. Pickups produced in Thailand are sold under the Ford and Mazda brands both domestically and in countries all over the world (except North America) [48].


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3.5.2 Production Interview findings indicate that Mazda took the lead role in production related decisions at AAT, including designing the plant. The shape of production facilities at AAT is a square, much the same as that of Mazda’s Hofu Plant in Japan and AutoAlliance International in Michigan (USA), a plant that was built by Mazda. The internal layout of the production-support offices at AAT is in the ‘open office’ style that is typically found in Japan and the foreign subsidiaries of Japanese firms. AAT’s production system has numerous similarities with Mazda’s production system. For example, in typical Mazda fashion, at AAT there is a very clear physical demarcation within the plant between an ‘automated zone’ and a ‘manual zone’. Many elements and key principles of Japanese production systems are very prominent at AAT. For example, there are low line-side inventories and consistent worker performance of routines such as FIFO parts picking. Case investigation revealed that there were two primary means by which these abilities were transferred to locally hired personnel. First, locally hired employees were sent to Japan for training, and second, there is the presence at AAT of active teaching by highly experienced production-orientated Mazda dispatchees. For example, a central figure in the startup of production at AAT was a now-retired Executive Vice President of AAT who had served as the production director at Mazda’s Hofu Plant before being dispatched to Thailand. There are also numerous differences between AAT and Mazda’s existing plants in Japan. First, automation at AAT is limited; whereas Mazda’s plants in Japan are highly automated. Behind this difference is the inexpensive cost of labor in Thailand, and the practice is much the same as what is found at other Japanese plants in Thailand. However, since AAT is also designed to be an export-orientated facility, the facility must be able to achieve ‘world-class quality.’ For this purpose, some important quality assurance processes have been kept automated at the plant. Second, AAT has developed its own unique methods for coping with the large variety of pickups that must be produced at AAT, as the plant exports vehicles, under two brands, to many countries around the world, and thus faces a myriad of regulations and requirements to which the vehicles must be built. AAT copes with this high level of model variety by limiting the scope of work for individual operators. Moreover, to minimize mis-assembly and maintain high quality levels, pokayokes are utilized to a larger degree at AAT than what is found at Mazda’s plants in Japan. Third, as many employees at AAT were completely unfamiliar with automotive manufacturing, Mazda dispatchees prepared detailed manuals and standard operation sheets containing detailed pictorial illustrations, which are not typical of what is generally done in Japan. These and other differences, however, do not seem to detract in any significant way from the overall impression that AAT is a very ‘Mazda-like’ plant. Contributing to this impression is the fact that few significant influences from Ford’s production systems were found at AAT. In addition to manufacturing, Mazda also heads the R&D function at AAT, with Mazda’s R&D center in Japan handling most of the product development processes related to AAT. Efforts are presently being made to increase the local R&D capabilities at AAT.

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3.5.3 Management Managerial functions at AAT have been designated as the responsibility of Ford. A visual reminder of this division of responsibility can be seen when first entering the managerial offices at AAT, as they are arranged according to the traditional ‘Western style’, that is, with high partitions between desks. This type of office layout contrasts sharply with what is found in the production-support offices at AAT, as is described above. A long-term Ford dispatchee heads the finance function at AAT, and he has worked hard to transfer the strong financial orientation of Ford to the venture. Not surprisingly, AAT is required to submit very detailed monthly reports to Ford and Mazda on AAT’s financial achievement, targets, results, descriptions, and explanations. The reporting to Ford is similar to that which is required of other Ford production facilities around the world. AAT follows Ford’s HRM system, with little influence from Mazda. This finding is somewhat unexpected since prior to the establishment of AAT, Mazda had for many years been assembling Mazda-brand vehicles for sale in Thailand at a KD facility located in the suburbs of Bangkok. The authors had expected that Mazda’s learning over the years about effective HRM in Thailand would be applied to AAT. However, this seems to be true only in the negative. For example, a notable characteristic of the HRM system at Mazda’s former plant was its many hierarchical layers, which had been created to fit what Mazda had perceived to be an unusually strong Thai predisposition to seek status. However, with the decision to close this older plant as the new facility came on line, personnel transfers of local managers from the old plant did not exceed 20%, and in discussions between Ford and Mazda, it was decided that the number of hierarchical layers at AAT would be kept as few as possible, which also facilitates comparisons of the plant with other Ford production sites around the world. While there are approximately 2300 locally hired employees at AAT, the number of long-term dispatchees from overseas working at AAT is only 20 (16 from Mazda and 4 from Ford), which is about half of what is found at similar sized Japanese production facilities in Thailand. AAT continues to work hard to try to place Thai nationals in positions that are now held by dispatchees from overseas. Evidence of this can be found in the fact that there is already a Thai national serving as a Vice President at AAT, which is remarkable given the short time the plant has been in operation. The goal to keep the number of dispatchees at AAT as low as possible is characteristic of Ford’s management style. AAT has adopted a pay system for its employees that is largely based on ability, in a way that is consistent with Ford operations in other countries. For example, a ‘Performance Review’ that is carried out at Ford plants worldwide every February, is also done at AAT. In this review, employees are asked about plant satisfaction, and results are directly linked to managerial bonuses. Supervisors evaluate plant workers according to such measures as, level of cooperation, quality achievement, attendance, etc. Results from these evaluations are linked to bonus levels. Managers are evaluated by their immediate bosses and through the yearly reviews described above. A long-term Ford dispatchee heads the purchasing function at AAT, though his direct reports are largely made up of dispatchees from Mazda. It is expected that Mazda would play an active role in purchasing at AAT, since Mazda heads R&D, process engineering, manufacturing, and because many of the local suppliers of the plant are firms that are


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affiliated with Japanese suppliers. However, Ford insisted on also having a strong say in this function and has pushed hard for parts cost reduction and tight financial control. 3.5.4 Summary Ford and Mazda have achieved a clear division of labor at AAT, with each side taking responsibility for those functions that are related to its respective capability strengths. The performance of AAT has been the best of Ford’s production sites in Southeast Asia. Mazda also appears to evaluate highly the facility’s performance and achievements.

3.6 Summary of case findings The first analysis undertaken above was of Ford–Mazda collaboration in Taiwan. The emerging nature of the collaboration over a period of more than 20 years is notable. Ford was found to have transferred capabilities in various managerial functions to FLH, and the overall managerial nature of the operation seems to have been strongly influence by Ford. Mazda was found to have transferred productive capabilities to FLH, but the relatively passive stance of Mazda in supplying these transfers is notable. Ford was also found to have also supplied various production capabilities. FLH’s overall production system seems to have largely emerged over time, and includes characteristics of Japanese, European, and US systems. The second analysis conducted above was of Ford–Mazda collaboration in Thailand. The deliberate nature of the collaboration is notable. The firms were found to have supplied complementary capabilities to the local operation, AAT, with Ford contributing managerial capabilities and Mazda contributing productive capabilities. Thus, the pooling of capabilities was observed in both cases, but in different ways. In Taiwan, a limited form of pooling was observed. This contrasted with what was observed in Thailand, which can be considered a fuller example of complementary capability pooling. The degree to which the allied automakers’ complementary capabilities have been transferred to the third-country operations seemed to determine the level of capability pooling that occurred in each country. Table 1 summarizes the comparison of the FLH and AAT examples of collaboration. Table 1 Comparison of FLH and AAT Established Year collaboration initiated Equity holders President

Function Product source

FLH 1972 1980 Ford: 70%, local partner: 30% Home-country national (until December 2001, a Ford expatriate) Full service, from design to sales Ford (Europe), Mazda (Japan), Ford (US)

AAT 1996 1994 Approximately 50–50 Ford/Mazda JV Expatriate (Mazda)

Manufacturing company Mazda (Japan)

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3.7 Categories revealed to influence capability transfers Based on the comparative analysis of the findings on the two third-country operations, the following categories were found to have influenced the transfer of capabilities to third countries. Categories seemed to vary in their level of influence, however. Depending on whether or not a major mitigating factor was observed for a category, its level of influence is deemed to be either high or low. 3.7.1 Path dependency of local operation A third-country operation that is already in existence when allied MNCs initiate collaboration there will likely face capability and strategy constraints stemming from the unique historical development of the operation [49,50]. For example, numerous factors at existing facilities, such as physical space limitations and prior learning of personnel, can constrain capability transfers. However, these path dependant constraints can be alleviated by closing an existing facility and limiting manager carry-over to a newly built facility, as Mazda did in Thailand. Since the case revealed this mitigating factor, the level of influence of this category on capability transfers is deemed to be low. 3.7.2 Equity stake Interviews at Mazda’s headquarters in Japan revealed that Mazda’s possession of an equity stake in AAT strongly influenced Mazda to provide a consistently high level of support for the operation. Likewise, Mazda’s lack of an equity stake in FLH strongly influenced Mazda to be relatively passive regarding capability transfers to the venture. Thus, the possession of an equity stake in a third country operation appears to influence the transfer of capabilities. Since the case did not reveal any major mitigating factors for this category, its level of influence on capability transfers is deemed to be high. 3.7.3 Dispatching of personnel The presence of personnel dispatched from Ford and Mazda who could teach capabilities directly to local personnel in the third-county operations was found to be an important factor contributing to capability transfers. Success in teaching appeared to be positively correlated with the length of time personnel stay in the third country and the experiential knowledge possessed by dispatchees regarding the capabilities being transferred. Thus, the dispatching of personnel by an MNC to a third-country operation appears to influence capability transfers. Since the case did not reveal any major mitigating factors for this category, its level of influence on capability transfers is deemed to be high. 3.7.4 Overseas training of locally hired personnel The sending of locally hired personnel of the third-country operations for training in Ford and Mazda facilities outside of the third country was found to be an effective means of transferring capabilities to the third-country operation, provided the locally-hired personnel returned to the third country. Thus, the overseas training of locally hired


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personnel by an MNC appears to influence capability transfers. Since the case did not reveal any major mitigating factors for this category, its level of influence on capability transfers is deemed to be high. 3.7.5 Transferability of capability Differences in the characteristics and properties of capabilities appeared to affect the ease with which they could be transferred by Ford and Mazda. In general, productive capabilities seemed to require a larger and broader human resource commitment to transfer than did managerial capabilities. However, as Mazda’s conduct at AAT showed, manipulation of some of the individual elements of a capability can be employed to increase the transferability of a capability, without significantly disrupting a capability’s functioning. Since the case revealed this mitigating factor, the level of influence of this category on capability transfers is deemed to be low. 3.7.6 Ability to transfer capability The ability of Ford and Mazda to transfer capabilities seemed to depend on: (1) the availability of sufficient financial resources to devote to capability transferring, (2) the presence and availability of knowledgeable experienced managers with a particular capability, and (3) the capacity of dispatched managers to understand and function successfully within a third country’s culture. These factors seem to affect the capability transfers of MNCs. Since the case did not reveal any major mitigating factors for this category, its level of influence on capability transfers is deemed to be high. 3.7.7 Ability to receive capability transfer Socio-cultural factors of the third-country operations, including the level of national economic development and technologic accumulation, were found to affect the ability of local operations to receive capability transfers. However, as with the transferability of capabilities category, it was observed that a firm could recast elements of a capability in order to fit the ability level of a third-country environment, and yet still largely preserve a capability’s basic functioning. Since the case revealed this mitigating factor, the level of influence of this category on capability transfers is deemed to be low. 3.7.8 Motivation to transfer capability Case investigation indicated that Ford and Mazda’s motivation to transfer capabilities to a third county was related to the degree to which these MNCs perceived it as valuable to engage in such transfer efforts. Factors influencing this perception could include the desire of an MNC to protect its brand image from being possibly harmed by a product being poorly produced or poorly distributed in a third country. Other possible influences are factors related to the condition of the relationship between the allied MNCs, which would be affected by changes in the perceptions within the MNCs as to the fit of their strategies, level of equality, and relative competitiveness and degree of complementarity of their respective capability strengths. In addition, the degree to which an MNC views

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itself as actually possessing a particular capability that can then be transferred abroad also appears to affect this motivation. The overall level of motivation of an MNC to transfer capabilities appears to affect capability transfers. Since the case did not reveal any major mitigating factors regarding this category, its level of influence on capability transfers is deemed to be high. 3.7.9 Motivation to receive capability transfer Case investigation indicated that perceptions of the locally hired personnel regarding the value of receiving capability transfers from Ford and Mazda would influence the desire of the third-country operation to receive capability transfers. The motivation of thirdcountry operations to receive capability transfers appears to affect capability transfers. Since the case did not reveal any major mitigating factors regarding this category, its level of influence on capability transfers is deemed to be high. The case findings listed above are summarized in Table 2. Using a replication logic as described by Yin [5], other instances of third-country collaboration by Ford and Mazda (e.g., in Europe, China, Mexico, Colombia, Philippines, and Australia), as well as the third-country collaboration of other allied MNC pairs must be analyzed to build the internal and external validity of these findings [5]. Table 2 Estimated level of influence on capability transfers by category Category Path dependency Equity stake Long-term dispatches Overseas training of locally hired personnel Transferability of capability Ability of automaker to transfer capability Motivation of automaker to transfer capability Ability of third country operation to receive capability transfer Motivation of third-country operation to receive capability transfer

High

Low u

u u u u u u u u

4 Discussion 4.1 Theory building Returning to the initial motivation of the paper, this section considers the types of collaboration that are possible when an allied MNC pair seek to extend their relationship to third countries and the expected effects of these types of collaboration on capability pooling. Again, the issue is addressed from the complementary capability transfer perspective that has been adopted throughout the paper. First, those categories listed in Table 2 that the case study showed to exert only a low level of influence on capability transfers are provisionally removed from consideration to simplify the discussion. Next, three of the remaining categories that appeared to be highly related to each other and are most readily measurable, namely equity stake, dispatching


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of personnel, and overseas training of locally hired personnel, are grouped together to form a single composite category, which is then termed managerial participation (MP). MP is then assumed to be divisible into three degrees, high, low, and non-existent. High MP consists of the presence of all three of the categories that make up this composite category. Low MP consists of the presence of at least one, but not all, of these categories. Non-existent MP consists of the presence of none of these categories. Next, the remaining three categories that the case revealed to have a high level of influence on capability transfers, namely ability to transfer capability, motivation to transfer capability, and motivation to receive capability are assumed to remain constant and conducive to transfers, thus allowing the following hypotheses on the capability transfer effects of the degree of MP to be proposed: Hypothesis 1: A high degree of MP will generally result in a capability being wholly transferred. Hypothesis 2: A low degree of MP will generally result in a capability being partially transferred. Hypothesis 3: No MP will generally result in a capability being negligibly transferred.

4.2 Types of third-country collaboration and expected capability pooling Based on the above hypotheses, possible types of third-country capability pooling are plotted in Table 3 according to the degree of MP engaged in by the allied MNCs, ceteris paribus. Table 3 Types of collaboration and expected capability pooling MNC B High MP Low MP No MP

High MP Type 1 (capability pooling) Type 2 (limited capability pooling) No pooling

MNC A Low MP Type 2 (limited capability pooling) Type 3 (severely limited capability pooling) No pooling

No MP No pooling No pooling No pooling

As can be seen in the table, only those types of third-country collaboration where both MNCs exercise some degree of MP can be expected to result in a significant level of capability pooling. The three types of collaboration that fit this requirement are described below. Please note that it is possible even for the same allied MNC pair to engage in different types of collaboration both within and across third countries. 4.2.1 Type 1: capability pooling This type of collaboration will be either a green-field or brown-field JV between the allied MNCs. The interests of both MNCs are directly represented in the third-country operation, and both MNCs engage in a high degree of MP. The complementary capabilities of both MNCs are wholly transferred and capability pooling results. This type corresponds to the Thailand example in the case study undertaken in this paper.

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4.2.2 Type 2: limited capability pooling This type of collaboration will generally take place within the third-country subsidiary of one of the allied MNCs. Since the interests of only the parent MNC will be directly represented within the venture, only it engages in a high degree of MP, and its complementary capabilities are wholly transferred. The other allied MNC only engages in a low degree of MP, and its complementary capabilities are partially transferred. Limited capability pooling results. The two cells in the matrix that correspond to Type 2 are symmetrical to the extent that the capabilities of the MNCs are equivalent in terms of their transferability, a category that was provisionally dropped from this analysis. This type corresponds to the Taiwan example in the case study undertaken in this paper. 4.2.3 Type 3: severely limited capability pooling This type of collaboration will generally be done though a local operation that is only loosely affiliated with the allied MNCs. Since the interests of the MNCs are only indirectly represented in the venture, both MNCs only engage in a low degree of MP, and their complementary capabilities are only partially transferred. Severely limited pooling results. An example of this type of operation could be a case where the allied MNCs seek to transfer their complementary capabilities to a small-scale third-country licensee, by means of contract-based technical assistance.

4.3 Implications for global competitive advantage The preliminary theory-building exercise outlined above requires additional checks of external validity before its value as an explanatory tool can be fully determined [5]. Nevertheless, some possible implications of capability pooling for global competitive advantage are considered here to show why pursuit of this validity check is worthwhile. Allied MNCs that possesses complementary capabilities and can repeatedly engage in the types of third-country collaboration illustrated in Table 3 should be able to achieve better performance abroad than they would be able to achieve own their own. The degree to which this performance will be superior to industry rivals depends on the relative strengths of the complementary capabilities of the allied pair vis-à-vis these rivals. If, however, the complementary capabilities of the allied MNCs are maintained at industryleading levels, then the allied pair should also be able to achieve significant global competitive advantage over rivals by repeatedly pooling their complementary capabilities in third countries.

5 Conclusion Based on a perspective rooted in the transfer of complementary capabilities, this paper has presented the results of an in-depth case study of the third-country collaboration of a pair of allied automakers. Local fieldwork in two third-country locations revealed various categories that were found to influence the transfers of capabilities. Capability pooling in a third country was found to depend on the degree to which the automakers had transferred their complementary capabilities to the third countries.


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Using these findings, an initial attempt at theory building was performed. A composite category, managerial participation, that was comprised of factors that seemed to highly influence capability transfers was created and used to build a matrix of types of collaboration that are possible when two allied MNCs transfer complementary capabilities to third countries. Assuming that other influences on capability transfers remain constant, hypotheses were formulated regarding the expected level of capability pooling that would accompany the different types of collaboration. The analysis of the paper illustrates the potential usefulness of a capability transferbased perspective for considering the coordination of capabilities, or competences, by allied MNCs, in particular automakers. However, care should be taken when expanding the implications of the paper findings to industries with very different product and production characteristics than those of the auto industry. Finally, pending a formal investigation of the performance of ventures that feature capability pooling as illustrated in this paper, preliminary consideration was given to the possible effects of capability pooling on the global competitive advantage of allied MNCs. The analysis suggests that capability pooling may have a high potential to make a positive contribution in this regard. As such, further investigation is warranted. Indeed, the observed examples of capability pooling by Ford and Mazda seem to be touchstones for these automakers as they attempt to marry their respective capability strengths and drive ahead in the pursuit of global competitive advantage [51].

Acknowledgement The authors would first like to extend their sincere appreciation to all the individuals in Ford and Mazda who generously shared their time and insights to make this research possible. The authors are also indebted to the academic guidance of Professor Takahiro Fujimoto, who was a co-author of an earlier draft of this paper that was presented in Paris at the 10th GERPISA International Colloquium in June, 2002. Gratitude is also extended to the many GERPISA participants, University of Tokyo colleagues, and anonymous IJATM reviewers who offered numerous helpful comments on how to improve this paper. Of course, the authors take full responsibility for any remaining shortcomings.

References and Notes 1

Dyer, J.H., Kale, P. and Singh, H. (2001) ‘How to make strategic alliances work’, MIT Sloan Management Review, Summer, pp. 37–43.

2

Doz, Y.L. and Hamel, G. (1998) Alliance Advantage: The Art of Creating Value Through Partnering, Harvard Business School Press, Boston, MA, USA.

3

Yoshino, M.Y. and Rangan, U.S. (1995) Strategic Alliances, An Entrepreneurial Approach to Globalization, Harvard Business School Press, Cambridge, MA, USA.

4

First-hand sources of evidence to support the findings of the paper’s case study include: interviews with corporate managers (for details, see Footnote 18), direct observation (including multiple plant tours), and internal corporate documents. Second-hand sources include documents from public archival systems (e.g., newspaper articles, statistics, etc.) For more information on the case study methodology used in this research see, Yin [5].

5

Yin, R.K. (1994) Case Study Research, Design and Methods, 2nd ed., Sage Publications, Thousand Oaks, CA, USA.

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6

Barney, J.B. (1997) Gaining and Sustaining Competitive Advantage, Addison-Wesley Publishing House, Reading, MA, USA.

7

Abo, T. (Ed.) (1994) Hybrid Factory, Oxford University Press, New York, USA.

8

Vernon, R.E. (1966) ‘International investment and international trade in the product cycle’, Quarterly Journal of Economics, Vol. 80, pp. 190–207.

9

Dosi, G., Nelson, R.R. and Winter, S.G. (Eds.) (2000) The Nature and Dynamics of Organizational Capabilities, Oxford University Press, Oxford.

10

Kogut, B. and Zander, U. (1992) ‘Knowledge of the firm, combinative capabilities, and the replication of technology’, Organizational Science, Vol. 3, pp. 383–397.

11

Nohria, N. and Ghoshal, S. (1997) The Differentiated Network, Organizing Multinational Corporations for Value Creation, Jossey-Bass Publishers, San Francisco, USA.

12

Harrigan, K.R. (1986) Managing for Joint Venture Success, Lexington Books, New York, USA.

13

Dymsza, W.A. (1988) ‘Success and failures of joint ventures in developing countries: lessons from experience’, in Contractor, F.J. and Lorange III, P. (Eds.): Cooperative Strategies in International Business, D.C. Heath and Company, Lexington, MA, USA, pp. 403–424.

14

Richardson, G.B. (1972) ‘The organisation of industry’, Economic Journal, Vol. 82, pp. 883–892 and 895–896.

15

Dyer, J.H. and Singh, H. (1998) ‘The relational view: cooperative strategy and sources of interorganizational competitive advantage’, Academy of Management Review, Vol. 23, No. 4, pp. 660–679.

16

The distinction between direct and indirect transfers is significant in this paper. In order to simplify the ensuing discussion, the paper’s area of inquiry is limited to direct transfers, which are defined as cases where an allied firm transfers its own complementary capabilities to a third-country operation. Thus, consideration is not given to indirect transfers, which are defined as cases where an MNC that has internalized [17] some or all of the complementary capabilities of an allied MNC then transfers these capabilities to a third-country operation on its own (i.e., without the assistance of an allied MNC).

17

Hamel, G. (1991) ‘Competition for competence and interpartner learning within international strategic alliances’, Strategic Management Journal, Vol. 12, pp. 83–103.

18

Humphrey, J., Lecler, Y. and Salerno, M.S. (2000) Global Strategies and Local Realities: The Auto Industry in Emerging Markets, Macmillan Press Ltd., Hampshire, England.

19

See, Ref. [20] for discussion of the complementarity of some inter-regional horizontal alliances in the world auto industry, namely, the Ford–Mazda, Nissan–Renault, and DaimlerChrysler–Mitsubishi relationships. The selection of an alliance between horizontally related MNCs as the primary unit of analysis makes it possible to ignore any effects that may be caused by industry-specific differences between partners and differences between partners that stem from their occupying different positions in a product’s value-chain.

20

Fujimoto, T. and Heller, D.A. (2001) ‘Recent trends in alliance-enabled capability building: implications for firm competitiveness in the global auto industry’, GERPISA: 9th International Colloquium Proceedings, Paris, France.

21

We consider alliances to be mutually beneficial relationships between firms where some significant level of independence is maintained by the firms. Thus, even in cases where an equity stake allows one firm to influence the strategic decision-making of its partner, as long as sufficient independence is maintained by the partner, we believe that the relationship should still be considered an alliance. Despite Ford’s long-held equity stake in Mazda and current high level of influence over the Mazda Board of Directors, the two firms can nevertheless still be regarded as distinct MNCs. It is true that Mazda in recent years has become more definitively positioned within the Ford Group; however, close observation of the relationship reveals that it is still one of alliance, rather than parent–subsidiary. First, Ford relates very


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differently to Mazda than it relates to the other auto manufacturing organizations in the Ford Group, which are wholly owned by Ford. For example, to date there still exists a Mazda Advisory Board within Ford that remains an active body where senior management of both Ford and Mazda interact as equals. This form of interaction is unique within the Ford Group. Second, interviews within both Ford and Mazda have revealed that (a) employees in the two automakers generally perceive the people in the other as being in separate firms, (b) the Ford dispatched directors at Mazda were sent to Mazda to work for the sake of Mazda even if that required taking positions that were contrary to Ford, and (c) people in both Ford and Mazda generally agree that Ford dispatched executives and managers at Mazda do indeed work for the sake of Mazda. Documentation and discussion of some of these points can be found in Refs. [22–25]. 22

Heller, D.A. (2001) ‘Thirty years of Ford–Mazda cooperative relations: capability learning and interfirm ties’, The Annual Bulletin of the Japan Academy of International Business Studies, Vol. 7, pp. 47–55.

23

Heller, D.A. (2000) Learning in a Strategic Alliance: The Case of Mazda and Ford – Transferring Capabilities to and from an International Partner, Unpublished Master’s Thesis, Graduate School of Economics, The University of Tokyo.

24

Taniguchi, M. (1998) ‘Gaikokujin shachou ka no jinnji kaikaku – matsuda sha no jirei’ [Personnel system revolution under a foreign president – the case of Mazda], Hiroshima Keizai Daigaku Keizai Ronshu, Vol. 21, No. 2, pp. 51–73 (in Japanese).

25

Nobeoka, K. and Taniguchi, M. (2000) Ishitsu no keiei moderu no yuugou: foudo shugi ni yoru matsuda no keiei kakushin [The Mixing of Heterogeneous Management Models: Management Reform in Mazda Under Ford Guidance], Discussion Paper Series No. J29, Kobe University (in Japanese).

26

See Refs. [27–31], among others, for discussion of organizational changes and capability improvements at Ford in the 1980s, [2,3,32–35], among others, for discussion of the role Ford’s relationship with Mazda played in bringing about some of these changes and improvements.

27

Ingrassia, P. and White, J.B. (1994) Comeback: The Fall and Rise of the American Automobile Industry, Simon & Schuster, New York, USA.

28

Green Jr., S.E. (1993) Ford: Petersen’s Turnaround, Harvard Business School Case, 9-494017.

29

Shook, R.L. (1990) Turnaround: The New Ford Motor Company, Prentice Hall Press, New York, USA.

30

Pelofsky, M. (1989) Transformation at Ford, Harvard Business School Case, 9-390-083.

31

Easterbrook, G. (1986) ‘Have you driven a Ford lately?’ The Washington Monthly, October; reprinted under the title ‘Driving quality at Ford’ (1992) in Kanter, R.M., Stein, B.A. and Jick, T.D. (Eds.): The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It, Free Press, New York, USA.

32

Babson, S. (1998) ‘Mazda and Ford at Flat Rock: transfer and hybridization of the Japanese model’, in Boyer, R., Charron, E., Jürgens, U. and Tolliday, S. (Eds.): Between Imitation and Innovation: The Transfer and Hybridization of Productive Models in the International Automobile Industry, Oxford University Press, Oxford.

33

Carrillo, J. and Montiel, Y. (1998) ‘Ford’s Hermosillo plant: the trajectory of development of a hybrid model’, in Boyer, R., Charron, E., Jürgens, U. and Tolliday, S. (Eds.): Between Imitation and Innovation: The Transfer and Hybridization of Productive Models in the International Automobile Industry, Oxford University Press, Oxford.

34

Bleeke, J. and Ernst, D. (Eds.) (1993) Collaborating to Compete: Using Strategic Alliances and Acquisitions in the Global Marketplace, John Wiley & Sons Inc., New York, USA.

35

Womack, J.P., Jones, D.T. and Roos, D. (1990) The Machine that Changed the World, Rawsons and Associates, New York, USA.

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36

Supporting evidence can be found in Refs. [22–25]. Ref. [3] also contains a summary of Ford– Mazda alliance relations through the mid-1990s, within the context of Ford’s other alliances.

37

For automakers, these broad areas of capabilities can be considered routines and principles both within and across relevant corporate functions for productive capabilities (e.g., design, engineering, quality control, manufacturing control, R&D) and for managerial capabilities (e.g., personnel, marketing, product planning, purchasing, public relations, finance, logistics, customer service). The analysis of this paper is concerned with the relative strengths of the allied MNCs in these complementary capabilities. Interviews and other case studies have revealed that, in general, Ford and Mazda perceive each other to be relatively stronger in managerial capabilities and in productive capabilities, respectively. However, this statement is not meant to imply that this is necessarily the perception of each firm regarding all of the functions listed above.

38

Glaser, B.G. and Strauss, A.L. (1967) The Discovery of Grounded Theory: Strategies for Qualitative Research, Aldine de Gruyter, New York, USA.

39

The use of the word “country” in reference to Taiwan is used simply for convenience and is not meant to carry any political overtones regarding the island’s status vis-à-vis the People’s Republic of China.

40

The authors’ fieldwork for this case study consists of interviews and discussions with a total of 19 Ford and Mazda and executives. The breakdown is as follows: in Taiwan (October 2000: two Mazda representatives; February 2002: one Mazda and six Ford representatives), in Thailand (November 2000: one Mazda and two Ford representatives; June 2002: one Mazda representative) and Hiroshima, Japan (August 2000: 1 Mazda representative; May 2002: six Mazda representatives). See Footnote 4 for additional details on the methodology of the research.

41

Mazda has traditionally been a very minor player in the Taiwanese auto market. Until 1998 a local Taiwanese firm was responsible for distributing Mazda-brand vehicles in Taiwan under license, but yearly sales stagnated in the low thousands with market share position well out of the top 10. Mazdas locally assembled vehicles for sale in Taiwan have long been built under license at Ford Lio Ho.

42

Mazda sales in Taiwan increased 23% in 2001, reaching a total of about 12,000 vehicles, despite an overall passenger car market that was down 18% market. The Mazda brand’s domestic market share in Taiwan since its distribution was taken over by FLH has been: 0.7% in 1998, 1.4% in 1999, 2.3% in 2000, and 3.4% in 2001. Over this period, Mazda’s market position has grown from 13th to sixth place. In January 2002, market share for Mazda was 5.3%, giving it the fifth highest market position, ahead of Honda.

43

Toyota re-entered the Taiwanese market with domestically assembled vehicles in 1986 when it began producing passenger cars at a new JV between it, Hino (a truck manufacturer that is part of the Toyota Group), and Kuozui Motors (a local Taiwanese firm).

44

A detailed description of the concept of multi-path system emergence is contained in Ref. [45]. A short summary of the concept can be found in Ref. [46].

45

Fujimoto, T. (1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press, New York, USA.

46

Heller, D.A. (2002) ‘Probing a prepared organization: reading The Evolution of a Manufacturing System at Toyota, winner of the 2002 Japan Academy Prize’, Annals of Business Administration, Vol. 1, No. 2, pp. 1–6.

47

Due to government regulations when the plant was built, there were also two local Thai firms, Mazda Thailand and KPN Group, that evenly split a 10% equity stake in AAT. However, due to the Asian economic crisis of the late 1990s, KPN Group had to sell off 60% of its stake, which was bought by Ford. Interviews revealed that local partner influence in the operation of AAT is extremely low.

48

Beginning in January 2000, for a short time, C-sized passenger cars (the Mazda-developed 323/Protégé) were KD assembled for the domestic market on a separate assembly line at AAT.


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However, this initiative was closed when production of this vehicle was consolidated to Ford’s subsidiary in the Philippines. 49

This definition of path dependency references Teece et al. [50].

50

Teece, D.J., Pisano, G. and Shuen, A. (1997) ‘Dynamic capabilities and strategic management’, Strategic Management Journal, Vol. 18, No. 7, pp. 509–533.

51

The term marry is used to imply two entities being intimately integrated together while still maintaining their unique identities and strengths.