An empirical study of the relationship between absorptive capacity and ...

Int. J. Technology Transfer and Commercialisation, Vol. 5, Nos. 1/2, 2006

An empirical study of the relationship between absorptive capacity and technology transfer effectiveness Naruemon Whangthomkum* Alcan Packaging Strongpack Public Company Limited 91 Moo 13 Kingkaew Rd. T. Rachadhewa, A. Bangplee, Samuthpakran 10540, Thailand Fax: (662) 312–4063 E-mail: [email protected] *Corresponding author

Barbara Igel School of Management, Asian Institute of Technology P.O. Box 4, Klong Luang, Pathumthani 12120, Thailand E-mail: [email protected]

Mark Speece Department of Business and Public Administration University of Alaska Southeast 11120 Glacier Highway, Juneau, Alaska 99801–8672, USA E-mail: [email protected] Abstract: This study investigates the relationship of Absorptive Capacity (AC) and its elements to Technology Transfer Effectiveness (TTE) in the flexible packaging industry in Thailand. The relationship of each AC element to each dimension of TTE is assessed. Findings are that TTE is related to all AC elements, but not all to the same degree. While all AC elements were found to have a positive correlation with two TTE dimensions, namely product and process performance and human resources capability, only two AC elements, namely the ability to assimilate and the ability to apply the new technology, showed a strong positive correlation to the TTE dimension of business performance. The findings of this study help academics and practitioners to have a clearer understanding of the different elements of AC and TTE, the impact of AC on TTE, and especially the correlation of each AC element to each TTE dimension. Keywords: technology transfer; absorptive capacity; flexible packaging industry. Reference to this paper should be made as follows: Whangthomkum, N., Igel, B. and Speece, M. (2006) ‘An empirical study of the relationship between absorptive capacity and technology transfer effectiveness’, Int. J. Technology Transfer and Commercialisation, Vol. 5, Nos. 1/2, pp.31–55.

Copyright © 2006 Inderscience Enterprises Ltd.

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N. Whangthomkum, B. Igel and M. Speece Biographical notes: Naruemon Whangthomkum received her MS in Business Administration in 1992 from the Graduate School of National Institute of Development Administration (NIDA), Bangkok, Thailand. She is Executive in a major multinational flexible packaging company in Thailand and a PhD candidate in the School of Management, Asian Institute of Technology in Bangkok. She has experience in research and development, technical service and development, quality assurance, and continuous improvement. Her professional skill is in operation improvement in different fields such as quality, manufacturing, logistics, management system, among others, in packaging operation in Thailand and various countries in Asia-Pacific. Barbara Igel received her MA in Economics in 1984 from the Technical University Berlin (West) and PhD in Economics in 1989 from the Freie University Berlin (West). She is Associate Professor of Management of Technology, and Coordinator of Tech-Ventures in the Management of Technology (MOT) programme, at the School of Management, Asian Institute of Technology. She has been several times Visiting Professor at the Helsinki University of Technology, Finland, and worked as Consultant to the World Bank in the IDA credit programme for small-scale export industries in Pakistan. Her research projects deal with the management of innovation in complex technology systems and entrepreneurship development in new, technology-based firms in Asia. She has published several papers in international journals such as Technovation, International Journal Technology Management, International Journal Entrepreneurship and Innovation Management, and Asian Business. Mark Speece is Associate Professor of Marketing and Director of the MBA programme in the School of Business, Public Administration, and Information System, University of Alaska Southeast. Earlier he taught in Thailand at the Asian Institute of Technology, Kasetsart University, National Institute of Development Administration, and Bangkok University; in Singapore at Nanyang Technological University; and in Hong Kong at the Chinese University of Hong Kong. He has also had numerous short-term visiting positions and consulting projects in other parts of the region, particularly China, Vietnam, Malaysia, Macau, and Bangladesh. His research focuses on sales and sales management, new product and service development, and technology in marketing, mainly in Southeast Asia and Greater China, as well as on cross-cultural educational methodology in marketing. Dr. Speece earned his PhD in Marketing from the University of Washington, Seattle, USA, and also earned a second PhD in Middle East Economic Geography from the University of Arizona.

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Introduction

Under fast changing technological and highly competitive market conditions, new customer requirements are continuously emerging. Firms in this environment are forced to search for new product and process developments and to respond quickly to these requirements. Since firms cannot develop new technology solely through in-house R&D due to high cost and risk (Ceh and Smith, 2001; Hollmer, 2003) and because this is time consuming, acquiring technology from outside helps increase their technological capability (Kim, 1999; Burger, 1999) at less cost, lower risk and higher efficiency (Kedia and Bhagat, 1988; Bratic and Warren, 2001).

An empirical study of the relationship

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When acquiring technology from other firms, a key concern is to really catch up and increase technological capability. Therefore acquired technology must be successfully utilised in operations to produce a product or service and thus links to technology transfer effectiveness. To be able to internalise the acquired technology successfully, firms require ‘absorptive capacity’ which is the ability to recognise the value of external technology, knowledge, and information (Cohen and Levinthal, 1990; Lane, et al., 2001; Lin, et al., 2002; Van Den Bosch et al., 2003); to identify and acquire the new technology; to assimilate it (Cohen and Levinthal, 1990; Zahra and George, 2002); and to apply or exploit the new technology to commercial ends (Cohen and Levinthal, 1990; Zahra and George, 2002; Van Den Bosch et al., 2003). Many studies have focused on the factors that influence technology transfers, such as the type of transferred technology (Ounjian and Carne, 1987; Keller and Chinta, 1990); the transfer channel (Keller and Chinta, 1990); R&D activity, training (Grosse, 1996; Hakam and Chang, 1988; Osaman-gani and Ahad, 1999); communication (Gibson and Smilor, 1991; Ounjian and Carne, 1987); culture (Kedia and Bhagat, 1988; Keller and Chinta, 1990; Gibson and Smilor, 1991; Chen, 1997; Osaman-gani and Ahad, 1999) and the existing technological capability (Kedia and Bhagat, 1988; Stock et al., 1996). Not many studies however, have focused on the influence of absorptive capacity on a technology transfer, especially at the firm level. This study aims to fill this gap by investigating the extent of influence of the multiple dimensions of Absorptive Capacity (AC) on Technology Transfer Effectiveness (TTE). This has been frequently discussed at the conceptual level but there is still no clear empirical analysis of how AC can support TTE or how each AC dimension can influence each TTE dimension. It is difficult for managers to implement effective AC policies that will ensure an effective technology transfer if they do not know exactly what they are trying to implement. The concepts of AC and TTE need to be more carefully defined so that they can be better measured and understood. We look at these issues in the flexible packaging industry in Thailand because this is a rapidly growing industry and technology is core for this industry. This paper is divided into eight sections. After the introduction, a review of the literature focuses on how to define TTE and AC, including their dimensions and measures, and how to analyse and understand the particular relationship between AC and TTE. Part III presents a model depicting the relationship between the two concepts and the research hypothesis. Part IV describes the methodology and Part V reports statistical results, followed by a discussion of the findings. Part VII presents the conclusions and the final part presents recommendations for further research.

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Literature review

2.1 Relationship between technology transfer effectiveness and absorptive capacity AC has been defined as the ability to recognise the value of external technology, knowledge, and information (Cohen and Levinthal, 1990; Lane et al., 2001; Lin et al., 2002; Van Den Bosch et al., 2003); to identify and acquire the new technology; to assimilate it (Cohen and Levinthal, 1990; Zahra and George, 2002) and to apply or exploit the new technology to commercial ends (Cohen and Levinthal, 1990; Zahra and George, 2002; Van Den Bosch et al., 2003). It has been suggested that AC is such a

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N. Whangthomkum, B. Igel and M. Speece

critical factor in determining the effectiveness of a technology transfer, that other related factors (such as the type of technology that is transferred, the technology transfer channel and the research and development process) will not be able to successfully support a firm’s technology transfer performance without a strong AC (Lin et al., 2002). The recipient’s lack of AC can result in a poor transfer because a successful technology transfer entails much more than the mere acquisition of physical assets (TID, 1997). Hence, AC is not an alternative to a successful technology transfer but appears to be a necessary condition for it. A successful technology transfer leads to the improvement of a firm’s technological capability, which allows for faster learning to accumulate higher levels of technological capability, which in turn enhances the firm’s AC (Kim, 1997). The effectiveness of a technology transfer can be defined as meeting the objectives of a specific technology transfer project (Wong et al., 1999). Firms must make efforts to effectively use the new technology and integrate it with existing technology to create either a new product or process, in order to adjust to a continually changing business environment. Technological capability is a function of a firm’s AC (Kim, 1997), as demonstrated in Wong et al.’s (1999) study of Taiwan’s information technology industry, which showed that the intraorganisational diffusion of information, and learning and training procedures, supported TTE. The impact of AC on technology transfer performance was also confirmed in Lin et al.’s (2002) study of the Republic of China’s electronic and chemical manufacturing industry. This study found that AC, R&D, organisational culture, and the mechanisms for interaction and connections within and outside the firm, influenced technology transfer performance. R&D, the organisational culture, the diffusion mechanism, and interaction mechanism all influenced AC. In summary, a firm’s AC appears to be a necessary condition for effectively transferring and utilising new technology.1 When considering TTE, firms should focus on performance outputs, which indicate effectiveness instead of efficiency (Schroer et al., 1995). Technology transfer has different outputs, and different effectiveness measures are used based on the specific objectives, goals, mission, and roles of the technology transfer projects (Spann et al., 1995). Firms transfer technology to create products and services to achieve business objectives, and human resource capability plays a critical role in the creation of a commercially viable product, service or process. In order to accurately measure the effectiveness of a particular technology therefore, the three dimensions of product and process performance, business performance, and human resource capability must be considered.

2.1.1 Product and process performance Firms transfer new technology to either produce a product or to establish the process required to produce a product, thus both are essential outcomes of the transfer project. Product and process performance of the transferred technology can be measured according to changes in the product defect rate; the increased number of products made in-house; the improved product quality and performance (Wong et al., 1999); the increased number of new products, improved processes and modifications of existing products (Schroer et al., 1995) and the shortened cycle time for product improvement and new product development (Chen, 1997; Wong et al., 1999).


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2.1.2 Business performance The objective of transferring a product or process technology is to improve business performance. Thus, business results are the second outcome of the transfer project. Technology transfer involves the acquisition and processing of equipment, technical information, and knowledge, which is necessary but not sufficient for creating value (Camp and Sexton, 1992). Since use of this technology to generate profit in the market is important, assessing transfer performance must involve aspects of commercialisation, i.e., new product and market development. Thus, commercial success is the dimension related to business performance of technology transfer. The business performance that results from a technology transfer can be assessed according to increased business volume (Lyles and Salk, 1996; Lyles et al., 1997; Lane et al., 2001); increased market share and the achievement of planned goals (Lyles and Salk, 1996; Lyles et al., 1997; Lane et al., 2001; Wong et al., 1999); company growth (Wong et al., 1999); profits (Chen, 1997; Lyles and Salk, 1996; Lyles et al., 1997; Lane et al., 2001; Lane and Lubatkin, 1998; Wang et al., 2001); larger ROI; economies of scale and scope; international expansion; delivery cost reductions (Wong et al., 1999); decreased operating costs (Schroer et al., 1995); savings from process improvements in plant or product lines; factor cost reductions per product and the savings to users and shareholders (Weatherly and Iorio, 1993).

2.1.3 Human resources capability A firm’s ability to make a product or establish the production process to improve business involves human resources. Since technology transfer involves product- and process-embodied technology and all the peripherals of disembodied knowledge associated with such a task, it relies on human resource input, which is considerably more difficult to transfer than a product or equipment. Human resource development should be at the very heart of any technology transfer endeavour because it is the people that need to be taught how to use the equipment (Akinyemi, 2001). Human resource capability in a technology transfer has been evaluated according to its ability to manage and modify (Chen, 1997; Lin et. al., 2002; Lane et al., 2001); the training offered by the technology seller (Chen, 1997; Lyles and Salk, 1996; Lyles et al., 1997; Lane et al., 2001); improvement of management capability and skills (Lyles and Salk, 1996; Lyles et al., 1997; Wang et al., 2001; Lane et al., 2001); technological capability improvement (Chen, 1997; Wang et al., 2001); the technical capability captured; the monitoring of technical change and getting access to the desired technology; the achievement of technical complementariness ; the aversion of potential risk; the pooling of resources; and the achievement of vertical integration (Wong et al., 1999). As mentioned before, TTE is strongly influenced by AC and the AC concept has been a research focus for many disciplines such as the management of R&D (Cohen and Levinthal, 1989; 1990; Cockburn and Henderson, 1998; Deeds, 2001) and innovation (Vinding, 2000; Lenox and King, 2003); interorganisational learning (Lofstrom, 2000; Gupta and Govindrajan, 2000); alliances (Tasi, 2001); technology transfer both at national and firm level (Kim, 1997; Liu and White, 1997; Sung and Kyun, 1999; Wong et al., 1999; Akubue, 2002; Lin et al., 2002); and knowledge transfers (Szulanski, 1995; 1996).

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This research categorises the different dimensions of AC in the following four ways: the ability to recognise the value of the new technology, the ability to acquire new technology, the ability to assimilate it, and the ability to apply it.

2.1.4 Ability to recognise the value of new technology Before firms can assimilate the new technology they must go through the stages of value recognition, adoption and acceptance (Gilbert and Cordey-Hayes, 1996). Firms need prior basic knowledge to understand the importance of new technology (Lane and Lubatkin, 1998). Thus this ability is measured according to two components, ‘basic knowledge’ and ‘specialised knowledge’ (Lane and Lubatkin, 1998).

2.1.5 Ability to acquire new technology The acquisition process determines which technologies the firm needs, which vendors have the technology that it wants to obtain, and what resources should be prepared before buying the new technology (Lin et al., 2002). The ability to acquire is measured according to the extent the firm can learn from partners in terms of: technological expertise; marketing expertise; product development tools; managerial techniques, and manufacturing processes (Lyles and Salk, 1996; Lyles et al., 1997; Wang et al., 2001) and new knowledge about foreign cultures and trust (Lyles and Salk, 1996). The most frequently used measures in the literature to determine the acquisition ability are: number of years having experience in in-house R&D and the amount of R&D investment (Zahra and George, 2002).

2.1.6 Ability to assimilate the new technology Assimilation of technology is the process through which firms bring new technology components into use. The ability to assimilate a new technology is a firm’s ability to develop and refine the routines that facilitate combining existing technology with the newly acquired technology and its ability to integrate it operationally (Zahra and George, 2002). It involves a knowledge processing system for sharing knowledge, communication and coordination in planning, and implementing, and problem solving while the new technology is put into use. When new technology is properly assimilated it becomes an established routine. The new technology accumulation process assists firms in learning about new technology again and again. Assimilation ability can be measured through various processes and outputs, such as functional interfacing, knowledge sharing, and communication (Welsch et al., 2001); knowledge processing system, compensation practices and firm structure (Lane and Lubatkin, 1998); and the number of cross-firm patent citations or citations made in a firm’s publications about research developed with other firms (Cockburn and Henderson, 1998; Zahra and George, 2002).

2.1.7 Ability to apply new technology A successful knowledge transfer is effective only when the knowledge transferred is retained for use (Szulanski, 1995), and to be retained for use, the knowledge acquired and communicated must be applied. It is the results of knowledge application that enable firm to learn (Gilbert and Cordey-Hayes, 1996), and knowledge transfer is achieved when an acquirer applies this knowledge to commercial ends (Ranft and Lord, 2002). Application


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is required to develop new technology from the assimilated technology, but this needs time and the firm must adapt itself before being able to apply this new technology (Lin et al., 2002). Application ability is a key dimension of AC as it may increase the firm’s innovativeness. This ability can be measured through current knowledge learned from the foreign parent, international joint-venture strategies and training and development competence (Lane et al., 2001); the number of external research communities in which the firm participates (Lane and Lubatkin, 1998); the number of patents, new product announcements or length of product development cycles (Zahra and George, 2002); New products and new applications using assimilated technology, finding alternative uses for the assimilated technology, and fusing assimilated technology with other technologies (Wong et al., 1999).

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Technology transfer and absorptive capacity conceptual model

In this study, we propose that Technology Transfer Effectiveness (TTE) is influenced by the firm’s Absorptive Capacity (AC) and that the relationship between AC and TTE is a positive relationship. As noted above, both concepts of AC and TTE have not been very clearly defined in the literature published so far, and an empirical analysis of their relationship is very rare. While we theoretically can expect that an improved TTE after having been enhanced by a sufficient level of AC, may in a secondary loop, feed back and help improve the firm’s AC, the flexible packaging industry is relatively young in Thailand, and none of the 27 firms surveyed have established a proper process for assessing the quantity or quality of their TTE. Given the rather short history of this industry in Thailand, we decided to put priority on empirically investigating the first round, to focus on the immediate impact that AC had on the TTE of a firm’s most recent technology transfer project. The empirical proof of a secondary, later feedback that the firm’s improved TTE performance may have on enhancing its AC should be investigated in an industry that is more mature and has had more experience with technology transfer projects and the assessment of their performance. Absorptive capacity is a firm’s combinative ability to enhance its technological capability and it consists of the ability to recognise the value of external technology, knowledge, and information; the ability to identify and acquire the new technology; the ability to assimilate it; and the ability to apply or exploit the new technology to commercial ends. This internalisation of the new technology enhances the firm’s competitive advantage and sustainability. Thus, in this study AC will be measured according to the following four dimensions; Ability to Recognise value of the new technology (RECOG); Ability to Acquire the new technology (ACQUIRE), Ability to Assimilate the new technology (ASSIM); and the Ability to Apply the new technology (APPLY). Technology Transfer Effectiveness (TTE) is defined as meeting the objectives of a specific technology transfer project both in the short- and long-term. Since each technology transfer has specific objectives, these different objectives are measured using different TTE dimensions. This study proposes the following three TTE dimensions: Product and Process Performance (PPP), Business Performance (BP), and Human Resources Capability (HRC).

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Figure 1 shows the relationship between the two research constructs and their related dimensions. Figure 1

Absorptive Capacity (AC) and Technology Transfer Effectiveness (TTE) relationship model

Ability to Recognise (RECOG)

Product and Process Performance (PPP)

Ability to Acquire (ACQUIRE)

Absorptive Capacity (AC) Ability to Assimilate (ASSIM)

Ability to Apply (APPLY)

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Technology Transfer Effectiveness (TTE)

Business Performance (BP)

Human Resource Capability (HRC)

Research methodology

4.1 Operational measures Two sets of variables were measured in this empirical study of TTE and AC in the flexible packaging industry in Thailand, with TTE being the dependent variable and AC being the independent variable. Technology Transfer Effectiveness (TTE) measures were developed mainly from the work of Chen (1997), Lyles and Salk (1996), Lyles et al. (1997), Lane et al. (2001), Lane and Lubatkin (1998), Lin et al. (2002), Wang et al. (2001) and from the results of in-depth interviews with industry experts. There are 16 items for the three TTE dimensions of PPP, BP, and HRC. All items were measured using four-point Likert scales, in which ‘1’ means low and ‘4’ means high. Product and Process Performance (PPP) was measured according to four items based on the extent to which the firm was able to produce the expected product; achieve the required quality level; meet production efficiency targets; and increase technological capabilities from the new technology. These measures came from the work of Chen (1997), Wong et al. (1999), and Wang et al. (2001) except for the second measure, required quality level, which was developed from the interviews with industry experts. Business Performance (BP) was measured using eight items based on the extent to which firms were able to increase new product development (increase innovation rate); achieve target costs; market the product on time; shorten product development cycle time; meet company growth targets; achieve planned goals; increase market share and increase profitability from the new technology. This modified version of business performance is based on the work of Chen (1997), Lyles and Salk (1996), Lyles et al. (1997), Lane and Lubatkin (1998), Lane et al. (2001), Wong et al. (1999) and Lin et al. (2002).


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Human Resource Capability (HRC) was measured using four items based on the extent to which firms were able to manage the acquired technology; increase the ability to manage future technology transfers; receive training from equipment or know-how vendors, and increase management skills and capabilities. This modified version of human resource performance was developed from the work of Chen (1997), Lyles and Salk (1996), Lyles et al. (1997), and Wang et al. (2001). Absorptive Capacity (AC) has 27 items for its four dimensions. All items were measured using four-point Likert scales, in which ‘1’ means low and ‘4’ means high. These questionnaire items were developed and validated by the in-depth discussion with these industrial experts. The measures for the Ability to Recognise the value of new external technology (RECOG), were developed from in-depth interviews with industry experts, since this dimension has not been discussed much in the literature. It was measured using two items based on the extent to which relevant personnel in flexible packaging firms saw the benefits of a new technology and tried to use it. The measures for the Ability to Acquire the new technology (ACQUIRE) were developed mainly from in-depth interviews with industry experts except for one item: the extent of background knowledge to understand the new technology, which came from the work of Lofstrom (2000) and was also validated by the experts. Thus, ACQUIRE measures included six items based on the extent to which relevant personnel had prior background knowledge to understand the new technology; a clear understanding of company requirements related to adoption of new technology; the planning and identification of requirements regarding acquisition of new technology; the ability to ask questions and understand answers with the technology vendor; the ability to understand and communicate in the same language as the technology vendor; and the ability to understand the technology vendor’s explanation of the new technology. Measures for the Ability to Assimilate the new technology (ASSIM) included ten items based on the extent to which project team members involved in the implementation process were able to generate output according to the project’s objectives. These ten items were: openness to the new technology; willingness to learn the new technology; knowledge of project details such as objectives, activities, milestones, etc., knowledge or information sharing (dissemination) among concerned staff such as project implementation results, changes, new needs or requirements; achieving plan for the agreed or assigned work among members at each stage of the project; coordination of different project jobs and work activities among different departments; efficiency of concerned people from different departments who had to work together; timing of all related activities in the everyday routine of the project; planning of the work assignments for people from concerned departments who work together and establishing the routines of different departments that had to work with one another. The measures for one, two, three, and five were developed from the in-depth interviews with industry experts. All other measures were developed from the work of Welsch et al. (2001), and Sivadas and Robert (2000), and were also validated by industry experts.

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Measures for the Ability to Apply the new technology (APPLY) were developed from the work of Wong et al. (1999) and from interviews with industry experts. These nine items are based on the extent to which the firm was able to develop the new packaging specification(s); new packaging process(es); new packaging application(s); modification existing packaging specification(s); modification existing packaging process(es); found alternative uses and applications; fused the assimilated technology with existing technologies and found additional products and process benefits from the assimilated technology beyond the project objectives. Dependent and independent variable measures and their references are presented in Tables 1 and 2, respectively. Table 1 Dependent variable, Technology Transfer Effectiveness (TTE), measure and dimensions Dimension Product and Process Performance (PPP)

References Chen (1997)

Produced the expected product

Wong et al. (1999)

Achieved the required quality level

Wang et al. (2001)

Met production efficiency targets

Expert in-depth interviews

Increased technological capabilities Business Performance (BP)

Chen (1997)

Increased new products (increased innovation rate)

Wong et al. (1999)

Achieved target costs

Lyles and Salk (1996)

Marketed product on time

Lyles et al. (1997)

Shortened product development cycle time

Lane et al. (2001)

Achieved company growth target

Lane and Lubatkin (1998)

Achieved planned goals

Lin et al. (2002)

Increased market share


Increased profitability Human Resource Capability (HRC)

Chen (1997)

Ability to manage the acquired technology

Lyles and Salk (1996)

Increased ability to manage future new technology transfer

Lyles et al. (1997)

Received training from equipment or know-how vendors

Wang et al. (2001)

Increased management skills and capabilities

An empirical study of the relationship Table 2

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Independent variable, Absorptive Capacity (AC), measure and dimensions

Dimension Ability to Recognise the value of new technology (RECOG)

References Expert in-depth interviews

Saw the benefits of the new technology Tried to use this new technology Ability to Acquire the new technology (ACQUIRE) Prior background knowledge to understanding the new technology

Lofstrom (2000) Expert in-depth interviews

A clear understanding of company requirements related to adoption of new technology Planning and identification of requirements regarding acquisition of new technology Ability to ask question and understand answers with technology vendor Ability to understand and communicate in the same language as the technology vendor Ability to understand technology vendor’s explanation of the new technology from Ability to Assimilate the new technology (ASSIM)

Welsch et al. (2001)

Openness to the new technology

Sivadas and Robert (2000)

Willingness to learn the new technology


Knowledge of project detail such as goals, objectives, activities Knowledge or information sharing (dissemination) among concerned staff such as project status implementation results, changes, new needs or requirements, and etc. Achieving plan for the agreed or assigned works among members at each stage in the project Coordination of different jobs and work activities among different departments Efficiency of concerned people from different departments who had to work together Timing of all related activities in the everyday routine of the project Planning of the work assignments of people from concerned departments who worked together Establishing the routines of different departments that had to work with each another

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Table 2

Independent variable, Absorptive Capacity (AC), measure and dimensions (continued)

Dimension Ability to Apply the new technology (APPLY) New packaging specification(s)

References Wong et al. (1999) Expert in-depth interviews

New packaging process(es) New packaging application(s) Modification of existing packaging specification(s) Modification of existing packaging process(es) Found alternatives use and applications Fused the assimilated technology with existing technologies Found additional product benefits example: reduce unit cost, improve quality of other products, etc. Found additional process benefits example: reduced unit cost, improved quality of other products, etc.

4.2 Questionnaire development The first step in the questionnaire development was qualitative pilot work to examine the two concepts in detail. Face-to-face interviews were conducted with six flexible packaging experts who were directly involved in new technology projects. Three industry experts included a CEO, a vice-president of manufacturing and a vice-president of marketing and sales. They worked for two long-established flexible packaging firms, one large-sized and one medium-sized firm, both of which continue to invest in new equipment and technology. These industry experts had between 13 and 25 years of industry experience. The three academic experts also worked extensively as consultants. They had a minimum of five years and maximum of more than 25 years of practical experience in packaging technology transfers, i.e., they were intimately involved in consulting and advising the industry in Thailand. Four of the experts were Thai, one was German, and the other was Belgian. Both foreign experts had worked extensively in Thailand. In each case, the interview appointment was set by telephone and the interview was conducted face-to-face. In these interviews the TTE and AC concepts were discussed in detail and the experts assessed the proposed measures for the various dimensions. A draft questionnaire was then developed to test the construct’s validity. It was tested with 14 industry experts who were in senior management at one of the leading flexible packaging firms. These 14 senior managers were selected to cover all roles involved in the company’s new technology projects. The English questionnaire was sent to these managers and followed up with a face-to-face discussion. Minor adjustments were made to a few questions to make them clearer, but no questions had any serious problem of understanding by the experts. Seven flexible packaging firms were then selected to further test the structured questionnaires for reliability. These seven firms consisted of three small firms, three medium-sized firms, and one large firm, with a total of 24 respondents. Respondents of this questionnaire included four general managers, six market development and sales managers, eight manufacturing managers, four R&D managers, one purchasing manager and one industrial engineering manager. Results of this pretest indicated a good reliability scale. The Cronbach’s alpha was above 0.7 for all


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dimensions of TTE and AC. Thus, there was no final adjustment for the questionnaire. The questionnaire was translated into the Thai language by the researcher and verified by the industry experts from the largest firm. Each respondent received a questionnaire in both languages to choose the one they best understood. During the testing process, the high-level managers we worked with all had a good command of English, since their company is extensively involved in international business. In the larger sample however, we could not be sure of English language proficiency among all Thai managers, so we made a Thai version available to them.

4.3 Sampling methodology and data collection The sampling frame for this study was developed from The Packaging Directory of Thailand 2002–2003, which is a database of flexible packaging firms in Thailand. From these lists only flexible packaging firms with multi-layer flexible packaging, defined as laminated packaging following Brody and Marsh (1997), were selected. This type of flexible packaging requires complex technologies, which are constantly evolving. This provided a good context for examining TTE and AC since new technology is frequently acquired. Each firm in the directory was called to confirm that they actually belonged to the multi-layer flexible packaging category. The final list of flexible packaging firms included 33 firms. Since the number of firms in this industry in Thailand is small, all firms were included and the questionnaire survey was sent to each one. The targeted respondents were R&D personnel, factory managers, sales and market development managers, or technical managers, who were involved in the firm’s new technology projects. The survey questionnaire was sent to the managing director and was then followed up by a telephone call. The response rate was 82%. Of the 33 firms targeted, 27 replied, with 62 respondents.

5

Results

The multiple regression statistical technique was applied to analyse the hypothesis, which asserts that AC has a positive influence on the TTE of firms in the flexible packaging industry in Thailand. This hypothesis is based on the assumption that all AC dimensions enhance TTE, and that each AC dimension influences each TTE dimension.

5.1

Descriptive statistics and reliability analysis

Measures were checked for scale reliability. The total reliability of TTE and AC was equal to 0.9323, 0.9393, respectively. The lowest reliability for any dimension was for the discussion of TTE, which was equal to 0.7760. For all the others, Cronbach’s alpha was above 0.8. This reliability level is acceptable (Santos, 1999), and these results indicate that these measure items can produce consistent results when used by different respondents. In general, it can be concluded that there was a high reliability for the measured constructs; so all the items were used to construct their respective composite dimensions.

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Overall, the mean scores for each dimension of both TTE and AC were somewhat above the midpoint on the four-point scale, indicating that managers generally believed their companies had somewhat good AC and could achieve moderately good TTE (see Table 3). Table 3 Dependent variable, Technology Transfer Effectiveness (TTE), and independent variable, Absorptive Capacity (AC), mean scores and standard deviation Means scores

Standard deviation

Cronbach’s alpha

Product and Process Performance (PPP)

2.98

0.5681

0.7760

Business Performance (BP)

2.74

0.5096

0.8509

Human Resources Capability (HRC)

2.82

0.5948

0.8017

Overall Technology Transfer Effectiveness (TTE)

2.85

0.5108

0.9323

Ability to Recognise the value of new technology (RECOG)

3.12

0.6001

0.8363

Ability to Acquire the new technology (ACQUIRE)

2.70

0.4962

0.8251

Ability to Assimilate the new technology (ASSIM)

2.79

0.5244

0.9272

Ability to Apply the new technology (APPLY)

2.87

0.5358

0.8819

Overall Absorptive Capacity (AC)

2.92

0.4522

0.9393

Variable

5.2 Regression analysis 5.2.1 Relationship of AC and TTE Table 4 presents the results of a regression analysis of AC and TTE in the flexible packaging industry. The regression results indicate that AC positively correlates with TTE in this industry, and that the influence of AC on TTE is fairly strong. The equation was statistically significant (p = 0.000) with R² = 0.694, which means that AC explains 69.4% of the variability in TTE. Thus, the overall hypothesis is supported for the flexible packaging industry. Table 4 Results of multiple regression analysis of independent variable, Absorptive Capacity (AC), with dependent variable, Technology Transfer Effectiveness (TTE) Unstandarised coefficients Independent variables

Standardised coefficients

B

Standard error

Beta

t-value

Significance

Intercept

0.099

239

–

0.415

0.680

Absorptive Capacity (AC)

0.941

0.081

0.833

11.671

0.000*

Note:

R² = 0.694; F (1.60) = 136.201; p = 0.000 p < 0.05*


45

5.2.2 Relationship of the AC dimensions with TTE Table 5 presents the regression results for the influence of each AC dimension on TTE. Results indicate that all AC dimensions have a statistically significant correlations with TTE. RECOG (sig. 0.013); ASSIM (sig. 0.001); and APPLY (sig. 0.001) are significant at p value equal to 0.05, while ACQUIRE is statistically significant (0.078) at p value equal to 0.10. The model R² is 0.734, indicating that AC dimensions can explain 73.4% of the variability of TTE in the flexible packaging industry. Table 6 presents a correlation matrix among AC dimensions in the model. Formal measures indicate no multi-colinearity problems among the AC dimensions. The variance inflation factors of RECOG, ACQUIRE, ASSIM, and APPLY, are 1.69, 1.63, 1.94, and 1.76, respectively, where the value of below five is considered low (Gerrie, 2004). The condition index of RECOG, ACQUIRE, ASSIM, and APPLY are 16.32, 17.01, 17.65, and 19.52, well below the level of 30, which would indicate high multi-colinearity (Gerrie, 2004). Table 5 Results of multiple regression analysis of independent variable dimensions, Absorptive Capacity (AC), with dependent variable, Technology Transfer Effectiveness (TTE) Unstandarised coefficients Independent variables


B

Standard error

Beta

t-value

Significance

Intercept

0.000

236

–

0.002

0.998

RECOG

0.197

0.076

0.231

2.576

0.013*

ACQUIRE

0.163

0.091

0.158

1.793

0.078**

ASSIM

0.334

0.094

0.342

3.561

0.001*

APPLY

0.301

0.088

0.313

3.427

0.001*

Note:

R² = 0.734; F (4.56) = 38.630; p =0.000 p < 0.05*; 0.1**

Table 6

Correlation matrix among Absorptive Capacity (AC) dimensions with each other

Independent variable

RECOG

ACQUIRE

ASSIM

APPLY

RECOG

1.000

0.522

0.562

0.518

ACQUIRE

0.522

1.000

0.545

0.500

ASSIM

0.562

0.545

1.000

0.604

APPLY

0.518

0.500

0.604

1.000

5.2.3 Relationship of the AC dimensions with each TTE dimension Table 7 presents results of the regression analysis to examine the influence of AC dimensions on each TTE dimension. Findings from this study are that in this industry technology transfer, PPP has a positive relationship with all AC dimensions; RECOG (sig. 0.01), ASSIM (sig. 0.049), APPLY (sig. 0.021), and ACQUIRE (sig. 0.085). The model R² is 0.617, indicating that AC dimensions explain 61.7% of the variability of the PPP dimension of TTE. BP has a positive relationship with only two AC dimensions,

46


ASSIM (sig. 0.000) and APPLY (sig. 0.009). The model R² is 0.636, indicating that AC dimensions explain 63.6% of the variability of BP in the flexible packaging industry. HRC has a positive relationship with all AC dimensions; RECOG (sig. 0.018), ACQUIRE (sig. 0.025), APPLY (sig. 0.004), ASSIM (sig. 0.074). The model R² is 0.651, thus AC dimensions explain 65.1% of the variability of HRC in the flexible packaging industry. Table 7 Result of multiple regression analysis between independent variable, Absorptive Capacity (AC), dimensions with dependent variable, Technology Transfer Effectiveness (TTE), dimensions Unstandardised coefficients


B

Standard error

Intercept

0.052

0.315

RECOG

0.274

0.102

0.289

ACQUIRE

0.213

0.121

0.185

1.754

0.085**

ASSIM

0.251

0.125

0.232

2.009

0.049*

APPLY

0.279

0.117

0.261

2.378

0.021*

Intercept

0.292

0.275

1.062

0.293

RECOG

0.068

0.089

0.080

0.759

0.451

ACQUIRE

0.004

0.106

0.004

–.039

0.969

Beta

t-value

Significance

0.165

0.870

2.685

0.010*

Dependent variables: Product and Process Performance (PPP)

Dependent variables: Business Performance (BP)

ASSIM

0.552

0.109

0.538

4.782

0.000*

APPLY

0.277

0.102

0.290

2.705

0.009*

Intercept

0.345

0.314

–

–1.097

0.277

RECOG

0.249

0.102

0.251

2.442

0.018*

ACQUIRE

0.280

0.121

0.233

2.310

0.025*

Dependent variables: Human Resources Capability (HRC)

ASSIM

0.227

0.125

0.200

1.818

0.074**

APPLY

0.347

0.117

0.310

2.961

0.004*

Note:

R² = 0.617; F (4.56) = 22.565; p = 0.000 R² = 0.636; F (4.56) = 24.447; p = 0.000 R² = 0.651; F (4.56) = 26.074; p = 0.000 p < 0.05*; 0.10**


6

47

Discussion

Findings from this study demonstrate that the relationship of AC is statistically significant with TTE for the flexible packaging industry in Thailand. AC is a predictor of TTE. This study also indicates that in flexible packaging, all AC dimensions correlate with TTE to some extent. This finding is consistent with the AC and TTE literature on the influence of AC, which is posited to largely determine the effectiveness of a technology transfer (Venu, 2002), although the literature rarely demonstrates this relationship empirically. AC is a critical factor in determining the effectiveness of the transfer performance (Lin et al., 2002). The transfer of technology entails much more than the mere acquisition of physical assets (TDI, 1997); and AC appears to be a necessary condition for a successful technology transfer (Akubue, 2002). One observation related to ACQUIRE (the ability to acquire a new technology), seems to be the slightly less importance given to overall TTE for the flexible packaging industry, (sig. 0.078). Actually, before knowledge can be transferred it must be acquired (Gilbert and Cordey-Hayes, 1996), which means there must be a process for the firm to determine which technologies it needs, which firms have the technologies that it wants to obtain, and what resources they should prepare before buying the new technology (Lin et al., 2002). But this empirical finding is consistent with the pilot study, which suggested that in the flexible packaging industry, ACQUIRE had already received management attention. Flexible packaging firms focus on how to best manage technology acquisition to ensure they receive the appropriate technology. So this ability is quite well developed in all firms and thus, has a somewhat weaker influence on overall TTE. ACQUIRE had no significant influence on the specific BP dimension of TTE, and was also weak on the PPP dimension. Findings related to how RECOG influences TTE are also consistent with the literature in terms of this ability as a necessary condition for technology transfer. RECOG is the first dimension of AC. Before firms can assimilate the new technology they must go through a number of stages including understanding and recognising the value, adoption and acceptance of the new knowledge or technology (Gilbert and Cordey-Hayes, 1996). The firm must first recognise the existence and value of the new technology. This finding is also consistent with the pilot study, which showed that when people do not recognise the value of a new technology they will not see its benefits and they will not try to use it. RECOG seems to affect the PPP and HRC dimensions of TTE, but not the BP dimension. Findings in terms of the influence that ASSIM and APPLY have on TTE are also consistent with the literature, which shows that these are necessary abilities for a successful technology transfer (Byun and Kim, 2000; Akubue, 2002; Lin et al., 2002; Chen, 1997; Venu, 2002). Technology transfer involves the movement of a technology, which can include know-how (Keller and Chinta, 1990), and new process techniques or equipment (Weatherly and Iorio, 1993), which moves from one entity (producer or supplier) to another entity (procurer or user) (Sharif, 1983). The receiving entity must effectively utilise the transferred technology with the objective of turning it into a marketable product or improvement in productivity (Weatherly and Iorio, 1993; Ramanathan, 1997). Technology transfer differs from a more straightforward scientific information transfer in that a genuine transfer depends on the successful utilisation of a particular technology. It must be embodied in an actual operation of some kind (Carayannis, 1999). A transfer of superior knowledge is effective only when the

48


knowledge transferred is retained in use (Szulanski, 1995). To be retained, the knowledge acquired and communicated must then be applied. The application of the knowledge enables the organisation to learn (Gilbert and Cordey-Hayes, 1996). Thus, ASSIM and APPLY capabilities both play a role in all of the TTE dimensions. We note that the PPP and HRC dimensions require broader absorptive capability than the BP dimension. Business performance seems mainly to require the ASSIM and APPLY capabilities, which are more about implementation than planning. This finding is partially consistent with the literature in the sense that firms must have the capacity to assimilate, adapt, modify, and generate technology for an effective technology transfer to occur. The capacity to make necessary adjustments to imported technology requires a superior level of skill, knowledge, and expertise on the part of the recipient (Akubue, 2002).

7

Conclusion

Technology transfers have been widely implementing in all countries and firms and the importance of effectively using and implementing a transferred technology has been mentioned in many studies. However, few studies in this area have paid attention to actually measuring the effectiveness of a technology transfer. This study has gone one step further by exploring the empirical relationship between AC and TTE. It also looked at the AC dimensions that help to improve TTE, and determined which AC dimensions influence specific TTE dimensions. We also proposed a clear definition for AC and its dimensions and measures in the context of technology transfer projects and their effectiveness. Technology transfer is effective if it meets the objectives of a specific technology transfer project in all of the three following performance areas: product and process performance, business performance and human resource capability. Each specific performance contributes to TTE in different ways. AC is a firm’s combinative ability to enhance its technological capability and is comprised of the following abilities: the ability to recognise the value of external technology, knowledge, and information, the ability to identify and acquire the new technology; the ability to assimilate a new technology and the ability to apply the new technology to commercial ends to enhance the firm’s competitiveness and sustainability. This study’s findings confirm the hypothesis that AC has a strong positive influence on TTE in the flexible packaging industry in Thailand. All dimensions of AC were found to be statistically significant with TTE and consistent with previous research findings. All AC dimensions were found to be statistically significant with the Product and Process Performance (PPP) and Human Resources Capability (HRC) dimensions, while only two AC dimensions: the Ability to Assimilate (ASSIM) and to Apply the new technology (APPLY), were statistically significant with Business Performance (BP). This is due to the fact that business performance will improve once firms are able to generate new products or processes but the Ability to Recognise the value of new technology (RECOG) and the Ability to Acquire it (ACQUIRE) are part of the planning stages of the technology transfer process. Only these abilities are not sufficient for generating tangible output but that doesn’t mean firms can ignore them. In conclusion, AC is an important condition for TTE and all AC dimensions have a positive correlation with TTE, but the degree of importance differs depending on the individual firm’s technology strategy and its strength and weakness in managing technology for commercialisation.


49

This study contributes to AC and technology transfer theory by offering better understanding of both definition and dimensions of AC and TTE. It also proves the empirical relationship between AC and TTE. This relationship has long been discussed at a theoretical level, but until an empirical understanding was possible, research was limited. This study helps to fill this gap. This study contributes to technology transfer theory by drawing industry attention to TTE and providing guidelines for its measures by offering a much fuller and richer understanding of TTE measures. Since all TTE aspects related to product and process performance, business performance, and human resources capability were considered and included in this study’s measures, they are of particular use to industry managers. This study also contributes to AC theory by proposing a measurement for AC by considering all four AC dimensions. These four AC abilities have been discussed from time to time, and some researchers have proposed measuring AC by considering specific AC dimensions. However, until now, no single study has proposed a measure that includes all four abilities. This is the first study to propose such a comprehensive measure. This is also the first study to offer both academics and practitioners detailed knowledge about each AC dimension and its influence on each specific TTE dimension in the flexible packaging industry. Managers will be able to determine which AC dimension is likely to have the most influence on each TTE dimension, and this will help them improve their firm’s AC and TTE by pinpointing which AC dimension requires improvement. This study focused on the multi-layer flexible packaging industry because of its heavy reliance on complex technology and technological innovation, and thus flexible packaging traders and single layer manufacturers using less complex technologies were not included. This study’s results are limited to this one industry and may need to be adapted to suit other industries. Since the concepts of AC and TTE have not been very clearly defined in the literature published so far, an empirical analysis of their relationship is very rare. This study tried to find empirical evidence for the first and immediate impact that a firm’s AC has on the technology transfer process performance measured by TTE because assessing the quantity or quality of TTE in Thailand’s flexible packaging industry is still not well established. It is reasonable to suggest the existence of a second feedback-loop relationship, whereby improved TTE feeds back and enhances AC. However, because this industry in Thailand is still quite young and lacks the requisite experience with technology transfers, this possibility could not be investigated. Although this is a limitation of the present study, it points the way to further research as the industry matures in Thailand.

8

Recommendation

On the basis of this study we suggest that the flexible packaging industry can enhance the effectiveness of its technology transfers by managing four specific AC dimensions that correlate with a firm’s TTE. Our data suggest that all AC dimensions are important for improving TTE. Flexible packaging manufacturers should evaluate their TTE in order to know the level of meeting project objectives to ensure the effective use of their resources,

50


to improve their next technology transfer activities, and lastly to improve the firms’ technological capability for competitiveness and sustainability. This study developed an integrated set of TTE measures, as well as AC measures for the flexible packaging in Thailand. Further research could explore specific measures for AC and TTE in other industries and should also explore the flexible packaging industry in other countries to revalidate and strengthen the AC and TTE dimension measures. It is important to note that although the data we have collected is very suggestive in the context of existing literature, association does not prove causation and that it will be necessary to conduct temporal studies to observe whether new strategies adopted to improve AC indeed have a longer term impact on TTE. Conversely, it would also be useful to empirically investigate a second possible relationship between AC and TTE, namely, the feedback that the firm’s TTE performance may have on its AC, to observe whether an improved TTE reciprocally helps to enhance AC. These studies would necessarily require longer periods of time to measure changes that take place after companies have taken steps to improve their TTE.

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Note 1

Technology can be in a pure informational form (disembodied technology) and embodied in a product, machine, process, or person (Keller and Chinta, 1990). It can be research results (Stock et al., 1996); information (Bratic and Warren, 2001); knowledge (Carayannis, 1999; Albino et al., 1999; Bessandt and Francis, 1999; Byun and Kim, 2000); and physical facility or hardware (Keller and Chinta, 1990; Sharif, 1983).

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Appendix

Research survey questionnaire

Questionnaire for an empirical study of the impact of absorptive capacity on technology transfer effectiveness in the flexible packaging in Thailand.

Part I Technology transfer effectiveness Please select the suitable answer by filling (X) in the box at the right side. To what extent was your company able to generate the following results from the recent new technology transfer project?

Low 1

High 2

3

4

1. Produced the expected product 2. Increased new products (increase innovation rate) 3. Achieved the required quality level 4. Met production efficiency targets 5. Achieved target costs 6. Marketed product on time 7. Shorten product development cycle time 8. Achieved company growth target 9. Achieved planned goals 10. Increased market share 11. Increased profitability 12. Able to manage the acquired technology 13. Increased the ability to manage future new technology transfer 14. Received training from equipment or know-how vendor 15. Increased management skills and capabilities 16. Increased technological capabilities

Part II Absorptive capacity Please select the suitable answer by filling (X) in the box at the right side. 1. To what extent was the concerned staff able to do the following during this recent new technology project? 1. Saw the benefits of this new technology 2. Tried to use the benefits of this new technology 2. In this recent project, to what extent did your project team meet the following conditions during the acquiring stage (the stage of bringing the new technology from equipment or know-how vendor to your company) 1. Prior background knowledge to understand the new technology 2. A clear understanding of company requirements related to adoption of new technology 3. Planning and identification of requirements regarding acquisition of new technology 4. Ability to ask questions and understand answers with technology vendor 5. Ability to understand and communicate in the same language as the technology vendor 6. Ability to understand technology vendor’s explanation of the new technology

Low 1

2

High 3 4


Appendix

55

Research survey questionnaire (continued)

3. In this recent project, to what extent did your project team meet the following conditions during the assimilation stage (the stage in which your company generate the output according to the project objectives) 1. Openness to the new technology 2. Willingness to learn the new technology 3. Knowledge of project detail such as goals, objectives, activities, milestones, etc. 4. Knowledge or information sharing (dissemination) among the concerned staff such as project implementing results, changes, new needs or requirements, and etc. 5. Achieving plan for the agreed or assigned work among members at each stage in the project 6. Coordination of different project jobs and work activities among different departments 7. Efficiency of concerned people from different departments who had to work together 8. Timing of all related activities in the everyday routine of the project 9. Planning of the work assignments of people from concerned departments who worked together 10. Establishing the routines of different departments that had to work with one another 4. In this recent project, to what extent did the achievements and accrued benefits from the assimilated new technology go beyond your project objectives? 1. New packaging specification(s) 2. New packaging process(es) 3. New packaging application(s) 4. Modification of existing packaging specification(s) 5. Modification of existing packaging process(es) 6. Found alternatives use and applications 7. Fused the assimilated technology with existing technologies 8. Found additional product benefits, example: reduce unit cost, improve quality of other products, etc. 9. Found additional process benefits, example: reduce unit cost, improve quality of other products, etc.

Respondent job title Respondent job function Contact telephone number

Low 1

High 2

3

4