Innovation capability building in emerging economies through joint venture: Case of Turkish automotive industry

Publication Type:

Conference Paper


Gerpisa colloquium, Paris (2015)


Automotive industry, capability building, emerging economies, innovation, R&D Management, Turkey


In recent decades, emerging economies have begun to compete on the innovation frontier in a variety of industries (Malerba & Nelson 2011) such as automotive. Upgrading from low-cost manufacturing, innovating firms in these economies are now building capabilities in R&D and advanced product development (Hobday, 1995). The rapidity of this process challenges established notions on the stickiness of local knowledge and technology management (Karabag and Berggren, 2015). However, current studies rarely focus on the innovation capability development process of emerging economies firms (Ilman, A. 2009; Fu, Pietrobelli, and Soete. 2011; Karabag, Berggren & Tuncay-Celikel, 2011). Therefore, this paper examines the following research questions:
Q1) What is the capability development process of emerging economies firm?
Q2) How do contest factors such as government, partners impact the capability development process?
Data collected from a CEO and 5 R&D managers at Fiat-Tofas, a joint venture between Koc Holding and FIAT to observe the innovation development process and the supporting and inhibiting contest factors in this processes.
Founded in 1968, to produce light commercial vehicles for the local market, Tofaş became a major exporter after Turkey joined the EU-customs union. In 1994, Tofaş established a product development department with a handful of engineers to assist production and the localization of components to Turkish suppliers.
The result of the study indicates that the capability building process at Tofas started from simple testing and adaptation in 1994. She was able to develop implementation capability and design skills during the Doblo project. Later, she developed more complex innovation capability such as concept development skills (during the MiniCargo project). However Tofas was mostly involved in the development of upper body and interior design, and files its patent applications related to these design activities, which was required to be eligible for Turkish R&D subsidies. Thus development of internal combustion engines, a core technology, was conducted by Fiat Powertrain in Italy, with no delegation to Fiat. Decisions regarding product platforms and models were also the responsibilities of the home country organization, as ere underbody design and styling until 2012. However, the firm currently has been developing its own new vehicle from underbody to upper body.
The results of the study show that Tofas has used contextual factors such as government and partners effectively. She has gained the advantage of government incentives efficiently and benefited from the MNE-partnerships both to get access to technology and international markets. The MNE partnership has supported accessing the technology. However, the partnership also confers significant limitations. As observed by senior managers at Tofaş, MNEs tend to have a finely elaborated structure regarding product decisions and intellectual property rights to ensure centralized MNE control.

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