Study of technology acquisition modes: the choice between 'making' and 'buying' technology

An enterprise can acquire technology either through 'making' (the pursuit of new technology development through internal R&D) or 'buying' (acquisition from external sources). This is known as the 'make-or-buy' technology, 'technology sourcing', or 'technology acquisition' problem and it is one of the most important issues confronting the management of any industrial organisation.

There have been many studies and researches in the area of technology acquisition and many scholars have developed models that can be used as a guideline to choose an appropriate channel of acquisition. However, most of them are from the experiences of developed countries such as the U.S., U.K, Japan, Germany, and Sweden. Limited studies have been conducted in the developing countries. Therefore, research from the perspective of a developing country, which is Indonesia in this case, is beneficial in contributing to the current body of knowledge.

This thesis presents technology acquisition practices in the Indonesian electronics industry. It involves a literature review and industry survey. A group of hypotheses were developed and tested using data from the industry survey. To collect the data, a survey questionnaire was developed and sent to electronics companies in Indonesia. The questionnaire contains a set of variables to be investigated based on the research objectives and research questions.

Key characteristics from the survey results were analysed and evaluated using parametric, non-parametric statistics tests and correspondence analysis method. Important findings from this work are: • Although internal technology development is the most significant acquisition channel, external technology acquisition will have a more dominant role in the future. • Both internal and external technology acquisitions are important for the long term core competency of a company. • Significant reasons for companies to acquire technology externally are to allocate limited resources more effectively; to reduce costs; to gain advanced know-how quickly; the incapability of in-house development to develop the new technology; and the pressure of global competition. • Significant problems in acquiring technology externally are dependence on the source of technology; transaction costs such as the costs to search, negotiate, execute and enforce the contract; how to organise, manage and implement a technology acquisition process, the need to adapt and fine tune the technology; and the technology may be overpriced. • There is no clear evidence that the cost of internal technology acquisition is higher than the cost of external technology acquisition, or vice versa. • Compare to internal technology development, external technology acquisition does not result in shorter time to market. • External technology acquisition creates dependence on the source of the technologies and for the Indonesian electronics companies most of the sources are overseas companies.

A technology acquisition framework is proposed to assist the decision making process. The framework incorporates criteria that were found to be important for the Indonesian electronics companies, including the strategic importance of the technology, time pressure, availability of resources, and dependency on the source of technology. An example of the decision making process involved in the proposed framework is also presented.