Metanational Management and Global Innovation: The Case of the TFT-LCD Industry

In the opening remarks, Professor Nagaoka stated that most Japanese companies have lagged behind in the globalization of their knowledge-creating functions, even while declaring their commitment to internationalization. In establishing the significance of the present symposium, Professor Nagaoka explained that verification of the processes of knowledge creation and use had an important role to play in finding the causes and solutions to this problem.

The keynote speech on metanational management in the TFT-LCD industry covered the subjects noted below. Professor Murtha presented an overview of why metanational management has come to attract attention, and referred to future directions in global management and the growing importance of metanational knowledge-creating functions in this framework.

1. Definition of metanational management
2. History and current conditions of metanational management
3. Drivers and dilemmas in metanational management

As a summary of the keynote speech and an introduction to the next session, Professor Asakawa presented an outline of the following: concepts of metanational management, reasons for choosing the TFT-LCD industry for this symposium, an overview of the entire symposium, and a presentation of the main issues.

The metanational concept provides a new way for looking at competition. Collaborations with customers, suppliers, alliance partners and affiliates are important in metanational management. The aim is to obtain accurate knowledge and information from these sources as quickly as possible. The market targeted for operation should be the market that is undergoing the most dynamic changes. Competing and learning in such markets promotes and facilitates the acquisition of new knowledge and is the key to achieving competitive advantages in the metanational setting. In this competitive environment, contemporary corporate management is called on to integrate in a balanced fashion existing and new knowledge that is obtained across borders and to link them with new strategies.

Over the past 16 years, the TFT-LCD industry has grown from sales of $3 billion to $86 billion. The main driving force has been the continuous decline in manufacturing costs. Factors contributing to successful reduction of manufacturing costs include the declining cost of materials, increased efficiency in manufacturing operations, and the development of new manufacturing technologies. This industry was chosen as a case study in metanational management because of the inter-regional and inter-firm process of knowledge creation that provided the backdrop for the development of its new technologies. Particularly in recent years this process of knowledge creation has been accelerated. The development of each new generation of LCD panels (defined in terms of panel size) requires new technologies and facilities. To realize this "re-invention," companies need to engage in free exchange of information with partner companies, customers and suppliers beyond regional borders, to integrate new inventions with existing knowledge, and to deliver this knowledge to various divisions within individual companies. In this sense, the development of LCD panels has been supported by metanational management, and metanational management will continue to serve as an important strategy in the future of this industry.

To acquire knowledge, many companies in the TFT-LCD industry mounted aggressive programs for the acquisition of human resources. This is because these companies recognized that knowledge is embodied in personnel, and that competitiveness could be strengthened either by acquiring human resources in regions with outstanding stocks of knowledge or through collaboration with companies with access to such human resources. For example, when Applied Materials entered into a collaborative relationship with Komatsu during the 1990s, what it wanted most was access to Komatsu's outstanding human resources. Similarly, what IBM sought from Sharp and Toshiba was the opportunity to access outstanding Japanese scientists.

Korean and Taiwanese companies are making strong advances in today's TFT-LCD market. One of the most important reasons for their success is that they were able to acquire knowledge through collaboration with other companies. One such example is the joint venture between Samsung and Corning. Samsung joined forces with Corning, a major glass manufacturer, in order to obtain knowledge on the manufacture of glass substrates. Samsung also obtained much knowledge from Sony engineers who were brought in for consulting. In a period when Japanese companies were not inclined to make large investments, Samsung undertook many upfront investments to acquire this knowledge and technology. These investments provided Samsung with its competitive advantage. As seen in these cases, metanational knowledge acquisition and integration have played a vitally important role in the TFT-LCD industry. This can be attributed to the high speed of change in this industry and the constant need to create new knowledge. In this industry, the development of the next generation of manufacturing technologies starts even before the current generation of manufacturing technologies has been fully understood and taken hold. In industries experiencing accelerated technological innovation, some form of metanational management (indicating the "creation of new knowledge through competition") is required. In the case of Korean companies, this involved the speedy acquisition and adoption of global tools. In the case of Taiwanese companies, the strategy featured the conclusion of a series of licensing agreements undertaken across borders and between companies.

What are the prerequisites for the realization of metanational management? Because knowledge exists in the minds of individuals, it is important to create an environment that is conducive to creative work. The key questions are how to nurture teamwork in a rapidly changing environment, and how to share and integrate knowledge. Intense interpersonal contact (direct exchange among individuals) and geographic concentration (short distance between individuals) are important. Government policies can become an obstacle to metanational management. Where companies are looking for alliances with foreign companies for the acquisition of knowledge, the government may intervene by offering subsidies (research funds) to encourage alliances with domestic companies. Such policies have not been seen in the United States in recent years. However, when subsidies were being provided for　this purpose, those companies that did not take the subsidies but instead moved aggressively to create alliances with foreign companies are the ones that have survived today. Metanational management is subject to a number of dilemmas. There is the dilemma of black box versus open innovation strategies, and the dilemma of vertical integration versus vertical networks. For instance, if the leading company declines to collaborate with suppliers, this will reduce the speed of technological change throughout the industry. On the other hand, entering into numerous alliances raises the risks of information leakage and increases the probability for the erosion of competitive advantages.

There are various factors that sustain metanational drivers. First of all, cross-border collaborative systems are important. However, knowledge is complex, tacit and competitively sensitive. This may give rise to such issues as who will own the intellectual property, and how will confidentiality be ensured. Questions may also arise concerning the industry generalization of knowledge and rules, the establishment of next-generation specifications, and consensus on supply and demand. Furthermore, there is no assurance that an industry that has developed in a metanational environment will continue to remain in a metanational setting. Given an uncertain future, it is still unclear what strategy each company should adopt and whether the sharing of vast bodies of knowledge will be necessary in the future.

The following questions were received from the floor concerning the keynote speech.

Q: What does the future hold for the European television manufacturing industry?

A: Brand value may decline as prices fall. Building a manufacturing plant is easy, but the problem is can these plants remain cost competitive vis-a-vis Chinese and Taiwanese manufacturers. The key question is whether European companies have the courage to make the investments needed to obtain global tool sets and to contract for consultation.

Q: What are the conceptual differences between metanational and non-metanational management?

A: Alliances have various objectives, and knowledge acquisition is not necessarily the only aim. However, a metanational dimension exists when two companies enter into an alliance for the purpose of knowledge acquisition.

The keynote speech identified the central issues of this symposium by providing a conceptual framework of metanational management and explained its advantages in the context of the innovation strategies of the TFT-LCD industry.

A conceptual framework for metanational management was presented as follows. A number of elements must be considered in developing an accurate understanding of the current management environment: the processes of global innovation must be observed from the perspective of knowledge management; existing corporate sites should not be used as a base; the importance of the role of alliances and other forms of corporate collaboration should be recognized; and emphasis should be placed on dynamic processes instead of categorizations. These elements in combination outline "metanational management." A company that has adopted a "metanational" approach engages in value creation throughout the world and opts for strategies aimed at achieving global advantages. This requires the securing of access to important knowledge sources that are dispersed throughout the world, integrating this knowledge within the company, and strategically utilizing this knowledge. External information brokers play a crucial role in the utilization of this knowledge. This points to the crucial importance of organizational capacity. In the context of these activities, the term "metanational innovation cycle" is used to describe the nexus of "sense," "mobilize" and "leverage." The ability to smoothly manage these activities on a global scale will be of vital importance in future global management. In the past, metanational management was promoted as a means of overcoming domestic environmental disadvantages. As seen in the cases of ST Microelectronics and Nokia, metanational management was seen to be a strategy for companies that were "born in the wrong place" (Yves Doz). However, recent research points to the need for metanational management also for companies that were not "born in the wrong place." For example, the metanational model can be applied to industries experiencing relative deterioration in domestic environmental advantages, such as the Japanese LCD industry and the French wine industry. What specific phenomena should be analyzed? And, what specific measures can be considered? This symposium focuses on the TFT-LCD industry to analyze various phenomena occurring within this industry. Relevant issues will be discussed at the panel discussion at the end of the program. I propose the following five points for discussion.

1. What is metanational, and what is non-metanational?
2. Competitive advantages of upstream and downstream industries and future directions
3. Trends in vertical integration strategies and their pros and cons
4. Risk and uncertainty in the TFT-LCD industry, and industrial policy perspectives
5. Other implications for the industry

Furthermore, I would like to raise some issues related to corporate management and industrial policy. Regarding corporate management, how can management make the transition to metanational management when faced with declining domestic and corporate competitiveness? Regarding industrial policy, what positions and actions should the government take when faced with the short-term outflow of primary value, which is implied in metanational strategies? I propose these issues as key themes for this symposium.