Internationalization of innovative capabilities: counter‐evidence from the electronics industry in Malaysia and Brazil

Abstract

The focus of this paper is the extent to which firms in the electronics industry in Malaysia and Brazil (Manaus) developed significant innovative technological capabilities. By examining whether innovative capabilities have spread to these two late‐industrializing countries, the paper seeks to add new evidence to the debate over internationalization of innovative capabilities and to argue against existing generalizations. Internationalization of innovative capabilities is measured here by the technological capability types and levels built within firms. The framework for capability‐building identifies types and levels of technological capabilities. The paper draws on empirical evidence from 82 electronics firms—transnational corporation subsidiaries and local firms: 53 in Malaysia (25 in Penang and 28 in Klang Valley) and 29 in Manaus (Northern Brazil). Empirical evidence was collected during extensive fieldwork based on different data‐gathering strategies. Both qualitative and quantitative data analysis methods were used. Contrary to common generalizations, the study found that the capabilities of most sampled firms had been upgraded to carry out diverse innovative technological activities. Additionally, these capability‐building efforts were strongly associated with higher capabilities for local decision‐making and control, automation level and efforts to increase exports. The study found firms that innovated to be competitive by reducing costs, being more productive, reducing lead time and producing better products—regardless of whether they were in a domestic market‐oriented country or in an export‐oriented country. Finally, the analysis and framework in this study challenge some existing perspectives on the internationalization of innovative capabilities to the late‐industrializing context.