Internal and External Sources of Capacity Building in the Mexican Auto- Parts Industry

A University of Sussex DPhil thesis Available online via Sussex Research Online: http://sro.sussex.ac.uk/ This thesis is protected by copyright which belongs to the author. This thesis cannot be reproduced or quoted extensively from without first obtaining permission in writing from the Author The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the Author When referring to this work, full bibliographic details including the author, title, awarding institution and date of the thesis must be given Please visit Sussex Research Online for more information and further details INTERNAL AND EXTERNAL SOURCES OF CAPACITY BUILDING IN THE MEXICAN AUTO- PARTS INDUSTRY CLAUDIA RUIZ GARCIA A thesis submitted in partial fulfilment of the requirements of the University of Sussex for degree of Doctor of Philosophy in Science and Technology Policy Studies April 2015 SPRU: Science and Technology Policy Research University of Sussex ii Internal and External Sources of Capacity Building in the Mexican Auto-parts Industry I hereby declare that this thesis has not been submitted, either in the same or different form, to this or any other University for a degree. CLAUDIA RUIZ GARCIA iii ACKNOWLEDGMENTS I am greatly indebted to my supervisor Nick von Tunzelmann. He was the inspiration for the ideas developed in this thesis. His patience and wisdom encouraged and guided me through the experience of writing the thesis. I am indebted to Simona Iammarino and Maria Savona too who were my supervisors at the beginning of my PhD study in SPRU. Finally, I would like to thank Johan Schot for his assistance in completing my studies. I want to thank CONACYT who sponsored my study at SPRU-University of Sussex. I also thank FUMEC for its sponsorship of my fieldwork in Mexico. I am indebted to all the firms and senior government officers who participated in my research. I especially thank Juan Carlos Becerril, Raul Carvajal, Leoncio Salaburu, Pat Shaw and Bernardo Rosas. I am greatly indebted to the many governments, agencies and chambers of commerce and industry representatives who participated in my research. I am particularly indebted to the people leading small and medium sized firms who contributed a lot and from whom I learned, and came to understand the immense efforts involved in their efforts achieving their dreams. I thank all my friends at SPRU for the times we spent together, for in depth discussions on my research and for their constructive criticisms. I dedicate this work to my mother, Rosalba, and my sister, Lorena, for their great love and priceless support which sustained me through the loneliness of writing up my work and who have always encouraged me to complete my goals. iv Internal and External Sources of Capacity Building in the Mexican Auto-parts Industry UNIVERSITY OF SUSSEX Claudia Ruiz Garcia DPhil in Science and Technology Policy INTERNAL AND EXTERNAL SOURCES OF CAPACITY BUILDING IN THE MEXICAN AUTO-PARTS INDUSTRY SUMMARY This thesis is concerned with the study of technology upgrading in late industrialising countries. This research aims to understand the process of technology upgrading of SMEs in the automotive industry by looking at the internal and external sources of technology for these firms. To do so, the main bodies of literature of this research are i) technological capabilities and absorptive capacity, ii) global value chains, and iii) NLSs. Technology upgrading has not been a well-developed notion in the literature. The literature has focused on technical change in industrialised economies and it has omitted the process of incremental changes and the shortcomings existing in the system of innovation for late industrialising countries. To observe technology upgrading in developing countries, I look at the transfer of technology from up-to-date firms (assemblers) to the less knowledgeable firms (SMEs) and the assimilation of this technology by the latter. To look at other sources of technology, I observed the country’ context and the role of other actors in the industry. In this regard, National Learning Systems (NLSs) permit to understand and explain the differences of the process of technical change in late industrialising countries where they learnt through the diffusion of technology created somewhere else rather than the creation of it within the system. In this research, I offer new findings for the literature which has paid little attention to the process of technology upgrading and SMEs. I also confirm that the use of NLSs instead of NIS is more accurate for late industrialising countries and I offer new paths for future research in these issues. v TABLE OF CONTENTS TABLE OF CONTENTS…………………………………………………………………..v LIST OF ABBREVIATIONS………………………………………………………….....xi LIST OF TABLES……………………………………………………………………….xiii LIST OF FIGURES……………………………………………………………………..xvii LIST OF GRAPHS……………………………………………………………………..xviii CHAPTER 1. Introduction, research questions and literature review ………………...1 1.1 Introduction 1 1.2 Literature review 2 1.2.1 Technological capabilities 2 1.2.2 Development of technological capabilities: Competencies and absorptive capacity 10 1.2.3 Technology transfer and technology upgrading: Relations in the supply chain 14 1.2.4 The structure of the automotive industry in developing countries 18 1.2.5 National Learning System 22 1.3 Research questions and outline of the thesis 32 CHAPTER 2. Empirical literature: comparative cases ……………………………….34 2.1 Introduction 34 2.2 Overview of the automotive and auto-parts industries 34 2.2.1 Automobile and auto-parts industries: Structure and relationships 35 2.2.2 The automobile industry global value chain and supply chain 38 2.2.3 Barriers to entry 40 2.3 The size of the global automobile industry 41 2.3.1 Trends in the auto-parts sector 46 2.4 Empirical evidence on technological capability building: Asian countries and Brazil 47 2.4.1 The case of South Korea’s automobile industry 48 2.4.2 The case of Taiwan and Japan: SMEs in developing and developed countries 51 vi Internal and External Sources of Capacity Building in the Mexican Auto-parts Industry 2.4.3 Technology upgrading and absorptive capacity in the Asian car industry 53 2.5 The case of Brazil: Technology upgrading in the car industry 55 2.6 The case of Mexico: The growth of the car industry and technology upgrading 58 2.7 Today’s automobile industry in Mexico: Main economic indicators 66 2.8 Conclusions 81 CHAPTER 3. Methodology………………………………………………………………84 3.1 Introduction 84 3.2 Analysis: Mixed method approach 84 3.3 Research design 89 3.3.1 The research actors 89 3.4 Fieldwork and collection of data 89 3.4.1 Development of the fieldwork 89 3.4.2 Focus group and results 91 3.4.3 Structure of the survey 92 3.4.4 Pilot interviews 96 3.5 The sample 96 3.5.1 The auto-parts industry 96 3.5.2 SMEs and large firms 99 3.5.3 Agents in the National Learning System 107 3.6 Conclusions 110 CHAPTER 4. Firm-level sources of capacity building………………...……………...112 4.1 Introduction 112 4.2 Large firms and interactions 112 4.2.1 Large firms and interactions with SMEs 114 4.2.2 Large firms with scarce interactions 121 4.3 Small and medium-sized firms in the Mexican auto-parts industry 123 4.4 Absorptive capacity, technological capabilities, and technology vii upgrading in SMEs 136 4.5 The surveyed SMEs: Important characteristics 144 4.5.1 Location of the surveyed SMEs 146 4.5.2 Age of the firm and type of product 146 4.5.3 Establishment of linkages in the NLS 148 4.5.4 Competencies 152 4.6 Conclusions 155 CHAPTER 5. External capacity building ………………………………......................157 5.1 Introduction 157 5.2 NIS versus NLS 157 5.2.1 National efforts: NSI versus NLS 159 5.3 The automotive industry in the NLS: Role of their agents 173 5.3.1 Structure of the automobile industry in Mexico 173 5.3.2 Efforts for the automotive industry: Surveyed agents 176 5.4 Conclusions 190 CHAPTER 6. DEVELOPMENT OF TECHNOLOGICAL CAPABILITIES IN THE SMEs OF THE AUTOMOBILE INDUSRY IN MEXICO: A STATISTICAL ANALYSIS…………………………………………………………….192 6.1 Introduction 192 6.2 Absorptive capacity in SMEs in developing countries: Quantitative analysis using PCA 192 6.3 Principal Component Analysis 197 6.3.1 Selection of factors 197 6.3.2 Component analysis 199 6.4 Qualitative and Quantitative outcomes 208 6.4.1 Absorptive capacity and development of technological capabilities in the surveyed SMEs 208 6.4.2 Technological capabilities and linkages in the automobile industry 209 6.4.3 Agents’ impact on the development of technological capabilities 209 6.4.4 A closer look at the interactions between large firms and domestic viii Internal and External Sources of Capacity Building in the Mexican Auto-parts Industry SMEs 210 6.5 Technological capabilities of the surveyed firms 210 6.6 Conclusions 214 CHAPTER 7. CONCLUSIONS………………………………………………………...216 7.1 Introduction 216 7.2 Analytical framework 216 7.3 Research questions and answers 219 7.4 Research contributions and findings 222 7.4.1 Technology upgrading in developing countries 223 7.5 Policy implications 228 7.6 Further analysis 230 BIBLIOGRAPHY 232 APPENDIX……………………………………………………………………………....245 ix LIST OF ABBREVIATIONS AERI Programme of strategic alliances and innovation networks AMDA Mexican Association of Automotive Suppliers AMIA Mexican Association of the Automotive Industry ANDELLAC National Association of Suppliers of Tires ANPACT National Association of Producers of Trucks and Heavy cars BANCOMEXT National Bank of Export and Commerce CANACINTRA National

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