How Psychological Resistance of Headquarter Engineers Interferes Product Development Task Transfer to Overseas Units

There are very few existing studies that focus on the internal headquarter organization in relation to knowledge transfer or innovation in overseas units. It is almost as if there is an implicit assumption that headquarter members ought to be proactive in transferring knowledge or information to overseas units. Thus, this study investigates the bottlenecks of the process in the transfer of product development tasks to overseas units, with particular focus on the psychological resistance of headquarter engineers. A detailed case study of a Japanese automobile supplier revealed the following problems that were faced by headquarter engineers: lack of motivation to business in emerging markets, perception gaps about original developers, and a high turnover rate of local engineers. Next, how the psychological resistance of headquarter engineers, which originate from these problems either directly or indirectly interferes with the transfer of development tasks, was explained by two paths, that is, decline in motivation toward a) Graduate School of Economics and Management, Tohoku University, 27-1 Kawauchi, Aoba-ku, Sendai-shi, Miyagi, Japan, h-kim@econ.tohoku.ac.jp An earlier version of this paper was presented at the ABAS Conference 2014 Autumn (Kim, 2014). Annals of Business Administrative Science 14 (2015) 171–191 Available at www.gbrc.jp http://doi.org/10.7880/abas.14.171 Online ISSN 1347-4456 Print ISSN 1347-4464 ©2015 Global Business Research Center


Introduction
Cases of Japanese firms trying to expand their product development tasks abroad have been increasing since late 2000s.A number of major firms, including Toshiba, Fuji Film, Clarion, Hitachi, Toyota, Honda, and TDK, have sought ways for speedy response to emerging market needs by establishing product development units onsite and increasing the employment of local engineers. 1  Furthermore, according to the Survey of Overseas Business Activities, conducted by the Ministry of Economy, Trade, and Industry in July 2013, the expenditure ratio on overseas research and development for 2012 was a record level of 4.4%, which was highest ever.From these facts, Prahalad and Doz (1987) and Bartlett and Ghoshal's (1989) observations that "Japanese business are characterized by products standardized by headquarters that are expanded overseas in a globally integrated manner" are becoming less and less applicable to current Japanese businesses.This is because the need for dealing with diversified overseas markets and the number of overseas development units to meet that needs have been increasing for products deployed overseas.
In most cases, development functions intended for overseas expansion are limited to the minimal tasks necessary to promptly respond to the local customers ' various and heterogeneous needs. 2   This is because the process of transmitting each of the local customers' demands to headquarters, requesting applied development works, and waiting for the responses are inadequate for emerging market businesses that are highly competitive and require more speed than usual.In other words, there has been a shift of dividing the development tasks, which used to be concentrated on headquarters, between the advanced technology development and standard product development at headquarter side, and tasks necessary for locally adapted design of existing products at local units. 3owever, although a number of Japanese firms are challenging the overseas expansion of product development tasks, it seems difficult.The author conducted field researches of multiple firms on this topic from 2008 to 2014, and found out that both engineers in local units and headquarters have complaints and dissatisfaction toward each other.For instance, engineers in local units often express dissatisfactions such as "the only concerns of Japanese expatriates are decisions and evaluations made by headquarters," "engineers in headquarters do not share information timely," and "they would not understand, no matter how hard we explain the issues of local markets to them."Conversely, engineers in headquarters often give opinions such as "local engineers quit their job so easily" and "because development is the very core of our firms' competitiveness, it needs a lot of care when transferring tasks." These mixed complaints from both sides have lasted for years and remain as it was.
The global expansion of development tasks by Japanese firms is a critical subject of research in terms of major strategic change and implementation of it by multinational corporations, which have concentrated their development functions in home country since their establishment.In particular, the expansion of development tasks to developing countries, which have a high technological gap with Japan, as opposed to Western developed countries that have equivalent or better technical resources, might have certain uniqueness in its contexts.This study aims to understand the causes of bottlenecks in the process of expanding development tasks to emerging markets.This paper will begin by reviewing existing literatures.This will mainly be an exploration of global R&D-related studies to search for answers related to research questions of this study.This will be followed by a methodology, and a description of a case study centered on three causes and two results of the psychological resistance of headquarter engineers.Finally, this study will conclude with a simple introduction of some approaches adopted by firms to solve these bottlenecks, and discussions.Martinez and Jarillo (1991) and Nohria and Ghoshal (1997) suggested that different strategic roles of overseas subsidiaries decide necessary coordination mechanisms of them.Furthermore, there are increasing studies that focus on global teams as an effective method for multinational corporations to utilize knowledge and information dispersed around the world.For instance, Govindarajan and Gupta (2001) tested the condition under which a global team's performance gets higher, and they found out that factors including goal clarity, team member variations, and trust among members are positively related to better performance of the team.In addition, Lagerstrom and Andersson (2003)

Method
This study use a qualitative case study method that is effective for in-depth understanding of complex social psychological phenomena in realistic contexts (Yin, 2003).One of the important values of qualitative research is its ability to describe and understand the interactions, meanings, and processes among people that compose an actual organizational setting (Gephart, 1997).Because concepts and theories regarding the research questions of this study have not been sufficiently developed in the preceding researches, the author took a grounded theory approach to observe the processes of transferring development tasks between headquarters and overseas units, as well as mutual interactions between engineers of both sides.
The major data sources were interviews, and secondary sources such as business documents, newspaper, and periodical articles were also referred.Interviews were conducted with headquarters and six overseas subsidiaries with development functions of the Japanese multinational corporation A. Twenty-two interviews were conducted between May 2008 and November 2013 using semi-structured questionnaires.In addition, actual field researches were conducted in the Japanese headquarters, China, India, Korea, and Thailand.
The units of analysis were product development engineers in three different positions.Since engineers are the main actors of product development, interviews and analysis were conducted with Japanese engineers in the headquarters' business unit, Japanese expatriate engineers in overseas units, and local engineers employed in local units, with focus on their mutual interactions.

Analysis
The keyword that arose from coding and analysis of interview data was "psychological resistance of headquarters engineers."The analysis results are summarized in Figure 1.The following sections Those of us who manage product development for emerging countries are hated by the engineers of business units.Engineers are motivated when trying to develop something better in technology than existing one.When the engineers would not understand and resist, we had to resort to the president's order to make them do so.(From an interview with Japanese headquarters, January 2012) As mentioned earlier, the preceding researches have hardly addressed the motivation of headquarter members toward information or technology transfer to overseas units.However, the degree of this type of motivation in headquarter members, who have accumulated various technologies for long time and can easily learn or access them, is an important factor that can determine the possibility and effectiveness of transfer itself.

Cause 2: Original developer's awareness gap
The second factor can be said to be a problem caused by differences in the culture of engineer groups across countries.Incidentally, there are differences in mindsets about "who the results and merits of development belong to."In Japan, they stress the originator, from whom the initial idea or design came from, or who started the development.On the other hand, particularly in China, there is a tendency to think that the results belong to whoever eventually makes it commercially viable.These differences in mindsets can be the source of troubles when transferring technology or knowledge developed in Japan to engineers in, for example, Chinese subsidiaries.
For material and production engineering technologies, which is one of the strength of many Japanese firms, Japanese headquarters have invested a huge amount of managerial resources for their developments.There are cases where, for instance, when a production technology that took more than 10 years of effort to develop is introduced to an overseas subsidiary, the technology is made commercially available in a short time.In this case, local engineers tend to believe that the success is a result of their own efforts, and declare this to others, resulting in deep displeasure of Japanese engineers to hear this.This causes the Japanese engineers, who experience troubles like this and take offense to them, to have strong resistance to transfer technology and knowledge to overseas engineers.Furthermore, the feelings of anxiety, mistrust, and resistance spread to fellow engineers, who hear about the experiences of other engineers within same organization.
In cases where engineer groups cooperate across borders and cultures, many studies have indicated the need for promoting socialization in order to share each other's values, work procedures, and understanding the nature of the cooperation (Ambos & Schlegelmilch, 2004;Govindarajan & Gupta, 2001).These differences in mindsets toward development results may not be understandable without a socialization process through mutual exchange.While intangible, these differences in mindset cause strong suspicions on the side transferring the technology or knowledge, and can be an important factor in bothering effective task transfers to overseas units.

Cause 3: High turnover rate of local engineers
The third cause that bring out psychological resistance of headquarter engineers is the sense of anxiety caused by high turnover rate of local engineers.This was frequently indicated in interviews mainly in India and China.While local engineers can be trained 2-3 years in Japan, there are many cases in which they are drawn by a higher salary offered by a competitor, and they quit after coming back to their home units.Although engineers' job hopping is considered usual in many foreign countries, Japanese engineers, who have worked for the same firm since they started working, find this difficult to understand, and this becomes a factor that causes them anxiety.
Considering this did not particularly become a problem in building development units in Europe and the United States, which have a similarly high turnover rate of engineers, why does this become a major factor of anxiety in emerging countries?This is because there is a big difference between the Western firms that many Japanese firms regard as an object of study (Hamel, 1991) and the firms in emerging markets, in which there is a large disparity in technological competence, thus many local firms seek to learn and catch up with Japanese firms.Therefore, even though the turnover of engineers in local units has not caused a serious problem of technology leaks, the high mobility of engineers in emerging markets causes anxiety to Japanese engineers in headquarters.As long as this anxiety is unresolved, headquarter engineers can hardly be expected to proactively proceed with task transfer to local engineers.
What type of actions does the psychological resistance of headquarter engineers resulting from these three factors manifest as, and how does this lead to the obstruction of task transfer to local engineers?The two resulting factors that arose from the interview analysis will be discussed in the following section.to build communication channels with the local sides, they do not take action from their side.
Oppositely, local engineers desire a clear communication with headquarters due to the need for learning from technological knowledge and knowledge accumulated in headquarters (Kim, 2013a).However, headquarter engineers have more accessibility to financial resources and decision-making power necessary for building a channel than local engineers.Therefore, this can be considered as a factor that prevents the transfer of tasks to local units.

Discussion
This study demonstrated three causes of psychological resistance of headquarter engineers and two resulting bottlenecks when transferring product development tasks to units.Recently, there are cases where headquarters recognized such problems, and they attempted to deal with them. 4While more empirical studies and evaluations about these challenges are necessary in the future, three directions of these countermeasures will be introduced below.
The first is the "inpatriation of local engineers" that many firms have been adopting recently.Contrary to expatriates, who are personnel of parent company dispatched to an overseas subsidiary, inpatriates are defined as personnel employed at an overseas subsidiary and are sent to the parent company during a certain period (Arimura, 2009).Unquestionably, this is conducted in parallel with the traditional expatriate system, and the purpose of impatriation is to transfer headquarters' knowledge to overseas units through local personnel (Kim, 2013b).When task transfer is obstructed by the psychological resistance of headquarter engineers, there is a high possibility that task transfer through the inpatriation of local engineers will be more efficient.A number of automobile firms are implementing a system of inpatriating local engineers for 2-3 years in Japan on a scale of several hundreds of people when it is large.This will systematically provide an environment and experience that will understand Japanese way of working and mindset and be conducive for networking that will lead to future communications.
The second is headquarter development heads taking the initiative for task transfer.There are cases where the heads of headquarter The third is the utilization of short-term project teams.In the case of firm A, which has been the main data source for this study, a three-year project team was established to give engineers of each business unit a push while managing connection with overseas units, and the joint product development that came about through this.When psychological resistance occurs as previously stated, it is difficult to expect for product development to progress as scheduled by leaving it to the business units alone.Therefore, a small-scale team (22 people) that would provide full-time management of coordination and development schedule was established.Certainly, this method may bring about short-term results; however, it might need continuing efforts to mitigate the underlying psychological resistance and opposition of headquarter engineers.
This study conducted an in-depth case study of firm A, focusing on factors within the headquarters organization that obstruct the transfer of development tasks to overseas units.As many Japanese businesses are expanding their development functions overseas, discussions in this study may provide a hint as to what type of management is necessary locally, at headquarters, and in the channels between them.In other words, the fact that the psychological resistance of headquarter engineers has become a major bottleneck to transferring tasks to overseas units, and the suggestion of its causes and results may provide an indication of where management ought to focus on.
However, while the theme of this study is related to international business, it is also deeply concerned with organization theory.In particular, further review of the literatures 5 on organization routine (March & Simon, 1958;Nelson & Winter, 1982), organization inertia (Hannan & Freeman, 1984), and resistance to organizational change, and discussion based on these will be necessary and is a subject for further research.

Finding
hints to this study's research question in existing literatures, there are following questions that are similar in terms of their concerns.The first is what factors influence efficiency of knowledge transfer between headquarters and local units, and the second is what are the necessary conditions for promoting innovations in local units.
indicated the importance of periodic meetings and social exchanges.Essentially, the major concerns of research in this category were to find effective methods and important factors to connect headquarters and subsidiaries around the world.At the same time, there are many studies focused on the internal organizational factors of overseas subsidiaries.The main focus of these discussions is on what types of conditions and factors can encourage innovations and knowledge transfer in overseas subsidiary organizations.For instance,Ghoshal and Bartlett (1988) tested influencing factors on innovation performance of overseas subsidiaries with slack resources and autonomy as independent variables, whileAsakawa (2001) tested this with internal information connectivity, andLi, Poppo, and Zhou (2010) with the accessibility of the local supplier's network.Unexpectedly, there are very few studies focusing on headquarters' internal organizational factors when discussing multinational corporation's knowledge transfer and innovations of local subsidiaries.A possible reason for this is an implicit assumption that

Figure 1 .
Figure 1.Psychological resistance of headquarter engineers: Causes and results technology departments regularly visit local development centers to directly introduce technologies.For instance, in the case of chemical maker B, which established a development center in Hangzhou, China, in 2012, is making an effort to strengthen competence for product development directed at local manufacturers.Thus, the head of the technology division visits the China unit once a month for guidance, and this gesture is promoting the cooperation and motivation of headquarter engineers.When attempting a strategic shift, such as overseas transfer of development tasks, the powerful leadership of top managers has great efficacy.Such top-down approaches may be more necessary when business unit leaders and their affiliated engineers have psychological resistance to task transfer.

Table 1 .
Classification of preceding researches

Table 2 .
Summary of researches on global R&D of Japanese firms ・Mid-size firms conduct more active overseas R&D than major firms.・Most of

these emerge from R&D affiliated with Western businesses purchased in the late 80s. ・Overseas R&D of Japanese firms is delayed compared to Western firms.
data from the early 90s for analysis.These studies deal with a similar flow of knowledge transfer from home country to overseas, and there also are no discussions on the headquarters' internal attempts to transfer R&D functions overseas.