Complex technological capabilities in emerging economy firms: The role of organizational relationships

Formal organizational relationships are important sources for capability building in emerging economy firms eager to move up the value chain. We examine how access to valuable knowledge available to firms via organizational relationships creates learning opportunities necessary for the development of complex technological capabilities. Using a sample of 852 observations of emerging economy firms from the Indian software industry between 1992 and 2000, we find that developing strong domestic intra-organizational relationships, through affiliation with a moderately diversified business group or operating in a related industry, promote more complex technological capabilities. In the case of foreign inter-organizational relationships, we find that greater foreign client contact enhances the complexity of firm technological capabilities. However, accessing knowledge from domestic inter-organizational relationships appears to hinder the development of firm complex technological capabilities. An interesting result from our research was that having greater access to knowledge from foreign intra-organizational relationships, embedded within foreign subsidiaries, did not lead to the development of complex firm technological capabilities. The results of our study highlight that for emerging economy firms wanting to improve their complex technological capabilities, there may be diminishing benefits to learning from and acquiring knowledge available within specific types of formal organizational relationships.