The Role of MNCs in Knowledge Accumulation, Absorption and Utilization in Indigenous Irish firms: A case study of the Galway Medical Technology Cluster

Abstract

This study examines the multifaceted role of MNCs in capabilities development of indigenous firms within a high-tech industrial cluster. The paper explores how MNCs and indigenous firms are involved in producing related product varieties. Furthermore, it indicates that the industrial dynamics of the cluster involve significant networking, learning and spillovers. The research shows that MNCs are strongly involved in asset exploiting R&D and asset acquisition along with routine production. These processes have a positive impact on the development of the core competencies of the cluster and the formation of indigenous startups. The core competencies encompass the development of resource management capabilities as well as low cost search for technological information and knowhow. The research found a two way loop involving spillovers. Exposure to MNCs' corporate structure allows Irish entrepreneurs to identify technology and market gaps. It also enables them to understand regulatory procedures and facilitates connection to foreign markets. The new indigenous startup firms network with the original equipment manufacturers, suppliers and team up with other value adding agents and MNCs inside and outside of the cluster to create a global presence. However, the rate of growth in indigenous firms is bounded by improper coordination of the innovation value added chain at the national level. Second, the cluster is gradually locked into the routine of the member MNCs. The study found that access to clinicians, inadequate finance model, and lack of critical skills in marketing are the three most important impediments to successful startup. Galway's credibility as a medical technology cluster, the presence of leading global medical technology MNCs as the source of learning and networking, and the presence of a skilled work force are the three main driving forces of innovation in this high-tech cluster. The study employed a novel quantitative database (ref: LUCERNA, CISC) and extensive qualitative information from interviews with new venture founders and CEOs from existing indigenous firms.