Learning and International Knowledge Transfer in Latecomer Firms: The Case of Taiwan's Flat Panel Display Industry

Most catch up studies focus on “external” foreign sources of technological learning as a means of building up latecomer technological capability. By contrast, strategic management studies in advanced countries center on the “internal” sources of organizational learning and routines (including R&D) within a firm, aimed at developing and renewing its knowledge and its absorptive capacity. This paper draws from both groups of studies to examine how latecomer firms accumulate in-house knowledge bases and assimilate foreign knowledge to create strategic innovation capabilities. We propose a clear three-stage development framework to examine two leading firms, AU Optronics (AUO) and Chimei Innolux (CMI), in Taiwan's flat panel display industry. This paper shows the coevolution of the firms' knowledge bases and external foreign sources of knowledge over time. We find that, with their increasing knowledge bases and strategic advancement over time, the firms are able to benefit from knowledge transfer; to build up their high-level innovative capabilities, and in the process to move from junior to senior status with foreign firms. These developments appear to allow leading firms to move “across” the technological frontier, contributing to a strengthening competitive position in the international market.