ARTICLE IN PRESS

Technovation 28 (2008) 551–563

www.elsevier.com/locate/technovation

Factors affecting the choice of technology acquisition mode: An

empirical analysis of the electronic firms of Japan, Korea and Taiwan
Shiu-Wan Hung, Ruei-Hung Tang
Department of Business Administration, National Central University, 300, Jung-Da Road, Jung-Li City, Tao-Yuan 320, Taiwan

Abstract

In today’s globalized economy, enterprises are facing ever increasing competitive pressures. A commonly adopted strategy for gaining
new technologies and remaining competitive is to acquire needed technology from external sources. The goal of this paper is to identify
influential factors and their impact using a multi-factorial analysis of the choice of technology acquisition mode. The effect of various
factors on these modes was studied by examining a sampling of the electronic industries of Japan, Korea and Taiwan. A patent analysis
combined with Logit Regression is made and tested using data of these electronic firms. The results indicate that among the factors
analyzed in this study, the technological capability (including technological level, technological innovation and research and development
(R&D) activities) of a firm is the most significant factor in influencing the determination of the mode of technology acquisition. Finally,
we discuss the significance of results based on resource theory and present our conclusions and their implications. By highlighting the
important links between a firm’s technological capability, size, previous experience and relevance of its core technology to the mode of
technology acquisition in these technology-based firms, we hope to cast light on the contribution of various influential factors on the
decision making of these modes for firms in these countries.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Technology acquisition mode; Patent analysis; Resource-based theory; Electronic firms

1. Introduction concerns is therefore the question of how to acquire the

Survival in highly competitive markets requires produ-
cers to focus on important factors such as technological
capability, product quality, adherence to standards and
rapid response as the basis for competitive advantage. In
an effort to meet these new demands, firms are deploying a
range of innovations including advanced equipment and
reconfiguration of business models. Competitive advantage
derives not solely from firm-level resources, but also from
difficult-to-imitate technologies (Teece et al., 1997; Betz,
2003). Technology acquisition is one way to enable an
industry to keep in touch with the latest trends of an
accelerated technology, and has continued to be a popular
strategy for corporate growth (Hagedoorn and Schaken-
raad, 1994). A major issue for an organization’s strategy
Corresponding author. Tel.: +886 3 4269903; fax: +886 3 2118558.
E-mail address: shiuwan@mgt.ncu.edu.tw (S.-W. Hung).
needed technology (Steensma, 1996).
Technology acquisition (Kim and Ro, 1995; Narayanan,
1998; James et al., 1998; Cho and Yu, 2000; Jones et al.,
2000; Ziedonis, 2004; Hemmert, 2004; Girma, 2005; Kiyota
and Okazaki, 2005; Poon and MacPherson, 2005) can be
defined as a process of planned, selective, focalized
importation of advanced technology which the enterprise
has not nor did not master, and new application of
imported technology which can bring expectant economic
benefits to new users (Lambe and Spekman, 1997; Lowe
and Taylor, 1998). As a component of its technology
strategy, the firm should choose the appropriate mode for
acquiring the needed technology; i.e., all available options
to a firm should be carefully considered when deciding the
mode of technology acquisition (Chesbrough, 2006;
Chesbrough and Crowther, 2006). Because of the nature
of technology, technology acquisition is not as simple
as the purchase of a capital good or the acquisition of its
blueprint. Recipients are normally obliged to devote

0166-4972/$ - see front matter r 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.technovation.2007.10.005
 ARTICLE IN PRESS
552 S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
Hypothesis 1a
-
Technological
Hypothesis 1b
capability
- High
Hypothesis 1c
-
Firm size Hypothesis 2
+
Hypothesis 3a
Previous
Hypothesis 3b
experiences
-
Hypothesis 3c
Technological
Hypothesis 4
revelance
Fig. 1. Specification of investigated model.
substantial resources to assimilate, adapt, and improve
upon the original technology (Barney, 1991). Therefore, to
the extent that technical knowledge is limited in terms of
understanding, availability and tacitness, successful use is
commonly dependent upon firms and countries developing
their own technological capabilities (Cohen and Levinthal,
1990).
Although some research has been done in this area,
limitations have been found in the choice of modes: (1)
using only one or a few factors (Davidson and McFetridge,
1985; Friedman, 1998; Durrani et al., 1999; Gopalakrish-
nan and Santoro, 2004; Howells et al., 2004; Kiyota and
Okazaki, 2005; Yoshikawa, 2003), or (2) using choice as a
function of internal technological capability (Jones et al.,
2000; Veugelers, 1997). Hence, previous studies have not
provided concrete results. While some results seem
plausible and in accord with each other, others contradict
each other and draw differing conclusions. Furthermore,
most of these studies used survey data (Hemmert, 2004) for
analysis, which might incorporate bias depending on how
the surveys were completed.
This paper proposes an integrated framework to identify
influential factors and their impact using a multi-factorial
analysis in the choice of technology acquisition mode (Cho
and Yu, 2000; Baines, 2004). There are a number of ways
of acquiring technologies, of which three, licensing,
cooperative research and development (R&D) and joint
venture, were considered in this study. They form a
continuum in terms of resource commitments (Hill et al.,
1990) demanded from the acquirer (Fig. 1). Barney (1991)
categorized the resources as physical resources, human
resources, and organizational resources. Physical resources
Joint
Venture
Resource
Cooperative
R&D
commitment
Licensing
Low
include tangible assets such as plants and equipment, and
intangible assets such as brand names and patents. Human
resources include the experience, skills and expertise of the
staff, while organizational resources include culture,
organizational structure, management, etc. (Tsang, 1997).
Each resource consists of a bundle of potential productive
services and these services, not the resources themselves,
are the inputs in the production process (Penrose, 1959).
Among the selected modes of technological transfers,
licensing requires the smallest amount of resource commit-
ment. Essentially, it is a non-equity mode of technological
transfer and the acquirer needs to invest mostly staff time
and attention (Kurokawa, 1997). On the other hand, the
joint venture is an equity-based form of direct investment.
The demand on a firm’s resources should not be
understated (Albert et al., 1990; Amit and Schoemaker,
1993). The resource commitment requirement for coopera-
tive R&D falls somewhere between licensing and joint
venture. Because strategic technology acquisitions (Lambe
and Spekman, 1997; Lowe and Taylor, 1998; Narula and
Hagedoorn, 1999; Russ and Camp, 1997; Ruckman, 2005)
play a central role for most firms in high-industries such as
electronic firms, it is quite important for them to have a
solid theoretical base for planning and analyzing various
aspects of acquisition activity.
The contents of this study are as follows: An analytical
framework for the technology acquisition mode is sug-
gested and a set of hypothesis is developed based on this.
Analysis of data from the electronic sectors of Japan,
Korea and Taiwan is conducted with Logit Regression
analysis for identifying influential factors and their impact.
In contrast to most of the previous studies, which used
 ARTICLE IN PRESS
S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
survey data for analysis, this current analysis was
completed and tested against the record data of technology
acquisitions from the SDC Platinum database and patents
from the US Patent and Trademark Office (USPTO). This
is followed by interpretations of the results based on
resource theory, and conclusions that include implications,
limitations of the empirical findings, and further research
directions.
2. Analytic framework and hypothesis
Technology acquisition plays an important role in
improving a firm’s competence. It is also one of the
important methods of advancing an enterprise’s technol-
ogy and accumulating key resources (Jones et al., 2000).
Among various channels of technology acquisition flow,
licensing, cooperative R&D, and joint venture are among
the most popular ones popular (Baranson, 1970; Contrac-
tor, 1980; Blodgett, 1992; Gomes-Casseres, 1990; Moon,
1998; Tsang, 1997; Kurokawa, 1997; Yoshikawa, 2003). In
evaluating the acquisition of a technology, managers need
to find the technology that combines factors of production,
usually capital, labor and other factors, in order to
minimize production costs and maximize revenue (Lambe
and Spekman, 1997; Lowe and Taylor, 1998).
Licensing is a method of gaining permission to use
certain technologies and access to the associated secret
know-how (Contractor, 1980; Kurokawa, 1997; Yoshika-
wa, 2003). For companies trying to meet their technology
roadmap requirements while maintaining an acceptable
risk profile, licensing in technology can be an excellent
option with many benefits. Acquisition of a ‘‘known
quantity’’ eliminates many uncertainties relating to perfor-
mance and deployment timeliness. By opting to acquire a
manufacturing technology with a proven track record, a
great deal of risk in terms of product development and
deployment can be reduced (Atuahene-Gima, 1992).
Additionally, the flexible scoping of transfers allows the
purchase of only the necessary intellectual property. From
an injection of domain-specific expertise to a full process
enablement, licensing transfers put licensees in the seat of a
customer (Hagedoorn, 1990).
Cooperative R&D has attracted wide attention both
from academics and industry (Yoshikawa, 2003). Advan-
tages associated with cooperative R&D include: better
access to external business resources, achieving economies
of scale and scope, synergy in R&D, reducing risk and
wasteful duplication of R&D efforts, and increasing
incentive for R&D investment by reducing appropriability
problems (Sakakibara, 1997). In order to grow and
diversify through technological innovation, firms might
need complementary intangible assets including basic
information, and tacit knowledge and know-how, which
cannot be easily contracted. In this case, monitoring and
related problems can be better solved through a partner-
ship (Narula and Hagedoorn, 1999). R&D cooperation
allows partners to share risks and costs of innovation under
553
growing technological complexity, as well as to exploit
economies of scale and scope. When outcoming R&D
spillovers are a serious concern, R&D partnerships provide
a mechanism for internalizing them (Pisano, 1990; Beec-
ham and Cordey-Hayes, 1998). Furthermore, R&D co-
operation may allow partners to increase their market
position. The choice of type of partnerships will be related
to the importance of each of these factors for different
firms and to the nature of their R&D projects (Russ and
Camp, 1997).
A joint venture is an organization that takes the form of
a short-term partnership in which the partners jointly
undertake a transaction for mutual profit (Baranson, 1970;
Hagedoorn, 1990). Generally each person contributes
assets and shares risks. In a joint venture, two or more
‘‘parent’’ companies agree to share capital, technology,
human resources, risks and rewards in a formation of a
new entity under shared control. Like a partnership, joint
ventures can involve any type of business transaction and
the ‘‘persons’’ involved can be individuals, groups of
individuals, companies, or corporations. Joint ventures are
also widely used by companies to gain entrance into foreign
markets (Tsang, 1997). Foreign companies form joint
ventures with domestic companies already present in
markets the foreign companies would like to enter. The
foreign companies generally bring new technologies and
business practices into the joint venture, while the domestic
companies already have the relationships and requisite
government documents within the country along with the
advantage of being entrenched in the domestic industry
(Moon, 1998). As there are good business and accounting
reasons to create a joint venture with a company that has
complementary capabilities and resources, such as dis-
tribution channels, technology, or finance, joint ventures
are becoming an increasingly common way for companies
to form strategic alliances (Steensma, 1996; Hagedoorn
and Schakenraad, 1994).
Yasuda (2005) studied the formation of strategic
alliances in high-technology semiconductor industries and
concluded that the resource-based theory prevails over the
transaction-cost theory in explaining alliance activities in
these industries. Different technology acquisition modes
require different resource commitments (Amit and Schoe-
maker, 1993; Barney, 1991). By resource commitment, we
mean dedicated assets that cannot be redeployed to
alternative uses without cost. These assets may be tangible
(e.g., physical plant) or intangible (e.g., management know-
how). In terms of resource commitment, licensing has the
lowest level and joint venture the highest, with R&D
cooperation falling between these two.
It is important to note that resource commitments
constitute an exit barrier and serve to limit the strategic
flexibility of the firm (Grant, 1991; Peteraf, 1993). When
resource commitments are extensive, the firms cannot exit
from a market without incurring substantial sunk costs.
From a purely economic perspective, sunk costs are an
‘‘irrational’’ exit barrier. However, theories of escalating
 ARTICLE IN PRESS
554 S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
commitment (Whyte, 1986; Brockner, 1992) suggest that
sunk costs constitute a very real perceptual exit barrier and
inhibit the firm’s ability to respond to environmental
change. The implication is that strategic flexibility is
greatest in the case of licensing, and lowest in the case of
joint venture. A firm has to determine the appropriate
acquisition mode for organizing its business activity, based
on its resource commitment (Tsang, 1997).
2.1. Technological capability and technology acquisition
mode
Technology has forced the global market to undergo
profound changes in the past, and shows every indication
that it will continue to do so (Sakakibara, 1997;
Yoshikawa, 2003; Kondo, 2005). Building technological
ability has become a must for a firm’s survival and
advancement (Moon, 1998). At first glance, firms with
high internal capability seem to generally prefer a
technology transfer by licensing, which requires the lowest
resource commitment. However, in high-tech industries
such as electronics or information technology, the acquisi-
tion of technology by licensing may not always be
available. Firms then turn to the choice requiring the next
lowest resource commitment such as R&D cooperation.
Previous research concluded that the higher the firm’s
relation standing or existing skill capabilities, the more
involvement they have in in-house R&D (Roberts and
Berry, 1985; Tyler and Steensma, 1995; Lowe and Taylor,
1998). Since a firms’ technology can be considered as
embedded in its resources, including physical, human and
organizational resources, we thus argue that as firms own
higher levels of technology, they become more likely to
choose a technology acquisition mode of lower resource-
commitment in order to maintain higher strategic flexibility
to respond to environmental change. The arguments lead
to the following hypothesis:
Hypothesis 1a. The higher the technological level a firm
owns, the lower the resource commitment the firm will
choose for the acquisition mode.
The innovation activity in a firm is chain-like and
cumulative. A product innovation means renewal of the
production organization and market. The modernization
of production technology can lead to a renewal in other
business areas (Teece, 1986). Support for innovation
activity at one point can also lead to innovation processes
in other business fields (Carlsson et al., 2002; Cavusgil et
al., 2003). The innovation networks of firms outside growth
centers should be promoted and supported and a start
could be made using the sectored approach, better
integration of the firms into the innovation system,
enhancement of the innovative capability of the firms with
the help of local projects, and development of the general
and local action milieu of the firms (Hobday, 1995). The
cost of transferring the innovation to other firms is
significantly lower, such that the marginal cost of
successive application is trivial compared to the average
cost of research, development, and application (Teece,
1977). This paradigm can also be extended to international
technology transfer (Rodriguez, 1975). A firm that has a
higher innovation capability will have more alternatives for
assessing the technology, either by manufacturing or by
buying. Therefore, the more the technological innovation a
firm owns, the more it may choose a technology acquisition
mode of lower resource-commitment, so that it can
maintain a higher flexibility in responding to market
change. The arguments lead to the following hypothesis:
Hypothesis 1b. . The higher the ability of technological
innovation a firm owns, the lower the resource commit-
ment the firm will choose for the acquisition mode.
The importance of technological change for a firm’s
long-run growth has received increasing attention from
researchers and policymakers over the past decade (Teece
et al., 1997). A key determinant of technological change is
knowledge accumulation through expenditure on R&D
(Moon, 1998; Kurokawa, 1997). Since technological
innovations have become progressively novel, costlier to
develop, faster in pace and more pervasive, it is inevitable
that the cost of technology imported by firms will continue
to rise. As balance-of-payments situations increasingly
worsen for most firms, they have less money to buy newer
(environmentally sound) technology and invest more in
their in-house R&D (Pisano, 1990; Cho and Yu, 2000).
There is empirical evidence that supports the theoretical
prediction that investment in R&D has a positive effect on
a firm’s growth (Teece, 1977). Investment in innovation can
be proxied by R&D expenditures. The more the R&D
expenditures a firm invests, the more able it is to choose a
technology acquisition mode of lower resource-commit-
ment and increasing its strategic flexibility in the market
(Cho and Yu, 2000). These arguments lead to the following
hypothesis:
Hypothesis 1c. . The higher the R&D activity a firm has,
the lower the resource commitment the firm will choose for
its acquisition mode.
2.2. Firm size and technology acquisition mode
It has been generally accepted that large firms should be
more innovative than small firms (Acs and Audretsch,
1988). Arguments in support of this premise include: (1)
large firms have superior access to the financing of R&D
projects because size is correlated with the availability and
stability of internal funds, and (2) marketing, sales, and
distribution channels are better developed within large
firms, increasing the return to R&D. Additionally, large
firms hold diversified R&D portfolios, and so may invest in
risky, high-return projects. Generally speaking, the size of a
firm influences its technology acquisition behavior (Poon
and MacPherson, 2005). One important factor that has a
bearing on a firm’s willingness to collaborate is related to
 ARTICLE IN PRESS
S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
its strategy. A strategic R&D partnership is connected with
high research expenditures and its persistence at a high
level. Higher R&D costs and greater innovation dynamics
have often been cited as the reasons why companies seek
cooperation in R&D (Tsang, 1997). Being an enterprise-
sized firm does have a bearing on the likelihood of
collaboration in R&D with a competitor, while small firms
are engaged in less cooperation with competitors and
universities than large firms. Due to the relatively limited
resources that small firms own, it is reasonable to assume
that smaller firms may choose a technology acquisition
mode with lower resource commitments. These arguments
lead to the following hypothesis:
Hypothesis 2. The smaller the size of a firm, the lower the
resource commitment the firm will choose for its acquisi-
tion mode.
2.3. Experience and technology acquisition mode
The technology of a firm is the result of its accumulated
experience in design, production, problem-solving and
trouble-shooting activities. Every firm passes through a
rather unique path of progressive accumulation of techno-
logical knowledge. Therefore, just like other capabilities of
a firm, the existing stock of technology is history dependent
and constrains the firm’s future technological development
(Tsang, 1997).
Previous experience gained from implementing a transfer
through both individual (Tyler and Steensma, 1995) and
organizational learning (Moon, 1998; Lane and Lubatkin,
1998) will have an impact on acquisition strategy and
resource constraints which in turn influences its future
decision for technology acquisition. In addition, when a
technology is transferred to a foreign country, suitable
adaptations to the local environment usually have to be
made. When the adaptations are worked out in each
transfer, there is a chance that innovative modifications are
discovered and the technology is substantially upgraded
(Tsang, 1997). The likelihood of generating these innova-
tions depends on a number of technology transfers
completed by the firm. Davidson (1980) proposed that
firms preferred countries that had extensive prior
experience as manufacturing sites. In addition to econo-
mies of scale realized on existing production facilities and
other resources, experience in technology transfer also
reduced costs associated with the initiation of foreign
production. Based on these theories, if a firm has previous
experience in any kind of technology acquisition mode, it
will adhere to and adopt the same mode of technology
acquisitions. These arguments lead to the following three
hypotheses:
Hypothesis 3a. The more experience in technological
licensing a firm has, the more the firm tends to choose
licensing as its mode of technology acquisition.
555
Hypothesis 3b. The more experience in cooperative R&D a
firm has, the more the firm tends to choose cooperative
R&D as its mode of technology acquisition.
Hypothesis 3c. The more experience in joint venture for
research and development a firm has, the more the firm
tends to choose joint venture as its mode of technology
acquisition.
2.4. Technological relevance and acquisition mode
The speed of technology acquisition is crucial to creating
and sustaining a competitive advantage. A technology
transfer’s relevance to the acquiring firm and its techno-
logical knowledge base significantly influences the rate at
which transfers succeed or fail (Pisano, 1990; Yasuda,
2005). Technologies that originated outside the firm usually
have a greater rate of success, due to the fact that licensed
technologies tend to be selected from a higher quality pool.
Additionally, this elevated quality keeps failed technologies
(projects) in the development phase for a longer period,
which incurs significant costs to the firm. Furthermore, the
positive effect of alliances on successful technologies is
enhanced when a technology is close to the acquiring firm’s
technological core. When technologies are relevant, the risk
of acquisition is diminished and assimilation is expected to
be smoother (Teece, 1992; Steensma, 1996; Dyer, 1997).
For failed transfers, this relevance helps firms escape bad
partnerships early on in the development cycle, and
therefore increases the hazards of discontinuing. Based
on these arguments, the higher the relevance between the
provider and the acquirer’s core technology, the less the
resource the acquirer needs to commit. These arguments
lead to the following hypothesis:
Hypothesis 4. The higher the relevance between the giver
and the acquirer’s technologies, the more likely the
acquirer chooses a low resource-commitment acquisition
mode.
In summary, Fig. 1 shows the framework of this study.
3. Methods
3.1. Sample
This study analyzes the technology acquisition modes
among Asian countries. Before focusing on specific
countries, a patent analysis of the electronic sector was
conducted from the US patent database at the USPTO.
The search field was limited to ‘‘assignee country’’ in order
to determine patents (Ahuja and Katila, 2001) owned by
different countries. Table 1 lists the top patent owners
among global major countries. As Japan, Korea and
Taiwan are the three Asian countries that are listed among
the top 10 global players, they are selected for further
analysis of their modes of technology acquisitions.
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556 S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563

Table 1
Distribution of US patent counts among major countries

Number of patens 2000 2001 2002 2003 2004 Total (2000–2004) Ranking

USA 97011 98655 97126 98597 94129 485518 1

Japan 32922 34891 36339 37249 37034 178435 2
Germany 10824 11894 11957 12140 11367 58182 3
Taiwan 5806 6545 6730 6676 7207 32964 4
Korea 3472 3763 4009 4132 4671 20047 7
United Kingdom 4092 4358 4202 4036 3905 20593 6
Canada 3925 4063 3857 3893 3781 19519 8
France 4173 4456 4421 4126 3686 20862 5
Italy 1967 1978 1962 2022 1946 9875 9
Sweden 1577 1741 1675 1521 1290 7804 10

Source: USPTO, http://www.uspto.gov/.

The research here focuses on the high-tech electronic
sector (including computer equipment, electronics, and
communications as defined by the SDC Platinum as listed
in Table 2) in these countries, because the firms involved
have been thought to be most affected by external
technology supports. Additionally, the high-technology
electronic sector is appropriate because rapid changes in
market and technological developments in these sectors
make technology acquisition in exchange relationships
particularly salient. Before the descriptive statistics analy-
sis, an analysis of electronics-related patents filed by global
major countries was first completed.
All technology acquisitions in Japan, Korea and Taiwan
from 1985 to 2004 were analyzed. Since the model in this
study assumes only two firms in each technology acquisi-
tion (one giver and one receiver), the technology acquisi-
tions that involve more than two firms were first
eliminated. The SDC Platinum database contains tens of
thousands of transaction records. A computer code based
on Boland C++ Builder 6.0 was specially developed in our
lab to access and analyze all these data. A total of 309
transactions matching the selection criteria were identified.
Table 3 lists the source distribution of technology acquisi-
tions for Japan, Korea and Taiwan from 1985 to 2004.
On the other hand, since all the variables used in this
study are based on the patent-related indicators, only those
transactions where both giver and receiver own patents
were selected. A total of 240 transactions fit these criteria,
approximately 77% out of the original 309 transactions, as
listed in Table 4.
3.2. Measurement items
The hypotheses in the previous sections were tested using
the record data of technology acquisition from the SDC
Platinum database. The measurement items for each factor
are presented. The factors, factor items and their opera-
tional definitions (based on those proposed by Albert et al.,
1990; Hagedoorm and Cloodt, 2003; Kayal and Waters,
1999) are listed in Table 5. The items have been divided
into four groups. The first group focuses on technological
capability considerations, such as technological level,
technological innovation, and R&D activities. The second
focuses on measurements related to the size of firms. The
third group focuses on items associated with the previous
experiences in technology acquisition. The fourth focuses
on the measurement related to technological relevance.
Table 6 shows the simple descriptive statistics result.
3.3. Modeling method
Since the data used in this study are binary data instead
of a linear continuous function, the Logit Regression
model was employed for the analysis (Hair et al., 1998).
Commercially available Statistica 6.0 software was used for
the analysis. Fig. 1 shows schematically the model used in
this study. This model is composed of a three-stage
analysis. In the first stage, the measurement model was
conducted to compare the modes of licensing and
cooperative R&D. The second and third stage analysis
compares the difference between cooperative R&D and
joint venture, and licensing and joint venture, respectively.
4. Results
In this study, the Logit Regression modeling is
composed of a three-stage analysis. In the first stage, the
measurement model was conducted to test the relationship
between each factor and the technology acquisition modes
of licensing and cooperative R&D, and the result is listed in
Table 7. The second and third stage analysis tested the
relationship between each factor and the acquisition modes
of cooperative R&D and joint venture, and licensing and
joint venture, respectively.
4.1. Licensing vs. cooperative R&D
As shown in Table 7, the overall fit of the measurement
model is good. The Chi-square value obtained is 37.746
and the p-value is 0.000 (o0.05). The three items of the
technological capability factor are all significant. The
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S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563 557

Table 2 tive R&D. The higher a firm’s innovation capability, the

Items of high-tech industries defined by SDC Platinum more likely it tends to acquire the technology by licensing
Computer equipment Electronics Communications
(Kurokawa, 1997; Yoshikawa, 2003). This is consistent
with Hypothesis 1b. For a successful technology acquisi-
Mainframes and Semiconductors Telecommunications tion, a firm needs to consider the time pressure, the
super computers equipment strategic importance of the technology, and the availability
Workstations Superconductors Telephone interconnect
of an acquisition target as well as internal resources
equip
Micro-computers Printed circuit Messaging systems including innovative capability. Therefore, the more
(PCs) boards innovative a firm’s technology, due to time pressure, the
Portable computers Process control Cellular communications more difficult it becomes to obtain any new technology by
systems modes of acquisition other than by licensing from other
Turnkey systems Precision/ Satellite communications
measuring test
firms (Yoshikawa, 2003).
equip The R&D activity is found to be significant (40.05) and
CAD/CAM/CAE/ Search, detection, Microwave is negatively related to cooperative R&D. The greater a
graphics systems navigation communications firm’s actively indigenous R&D activity, the more likely it
Other computer Other electronics Alarm systems is to acquire the technology with the least resource
systems
commitment and adopt the licensing mode. This result
Printers Facsimile equipment
Disk drives Data communications provides supports for Hypothesis 1c.
(exclude networking Previous experience in cooperative R&D is positively
CD Rom drives Other telecommunications related to cooperative R&D. The more experience a firm
equip has in cooperative R&D, the more the firms tends to adopt
Networking systems Internet services and
the cooperative R&D mode for technology acquisition.
(LAN, WAN) software
Monitors/terminals The result is consistent with Hypothesis 3b.
Scanning devices The size of a firm, its previous experience in licensing and
Modems the relevance of its technology do not show significant
Other peripherals levels in the analysis.
Database software/
programming
Operating systems 4.2. Cooperative R&D vs. joint venture
Applications
software (business) The test results in Table 7 indicate that only the firm’s
Applications size and technological relevance reach significant levels.
software (home)
The firm size is positively related to the joint venture; i.e.,
Desktop publishing
Communication/ as the size of the firm increases, the more likely a firm is to
network software adopt joint venture as the mode of technology acquisition.
Utilities/file mgmt This provides supports for Hypothesis 2. Additionally,
software technological relevance is positively related to the joint
Other software (inq.
venture. This is contrary to Hypothesis 4. The higher the
games)
Programming technological relevance of both giver and acquirer, the
services more likely a firm is to adopt joint venture for the
Computer consulting technology acquisition.
services
Data processing
4.3. Licensing vs. joint venture
services
Other computer-
related services As shown in Table 7, the Chi-square value and the p-
value of the measurement model are 42.77 and 0.000
(o0.05), respectively. The three items of the technological
capability factor are found to be significant.
cooperative R&D experience of a firm also shows a The results indicate that a firm’s technological level is
significant level in the analysis. negatively related to its participation in joint venture. This
The results indicate that technological level is negatively means that the higher a firm’s technological capability, the
related to the cooperative R&D; i.e., the higher a firm’s more likely it is to acquire the technology by licensing, which
technological capability, the fewer resources it tends to has a lower resource commitment. This is consistent with the
commit to acquire the technology by licensing (Tsang, analysis result in Session 4.1 and with Hypothesis 1a.
1997). The result is consistent with Hypothesis 1a. The significant level of technological innovation was
The significant level of technological innovation reached 0.05. The empirical result in this study suggests that a firm’s
0.01. The empirical result in this study suggests that technological innovation is negatively related to its
technological innovation is negatively related to coopera- participation in joint venture. The higher a firm’s innova-
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Table 3
Source distributions of technology acquisitions for Japan, Korea and Taiwan from 1985 to 2004

Taiwan Korea Japan

United States 10 41.67% United States 14 36.84% Japan 134 54.25%

Taiwan 8 33.33% Japan 10 26.32% United States 72 29.15%
Japan 3 12.50% Korea 8 21.05% Canada 10 4.05%
China 2 8.33% United Kingdom 1 2.63% Korea 8 3.24%
Canada 1 4.17% Israel 1 2.63% France 7 2.83%
Germany 1 2.63% United Kingdom 7 2.83%
China 1 2.63% China 2 0.81%
Canada 1 2.63% Germany 2 0.81%
Austria 1 2.63% Netherlands 2 0.81%
Taiwan 2 0.81%
Israel 1 0.40%
Total 24 Total 38 Total 247

Table 4
Samples of technology acquisition modes for Japan, Korea and Taiwan R&D activity is found to be significant (40.1) and is
for analysis negatively related to participation in joint venture. The
Japan Korea Taiwan Total greater a firm’s level of actively indigenous R&D activity is,
the more likely it is to acquire the technology with the least
Licensing 41 19.90% 9 37.50% 4 40.00% 50 resource commitment and to adopt the licensing as a mode.
R&D cooperative 128 62.14% 13 54.17% 5 50.00% 146
This result provides supports for Hypothesis 1c and again
Joint venture (R&D) 37 17.96% 2 8.33% 1 10.00% 40
Total 206 24 10 240 is consistent with the result in Session 4.1.
Other factors, including the size of firm, its previous
experience in licensing and in joint venture, and the
relevance of its technology, do not show significant levels
Table 5 in the analysis.
Structure, independent variables and their operational definitions

Factor Items Operational definitions

5. Discussion

Technological Technological Average number of cited patents during Technology acquisition is a process by which companies
capability level the past 5 years can acquire new products, processes or technology without
Technological Average technology cycle time (TCT)
innovation during the past 5 years
going through the expensive and risky stages of research
R&D activity Patent number growth rate 1 year and development. A firm’s resources are defined as
before the technology acquisition anything which could be thought of as a strength or
Size of firms Firm size Total numbers of patents for the past 5 weakness of the firm including brand names, in-house
years knowledge of technology, employment of skilled personnel,
Previous Experiences in Number of technological acquisition of
etc. (Wernerfelt, 1984). It has been generally accepted that
experiences licensing a firm based on the database of SDC
Platinum a technology can be embodied in three types of firm
Experiences in resources: physical (e.g., machinery, blueprints, and
cooperative R&D technical drawings), human (e.g., the skills and knowledge
Experiences in of technical staff) and organizational (e.g., production
joint venture
system, and quality control procedures) (Barney, 1991).
Technological Core Difference of major patents owned by
relevance technological the giver and the acquirer Firms always try to increase their total long-run profits and
relevance want to expand whenever profitable opportunities exist. It
is in the interest of the firm to increase its technical
knowledge by acquisitions and to reap the most benefits.
The acquisition of technology involves significant resource
tion capability is, the more likely it is to acquire technology costs, reflecting the problem of replicating knowledge
by licensing. Again this is consistent with Hypothesis 1b, as across the boundaries of firms and countries.
well as with the analysis result in Session 4.1. The more A basic assumption held in the following discussion is
innovative a firm’s technology is, the more difficult it that firms economize on the deployment of resources; i.e., if
becomes to obtain any new technology by other modes of a firm is able to achieve the same strategic objective
acquisition from other firms, other than by licensing through two different acquisition modes, the firm will
acquisition. choose the one that requires lower resource commitments
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S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563 559

Table 6
Analysis results of simple descriptive statistics

Factor Firm size Technological capability Previous experience Technological

relevance
Items Firm size Technological Technological R&D Experience Experience in Experience Technological
level innovation activities in cooperative in joint relevance
licensing R&D venture

Licensing Mean 1273.481 9.853 96.946 0.411 0.259 0.333 0.019 0.667
Minimum 1.00000 0.00000 26.00000 0.00000 0.00000 0.00000 0.00000 0.00000
Maximum 6085.000 31.500 203.550 3.000 3.000 6.000 1.000 4.000
Std. dev. 1879.411 5.036 39.940 0.626 0.705 1.116 0.136 1.213
Cooperative Mean 1892.870 8.158 84.163 0.193 0.116 1.493 0.103 0.582
R&D Minimum 1.00000 0.00000 22.00000 0.00000 0.00000 0.00000 0.00000 0.00000
Maximum 9586.000 29.000 210.067 1.678 5.000 12.000 4.000 4.000
Std. dev. 2508.348 4.000 27.511 0.243 0.616 2.528 0.495 1.036
Joint Mean 3519.775 6.920 82.484 0.154 0.000 1.475 0.400 1.150
venture Minimum 1.00000 1.00000 49.00000 0.00000 0.00000 0.00000 0.00000 0.00000
Maximum 9591.000 17.978 207.333 0.857 0.000 13.000 5.000 4.000
Std. dev. 3261.202 3.468 25.042 0.170 0.000 2.602 1.128 1.610

Table 7
Logit Regression analysis result of each factor and the acquisition modes

Factors Items Licensing vs. R&D R&D cooperation vs. joint Licensing vs. joint
cooperation venture venture
Y ¼ 1 (R&D cooperation) Y ¼ 1 (joint venture) Y ¼ 0 Y ¼ 1 (joint venture)
Y ¼ 0 (licensing) (R&D cooperation) Y ¼ 0 (licensing)

Estimate p-Level Estimate p-Level Estimate p-Level

Technology capability Technology level 0.5109 0.0094*** 0.3490 0.1783 1.0272 0.0189**
Technology innovation 0.6385 0.0016*** 0.0240 0.9248 0.9018 0.0216**
R&D activities 0.5933 0.0135** 0.0945 0.7976 1.2892 0.0732*
Firm size Firm size 0.3747 0.1374 0.5118 0.0197** 0.3832 0.2625
Previous experiences Experiences in licensing 0.1158 0.4725 – – 0.2243 0.9978
Experiences in R&D cooperation 0.9430 0.0140** 0.2815 0.1666 – –
Experiences in joint venture – – 0.0334 0.8408 0.2841 0.6361
Technological relevance Technological relevance 0.0878 0.6679 0.3811 0.0272** 0.3633 0.2045

*0.1 significance; **0.05 significance; ***0.01 significance.

Stage I Chi 2 (7) ¼ 37.746; p ¼ .00000.
Stage II Chi 2 (7) ¼ 19.488; p ¼ .00680.
Stage III Chi 2 (7) ¼ 42.77; p ¼ .00000.

(Albert et al., 1990; Amit and Schoemaker, 1993). The
assumption is a reasonable one as resource economizing
leads to greater opportunities for the firm for further
expansion.
5.1. Technological capability
The resource requirement of a technology refers to its
demand on the recipient’s input of resources. If the demand
is great, the recipient will have to choose a high resource
commitment acquisition mode in order to implement an
effective transfer. The first factor encountered is the
technological capability of the recipient. A successful
technology transfer needs the active participation of not
only the transferor, but also the transferee (Moon, 1998).
Recipients would normally be obliged to devote substantial
resources to assimilate, adapt and integrate the technology
into its production system (Cohen and Levinthal, 1990).
When the recipient has a high technological capability, the
transferer can put in less effort and the acquisition process
may take a shorter time than is normally required (Cho
and Yu, 2000).
The empirical results in this study indicate that the
higher the technological capability of a firm, the fewer
resources it will commit and the more likely it will be to
acquire the technology by licensing. General speaking, the
higher the firm’s relative standing or existing skill
capabilities, the more involvement they have in in-house
R&D (Ahuja and Katila, 2001). Firms with high internal
capabilities have more choices for technology acquisitions,
either depending upon in-house technologies or external
transfers. Thus they may choose the mode of technology
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560 S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
acquisition that requires the lowest resource commitment
to reap the most benefits.
The results in this study also suggest that the higher the
innovation capability of a firm, the more likely it will be to
adopt an acquisition mode of lower resource commitments
and to acquire technology by licensing. One possible
explanation for this result is that the more innovative a
firm’s technology, the more difficult it becomes to obtain
new technology by other modes of acquisition, other than
through licensing from other firms.
R&D activity is found to be significant (40.05) and is
negatively related to the cooperative R&D. This might be
due to our finding that the greater the level of a firm’s
indigenous R&D activity, the more likely it will be to
acquire technology by means of the mode requiring the
least resource commitment and to adopt the acquisition
mode of licensing (Tsang, 1997).
5.2. Firm size
One common resource constraint faced by a firm is its
existing financial base. There is a limit that the firm is able
to raise as its debt or equity capital. This constraint is more
serious for small than for large firms. Furthermore, the
lack of qualified personnel is another factor restricting
small firms’ technology acquisition activities (Barney and
Baysinger, 1990). Overall, it is expected that small firms
choose a technology acquisition mode that makes less of a
demand on the firm’s resources.
From the analysis, the size of a firm was not found to be
a significant factor in influencing licensing or cooperative
R&D. This result is in accord with the findings of Cohen et
al. (1987) and Fung (2002) that the overall size of a firm has
a very small and statistically insignificant effect on a
business unit’s R&D intensity when either fixed industry
effects or measured industry characteristics are taken into
account. Additionally, for business units that perform
R&D, the business unit’s size had no effect on the intensity
of R&D, but it did affect its probability of conducting
R&D.
On the other hand, the empirical results in this study also
suggest that as the size of the firm increases, the firm is
more likely to adopt joint venture as its mode of
technology acquisition. This implies that as the size of a
firm increases, the firm will be more able to select a mode
requiring higher resource commitments and to adopt the
joint venture mode for its technology acquisition.
5.3. Previous experience
In the case of technology acquisition, experience effects
are important (Tyler and Steensma, 1995). By doing an
acquisition, a firm lowers the cost of future acquisitions.
During the transfer process, technical problems encoun-
tered in application and adapting to local conditions are
ironed out. The technology is thus gradually improved and
better understood by the transferor, making future
transfers easier and cheaper. Furthermore, when compared
with hands-off acquisition modes, a firm will learn more if
the acquisition mode demands substantial resource com-
mitments (Moon, 1998; Lane and Lubatkin, 1998).
Additionally, experience in technology acquisition also
reduces costs associated with initiation of production. In
short, experience effects gradually reduce the resource
constraints faced by a firm. The lessons learned from using
an acquisition mode also have effects on a firm’s strategy
(Tsang, 1997).
Once an acquisition is chosen, the experience gained
from implementing the transfer will have an impact on the
recipient’s strategy and resource constraints which in turn
influences its future acquisition decisions (Tyler and
Steensma, 1995). The empirical result in this study suggests
that previous experience in cooperative R&D is positively
related to future cooperative R&D. The more experience a
firm has for cooperative R&D, the more likely the firm is to
adopt the cooperative R&D mode for its technology
acquisition. When technological advances are cumulative,
a firm’s efficiency in performing R&D depends on its prior
experience with similar projects (Cohen and Levinthal,
1990). Additionally, as R&D experience can reduce not
only the development costs, but also transaction costs,
firms are more likely to prefer cooperative R&D the greater
their experience with cooperative R&D. From transactions
cost economics, experience can decrease transaction costs
when using that specific mode. Therefore, a firm’s ability to
perform cooperative R&D projects may depend on the
number of previous cooperative R&D ventures it has
participated in the relevant area.
5.4. Technological relevance
According to the resource-based theory, firms maximize
profits through using and developing their resources. Based
on this theory, the fundamental motivation is to maximize
the long run profit, and the inherent source of instability is
the imitation of resources by partners (Yasuda, 2005).
The analysis results in this study show that technological
relevance is positively related to joint venture. The higher
the technological relevance of both transferor and trans-
feree is, the more likely a firm will be to adopt joint venture
as its mode of technology acquisition. This can be
explained in that the positive effect of alliances on
successful technologies would be more enhanced, the risk
of acquisition diminished, and the acquisition would be
expected to be smoother when a technology is close to the
acquiring firm’s technological core. The recipients would
then adopt the mode of joint venture to acquire the needed
external technology.
6. Implications
Previous research on technology acquisition modes have
shown that they have significant implications for the
strategic management of a firm as it explores critical
 ARTICLE IN PRESS
S.-W. Hung, R.-H. Tang / Technovation 28 (2008) 551–563
choices on its scope and boundaries. In this study, we have
found some important implications, both academic and
practical, for management. First, when compared to
previous research which used survey data for analysis, this
current research adopted data from the USPTO and the
SDC Platinum technology acquisition database, providing
more subjective data for analysis. Second, the empirical
result of this study suggests that among the factors
analyzed in this study, the technological capability
(including technological level, technological innovation
and R&D activities) of a firm is the most significant factor
in influencing the determination of modes of technology
acquisition. Third, it underscores that a firm’s various
internal factors should also be considered in order to make
the appropriate decision for selecting the technology
acquisition mode. Additionally, the results of our frame-
work send out especially strong signals to a resource-based
view.
In addition to serving as a useful guide for academic
research, this analysis also offers a framework of reference
for the choice of a technology acquisition mode. By taking
into account a firms’ technology as embedded in its
resources, including physical, human and organizational
resources, this study has broadened the narrow view of
technology usually adopted by the acquirer. A detailed
consideration of the factors proposed in the analysis may
help a firm in choosing an international technology
acquisition mode. Another important implication relates
the historical effect of the technology acquisition experi-
ences. A technology acquisition project should be con-
sidered as a learning activity that improves the technology
and the acquirer’s skills. By highlighting the important
links between technological capability, firm size, previous
experience and core technology relevance on the mode of
technology acquisition in these technology-based firms, this
study is able to shed light on the contribution of various
influential factors on the decision making of technology
acquisition modes for firms in these countries.
7. Limitations and future directions
In our study, there were limitations that might provide
ideas for extension and improvement. In the first place, we
limited our scope to US patent and SDC Platinum
statistics. The main advantage of patent analysis is that
records exist over long periods of time in most countries.
The main weakness of patents data is that aspects of patent
law and procedures may vary from one country to another.
Besides, the particular role of patenting the complex
process of invention and innovation and its role in
companies’ strategies may vary. There are also differences
in patenting behavior across sectors, patent institutions,
markets, and type of inventor firms. Secondly, we limited
our analysis to the firms in three Asian countries, i.e.,
Japan, Korea and Taiwan. Despite that empirical results
offer a more integrative approach to the choice of
technology acquisition mode than before, they do not
561
reflect how practices of these Asian firms differ from those
of North American and European companies, especially as
many of the relationships are with firms outside the home
country. Thirdly, the current study focuses only on the
choice of firms and does not take into account the results
for different modes under similar conditions. It therefore
may not able to firmly suggest a solution for the
‘‘optimum’’ acquisition mode for management under the
various conditions.
At the same time, the narrow focus of this study helped
to control for industry and country-specific differences that
might have otherwise masked significant effects. Future
studies conducted in other industry and country settings
may shed light on the generalizability of the theoretical
positions developed here.
Acknowledgment
The National Science Council of Taiwan, R.O.C. under
the grant NSC 94-2416-H-008-021, has supported this
work financially.
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