A Study On The Absorptive Capacity Of The Chinese Automobile Company

As we know that China is one of the most attractive foreign investment destinations in the world, and the international joint ventures (IJVs) in China almost make up one-third of the whole foreign direct investment. From the view of knowledge theory, the prime goal of the establishment of IJVs is that companies have the needed knowledge or technology each other which is urgent and lacked to the partner. Furthermore, the knowledge transfer from multinational companies to the local companies in the host country is an important channel to enhance the positive spillover effect of foreign direct investment. But in reality, disadvantages of the "market for technology" policy which was implemented together with China's reforming and opening up policy have shown up in the recent years. Taking the automobile industry as the very example, since the beginning of foreign investment into the industry, multinational companies and their IJVs in China have already occupied most of the Chinese automobile market, especially for the passenger car market, while the Chinese companies have not acquired the needed knowledge or really advanced technology, grasping little core technology. What's worse, China's own automobile brands are still with vulnerable competitive advantages after all these years of development.Absorptive capacity refers to the set of organizational routines and processes with which companies acquire, assimilate, transform and exploit the external knowledge in order to develop the organizational dynamic capabilities. Thus the concept of absorptive capacity focuses on the dynamic capabilities to suit the strategic changes and strategic flexibility, and to create and explore the new knowledge after transforming the acquired knowledge. The Chinese government makes great efforts to attract foreign investment because of the positive spillover effects which depends on the formation of national absorptive capacity, industrial absorptive capacity, absorptive capacity on the organizational level, and so on. Whereas, corresponding technological development has not taken place in the Chinese automobile companies together with the rapid growth of IJVs and Chinese automobile industry market. And to people's disappointment, the development of independent brands in Chinese automobile industry has no significant progress. From the point of view of knowledge transfer theory, the reasons are from two sides. On one side, the foreign companies placing the protection on their knowledge are not willing to disseminate the advanced technology to their Chinese partners. On the other side and more significantly, the Chinese companies involving international strategic alliances have little absorptive capacity and can't acquire the needed knowledge. Some Chinese companies even ignore the development of absorptive capacity so that they can't exploit the external knowledge to business purposes in the end.Taking this as the theory starting point, the study focuses on the knowledge transfer conditions of Chinese parent companies in the IJVs based on the perspective of absorptive capacity, taking Dongfeng Motor Company as the selected case. The theory framework includes the impacting factors, measurement of absorptive capacity, and performance of knowledge transfer and innovation. The case study analyzes the routines for Chinese automobile companies to foster own brands, revealing the dynamic source to develop self-independent innovation capabilities during the cooperation with foreign partners.Analysis results show that the factors of prior knowledge, R & D intensity, human resources, and organizational culture affect both the potential absorptive capacity and realized absorptive capacity, and the absorptive capacity positively influences the knowledge transfer performance. Specifically, R & D intensity has positive relationship with the acquisition and assimilation capacity, which make up the potential absorption capacity of the automobile enterprise. Both the factors of prior knowledge and organizational culture have positive relationship with the acquisition and exploitation capacity. And there is positive relationship between the human resources factor with both the assimilation and transformation capacity, which means that human resources can effectively push the potential absorptive capacity into realized absorptive capacity. On the other hand, the potential absorptive capacity effectively influences the explicit knowledge transfer performance, and the realized absorptive capacity has relatively strong relationship with the tacit knowledge transfer performance. Meanwhile, all the organizational routines and rules, including prior knowledge, innovation strategy, R&D organization structure, human resources and R&D input, improve the automobile enterprise to increasingly develop its absorptive capacity, implement the integration of external knowledge and independent R&D, and realize the own brand automobile products launching through the three sorts of innovation models.At last, based on the analysis and reflections on the automobile industry policies of Japan, Korea and Brazil, the study concludes the characteristics of policies in Chinese antomobile industry from different aspects. Some policy suggestion is proposed for the Chinese automobile industry to help companies to raise their absorptive capacity from different aspects, namely, the industry development strategy, commercialization of technological and innovative outcomes, self-independent innovation progress, and internationalization business.