Technology sourcing decision making for new technology development projects: An empirical study of South Korean high-tech small firms

Abstract

Although external development has been strongly recommended as an effective governance strategy for new technology development projects (NTDPs), it may not always be appropriate for high-tech small firms (HTSFs). This study examined South Korean HTSF decision makers’ consideration of internal and external development for NTDPs. Drawing on transaction-cost and resource-based perspectives, we identified five key determinants of governance decisions: respondents’ perceived levels of technological capability, entrepreneurial strategic orientation, specialized asset investment, technological uncertainty and environmental uncertainty. A questionnaire-based survey of Korean HTSFs in the telecommunications industry yielded a sample of 258 respondents. On the basis of a logistic regression analysis of the firms’ responses, we found that firms’ perceived technological capability, entrepreneurs’ strategic orientations, levels of technological uncertainty and redeployability of invested assets were key criteria in the decision-making process. Specifically, this study showed that technologically strong Korean HTSFs preferred to use internal development methods, but tended to choose external development methods when they perceived high levels of technological uncertainty and low levels of invested asset redeployability. Entrepreneurs’ strategic orientation also influenced the choice of an external development method. On the basis of our empirical results, we discuss the managerial and practical implications of our research.