Ethnic Innovation Networks: A Strategic Linkage Explanation for Intellectual Advantage in International Business

Abstract

In the current era of knowledge-intensive competition, intellectual stocks differentiate winners from losers. In view of an emergent global economic structure, brain drain has been seen as causing serious problems for countries suffering net losses of human capital. The impact of this phenomenon has been felt most acutely by less developed countries. Firms located in these national economies have thus found it difficult to keep pace with the increasing globalization. Therefore, public policy resulting in reverse brain drain finds its preeminence in these developing economies. Networking has been seen to be critical to the success of business organizations, which need to profit through internalizations of external resources. In this regard, collaborative arrangements are particularly important for encouraging innovation through formal structures such as joint R&D agreements, technology exchange programs, licensing, subcontracting as well as through informal means of networking. All such activities involve intensive interaction of human resources. Human resources indeed are the most important resources of knowledge-intensive competition. Beside formal linkage, informal networking of the same ethnicity of Chinese enables construction of network of innovators and contributes technological and economic prosperity in Taiwan since late 1980's and in China since late 1990’s. There are two foci of present study: first, the antecedents of formulating cross-border innovator networks, and second, the potential contribution of these cross-border innovation networks to internalize intellectual advantage in international business. The paper applies a strategic linkage perspective (Chen and Chen, 1998) to examine the effect of human resource linkages and the development of an industrial cluster in Taiwan and China. A Chinese ethnic innovation network (EIN) is suggested to explain linkage effects of prosperous cross-border innovation activities. An analytical framework and relevant research propositions are developed followed by literature review in the fields of innovation and international business. The framework provides implications to both public policy and strategic management of innovation and technology.