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THE ROLE OF ABSORPTIVE CAPACITY IN HI-TECH ORGANIZATIONS WHILE TRANSFERRING TECHNOLOGY Iuan-Yuan Lu1, Ting-Syuan Lin2 1 Vice Chairperson of Asia Network for Quality Professor, Institute of Business Administration, National Sun Yat-Sen University No.70, Lien-Hai Road, Kaohsiung 804, Taiwan, R.O.C [email protected] 2. Ph. D Candidate, Institute of Business Management, National Sun Yat-sen University, No.70 Lien-Hai Road, Kaohsiung 804, Taiwan, R.O.C [email protected] ABSTRACT The purpose of this article is to highlight the important role of absorptive capacity as a vital element of existence in hi-tech organizations while transferring technology. This research positions the role of absorptive capacity in technology transfer across the hi-tech organizational boundary; in short this ‘absorption’ principle is combined with multi-dimensional thinking in the technology and organization field. The study also sets out to model a framework that focuses on the transfer of technology and its assimilation among organizations. Based on the above objectives, this study seeks to achieve the following goals: 1. to focus on technology transfer issues, and to develop measurement indicators and tools. 2. To extract the key factors related to technology transfer and absorptive capacity and to empirically determine how Technology transfer and absorptive capacity affect the performance of hi-tech firms. 3. To inspect and analyze intention, behavior and organization support the random samples using multivariate analysis, and then to diagnose the interactions among the technology transfer, absorptive capacity and performance of hi-tech firms. A number of interviews with professors and professional managers have been scheduled as expert validity for measurement. By comparing the results of the profundity interviews, it was found that some of the relevant theories support all of the constructs in each concept. A questionnaire was used to measure the factors in each construct. 262 copies were valid for analyze. Multivariate method has been utilized for this empirical research to examine the theoretical construct and moderate effect in this research. The article identifies constructs and provides implications for further academic research as well as for hi-tech industry. Keywords: Technology Transfer, Absorptive Capacity, Performance INTRODUCTION In the fast-paced changing technology environment, innovative technology becomes increasingly important role at the present time. More and more organizations endeavor to innovate and update technology. Technology Transfer across organized boundaries has become a trend in the high-tech industry. While there are relatively few successful cases, still numerous Technology Transfer plans are in operation. From the perspective of hi-tech firms, hi-tech firms can use technology transfer to help themselves survive and develop within the industry. Since in the hi-tech industry, the ability of integrating new technology has an essential role in the long-term, this study tries to build an integrated model of technology transfer by concerning different levels of absorptive capacity in hi-tech firms. Moreover, most scholars such as Nonaka (1995) and Senge (1997) in the past have only discussed a single dimension or have just been concerned about key factors. This study combines the absorption with multi-dimensional thinking in the technology and organization field. The study also sets out to model a frame work that focuses on the transfer of technology and its assimilation among organizations. Based on the above objectives, this study seeks to achieve the following goals: 1. To focus on Technology transfer issues, and to develop measurement indicators and tools. 2. To extract the key factors related to Technology transfer and absorptive capacity and to empirically determine how Technology transfer and absorptive capacity affect the performance of hi-tech firms. 3. To inspect and analyze the random samples using multivariate analysis, and to then diagnose the interactions among the Technology transfer, absorptive capacity and performance of hi-tech firms. 1 LITERATURE REVIEW Technology In a general sense, “Technology” has been implicated and defined broadly. Basically, it means any kinds of elements including goods, labor, knowledge, skills and methods which are related to production, allocation and maintenance of society and economic needs. From a specific viewpoint, it is a kind of skill for production. For example, it is a unique know-how or method which can be used to solve a specific problem. In the past, numerous scholars have discussed this issue and have produced statements as follow: Table 1 Definition of Technology Scholars Solow(1957) Definition Technology is a kind of method to make use of elements effectively for producing goods or service. It can be decided whether elements have been effectively used by the technology quality. Rohit, et al.(1983) From a technology utility viewpoint, technology can reduce the uncertainty of achieving specific goal. Adopting new technologies usually accompanies the learning and application risk. Hence, technology needs to be popularized and learned for diminishing the risk of use and the improvement its diffusion and effect. Kast and Rosenzweig (1985) Technology sub-system must include machine, equipment, computer, tools, device, program, method, procedure, and information management et al. Porter(1985) Value chain is composed of: resources invest, produce, allocate, marketing, after service etc. Each function of enterprise exists value create technique. Daft and Lengel(1986) Generally speaking, technology transfer is a way of transferring the technology into organizational knowledge, tool or skill output. Sounnder(1987) Technology can be different embodiments such as: a product, a concept, a manufacturing process, a pattern or a mould existing in the world. Technology can be applied, developed or be a based stone to other inventions. Sharif(1988) The main activity is selecting a specific object to invest in resource transfer to outcome that can be called technology. Hence, technology not only contains tools and facilities needed in the process, but also uses skills and relative knowledge. Adler(1989)、Burgelman and From enterprise’s view, technology symbolizes an ability of profiting. Rosenbloom(1989)、 Steel(1989) Porter(1983)、Adler(1989)、 Technology is an important resource for the firms to create competitive advantage and gain the benefit, Ansoff and profit and growth. McDonnell(1990)、 Gaynor(1990) Source of information: Compiled by this study Economist, Solow (1957) said technology is a kind of method to make use of elements effectively for producing goods or service; that whether elements have been effectively used is decided by the technology quality. From technology utility viewpoint of Rohit et al. (1983) he contended that technology can reduce the uncertainty of achieving specific goals. Furthermore, he emphasizes that new technologies come with learning and applicator risk. Hence, technology needs to be popularized and learned to diminish risk of using it incorrectly and improve technology diffusion effect. Kast and Rosenzweig (1985) assert that technology sub-systems must include machine, equipment, computer, tools, device, program, method, procedure, and information management et al. However, Sharif(1988) believes the main activity is selecting a specific object to invest in resource transfer to outcome that can be called technology. Hence, technology not only contains tool and facility needed in the process, but also uses skills and relative knowledge. For Porter(1985) the value chain is composed of: resource investment, production, allocation, marketing, after service etc. Each function of enterprise exists value create technique. Daft and Lengel(1986) believe that, generally speaking, technology transfer is a way of transferring the technology into organizational knowledge, tool or skill output. For Sounnder(1987) technology can be have embodiments such as: a product, a concept, a manufacturing process, a pattern or a mould existing in the world. Technology can be applied, developed or be a based stone to other inventions. Hence, technology can be presented with the form of equipment, tool, machine, handbook, a rule, prescription, patent or a notion etc. Therefore, Sounder said that any kind of knowledge or know-how is regarded as technology. Moreover, technology has multi-construct characteristic and comply with three principles: 1. It can be used to produce or manufacture new product. 2. It can be used to raise capacity, improve quality of product or reduce produce cost. 2 3. It can be used to improve design, operate and operational skill, or aim other improver. Adler (1989), Burgelman & Rosenbloom(1989) and Steel(1989) et al., come from an enterprise’s view, they assert that technology symbolizes an ability of profiting. Porter(1983)、Adler(1989)、Ansoff & McDonnell(1990)、Gaynor(1990) et al. Technology is an important resource for the firms to create competitive advantage and gain the benefit, profit and growth. Technology Transfer Technology transfer is a method in which technologies are transferred by an individual or a group to other individuals or groups. The technology receiver can use or apply this technology to deal with problems. Many scholars identify and describe technology transfer in table 2 as the following. Table 2 Definition of Technology Transfer Scholars Brooks(1966) Definition Technology transfer is a kind of interpersonal relationship activity, used for science and technique diffusion process. Harvey(1966) From a macro-perspective, technology is a process regarding science and technique diffusion. Pierre(1974) Technology is innovated by an organization or a system, and is a process adopted by another system. Kohler et al. (1973) Technology transfer between nations means a nation canalizing new technology achievement from other nations. Therefore, it brings some benefit or duplicate ability. Mansfield (1975) Technology transfer is a region, organization or nation technique embedding other region, organization or nation for use. Hawthrone (1987) Technology transfer is a kind of behavior between individuals to individuals or groups to groups. Two or more parties may role a play to change into or out of the technology. Katz and Kahn (1978) From generating an entity of technology transfer with region, technology transfer seems a research conclusion applied to the society. No matter domestic or overseas. Baranson(1987) Technology transfer is a kind of knowledge delivered to aid the receiver to build a basic ability for manufacturing specific product or service provide. Harvey(1987) Advocate technology transfer is a process used to acquire technique to gain more profit. Ounjian and Carne(1987) Technology includes software, hardware and other support objects. Technology transfer is a sale technique process from seller to buyer. Sounnder(1987) Technology transfer is a process of transferring from one organization to another one. Landau(1988) Technology transfer is a kind of organizational innovation. It can be adopted or used in other organization. Smilor(1991) Technology transfer can be identified as a kind of knowledge application. Technology format (an idea or a product) can be moved between individuals, groups or organizations. Keller(1991) Technology transfer process is a specific technique through different organization boundaries. Technology is embedded by product, machine, process or people. It is a set of machine for the receivers to use. Usually, that the technology and the operator are transferred at the same time is a better solution to the operation problem. Bozeman(1992) Technology transfer is a visible designing progress, knowledge or relative information that can be moved to other organizations or units. It includes papers, documents and products. Chen(1995) Technology transfer can be defined as a process of experience and know-how moved by economic benefit. Hameri(1996) Technology transfer is an authorizing, external invest, purchase progress, accomplished by aggressive and ambitious individuals or organizations to reach their goal and then diffuse or acquire knowledge, experience and relative artifacts. Source of information: Compiled by this study According to what the scholars’ above state, basically, ‘Technology Transfer’ is a kind of process, technique, document or service switch between organizations. Furthermore, we can also summarize all of their statements about ‘Technology Transfer’ as follows: technology transfer is through human connection providers and receivers; this process also represents their organization, intention, behavior, and support that enable the transfer of technology efficiently. Furthermore, the innovations in discipline of ‘technology transfer’ have created new skills, progress and greater specification in this field. Finally, the respective scholars also highlight that both sides—the providers and receivers of technology—are willing to both work together in order to make, in general, organization better. 3 Absorptive Capacity Since Cohen & Levinthal (1990) introduced the absorptive capacity theory, Kim (1998), Van den Bosh et al., (1999) and Zahra & George et al. (2002) began to examine the issue carefully. Due to the divergent Research backgrounds, the definitions differ. Some of the definitions are listed in Table 3 as follows. Table 3 Definition of Absorptive Capacity Scholars March &Herbert (1958) Definition Most innovative activities are from borrowing, and not inventions. Cohen & Levinthal (1990) Previous studies suggest that organizations that are good at learning can develop routines that allow them to effectively develop, store, and apply new knowledge on a View point Borrow Concept Learning and Innovation systematic basis. Mowery & Oxley (1995) Understanding its own tacit technology and transferring to external technology as the Human Resources skill. Kim (1998) Building up problem-solving ability based on leaning capacity. Knowledge based Zahra & George(2002) Absorptive Capacity is a kind of accumulation and flow of organizational knowledge. Dynamic Ability By cultivating dynamic ability, the competitive advantage of the organization can be created and maintained. So absorptive capacity can be defined as the process of knowledge acquisition, assimilation, transformation, and exploitation. Source of information: Compiled by this study Zahra & George (2002) classified the process into two parts. One was composed of acquisition and assimilation, which was referred to as Potential Absorptive Capability (PACAP) while the other, consisted of transformation and exploitation, which was referred to as Realized Absorptive Capability, (RACAP) focused on how knowledge runs deep in organizations. However, RACAP placed emphasis on the knowledge integration of operations in organizations. METHODOLOGY Research Framework According to the above literature review, technology is an element which represents a kind of ability or resource through human beings. Technology is also a vehicle that creates organizational competitive advantage. Organizations achieve their goals by way of the improvements of technology. However, technology transfer goes along with people. From technology providers’ perspectives, intention, behavior and organization support can transfer thinkable conditions. But, receivers also need intention, behavior and organization support to meet the basis absorptive ability requirement. It can be inferred that organization absorptive ability can affect performance. Therefore, this research develops hypothesis 1 which states that the organizational performance is positively affected by the ability of transferring technology across the organizational boundaries in hi-tech firms. Identically, technology resembles knowledge that contributes organization performance to employees, who bring skill or talent into full play. Zahra and George (2002), on the other hand, regard absorptive capacity as a kind of analysis of knowledge accumulation and flow processes. Organizations can create and maintain their competitive advantage through training in dynamic ability. Hence, the absorptive capacity can be defined as the process concerned with acquisition, assimilation, transformation and exploitation of the knowledge or technology within an organization. If new technology cannot change or develop new behavioral models, it does not constitute a successful transfer. However, technology transfers may still have the intention of transferring their own technique. Meanwhile, receivers must possess equal levels of technology base. Most technology transfer processes involve the information interaction, explanation or learning with receivers. Therefore, Hypothesis 2 states that absorptive capacity is a moderator between Technology Transfer and performance. According to the two hypotheses, this study establishes the following research framework as figure 1. Absorptive Capacity H2 Technology Transfer H1 Performance Fig 1 Research Framework 4 Sampling This research is developed by the Delphi method. The research first scheduled a number of interviews with professors and professional managers as experts’ validity for measurement. By comparing the results of the interviews, some of the relevant theories were applied to support all of the constructs in each concept. A questionnaire was used as a tool to measure the factors in each construct. The study selected a number of technology companies which had technology transfer experience. 300 questionnaires were sent out. A total of 268 replies were received, of which 262 were valid. To avoid bias due to the command region variance (CRV) problem, the sampling process was set in such a way so as not to draw more than 10 samples from an organization. All of the sampled questionnaires were anonymous which protect the private information of firms. DISCUSSION Reliability and Validity The research used exploratory factor analysis to extract the representative factors to see which factor’s Eigen Value was over 1, and whose factor’s loadings were bigger than 0.5 (Hair et al., 1995). Under “Technology Transfer,” there were three key factors extracted that were referred to as “Technology Transfer Intention,” “Technology Transfer Behavior,” and “Organizational Coordination.” The proportion of cumulative explanatory variables reached 68.023%. In the construct of “Absorptive Capacity,” four key factors were extracted and named: “Acquisition,” “Assimilation,” “Transformation” and “Exploitation.” The proportion of cumulative explanation variable reached 76.848%. In “Performance” four key factors were extracted and referred to as “Internal Process” “Customer Retention” “Financial Indication” and “Learning & Growth.” The proportion of accumulative explanatory variables reached 72.474%. The reliability analysis of the new constructs showed that Alpha=0.75, which meant that this measuring tool was reliable. Empirical Analysis The research framework consists of a model that uses multi-regression to test the framework empirically. Regression analysis has been applied to confirm the linear relationships between the concepts. Both Technology Transfer and Absorptive Capacity are significant to affect performance in hi-tech industries. The results are presented in Table 4. Table 4 the Relationship between Concepts Technology Transfer (X2) Absorptive Capacity (M3) Performance (Y1) Adj R² β Durbin-Watson P<0.005 0.306 0.556* 1.717 P<0.005 0.147 0.387* 1.667 Technology Transfer (X2) + Absorptive Capacity (M3) P<0.005 0.363 0.486* / 0.252* 1.715 Source of information: Compiled by this research According to the regression analysis result, the increase of Technology Transfer has positive effect on performance. The relationship is significant to Adj R2 0.306 statistical support. It means that Technology Transfer only influences the performance of the Hi-tech firms for 30.6% between the two constructs. The increase of Absorptive Capacity also has positive effect on performance. The relationship is significant to Adj R2 0.147 statistical support. It means that Absorptive Capacity only influences the performance of the Hi-tech firms for 14.7% between the two constructs. The combination of Technology Transfer and Absorptive Capacity can have more influence on the performance (36.3%). That is, the influence of Technology Transfer and Absorptive Capacity provides more contribution to the performance of these firms than each factor. Furthermore, βvalue in the relationship between Technology Transfer with Performance has been presented 0.556, whileβvalue in the relationship among Technology Transfer, Absorptive Capacity and Performance has been presented 0.486. As a result, the result of multi-regression analysis denotes that βvalue in the relationship between Technology Transfer with Performance is higher than the relationship among Technology Transfer, Absorptive Capacity and Performance. It means that Absorptive Capacity has the significant partial modulation effect existing between Technology Transfer with Performance in Hi-tech firms. CONCLUSION According to the above analysis, three discoveries have to be confirmed. First of all, three factors of Technology Transfer in hi-tech organizations have been extracted and been named “Intention,” “Behavior” and “Organization Coordination.” Secondly, four factors of Absorptive Capacity in hi-tech organizations have been extracted, which are similar to absorptive factors of traditional organizations. Thirdly, Absorptive Capacity has been empirically verified when having a moderate effect between technologies with performance. According to the above results, this research suggests that Hi-tech firms play a role as technology providers. Hi-tech firms need to be well prepared to motivate employees’ intention in order to 5 achieve Technology Transfer Behavior. 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