The roles of Inter-firm relationships in R&D: The case of NTT in the Japanese Telecom Industry Kenichi Nishioka PhD The University of Edinburgh 2009 Declaration I certify that this thesis does not incorporate without acknowledgement any material previously submitted for a degree or diploma in any university; and that to the best of my knowledge and belief it does not contain any material previously published or written by another parson where due reference is not made in the text. Kenichi Nishioka, September 2009 Abstract The value and scope of telecom services have increased substantially in the decade from the mid 1990s. The telecom companies have offered not only telephone services but also data exchanges for example streaming services. Therefore, they now offer telecom services as packaging into which layered services are integrated. The number of actors involved in the market has increased due to the expansion of business areas, while rapidly changing technological trends have altered R&D methods. The thesis shows that the adoption of the marketing concept and the development of complex inter-firm technology based relationships underpin the creation and management of new telecom services. The relationships have originated from an exchange of technological knowledge and specialized skills. This research uses the NTT-centred collaboration system in Japan, which features relational exchanges and high mutual dependence. This case shows that inter-firm relationships greatly contributed in the development of technological resources in two ways; collecting advantageous technologies from others and mediating in the introduction of new technologies. In addition, developments in technology resulted in an expanded domain of applicability. Consequently, not only the market structure was changed but also the relationship between marketing and R&D changed. With increasing integration of the market, the number of related firms increased as firms concentrated on specific technologies, with additional firms having superior competitive advantages in each layered business area. The case in the thesis also shows mechanisms of changing inter-firm relationships under dynamic business circumstances; indirect exchanges occurred when inter-firm relationships changed. Inter-firm relationships are changed, keeping existing but adding new relationships. The study also indicates a new direction to study service marketing. As the new trend of service development in ICT industry develops so the integration abilities and the management of inter-firm relationships in supply-sides become more focused. The thesis points to the importance of these upstream activities (coordinating inter-firm relationships in a service-oriented approach) and advocates the presence of a facilitator who can bridge both upstream and downstream activities. The results should contribute to both marketing and technology management in academia as well as business practices in R&D management. Table of Contents Chapter 1 Introduction · ···································································· 1 1. Overviews ························ ···············································································1 2. The definition of R&D activities····································································2 3. R&D and inter-firm relationships ································································4 3.1 Focusing on fundamental R&D and the linear model ·······················4 3.2 Incremental and collaborative R&D··················································5 3.3 Focusing on interaction with customers············································6 3.4 Towards a new approach to R&D management································7 4. Proposition of the study·· ··············································································8 5. Description of contents ··· ··············································································9 Chapter 2 Literature Reviews ··························································10 Introduction ·················· ··································································· 10 Section1 The resource of the R&D and the inter-firm relationships11 1. Introduction····················· ·············································································11 2. Market Orientation in business strategy ····················································11 2.1 Competitor orientation·····································································12 2.2 Toward customer orientation ··························································13 2.3 Innovation and Market Orientation ··················································13 2.4 Market-oriented approach································································14 2.5 The market orientation and business resources ·······························16 3. Market orientation and resource management··········································17 3.1 Resource Based view of the firm ·····················································17 3.2 The bundle of Operant resources ·····················································19 3.3 The origin of capabilities and resources···········································20 3.4 Learning process as capabilities ······················································21 3.5 The necessity of expand the market view and business networks ····22 4. Summary·························· ·············································································23 Section2 Relationship Marketing in Service Approach ············· 24 1 Introduction ··················· ·············································································24 2. Definition of Service as intangible things····················································25 3. Approaches of service marketing ································································27 3.1 Trying to create a new concept ························································27 3.2 Establishing service marketing ························································28 3.3 Service Quality ·· ············································································28 3.4 Service Encounters ··········································································29 3.5 Relationship Marketing····································································30 3.6 Internal marketing ···········································································33 4. Discussion ························ ·············································································35 Section3. Industrial Marketing ······················································ 37 1. Introduction····················· ·············································································37 2. Buyer behaviour model in industrial marketing········································38 3. The emergence of the interaction perspective in industrial marketing ···39 4. Relational exchange in channel relationships ···········································41 4.1 Towards relationships ······································································41 4.2 Shift foresight ····· ············································································42 5. Discussions ······················· ·············································································45 Section4. The Network Approach·················································· 47 1. Introduction····················· ·············································································47 2. Philosophy of the network approach···························································47 3. Characteristics of the network approach····················································49 4. The interface between an organization and its environment····················52 4.1 The boundary of an organization and its Environment·····················52 4.2 The network approach as an organization-environment interface ····53 4.3 Discussion - Boundaries between a firm and its environment -········55 5. Summary·························· ·············································································60 Section5. Characteristics of R&D and Inter-firm relationships 62 1. Introduction····················· ·············································································62 2. Alliances and Industrial groups···································································62 3. The characteristics of R&D market ····························································65 3.1 The characteristics of the R&D market: Uncertainty and Equivocality·· ············································· ············································································65 3.2 The nature of partnerships in R&D activities···································66 3.3 Difficulties of Change partnership ···················································67 4. Summary·························· ·············································································71 Summary and Research Questions················································ 72 Chapter3 Research Questions and Methodology············· 75 1. Research Questions········· ·············································································75 2. Methodology ···················· ·············································································77 3. Research Site ··················· ·············································································81