Research Project of Paper Industry

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					  Changes in policy regimes, technological capability development, the underlying
     learning processes and implications for techno-economic performance:
         evidence from the pulp and paper industry in Brazil (1950-2006)

                                 On-going research project led by

                                        Paulo N. Figueiredo,
     Research Programme on Technological Learning and Industrial Innovation Management in Brazil
                at the Brazilian School of Public and Business Administration (EBAPE),
                                   Getulio Vargas Foundation (FGV)

           This summary has especially been prepared for the Catch-Up Project meeting at
                             Manchester University, 11-13 May 2006

Although the issues of firm-level technological capability development and the underlying learning
processes, their implications for techno-economic performance improvement and their links with
changes in the economic environment began to be researched about 30 years ago in the context of
late-industrialisation, over the past two decades we have witnessed a scarcity of studies addressing
these issues together and over time from the perspective of latecomer firms. This scarcity of
empirical research into these issues has given rise to some interpretations and generalisations that do
not seem to reflect the real dynamics of industrial development in late-industrialising countries,
particularly in Brazil.

Such lack of understanding (or mis-interpretation) of the industrial reality, in turn, prevents
researchers from providing proper recommendations for corporate management and government
decision-makers in developing countries to support their efforts on industrial innovation. This, in
turn, would have implications for the catching-up process of specific firms and industries in such

The unit of analysis of this on-going research project is the process (manner and rate) of
accumulation of capability for different technological functions in the pulp and paper industry in
Brazil during the 1950-2006 period. More specifically, the key issues involved in this research
project are:

   (1) Firm-level processes of capability accumulation for different technological functions in the
       pulp & paper industry in Brazil;
   (2) Key influencing factors such as:
           (i)     intra-firm learning processes
           (ii)    inter-organisational knowledge links
           (iii) changes in policy regimes during the 1950-2006 period (e.g. from import
                   substitution policy regime and protectionism to globalised competition)
   (3) Implications for techno-economic performance improvement in the sampled firms
   (4) Practical recommendations for the design and implementation of corporate management and
       government strategies aimed at speeding up the catching-up process of this industry in

                                     Paulo N Figueiredo – page 1 of 2
In order to examine these key issues, we draw on frameworks available in the literature of
technological capability building in latecomer firms as follows.

In order to measure technological capability development, the study draws on a framework
developed in Lall (1992) and Bell & Pavitt (1995) and previously applied in Figueiredo (2001). The
framework identifies types and levels of capabilities for different technological functions. Following
Bell & Pavitt (1993, 1995) we distinguish between production-based capabilities and innovative
capabilities. Technological capabilities are being measured by the activities that firms are able to
carry out independently over time.1 This framework is now being adapted and validated on the basis
of continuous and systematic consultation with industry experts for three major areas/businesses:
forest, pulp, and paper. The final framework will identify six to seven levels of capabilities for each
of the 12 technological functions across these three major areas within these industries.

The framework for intra-firm learning process draws on Figueiredo (2001, 2003) and Dutrénit
(2000), while the framework for inter-organisational knowledge links draws on Ariffin (2000).

This research is primarily based on first-hand and firm- and industry-levels empirical evidence
gathered through three major phases of fieldwork:
    (i)    Exploratory – March-May 2005 (two companies plus industry specialists)
    (ii)   Pilot work: February 2006 (four companies)
    (iii) Main fieldwork: June-October 2006 (21 companies)

Expected outcomes:
   (1) Concrete picture of the time-scales involved in the sampled latecomer firms’ technological
       accumulation process.
   (2) Understanding of the roles of key sources of knowledge in speeding up (or slowing down)
       the capability accumulation process in the sampled firms;
   (3) Understanding of the role of changes in industrial policy regimes in speeding up (or slowing
       down) the capability accumulation process in the sampled firms;
   (4) Understanding of how the manner and rate of capability accumulation affect inter-firm
       differences in the rate of techno-economic performance improvement in the sampled firms;
   (5) Practical recommendations for corporate management and government strategies related to
       industrial catching-up process
   (6) Comparisons with results of other past and recent studies that have systematically tackled the
       issue of firm-level rate of capability accumulation processes in latecomer firms (e.g. Jorge
       Katz and colleagues (1975-1982) as summarised in Katz (1987); Bell et al., 1982; Ariffin
       (2000 – electronics firms, Malaysia), Dutrénit (2000 – glass company, Mexico), Figueiredo
       (2001 – steel firms, Brazil), Tacla and Figueiredo (2006 TNC-capital goods firm for pulp &
       paper mills, Brazil); and Figueiredo (2006 – TNC-subsidiaries and local firms, Brazil) in
       order to contribute to systematising some generalisations relative these issues.

  In this research we do not make use of conventional indicators of technological capabilities such as those based on
statistics of patenting, R&D expenditures and individuals’ qualifications since they are not adequate to measure
innovative capabilities in latecomer firms. For detailed arguments see Bell & Pavitt (1993, 1995), Ariffin (2000),
Figuiredo (2001), Ariffin and Figueiredo (2004).

                                          Paulo N Figueiredo – page 2 of 2

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