148 Int. J. Techno|ogy Management, Vo|. 36, Nos.

1/2/3, 2006
Copyright 2006 Inderscience Enterprises Ltd.













Firms' cuIture and technoIogicaI behaviour: the case
of two breweries in Mexico
Alexandre O. Vera-Cruz
Metropolitan Autonomous University
Campus Xochimilco (UAM-X)
Calzada del Hueso 1100
Col. Villa Quietud, Coyoacn 04960, Mxico, DF
Fax: (5255) 5483 7235
E-mail: veracruz@correo.xoc.uam.mx
Abstract: This paper addresses two related issues seldom explored in the
literature on learning and technological capability accumulation in developing
countries: first, whether and how firms` learning and accumulation processes
change in response to radical modifications in the context; second, how
differently firms respond to such changes, with special emphasis on the role
played by the firms` culture in the variability of responses. This study is based
on detailed case studies of two internationally competing Mexican breweries.
The cases reconstruct the lifetime process of learning and technological
accumulation of the case-study firms, emphasising strategies, processes and
mechanisms. They reveal the way in which the firms` culture shaped learning
processes and created rigidities in the firms` responses to changes. The results
show that early experiences of the firms and deeply ingrained assumptions
underlying the firms` culture are a major factor for explaining the variability of
the firms` learning responses to changes in the context.
Keywords: technological learning; technological capabilities; organisational
culture; latecomer firms.
Reference to this paper should be made as follows: Vera-Cruz, A.O. (2006)
Firms` culture and technological behaviour: the case of two breweries in
Mexico`, Int. J. Techno|ogy Management, Vol. 36, Nos. 1/2/3, pp.148-165.
Biographical notes: Alexandre O. Vera-Cruz is a Professor at the
Master/Doctorate in Economics and Technology Management, UAM-X. He
holds a PhD in Science and Technology Research Studies, SPRU, in the
University of Sussex. Dr. Vera-Cruz is a member of the National System of
Researchers in Mexico and referee of the National Prize of Technology. He has
authored and coauthored the following publications: Cu|tura de |a Empresa,
Aprendizaje y Capacidades Tecno|gicas. E| Caso de |as Cerveceras
Mexicanas, UAM-ADIAT-Miguel Angel Porra; Spillovers from MNCs
through worker mobility and technological and managerial capabilities of
SMEs in Mexico`, Innovation, Management, Po|icy and Practice; Diferencias
en los perfiles de acumulacin de capacidades tecnolgicas en tres empresas
mexicanas`, El TrimestreEconmico; and Aprendizaje y acumulacin de
capacidades tecnolgicas en la industria maquiladora de exportacin: el caso de
Thomson-multimedia de Mxico`, Espacios.










Firms' cu|ture and techno|ogica| behaviour 149















1 Introduction
Over the years, the literature on learning and technological capability accumulation in
developing countries has focused on analysing firms` internal learning processes as the
drivers of the acquisition of certain technological capabilities (Dahlman and Westphal,
1982; Katz, 1986; 1987; Lall, 1987; 1992; Bell and Pavitt, 1995; Kim and Nelson, 2000).
The literature has emphasised the analysis of the typical` firms, and the authors` efforts
have focused on identifying generalities in patterns of behaviours. In contrast, little
attention has been paid to identifying the differences between firms` behaviours and
examining the reasons for these differences.
Following the outburst of the world debt crisis in 1982, which signalled the definitive
end of the Import Substitution Industrialization (ISI) and conducted a major change in the
economic and policy context in the Latin American countries, recent works have focused
on the study of the new conditions of competitiveness and industrial restructuring (Unger,
1994; Katz, 2000; Ferraz et a|., 1999; Kosacoff, 2000; Cimoli and Katz, 2003). Others
have analysed the new patterns of technological capability accumulation for different
types of firms, or the interaction between technological accumulation and learning
processes (Figueiredo, 2002; 2003; Dutrnit, 2000). Indeed, Figueiredo (2001) focuses on
differences between firms in terms of operational performance improvement and the role
of learning processes and capability-building paths in influencing such differences.
However, the role of firms` behaviour in influencing interfirm differences in capability
building has not been investigated.
This paper draws on these previous works, but addresses two related issues seldom
explored in that literature:
1 whether and how firms` learning and accumulation processes change in response to
major alterations in their economic and policy context
2 possible differences in the way firms respond to such changes, an issue that is
examined through an exploration of the role played by firm`s culture in the
variability of the responses.
To tackle these issues, this work bridges the former literature on learning and
technological capability accumulation with the literature on organisational culture. The
latter includes two streams of work relevant to this paper. One consists of the literature on
organisational culture, which provides a number of insights, definitions and specific
methodologies for understanding the culture of organisations (Hampden-Turner, 1990;
Schein, 1984; 1991; Handy, 1993; 1995; Detert et a|., 2000; Noorderhaven et a|., 2002).
These authors view culture as deeply held assumptions resulting from learned responses
of groups to their problems of survival in a changing environment. The second stream
consists of the strategic management literature, which focuses on the learning trajectories
and technological capability-building processes of firms from industrialised countries.
Some of these works have looked for ways of integrating the concept of culture in the
analysis of the strategic capability-building process (e.g., Leonard-Barton, 1995; Garvin,
1993; Teece and Pisano, 1994). These two streams of literature are concerned with
differences between firms, however, being focused on developed countries, the links
between firms` culture, the economic and policy context and the processes of learning
and technological accumulation are not part of their agenda. In general, both streams










150 A.O. Vera-Cruz














present limited evidence on the role of firms` culture in the capability-building process
and, more specifically, on the role of firms` culture as a major factor in shaping their
responses to changes in the economic and policy context.
This paper explicitly explores these issues through in-depth case studies and a
comparative analysis of two large Mexican breweries: Cervecera Cuauhtmoc
Moctezuma and Cervecera Modelo.
Section 2 presents the conceptual framework and the research methods. Section 3
describes the two case-study firms. Section 4 describes and compares the firms`
technological behaviour during the ISI period. Section 5 is concerned with describing and
analysing the changes observed in the firms` technological behaviour after the major
economic and policy change, and puts forward the diverse nature of the firms` responses.
Section 6 explores the relationship between firms` culture and technological behaviour.
Finally, Section 7 contains the main conclusions.
2 Conceptual framework and research design
This section contains the framework within which the evidence on the changes in the
technological behaviour of the case-study firms is examined. Here, the main concepts are
defined and a brief discussion of how they relate to the basic questions and arguments of
this research is presented. The central variables to be analysed are the context, the
technological behaviour and the culture of the firm.
2.1 Context
The firms` technological behaviour is likely to be influenced by the economic and policy
context in which they operate. However, the focus of this work is on analysing variations
in the firm`s technological behaviour in response to the change from the ISI context to
the post-ISI context. Thus, this work is primarily concerned with links between changes
in context and intrafirm learning and technological accumulation processes.
The changes in context constitute a background to this research, and they are assessed
by means of a simple comparison drawn mainly from the Latin American literature
describing the basic features of the ISI policy and the changes observed in that model
during the 1980s. The changes more relevant to this work are those associated with the
opening up of the Mexican economy to foreign competition; in contrast, alterations of the
technological frontier of the industry are not addressed.
2.2 Techno|ogica| behaviour
There is a wide use of the concept of technological behaviour in the literature on
innovation. The concept used here draws on two main ideas. First, as pointed out by Bell
et a|. (1984), because developing country firms start under the condition of being
uncompetitive in the world market, the basic technological problem that they have to deal
with is the accumulation of technological capabilities to become and remain competitive
in the world market. Second, there is vast empirical evidence that firms build up
technological capabilities through learning processes. Based on these ideas, this work
defines technological behaviour in a narrow sense; thus, technological behaviour refers
only to the observable pattern of actions undertaken by the firm aiming to build up









Firms' cu|ture and techno|ogica| behaviour 151















technological capabilities. As a result of this definition, a large part of the work of the
original research from which this paper is derived (Vera-Cruz, 2000) was directed to
describing, analysing and comparing the processes of learning and technological
capability accumulation in the two case-study firms.
This study uses the definition of technological capabilities proposed by Kim
(1997,p.86) as:
... the ability to make effective use of technological knowledge to assimilate,
use, adapt, and change existing technologies. It also enables one to create new
technologies and to develop new products and processes in response to the
changing economic environment ..
This definition draws on several other definitions proposed in earlier works from the
learning and technological accumulation literature (Katz, 1986; Bell, 1984; Dahlman and
Westphal, 1982; Lall, 1987; Scott-Kemmis, 1988; Bell and Pavitt, 1995).
This research draws on the distinction between routine production capabilities and
innovative technological capabilities and the taxonomy of technological capabilities
presented by Bell and Pavitt (1995), which is adapted from Lall (1992). The taxonomy
differentiates between ... the kind of knowledge and skills required to operate given
production systems, and the kind of knowledge required to change them, and is based on
the idea that in developing countries:
. these two sets of capabilities are not so closely and effectively linked.
Industrial output can grow and production capacity can be expanded and
diversified without automatically giving rise to the development of effective
capabilities for generating and managing technical change. (Bell and Pavitt,
1995,p.77)
In this way, the taxonomy differentiates between routine production capabilities and three
levels of innovative technological capabilities (basic, intermediate and advanced).
The original taxonomy has been adapted and improved by different authors, such as
Figueiredo (2001) in the case of the steel industry in Brazil, Dutrnit (2000) in the glass
industry in Mexico, and Ariffin and Figueiredo (2004) as well as Dutrnit and Vera-Cruz
(2003) in the case of subsidiaries from multinationals in Brazil and Mexico, respectively.
Since firms build up technological capabilities through learning processes, the firms`
technological behaviour can be described at any moment by observing the characteristics
of the firms` learning processes. To characterise the firms` technological behaviour, four
aspects of the learning processes are analysed:
1 main targets
2 direction of accumulation
3 main technological capabilities developed
4 sources of knowledge and learning mechanisms.
The selection of these aspects was based on considerations about their relevance for the
case-study firms and the accessibility to comparative information in the two firms.
The assessment of these aspects of learning processes is made on a qualitative base. It
is based on reconstructed stories about technological change processes, particularly about
processes of learning associated with projects of technological change carried out in the
case-study firms in different periods.









152 A.O. Vera-Cruz














2.3 Cu|ture
In addition to exploring whether and how the firms` learning and capability accumulation
processes change in response to major alterations in their economic and policy context, a
central purpose of this paper is to explore whether the firms` culture might explain the
variation between those responses.
A firm`s culture is seen as a pattern of deeply held assumptions, values and beliefs,
most of which were established in the early days of the companies and constitute
the firm`s personality` (Schein, 1991; Leonard-Barton, 1995; Teece and Pisano, 1994;
Teece, 1995). Schein (1991; 1996) points out that the underlying assumptions are the
ultimate, nondebatable, taken-for-granted values, beliefs, perceptions, thoughts and
feelings; they are invisible and preconscious.
Scholars have pointed out that solutions, particularly those that worked well,
undertaken by leaders to respond to major obstacles, sources of anxiety, threats,
opportunities and conditions operating at the time the firms were founded, including their
initial strategy, create an internal consensus about the way things should be done to
succeed. Over the years, by undertaking identical actions in response to similar problems,
the hidden principles behind those actions are gradually transformed into underlying
assumptions about how things are really done. Those assumptions come to be accepted as
secure guides of action and they drop out of the awareness to become unconscious norms
of action.
1
Thus, they are very difficult to change.
The rigidity of organisations to change long lasting norms of behaviour has been
identified by authors from different lines of thought. Looking at populations of firms
instead of at individual firms, Stinchcombe`s (1965) proposes the imprinted` argument,
which suggests that each vintage` of organisations is imprinted` with the social,
cultural, and technical features that were common in the environment at the time of the
respective foundation. These imprinted characteristics, being highly resistant to change,
are more likely to be reflected, to a large extent, in the current characteristics of
populations of organisations than the recent social structure and characteristics of the
environment. In the same line, the organisation ecology theory (Hannan and Freeman,
1989) treats organisations as complex systems, which have enormous limitations in
terms of flexibility and speed of response, that is to say, systems characterised by
substantial inertia.
Because culture is dropped out of awareness, members of an organisation cannot
spell out the basic elements of their culture. Culture must be unveiled. To decipher
the culture of an organisation, and so to identify the pattern of interrelated assumptions,
it is necessary to go beyond the organisation`s surface and uncover the basic underlying
assumptions. Schein (1991) provides a meaningful discussion of the methodological
problem that a researcher may confront to investigate the assumptions underlying an
organisational culture. He proposes that the only way to decipher the essential
assumptions and their pattern of interrelationship is by means of a ... series of
encounters and joint exploration between the investigator and various motivated
informants who live in the organisation and embody its culture.
Thus, in this study the culture of the case-study firms is assessed by observing their
long-term pattern of technological behaviour and conjecturing about the possible
underlying assumptions behind the observable pattern of behaviour. The exploration of
the role of the firm`s culture on shaping its technological behaviour in response to a










Firms' cu|ture and techno|ogica| behaviour 153















major change in the context follows two main steps: firstly, the basic pattern of
assumptions in relation to technology in each firm is uncovered; secondly, the way these
basic assumptions shape the changes in the firm`s technological behaviour is discussed.
2.4 Research methods
The objective of this work demanded a research method capable of capturing detailed
qualitative information that would allow the researcher to reconstruct the internal
and external context of the firm over an extended period of time, to describe and
compare organisational behaviour over time, as well as the pattern of basic assumptions
underlying the firm`s culture. Therefore, the research strategy chosen was a comparative
in-depth case studies (Yin, 1994). The study concentrated on two large Mexican
breweries: Cervecera Cuauhtemoc Moctezuma (CCM) and Grupo Modelo (Modelo),
which are noteworthy for having quite different cultures and technological behaviours,
thus providing a good base for investigating the particular objectives of this paper.
A wide variety of sources of evidence was used, such as systematic interviewing,
direct observations, archival data and documentation. Interviews played a central role; all
in all the study involved interviews with 56 people in both companies at the central
offices and plant levels; several interviewees were interviewed more than once. Three
main analytical processes were conducted:
1 developing a cross-case search for patterns, where matrices were built to identify
differences and similarities between the cases
2 developing an internal analysis of each firm and writing up short narratives
according to the key issues of the research, which were sent to key informants
for review
3 reviewing the results of the preliminary cross-case search for patterns.
3 Similarities between the two breweries
This section briefly describes some key characteristics of the case-study firms. Their
similarities in economical terms are also stressed.
Cervecera Cuauhtmoc Moctezuma (CCM) was founded in Monterrey, a city close
to the Mexico-US border, in 1890.
2
It is the oldest existing Mexican brewery; it was
family-owned by Mexican shareholders from the outset until 1994, when Labatt Canada
bought 22% of CCM`s shares.
At present CCM is the beer division of the Grupo FEMSA`, a Mexican industrial
group in businesses related to beer, soft drinks, packaging and commercialisation. CCM
is its largest subsidiary. FEMSA is publicly held and has been traded in the Mexican
Stock Market since the 1970s. CCM`s export tradition had started by the end of the
1920s, with sales to the USA. However, until the end of the ISI period the firm did not
regard systematic growth of its export activities as an important goal.
Cervecera Mode|o's
3
started with the founding of Cervecera Modelo in Mexico
City in 1925. The brewery was established by a small group of family-related
Spanish immigrants, who remained the unique owners of the brewery until 1993, when
Anheuser-Busch bought 17.7% of the Grupo Modelo`s shares. A few months later, in
1994, it became a public company, trading in the Mexican Stock Market.









154 A.O. Vera-Cruz














At present it is a specialised brewing company, vertically integrated both backward,
with the key raw materials and inputs for beer production, and forward, to the
distribution. From having virtually no export experience until the end of the ISI, in the
post-ISI period, exports, particularly to the USA, became the main target of the firm`s
strategy of marketing and growth.
These two firms belong to the same industry, have confined the bulk of their activity
to the Mexican market, and have had a similar size and market share over time, as
illustrated in Table 1. During the ISI period, both became multiplants vertically integrated
firms, backward and forward. Both have been family-owned firms of Mexican
shareholders from the outset until the signing-up of the NAFTA agreement in the early
1990s. In economical terms, both firms were quite similar during the ISI period and
continued to be so in the post-ISI period.
Table 1 General characteristics of the firms
Firm CCM Mode|o
Years 1970 1980 1990 1997 1970 1980 1990 1997
Production (million hl/year) 5.02 8.78 19.13 24.65 5.59 10.15 19.96 29.95
Market share (%) 29 33 51 45 39 39 49 55
Exports (% of sales) NA 2.4 3.9 5.1 NS NS 6.9 16.4
Number of plants NA 8 7 7 NA 5 7 8
Notes: NS = Not Significant; NA = Not Available. Data from 1970 to 1980
corresponds to Cervecera Cuauhtmoc only. From 1985 data includes
Cuauhtmoc and Moctezuma breweries.
Source. Femsa (1978-2000); Grupo Modelo (1994-2000)
Referring to their business strategies, there has been a close coincidence in the type,
sequence and timing of the strategic moves that each firm undertook to respond to
different changes in the context. For instance, both firms have followed a process of
vertical integration from the early days. During the ISI they reinforced this strategy and
also followed a strategy of expanding their capacity through the acquisition of small local
breweries. During the post-ISI period, in the beginning of the 1990s, both firms signed
strategic alliances with the main possible competitors in the USA and Canada, as a way
of avoiding direct competition from foreign firms in the Mexican market.
It is important to highlight these similarities because, as it is argued in the following
sections, in spite of the fact that they were quite similar firms in economical terms and
presented important similarities in their business strategies, each firm followed a rather
different technological behaviour both during the protected economy in the ISI period,
and during the open economy in the post-ISI period.
4 Differences in the firms` technological behaviour during the ISI period
Even though the firms revealed some similarities in economical terms, important
differences were observed in their technological behaviour during the ISI period. This
section outlines the characteristics of the firms` technological behaviour on the basis of
four aspects of the learning processes:









Firms' cu|ture and techno|ogica| behaviour 155















1 the main targets
2 the direction of accumulation
3 the main technological capabilities developed
4 the main sources of knowledge and learning mechanisms used.
During the ISI period, the targets of the technological behaviour, the main direction of
accumulation and the main technological capabilities developed by both firms were
different, as illustrated in Table 2. The targets of CCM and Modelo were oriented to
generate the minimum knowledge base to survive in the market and grow. CCM`s growth
strategy prioritised the direction of accumulation in chemical and biochemical processes
for beer formulation and processing. In contrast, Modelo prioritised the accumulation in
the area of investment project management and engineering, thus developing more
innovative capabilities in this area.
Table 2 Technological behaviour in the ISI context
Aspects of the
|earning processes CCM Mode|o
Main targets Maintain product stability
Introduce new products
Sort out problems of raw materials,
scarcities or/and rising in prices
Maintain product stability
Consistently expand output at a low
cost through in-house engineering
projects of adaptation and modification
of plant equipment
Direction of
accumulation
Prioritisation of the accumulation in
chemical and biochemical processes
for beer formulation and processing
Limited efforts in investment project
management and engineering
Prioritisation of the accumulation
in investment project management
and engineering
Limited efforts to accumulate in
chemical and biochemical processes for
beer formulation and processing
Main technological
capabilities
developed
Beer formulation and processing:
Capability for applying a process of
quality control
Capability for improving the
production processes based on
R&D activities
Strengthening of the capability for
generating incremental product
design
Investment project management and
engineering:
Basic innovative capabilities to be
in the market
Beer formulation and processing:
Routine production capabilities
Investment project management and
engineering:
Capability to adapt different
vintages of equipment
Stretching the useful life of plant
equipment
Maintain an active monitoring and
control of investment projects
Main sources of
knowledge and
learning
mechanisms
Emphasis on external sources of
knowledge before considering
potential use of internal sources
R&D activities
Hiring foreign technicians
Purchase of equipment
Emphasis on internal sources
Own production experience
Own experience on adaptation and
investment projects









156 A.O. Vera-Cruz














The firms also presented significant differences in relation to the main sources of
knowledge and learning mechanisms. The general approach of CCM was to emphasise
the use of external sources of knowledge before considering the potential use of internal
sources, and employed a set of learning mechanisms associated with learning through the
purchase of new equipment. According to the emphasis on the accumulation in beer
formulation and processing, and due to the specificity of its beer formula, R&D activities
were also an important source of knowledge and learning mechanism in this area. In
contrast, the general approach of Modelo was to put emphasis on internal sources and
learning from own experiences; no R&D activities were carried out.
Thus, two similar firms in terms of their economical characteristics and business
strategies, have followed a different technological behaviour in the same context. This
observation is important because it suggests that the context is not enough to explain the
firms` technological behaviour.
5 The impact of a major change in the context
As referred to earlier, the beginning of the 1980s signalled a major change in
the economic and policy context in Mexico and other Latin American countries. This
section discusses the impact of this major change in the context of the firms`
technological behaviour.
Table 3 outlines the main changes observed in the technological behaviour of the two
case-study firms. The targets of the technological behaviour during the post-ISI period
changed deeply and quickly as related to the ISI period, just after the debt crisis in 1982.
The new context was more competitive and put pressure on the firms` export. This
required increasing the operational efficiency and product quality. As a result, the targets
of the technological behaviour were oriented to adjust the technological activities towards
these requirements of the context. In the case of CCM, the targets changed from a limited
concern about market signals, clients, quality and cost reduction to a stress on market
conditions, customers` needs and operational efficiency. In Modelo`s case, the targets
changed from a limited concern about equipment update, clients, quality and the firm`s
image to a concern for introducing new equipment, improving plants efficiency and
generating a new image of the firm.
The single fact that this aspect of learning processes in CCM and Modelo changed in
line with changes in the context suggests that such changes in context likely affect the
firms` technological behaviour. This also reveals that the firms had a greater concern with
allocating resources to technological activities more closely related to the firms` goals
than in the past.
The other aspects of the firms` technological behaviour: the direction of
accumulation, the technological capabilities accumulated, and the main sources of
knowledge, responded quite differently to the major change in the context. Instead of a
deep and quick change, these aspects presented a rather high resistance to change.
Actually, during the post-ISI period, they remained quite stable and retained much of
their characteristics observed in the ISI period.












Firms' cu|ture and techno|ogica| behaviour 157















Table 3 Main changes in CCM`s and Modelo`s technological behaviour
Main responses Aspects of the
|earning
processes CCM Mode|o
Main targets From a limited concern about market
signals, clients, quality and cost
reduction to a stress on market
conditions, client needs and operational
efficiency increases
From a limited concern about
equipment modernity and firm`s image
to an important concern for introducing
new equipment, improving plants`
efficiency and generating a new image
of a modern firm
Direction of
accumulation
Beer formulation and processing
continues to be the most
knowledgeable area; focus on the use
of the knowledge accumulated instead
of showing concern for creating new
knowledge
Developing the knowledge required on
investment project management and
engineering to improve technology
transfer and plants operation
Investment project management and
engineering continues to be the most
knowledgeable area; reinforcement of
the accumulation to keep production
capacity expansions at low costs
Accumulating some basic knowledge
in beer formulation and processing to
ensure beer stability
Main
technological
capabilities
developed
Strengthening capabilities in beer
formulation and processing for
carrying out minor improvements,
adaptations and incremental product
design
Strengthening capabilities in
investment project management and
engineering to be a good buyer of
equipment
Deve|oping the most basic capabilities
in beer formulation and processing for
carrying out minor improvements and
adaptations
Strengthening capabilities in
investment project management and
engineering to improve processes of
technology transfer to support purchase
of equipment and production of certain
equipment, and to improve new plants
design
Main sources
of knowledge
and learning
mechanisms
Maintaining the same general approach
that prioritises the use of external
sources
Increase in the importance of certain
internal sources, particularly
production experience and continuous
improvements; decrease in the
importance of the R&D activities
Maintaining the same general approach
that prioritises the use of internal
sources
Increase in the importance of external
sources, however articulated to
learning from experience to quickly
embed knowledge from suppliers
Source. Own elaboration from interviews
In relation to the direction of accumulation and main capabilities developed, even though
CCM increased its concern on accumulating knowledge in investment project
management and engineering, and developed knowledge required to improve technology
transfer and plants operation, it continued emphasising the accumulation in the area of
beer formulation and processing. Modelo also maintained its direction of accumulation
and integrated vertically towards capital goods supply; while in the area of beer
formulation and processing, it did the minimum required for responding to the new
market conditions.










158 A.O. Vera-Cruz














In relation to the main sources of knowledge and learning mechanisms, CCM
maintained its approach of relying on the use of external sources of knowledge before
considering the potential use of internal sources. Modelo maintained its general approach
of relying largely on internal sources; however, it increased the use of external sources in
relation to the past. Thus, even though there were some changes in this aspect, they were
not radical in the sense that each of the two firms maintained its traditional approach.
Table 4 summarises and compares the depth and nature of changes observed in the
firms` technological behaviour. This table shows that the firms` responses had important
similarities and differences with regard to the depth of the changes and the nature of the
responses. With regard to the depth of changes, the firms` responses were similar. The
four aspects of the technological behaviour of CCM and Modelo changed in a similar
way. One aspect, the targets, showed significant changes, while for the other three
aspects change was only limited. Referring to the nature of the responses, the evidence
shows a few similarities and some important differences. One of the four aspects of the
technological behaviour changed significantly and quickly. Specifically, the targets of
both firms` technological behaviour were to increase product quality, reduce costs and
increase production efficiency. Here, the nature of the firms` responses was quite similar
and their technological behaviours began to converge.
Table 4 Comparison of firms` responses
Depth of the changes Aspects of the
|earning
processes CCM Mode|o
Nature of the responses
Main targets Significant Significant Similar
Increase product quality
Cost reduction
Increase production efficiency
Direction of
accumulation
Limited Limited Different
The area of accumulation prioritised by each
firm was different
Main
technological
capabilities
developed
Limited Limited Different
The level and kind of capabilities that each
firm sought to develop in each area
of accumulation
Main sources
of knowledge
and learning
mechanisms
Limited Limited Different
The approach to use and link internal and
external sources of knowledge
The learning mechanisms that each firm used
In the remaining three of the four aspects of technological behaviour, the changes were
neither significant nor quick; in other words they were limited, in both firms. Because the
firms continued to do things largely in the same way as in the ISI period, the nature of the
responses of these aspects of the technological behaviour was different for each firm.
This is the case for the main direction of accumulation, where the area of accumulation
emphasised by each firm was different; for the main capabilities developed, where the
level and kind of capabilities that each firm sought to develop in each area of









Firms' cu|ture and techno|ogica| behaviour 159















accumulation was different; and for the main sources of knowledge and learning
mechanisms, where the approach to use and link internal and external sources of
knowledge, and the specific learning mechanisms that each firm used were different.
Because the nature of the response of the technological behaviour to the changes in
the context of each firm has some similarities but many differences, the overall responses
of the firms` technological behaviour were different. Strikingly, in three of the four
aspects the changes were limited, or the changes happened at a slow pace. Both firms
continued with the approach that had been pursued in the ISI period in these three
aspects; in other words, both firms mostly continued with their traditional approaches and
ways of doing things. Thus, the question is: Why did these three aspects of technological
behaviour tend to remain unchanged or at least displayed more reluctance to change? It
seems that there are other factors, in addition to change in the context, that contribute to
explaining this behaviour.
6 The role of the firms` culture in explaining differences between
their responses
In the face of a major change in the context, some aspects of the firms` technological
behaviour changed radically, quickly and in similar ways. In contrast, other aspects
displayed a rather strong resistance to change. This section explores the reasons for the
differences in the firms` responses by analysing the firms` culture and the deeply held
assumptions of each firm. Figures 1 and 2 below contain the basic assumptions of the two
firms and the aspects of the technological behaviour that they influence.
4

Figure 1 Basic assumptions of CCM affecting technological behaviour

Basic assumptions
Aspects of the
technoIogicaI behaviour

Success in the marketplace depends on the firm's modernity

Money allows technology and knowledge to be
purchased abroad
Foreign technology and knowledge are better than
domestic
Knowledge in beer is more important than in engineering
Direction of
accumulation and main
capabilities developed
Success in the marketplace depends on the firm's modernity
Money allows technology and knowledge to be
purchased abroad
Foreign technology and knowledge are better than
domestic
Knowledge comes from clever people at high level
Family ties and friendship are the bases for distribution of
power and trust within the organisation
Sources of knowledge
and learning
mechanisms









160 A.O. Vera-Cruz














Figure 2 Basic assumptions of Modelo affecting technological behaviour
First, the analysis of the culture of CCM and Modelo revealed that each firm built
its culture through different deeply held assumptions that had their origins in the early
days of each firm. These assumptions were reinforced over time, they were present in
the ISI and they survived in the post-ISI period. Each firm had a different set of
basic assumptions and this determined that the two firms developed different cultures
over time.
Second, the deeply held assumptions of CCM in relation to technology are:
success in the marketplace depends on the firm`s modernisation, which worked
through two additional secondary intertwined assumptions:
a short-term financial results combined with the view that technology and
knowledge can be purchased abroad
b foreign technology and knowledge are better than domestic.
As a result of the above assumptions, CCM developed the assumption that
knowledge of beer is more important than engineering knowledge. In addition,
two more assumptions underlying the firm`s culture were revealed:
knowledge comes from clever people at top-management level
family ties and friendship are the bases for distribution of power and trust within
the organisation.
Third, the deeply held assumptions of Modelo that are the bases for its technological
behaviour are:
contracting debt is intrinsically bad for the firm
a good product is one that sells well
relevant knowledge comes from own experience, which was revealed to work in the
form of two additional secondary intertwined assumptions
Basic assumptions
Aspects of the
technoIogicaI behaviour

Debt is intrinsically bad for the firm

A good product is one that sells well
Relevant knowledge comes from experience
Knowledge and technology cannot be purchased
ready-to-use
The criterion to assess which technology or
equipment is good is by testing whether it works
Debt is intrinsically bad for the firm
Relevant knowledge comes from experience
The bases for distribution of power and trust within the
organisation are the employees' roles
Direction of
accumulation and
main capabilities
developed
Sources of knowledge
and learning
mechanisms









Firms' cu|ture and techno|ogica| behaviour 161















knowledge and technology cannot be purchased ready-to-use
the selection of technology for the firm depends on whether it works under the
specific conditions of the firm
the bases for distribution of power and trust within the organisation lie in
employees` roles.
Fourth, these different assumptions underlying firms` cultures determined that each firm
followed a different technological behaviour over time. CCM`s case shows that the
assumptions that the success in the marketp|ace depends on the firm's innovativeness,
and that know|edge about beer is more important than know|edge about engineering
contribute to explaining why the firm emphasised the accumulation of capabilities in the
beer formulation and processing area both in the ISI and post-ISI periods. In contrast,
Modelo`s assumptions that debt is intrinsica||y bad for the firm pushed it to concentrate
on the accumulation of capabilities for expanding production capacity at low costs,
while the assumption that a good product is what se||s we|| discouraged the firm
from developing capabilities to change the characteristics of its products once they
were established in the market. These two assumptions, in addition to the assumption
that re|evant know|edge comes from experience help to explain why the firm valued
know|edge about engineering over know|edge about beer, and prioritised the
accumulation of capabilities in the investment project management and engineering area.
These findings lead to the conclusion that culture is an important factor in explaining
differences between firms in terms of technological behaviour even under the same
economic and policy context.
Fifth, the analysis of the cases of both CCM and Modelo revealed that their original
assumptions survived the major change in the context. Their cases reveal that the
direction of accumulation, the main capabilities developed, and the main sources of
knowledge and learning activities in each of the firms were closely related to a set of
different assumptions held by each firm. As these assumptions prevailed after the major
change in the context, these aspects of the technological behaviour tended to remain
stable, as illustrated in Table 4 above. In this sense, the prevalence of these assumptions
explains why some aspects of the firms` technological behaviour remained quite stable or
presented high resistance to change in response to the major change in the economic and
policy context. Thus, the prevalence of the firms` culture explains the differences
observed in the nature of the firms` responses.
Looking at the process as a whole, this paper shows that both firms changed their
technological behaviour in response to the major changes in the context. However, each
responded differently because their deeply rooted assumptions, most of them born with
the early experiences of the firms, survived and are now putting their stamp on the
technological behaviour that the firms are following within the new context. In this sense,
the firm`s culture is a major factor in explaining the main differences in technological
behaviour observed between CCM and Modelo when these firms responded to the major
change in the context.









162 A.O. Vera-Cruz














7 Conclusion
This paper has explored key features of the technological behaviour of two large Mexican
firms in order to discuss differences observed in their responses to a major change in the
economic and policy context. This paper has also explored the extent to which firm`s
culture might explain these differences. The results show that in the face of a major
change in the economic and policy context, some aspects of the firms` technological
behaviour changed radically, quickly and in similar ways, particularly those aspects that
are clearly and most immediately linked to the solution of problems related to business
performance. In contrast, other aspects of technological behaviour that are linked to the
long-term processes of technological capability accumulation in the firms displayed a
rather strong resistance to change, and a great part of the firms` traditional ways of doing
things continued. Specifically, the main conclusion is that deeply ingrained assumptions
underlying the firms` culture are at the base of the differences observed in the firms`
responses to such major change in the context. The firm`s culture tended to generate
rigidities in certain aspects of the learning strategies and processes, which shaped the
long-term process of technological accumulation.
The cases analysed in this paper also suggest other conclusions. The change from a
less demanding context to a more demanding one affects the firms` behaviour; the cases
show how firms tended to develop a greater awareness of the market signals and become
more concerned with allocating resources for technological activities more closely related
to their goals. However, firms were inclined to keep their more traditional ways of doing
things in key aspects of their learning processes. Then firms tended to keep doing what
they were used to, instead of changing radically their ways of doing things.
Even though the two firms analysed have been quite similar in economical terms over
time, and have observed important similarities in their business strategies, both behaved
differently during the ISI period and responded differently to the changes in the economic
and policy context in the post-ISI period. This evidence clearly contradicts the dominant
stream of Latin American policymakers, who expect to generate automatic changes in the
firms` technological behaviour through the simple manipulation of the economic
variables, in particular the macroeconomic variables. Indeed, the high degree of cultural
embeddedness shown by the two cases suggests that the simple manipulation of the
economic variables seems to be quite insufficient for driving the firms` technological
behaviour in a specific direction of accumulation or into a sustained process of
technological capability building.
As analysed in detail elsewhere (see Vera-Cruz, 2000; 2004), the pattern of basic
assumptions underlying the culture of the two case-study firms strongly determined the
kind of changes in behaviour that could be implemented in response to the change in the
context. This conclusion has important practical implications for management. If a firm`s
culture filters the modifications that can or cannot be implemented in the firm, then
managers should draw on the characteristics of the firm`s culture to figure out what kind
of changes have higher probability of success.
Finally, the evidence presented in this work showed that over the ISI and the post-ISI
periods, the firms analysed followed a path of technological capability accumulation that
emphasised knowledge acquisition in a certain direction of accumulation. This behaviour
is congruent with the literature on innovation, which extensively recognises that firms
tend to maintain the trajectories of accumulation that they have followed in the past. This
is recognised as a path dependency` problem (Dosi, 1982). By following a different









Firms' cu|ture and techno|ogica| behaviour 163















approach to the problem of the firm`s persistent behaviour in certain directions of
accumulation, this paper provides new insights that can be used to search for deeper
explanations of the phenomenon. Much of the literature on path dependency locates the
issue in technological domain. The existing knowledge accumulated by firms restricts
their ability to change the direction of accumulation. This paper has shown that
significant cultural elements` can be identified as determinants of the path dependence`.
Although this idea is based on the evidence provided by only two case studies, the
findings suggest that the influence of these cultural elements` on persisting paths and
trajectories of learning may be more significant than has been suggested by the learning
and technological accumulation literature.
Acknowledgement
I wish to thank Cervecera Cuauhtmoc Moctezuma and Grupo Modelo for willingly
opening their doors to me. Any inaccuracies or errors in the text are, however, my
own responsibility.
References
Ariffin, N. and Figueiredo, P.N. (2004) Internationalisation of innovative capabilities:
counter-evidence from the electronics industry in Malaysia and Brazil`, Oxford Deve|opment
Studies, Vol. 32, No. 4, pp.559-583.
Bell, M. (1984) Learning` and the accumulation of industrial technological capacity in developing
countries`, in K. King and M. Fransman (Eds.) Techno|ogica| Capacity in the Third Wor|d,
London: Macmillan, pp.187-209.
Bell, M. and Pavitt, K. (1995) The development of technological capabilities`, in I.U. Haque (Ed.)
Trade, Techno|ogy and Internationa| Competitiveness, Washington: The World Bank,
pp.69-101.
Bell, M., Ross-Larson, B. and Westphal, L.E. (1984) Assessing the performance of infant
industries`, Journa| of Deve|opment Economics, Vol. 16, Nos. 1-2, pp.101-128.
Cimoli, M. and Katz, J. (2003) Structural reforms, technological gaps and economic development:
a Latin American perspective`, Industria| and Corporate Change, Vol. 12, No. 2, pp.387-411.
Dahlman, C. and Wesphal, L.E. (1982) Technological effort in industrial development. An
interpretative survey of recent research`, in F. Stewart and J. James (Eds.) The Economics of
New Techno|ogy in Deve|oping Countries, London Frances Pinter, pp.105-137.
Detert, J.R., Schroeder, R.S. and Mauriel, J.J. (2000) A framework for linking culture and
improvement initiatives in organizations`, Academy of Management Review, Vol. 25, No. 4,
pp.850-863.
Dosi, G. (1982) Technological paradigms and technological trajectories: the determinants and
directions of technical change and the transformation of the economy`, Research Po|icy,
Vol. 11, pp.147-162.
Dutrnit, G. (2000) Learning and Know|edge Management in the Firm. From Know|edge
Accumu|ation to Strategic Capabi|ities, Cheltenham: Edward Elgar.
Dutrnit, G. and Vera-Cruz, A.O. (2003) Technological capability accumulation in the maquila
industry in Mexico`, Paper Presented in the 7th Internationa| Conference on Techno|ogy
Po|icy and Innovation Connecting Peop|e, Ideas, and Resources Across Communities',
ITESM, Monterrey, 10-13 June.
Femsa (1978-2000) Annua| Report, Monterrey: Femsa.









164 A.O. Vera-Cruz














Ferraz, J.C., Kupfer, D. and Serrano, F.L.P. (1999) Macro/micro interactions: economic and
institutional uncertainties and structural change in the Brazilian industry`, Oxford
Deve|opment Studies, Vol. 27, No. 3.
Figueiredo, P.N. (2001) Techno|ogica| Learning and Competitive Performance, Cheltenham:
Edward Elgar.
Figueiredo, P.N. (2002) Does technological learning pay off? Inter-firm differences in
technological capability-accumulation paths and operational performance improvement`,
Research Po|icy, Vol. 31, No. 1, pp.73-94.
Figueiredo, P.N. (2003) Learning, capability accumulation and firms differences: evidence from
latecomer steel`, Industria| and Corporate Change, Vol. 12, No. 3, pp.607-643.
Garvin, D.A. (1993) Building a learning organization`, Harvard Business Review, Vol. 71, No. 4,
pp.78-91.
Grupo Modelo (1994-2000) Annua| Report, Mexico: Grupo Modelo
Hampden-Turner, C. (1990) Corporate Cu|ture. From Vicious to Virtuous Circ|es, London:
Hutchinson Business Books Limited.
Handy, C. (1993) Understanding Organizations, London: Penguin Books.
Handy, C. (1995) Gods of Management. The Changing Work of Organisations, London: Arrow
Books Limited.
Hannan, M. and Freeman, J. (1989) Organizationa| Eco|ogy, Harvard University Press.
Katz, J. (1986) Desarro||o y Crisis de |a Capacidad Tecno|gica Latinoamericana, Buenos Aires
BID-CEPAL-CIID-PNUD.
Katz, J. (1987) Techno|ogy Generation in Latin American Manufacturing Industries, London:
Macmillan.
Katz, J. (2000) Reformas Estructura|es, Productividad y Conducta Tecno|gica, Santiago de Chile:
CEPAL/FCE.
Kim, L. (1997) From Imitation to Innovation. The Dynamics of Korea's Techno|ogica| Learning,
Boston, MA: Harvard Business School Press.
Kim, L. and Nelson, R. (Eds.) (2000) Techno|ogy, Learning and Innovation, Cambridge:
Cambridge University Press
Kosacoff, B. (Ed.) (2000) Corporate Strategies Under Structura| Adjustment in Argentina, Oxford:
St. Antony`s College.
Lall, S. (1987) Learning to Industria|ize. The Acquisition of Techno|ogica| Capabi|ity by India,
London: Macmillan Press.
Lall, S. (1992) Technological capabilities and industrialization`, Wor|d Deve|opment, Vol. 20,
No. 2, pp.165-86.
Leonard-Barton, D. (1995) We||springs of Know|edge, Boston, MA: Harvard Business
chool Press.
Nelson, R. and Winter, S. (1982) An Evo|utionary Theory of Economic Change, Cambridge MA:
Harvard University Press.
Noorderhaven, N.G., Koen, C.I. and Beugelsdijk, S. (2002) Organizational culture and network
embeddedness`, Center Discussion Paper 2002-91, Tilburg University.
Schein, E.E. (1996) Strategic Pragmatism. The Cu|ture of Singapore's Economic Deve|opment
Board, Cambridge, MA: The MIT Press.
Schein, E.H. (1984) Coming to a new awareness of organizational culture`, S|oan Management
Review, Vol. 25, pp.3-16.
Schein, E.H. (1991) Organizationa| Cu|ture and Leadership, San Francisco and Oxford:
Jossey-Bass.
Scott-Kemmis, D. (1988) Learning and the accumulation of technological capacity in Brazilian
pulp and paper firms`, Working Paper WEP 2-22/WP 187, Geneve, Wor|d Emp|oyment
Program Research, International Labour Office (ILO), February.









Firms' cu|ture and techno|ogica| behaviour 165















Stinchcombe, A. (1965) Social structure and organizations`, in J. March (Ed.) The Handbook of
Organizations, Rand Mcnally and Company, Chicago, Chap. 4, pp.142-193.
Teece, D. (1995) Firm organization, industrial structure and technological innovation`, Working
Paper, Berkeley.
Teece, D. and Pisano, G. (1994) The dynamic capabilities of firms: an introduction`, Industria|
and Corporate Change, Vol. 3, No. 3, pp.537-556.
Unger, K. (1994) Ajuste Estructura| y Estrategias Empresaria|es en Mxico. Las Industrias
Petroqumica y de Mquinas Herramientas, Mexico City: CIDE.
Vera-Cruz, A.O. (2000) Major changes in the economic and policy context, firms` culture and
technological behaviour: the case of two Mexican breweries`, Dphi| Thesis, SPRU, Sussex
University.
Vera-Cruz, A.O. (2004) Cu|tura, Aprendizaje y Comportamiento Tecno|gico. E| Caso de |as
Cerveceras Mexicanas, Mexico City: UAM-ADIAT-Miguel Angel Porra.
Yin, R.K. (1994) Case study research: design and methods`, App|ied Socia| Research Methods
Series, 2nd edition, California: Sage Publications.
Notes
1 See also Leonard-Barton (1995) or the solidified routines` of Nelson and Winter (1982).
2 The name Cervecera Cuauhtmoc Moctezuma is quite recent. Cervecera Cuauhtmoc
acquired this name in 1985 after merging` with Cervecera Moctezuma, which was founded
in 1894.
3 Cervecera Modelo is called either Grupo Modelo or Modelo.
4 Vera-Cruz (2000; 2004) presents a detailed analysis of the deeply held assumptions of each
firm and the extent to which they influence aspects of their technological behaviour.