External technology acquisition in large multi‐technology corporations

Abstract

Based on different contractual forms and their associated degrees of organizational integration, a typology of strategies for technology acquisition (sourcing) is constructed. Based on a sample of corporations in Europe, Japan and US, it is shown that external acquisition of technology through various strategies increases in importance in general. Product case studies further show that external acquisition of technology is associated with technology diversification into increasingly costly new technologies. As a result corporations become multi‐technological (‘multech’). At the same time quasi‐integrated corporate systems of innovation arise in which in‐house R&D is managed together with a mix of strategies for external acquisition of technology, using various contractual forms. This presents new challenges to traditional in‐house R&D management. Technology diversification is moreover shown to be associated with growth of sales as well as with growth of R&D expenditures. A high level of external technology acquisition presents risks that ought to lead companies to consider technology based product diversification.