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GL AL INNO ATION MA AGING INTERNATIONAL INNOVATION PROJECTS AT ABB AND ELECTROLUX 8! ,tR) INSTITUTE OF INTERNATIONAL ~~:~:3 ~,.~.,~ BUSINESS- lIB a STOCKHOLM SCHOOL OF ECONOMICS Address: Hollandargatan 32, P.O. Box 6501, S-113 83 Stockholm, Sweden. Telephone: +46 (0)8 736 9500, Fax: +46 (0)8 31 99 27, E-mail: [email protected], Telex: 16514 HHS S • Founded in 1975 • Is a research institute at the Stockholm School ofEconomics • Conducts theoretical and empirical research within the area ofBusiness Administration with emphasis on issues in International Business • Arranges seminars and academic symposia • Is in charge ofundergraduate and graduate courses in International Business and Strategic Management at the Stockholm School ofEconomics • Is in charge ofthe International Graduate Program (IGP) at the Stockholm School ofEconomics • Is in charge ofthe Advanced Management Program (AMP) at the Stockholm School ofEconomics • Publishes its research findings and results in a series ofresearch papers and articles and books lIB Board Professor Claes-Robert Julander, President, Stockholm School ofEconomics (Chairman) Professor Magnus Blomstrom, Stockholm School ofEconomics Mr. Jonas afJochnick, Vice Chairman, Oriflame International S.A.; CEO, ORESA Professor Lars-Gunnar Mattsson, Stockholm School ofEconomics Dr. Lars Otterbeck, President and CEO, Axel Johnson SABA AB Dr.h.c. Jacob Palmstierna, Chairman, Nordbanken Dr.h.c. Hans Rausing (honorary member) Mr. Bert-OlofSvanholm, Chairman, Volvo AB; Chairman, Royal Swedish Academy of Engineering Sciences Mr. Tom Wachtmeister, Chairman, Swedish Trade Council; Vice Chairman Atlas CopcoAB Mr. Sven Agrup, Chairman, AGA AB Acting Professor Orjan Solvell, Director 1m Further information about current research at the institute and its publications will be mailed on request. GLOBAL IN 0 ATI N A GING IN ERNATI NAL INNOVATION PROJECTS AT ABB AND ELECTROLUX Jonas edderstrale .<,.OCKHO( Dissertation for the degree of c;,'" ,{§;~,1-,:" Doctor ofPhilosophy, Ph.D. g u'@'(I)'@'u :d ~.r, ~ °o("'.',~p' ~o Stoc kh0 IShm c 00I 0 fEconormcs. OF ECO Stockholm, 1996 © lIB and the author ISBN 91 971730-45 Multinational company Innovation Product development processes Project management Organizational architecture Distributed by: lIB, Institute ofInternational Business P.O. Box 6501, S-113 83 Stockholm Sweden. Tel. +46(0)8 736 90 00, Fax. +46(0)8 31 99 27 gofab 17909, Stockholm 1996 PREFACE This thesis was written while Jonas Ridderstrale was a doctoral student at the Institute of International Business (lIB). The research was generously funded by Atlas Copco AB, Carnegie Bosch Institute for Applied Studies in International Management, the European Institute of Japanese Studies, Jan Wallanders och Tom Hedelius Stiftelse for Samhallsvetenskaplig Forskning, and Japan Foundation. This support is gratefully acknowledged. The preparation of the thesis was made possible due to the kind co-operation of managers at several companies. lIB would especially like to thank managers at ABB and Electrolux. Orjan So/vel! Director Institute ofInternational Business Acknowledgements Anyone who has endured the process ofwriting a dissertation realizes that Winston Churchill was more right than perhaps he ever imagined when he stated, "This is not the end. It is not even the beginning ofthe end. It is merely the end ofthe beginning." Naturally, the content of this dissertation does not represent more than a small fraction of the ideas and impressions gained during my years as a researcher. Still, given the extensive number ofpages included in this volume, I guess most people are glad that I did not try to include them all. I am most grateful to the members of my thesis committee for their patience and support. Professor Sven-Erik Sjostrand first interested me in academic research and then remained a valuable member of my thesis committee throughout the process. Acting Professor Orjan Solvell served as my landlord, boss, committee member, but above all he has been a dear friend during this period. For all this, I am greatly thankful. Professor Eleanor Westney also contributed with important pieces of advice toward the end ofthe research process. However, my deepest gratitude is to Professor Gunnar Hedlund. Gunnar has served more roles than I can remember, and he has inspired and helped me in ways far beyond the duties of a thesis adviser. His unfortunate illness toward the end ofthis research project also reminded me that there are things in life so much more important than a dissertation. A number of other people who contributed greatly, in one way or another, to this dissertation should also be mentioned. Gunnar's wife, Liisa, definitely contributed to my gain in weight with her fantastic cooking, but also more generally she made me enjoy life outside research. Liisa, thanks for everything. Now, you finally get the credit you deserved some 20 years ago (you know what I mean). I am also in debt to Professor David Hawk and his family, who always provided a warm and hospitable den during all the trips to the USA. Professor Ikujiro Nonaka introduced me to the mysteries of product development in Japanese companies. For this, I am most grateful. Furthermore, lowe a great deal to Martin and Stefan, who assisted us in administering the survey. Finally, without the financial support of several research funds, this project would never have been possible to pursue. All the managers who spent time with me were also essential in the realization of this research project. I am most grateful to both these groups ofpeople. My dear friend and colleague, Johan Stein, once called me a devil's advocate in his dissertation. I do not know too much about his association with the prince of darkness, but Johan has surely provided many valuable comments. Moreover, he has been a challenging benchmark since we met some 10 years ago. I am deeply in debt to another friend and colleague, Mr. Robert Nobel. Robert, thank you for all the help, particularly with my computer(s). Mr. Richard Wathen assisted me in correcting linguistic errors in my manuscript and did a tremendous job in doing so. I would also like to thank Assistant Professor Kjell Nordstrom and Mrs. Vanja Ekberg. Kjell taught me much more than the essentials about executive teaching. For all the interesting discussions we have had, lowe him a great deal. Vanja provided valuable administrative support and listened patiently to all my worries. No matter what you do, the people around you matter the most. All you former colleagues at "A sektionen", thank you. Everyone else at lIB: Amelie, Carl, Dag, Henrik, Ivo, Jan-Erik, Jerker, Julian, Kerstin, Lars H, Lars A, Lena W, Lena Z, Lin, Maria, Niklas, Patrick, Per, Peter, Robin, Stefan, Udo, thank you so much for always being there, and for being who you are. You make work ~ enjoyable. A final gratitude goes to my family, Even though some of my relatives initially confused "Handels" (the SSE) with Konsurn (the "K-Mart School of Economics"), I hope I have been able to explain what I am doing. Mother, Father, Martin, and Johan, many thanks for always believing that I would finish this project. At last, but definitely not the least, one person more than any other has had to put up with all my mood-swings during the ups and downs of the research process. Asa, this one is for you. Lidingo in November 1996 Jonas Ridderstrale CONTENTS CHAPTERl GLOBAL INNOVATION - An emerging phenomenon Introduction 1 The organizational architecture ofthe firm 2 Classical innovation processes in the MNC 5 The changing organizational architecture of the MNC 7 Forces for change 8 External factors 8 Internal factors 10 Toward international innovation processes 13 Ford Mondeo - an lIP 13 Reasons for lIPs 14 Research on lIPs 16 Management of innovation 17 Innovation as a process unfolding over time 17 Innovation across cultural and geographical space 19 Innovation involving multiple levels 20 Innovation involving different knowledge bases 22 Global innovation - a complex managerial puzzle 24 Purpose of the study 25 Expected contributions 26 Summary of the chapter 27 Outline of the thesis 30 Notes to Chapter 1 32 CHAPTER 2 RESEARCH DESIGN AND SETTING Introduction 39 Searching for an appropriate design 39 Arguments for a qualitative design 40 Case studies 41 Selecting the sample 42 Why innovation projects? 42 What kinds ofinnovation projects? 43 Why ABB and Electrolux? 45 Approaching ABB and Electrolux 47 Defining the objectives of the study 48 Handling preconceptions 49 Data collection 50 The interviews 50 Parallel collection and analysis 53 Letting theories and empirical data interact 53 Criteria for judging the quality of research 54 Enhancing the quality ofresearch 56 The survey 58 An introduction to the cases 59 rd The 3 tap 59 Alliance 61 Holger 63 M2000 64 Summary of the chapter 65 Notes to Chapter 2 67 CHAPTER 3 THE HISTORICAL EVOLUTION OFABB AND ELECTROLUX - Cases in the rise ofthe modern MNC Introduction 71 The birth ofthe multinational company 71 Early internationalization efforts 73 The road to global industrial leadership - reshaping industry structures 76 Strategic thrust 82 Generic strategies 87 Growth pattern 88 Primary capabilities and competencies 88 The strategy process 89 Organizational responses 89 Traditional modes oforganizing the MNC 90 Organizational aspects ofthe MNC 92 Moving toward more globally integrated structures 94 The organizational properties ofABB and Electrolux 100 Describing the organizational architectures of ABB and Electrolnx 103 Summary ofthe chapter