Knowledge Acquisition: Lessons from Local and Global Interaction in the Indonesian Consumer Electronics Sector

Knowledge acquisition plays an important role for firms, particularly those in developing countries, helping them keep up with process and product innovation and also to effectively compete in the domestic and export markets. Foreign direct investment is often regarded as the major source of knowledge acquisition for local firms in developing countries. The global value chain (GVC) framework provides an analytical tool for understanding knowledge transfer and acquisition in the context of governance. Based on empirical evidence within the Indonesian consumer electronics sector, this paper explores knowledge transfer and acquisition in the context of governance of value chains in which Indonesian manufacturing firms are engaged. Different forms of GVC governance have an impact on knowledge transfer and learning mechanisms within the chains. In captive value chains, Indonesian firms acquire production knowledge and capability from global lead firms by satisfying product and process specifications imposed by the global lead firms. In hierarchical structures, Indonesian firms learn from their joint venture partners not only production capability, but also design and product engineering. Within market-based structures, Indonesian firms acquire production and non-production knowledge through their own efforts in accessing external knowledge sources other than global lead electronics firms.