Roles of Japanese Assemblers in Transferring Engineering and Production Management Capabilities Technology: A case of Toyota Kriengkrai Techakanont Faculty of Economics, Thammasat University 17 December 2007

Why? MNCs view their global production as a network or GPN MNCs view their global production as a network or GPN Lack of understanding of the impacts of being a global production network on technology transfer Lack of understanding of the impacts of being a global production network on technology transfer GPN will create new opportunities for host economies to upgrade their industrial sectors and promote technological capabilities GPN will create new opportunities for host economies to upgrade their industrial sectors and promote technological capabilities

Aims of this research 1. To study the roles of automobile assemblers in promoting Thailand as part of GPN and in transferring technology 2. To draw lessons for local parts firms and policy recommendations for policy makers to promote the industry

Thailand’s Automobile Industry The government had specific and clear goal to promote the industry Reliance on foreign firms to promote supporting industries Relatively short historical development Export orientation industry Integrated into part of global production network of many firms

Thai Automobile Industry Production capacity was 1.57 mil.units in 2006

Car exports by brand ( )

Production and Export in 2005

Data collection ( ) Visits assemblers (in Japan and Thailand) In-depth interview with Toyota staff in Thailand and Japan Visits part suppliers

Technology Transfer as a Knowledge Conversion Process (Nonaka and Takeuchi 1995, McKelvey 1998) Codified and tacit knowledge of the Technology owner Codified and tacit knowledge of the Technology recipient Internalization of knowledge by the recipient Transferor Recipient Recipient

Model of Knowledge Conversion Nonaka and Takeuchi (1995) proposed SECI model to analyze knowledge creation process –Socialization (Tacit-to-Tacit) : Share of tacit knowledge among individuals –Externalization (Tacit-to-Explicit) : Articulation of tacit knowledge to explicit format –Combination (Explicit-to-Explicit) : Combining of discrete pieces of explicit knowledge to make a new whole –Internalization (Explicit-to-Tacit) : Internalization of new explicit knowledge into individual tacit knowledge

Intra-firm Technology Transfer and Knowledge Conversion

Inter-firm Technology Transfer and Local Capability Formation

IMV project

Stages of Toyota’s Global Production

Toyota’s Production and Supply Network (IMV project)

Processes that are Likely to be Transferred to Thailand Source: Adapted from Mori (2002); Fig. 2, pp. 33, and from interviews with manufacturers.

Toyota’s Roles Necessity: –Competition in the world market –Advance in IT and computer technology –Pressure to shorten time-to-market Toyota tries to promote –More efficient product development –More efficient production management Technology transfer is necessary

Toyota’s roles in transferring… Product engineering and design technology –Establishment of TTCAP-TH –Investment 2,700 m.baht –Train engineers in Japan (more than 200 persons) through “Inter-Company Transfer” (ICT) Program –Technology : Toyota Development System (TDS), V-Comm (Virtual & Visual Communication), digital mock-up

Toyota’s roles in transferring… Process engineering and manufacturing technology –Train local staff in Japan –Dispatch Japanese expert to Thailand Establishment of Global Production Center –Visual manual –Lower training cost –Lower technical support to overseas plant Establishment of AP-GPC in August 2006 Establishment of TMAP-EM in April 2007

Visual Manual Training steps

Target of GPC

Toyota’s roles in transferring technology Management technology (Toyota Production System: TPS) Establishment of “Toyota Academy” in 2004 –In-house training (production skills) –Train suppliers, dealers, and affiliates (conceptual and managerial skills) Diffuse TPS concept to suppliers through “Toyota Cooperation Club” Key Successes of Knowledge-sharing Network –(1) motivate members to participate and openly share knowledge (2) prevent free rider problem (3) efficiently transfer knowledge.

Toyota’s roles in transferring… Production management technology to suppliers –Toyota Cooperation Club –TPS Activity –Jishuken activity Set up a “TPS Promotion Team” –Provide consultant service to suppliers –Rove experts to suppliers

Knowledge-sharing Network in Quality Assurance (QA), Toyota Production System (TPS), and Quality Control Circle (QCC)

Number of Firms Participated in TPS Activities TPS Promotion Activity Concept 1) Level up TPS leaders with TMC support 2) Each TPS Leader provide jishuken training to members 3) Each member do jisuhken by making a TPS model line 4) TPS final presentatio n

Implications to Local Suppliers Heighten quality and capacity requirement. Automakers require design capability QCD + E + M Local firms lack of “process engineering” and “design” capability so they have limitation to be a part of supplier network Acquiring foreign technology may be possible means to sustain business Support from public sector is necessity

End of Presentation Questions and comments are welcome