Configuring an alliance portfolio for eco-friendly innovation in the car industry: Hyundai and Toyota

Configuration of alliance portfolio

Many previous studies analyzed the configuration and properties of alliance portfolios using the quantitative indexes as the number of partners, partner diversity, intensity of partnership (repeated partnerships) and technological similarity (Frankort et al. 2012; C. Kim and Song, 2007; Kim and Choi 2014; Ma et al. 2013). However, this study analyzes the configuration of alliance portfolio using the patent citation information and various patent cation indexes.

Many studies use patent citation information to analyze the flow of technological knowledge and the relative importance of the technology that companies produce (Hall et al. 2005). Patents contain a lot of information, which researchers use to derive multiple properties related to technological innovation or technological excellence (Ernst 2003). Tseng et al. (2011) analyze the trends and technological strategies in the amorphous silicon thin-film solar cell industry using patent citation indexes. David W.L. Hsu and Yuan (2013) identify knowledge creation and diffusion in Taiwan’s universities utilizing forward citations, backward citations, and Science Linkage (SL).

There are various patent citation indexes. Current Impact Index (CII) is an index that represents technological excellence measured by the number of citations of one patent by other patents in the previous five years. A higher CII indicates that a patent has high technological capability (Chang et al. 2012; Chen et al. 2007; Chiu and Chen 2007). Technological Strength (TS) demonstrates the excellence of technology by indicating the scale of a company’s influence in a specific technological field. A higher TS means that the company has higher market competitiveness. Therefore, a company with the higher TS in its alliance portfolio may enjoy a dominant position in the market. Another index is Technological Independence (TI) that implies technological innovation is the degree of citations of internal patents developed in an alliance portfolio. In other words, it indicates that an alliance portfolio with the higher TI actively uses the technologies developed by internal actors (Huang et al. 2003).

Lastly, Science Linkage (SL) represents technological innovation. SL indicates that actors in an alliance portfolio actively develop science-based technologies and lead scientific technology in the market. Sung et al. (2015) classify four companies with a higher SL by analyzing the results for the top 20 companies in the Computers and Communication (C&C) field. They emphasize that a higher SL does not mean that a company has the low technological competitiveness, but that it has technological innovation capability.

Previous studies measured the degree of collaboration between a focal firm and their partners using the number of joint patents. However, it is difficult to determine the extent of cooperation between enterprises for technological innovation accurately using this method. Salton’s index compensates for this disadvantage by providing information about the scale of cooperation between companies using the relative rate of joint patents in all patents (Lu and Feng 2009). Lee et al. (2016) measure the extent of cooperation between large firms and small-medium firms using Salton’s index.

This study uses the CII, TS, TI, and SL indexes, which represent technological innovation and technological excellence to measure patent quality, and Salton’s index to measure the degree of cooperation between a focal firm and its partners. The present study thus differs from previous research because it uses patent citation indexes for analyzing the configuration of alliance portfolio.

Bioplastic industry

Bioplastic is the polymer produced with bio-mass, a bio-resource based on the fermentation process (Jegal 2012; Ministry of Environment 2014). Its renewable properties have focused attention on bioplastic as an eco-friendly material that can reduce CO₂ emissions.

The global bioplastic market was at $ 1.9 billion, formed initially by the US, Europe, and Japan, which have strong environmental regulations in 2011. Europe accounts for 60% of the entire bioplastic market (European Bioplastics 2016). Leading countries such as the US, Japan, and some in Europe focused early on R&D in environmental packaging technology. These countries completely supported R&D and investment costs in the bioplastic industry at the early stages, led by the government (Iles and Martin, 2013). Strategic alliances between traditional chemical companies and start-up bio-companies have expanded in the industry. In the automobile industry especially, companies have expanded the use of bioplastic materials for to enhance their eco-friendly image (European Bioplastics 2015).

In the Japanese automobile business, Toyota has actively used bioplastic to produce eco-friendly cars. In 2009, Toyota produced a new eco-friendly hybrid vehicle using plant-based bioplastic for 60% of the vehicle’s inner areas. Additionally, after taking over the PLA production factory from Shimadzu in 2002 through a strategic alliance, Toyota expanded PLA production to produce eco-friendly cars and supplied other companies with the material. Moreover, Toyota engages in active research to improve PLA’s material properties (Jegal et al. 2008), with many patents related to bioplastic because they vigorously cooperate with other companies in R&D.

In Korea, after a set of government-mandated tasks related to bioplastic R&D in 1993, companies such as SK chemical, LG Chemical, and so on engaged in bioplastic R&D. Although many firms’ manufacturing technology for bioplastic reached a relatively high standard, most commercialization stopped due to excessively strict regulations (Han 2011). Domestic bioplastic in Korea is produced mainly by big chemical companies such as LG chemical, GS Caltex, and CJ. In 2009, Hyundai was the first to use PLA to produce an eco-friendly hybrid car.

Measurements

We use patent statistics to measure the firm’s innovation capability and R&D collaboration since they provide useful information about the flow of technology development with objective and standardized indexes containing the latest technology trends. In addition, because patents are an objective and formal innovation measurement result, many previous studies use patent statistics to measure firms’ innovation capability.

We define a joint patent as that consisting of two of more assignees affiliated with different organizations through information contained in patents. We use these joint patents to measure and analyze R&D collaboration activity, a common methodology employed in earlier research (Y.-S. Chen & Chen 2011; Hoffmann 2007; Huang et al. 2012; Lee and Lee 2013; Lin et al. 2012; Motohashi and Muramatsu 2012; Tseng et al. 2011; Yun et al. 2015). We thus adopt this method to measure the relationship between R&D collaboration and innovation capability.

It is possible to create an alliance portfolio from joint patents resulting from R&D collaboration. Although alliance portfolios can be categorized as alliance portfolio emergence, configuration, and management, this study focuses on alliance portfolio configuration, measured by the size and intensity of the R&D collaboration network.

The firm’s innovation capability is measured with a patent citation analysis. Previous studies showed that patents with high numbers of citations in patents filed by other firms have a high technology value. Through a patent citation analysis, many researchers analyzed technological skill and market power, and also measured a firm’s innovation capability.

This study analyzes co-assignees in joint patents to create an alliance portfolio for the focal firms and measure its technological skill according to the alliance portfolio. Furthermore, we conduct a comparative analysis about the degree of R&D collaboration among partners and the level of technological skill.

Data

We use data from the Thomson Innovation Database because it supplies a variety of the information required for this study, such as inventors, application year, and assignees’ affiliations. We can also select only bioplastic patents because this database provides patent information supplemented by expert reviews since patents may differ in their actual contents when assignees do not want to publish their patent information openly. We searched this database including USPTO (United States Patent and Trademark Office), EPO (European Patent Office), JPO (Japan Patent Office) and KIPO (Korean Intellectual Property Office) for patents from 1984 to 2013 related to bioplastic for Toyota and Hyundai. We identified 45,240 bioplastic patents and classified the patents of Hyundai and Toyota from the entire bioplastic patents (see Fig. 1). Toyota has 233 joint patents of their total of 415 patents, and Hyundai has 71 joint patents of their total of 165 patents. Additionally, Toyota collaborated in R&D with 34 partners, while Hyundai collaborates with 26 partners.

Patent citation analysis indexes

This study analyzes firm’s innovation capability through the number of partners and the degree of cooperation using the patent citation information of joint patents of both companies. Joint patents are analyzed through the patent citation indexes suggested by CHI research Inc. (Narin 1999).

t: the past 5 years based on current year

C_ij: Number of the cited patents in a certain year

K_ij: Number of patents

\( {\displaystyle {\sum}_{t=1}^5}{\mathrm{C}}_{\mathrm{ij}} \): Number of cited patents of company i in industry j from the previous five years

\( {\displaystyle {\sum}_{t=1}^5}{\mathrm{K}}_{\mathrm{ij}} \): Number of patents of company j produced in industry j during the previous five years

P_ij: Number of i and j joint patents

P_i: Number of joint patents of company i

P_j: Number of joint patents of company j

Alliance portfolio configuration and properties of partners

Figure 6 shows the relationship between the degree of collaboration and patent quality in Toyota’s alliance portfolio. We classified four groups according to the degree of the relationship between the degree of collaboration and patent quality. ‘Key partners’ have a high value for the degree of collaboration and patent quality and ‘Potential partners’ have a high value for patent quality and a low value for the degree of collaboration. ‘Nominal partners’ have a low value for the degree of collaboration and patent quality and ‘Diligent partners’ have the high value of degree of collaboration and a low value for patent quality.

Figure 7 shows the relationship between the degree of collaboration and patent quality in Hyundai’s alliance portfolio. Table 2 shows the properties of the four groups. The patents of ‘Key partners’ are cited very frequently by other patents, and ‘Diligent partners’ cite many more patents than other groups. ‘Potential partners’ focus on R&D based on science and use external knowledge more often. ‘Nominal partners’ patents are cited more often by other patents than for the other groups except ‘Key partners’. ‘Diligent partners’ has a high value for TI, meaning that these firms use external technology more than other groups.

Group	Degree of collaboration	Patent quality	Forward citation	Backward citation	TI	SL
Key Partners	7.56	1.84	1.28	3.58	0.00	0.16
Potential Partners	2.70	1.11	0.67	3.44	0.14	0.53
Nominal Partners	1.65	0.29	1.09	2.90	0.00	0.13
Diligent Partners	6.01	0.07	0.50	2.68	0.17	0.00

Typical collaboration patterns

As shown in Table 3, companies belonging to ‘Potential partners’ have a lower degree of joint research cooperation with Toyota, though have a significant impact on securing Toyota’s source technology. For example, Mitsubishi has technology to enhance heat resistance, since this is a disadvantage of PLA, though Toyota’s R&D aims to improve the physical properties of PLA. In addition, Kanebo is the other partner with an annual production capability of 500 tons of PLA fiber in Japan’s best PLA textile company.

The representative partners in ‘Key partners’ are Shimadzu and Mitsui. Shimadzu is a fine chemical manufacturing company, and also an excellent Japanese PLA production company. Toyota cooperated with Shimadzu steadily from 1994 to 2002, and then acquired the PLA production plant in 2002, later producing and selling its own PLA to other companies. The cooperation between Toyota and Shimadzu is a good example from Lin et al. (2012)’s finding that an alliance for product development is better than one based on technological cooperation. Mitsui Chemicals that is another partner of Toyota established a bioplastic production plant with the US chemical company Dow in Brazil, and cofounded a joint venture with Toyota called bio-Indonesia to sell Toyota’s bioplastic in Indonesia.

‘Nominal partners’ are characterized by low joint research cooperation to acquire the simple knowledge where the source technology development level is also low. Unitika has its own production facilities and produces engineering plastics derived from biomass, R&D objectives, and other directions from Toyota. Thus, cooperation for simple knowledge acquisition had the lowest cooperative partnership to improve Toyota’s patent portfolio quality. Gosen, another typical example, is a company manufacturing sporting goods in Japan. Recently, the trend of adding a bio-derived plastic has increased in response to the supply of the PLA from Toyota, as indicated by the high degree of cooperation. However, Gosen does not engage in R&D related to bioplastic, so it does not have a significant effect on patent quality.

‘Diligent partners’ have the highest degree of collaboration as a cooperative group with high joint research cooperation, though this group has low patent quality. In addition, Hitachi has recently expressed an interest in bioplastic production and has less expensive bioplastic manufacturing technology than Toyota’s, but has thus not improved patent quality in cooperation with Toyota. In other words, partners belonging to ‘Diligent partners’ are either receiving a supply of bioplastic or having bioplastic manufacturing technology to produce independently of Toyota.

Table 4 shows the properties of Hyundai’s representative partners in four groups. KRICT (Korea Research Institute of Chemical Technology) is the institution representing ‘Potential partners’. KRICT opened the Bio-Chemical Commercialization Center in 2016, focusing on bioplastic R&D.

GS Caltex represents a ‘Key partners’. The company is developing bio-nylon made from biomass. This material has very similar mechanical properties as existing products.

LG belongs to the ‘Nominal partners’, which has a higher number of joint R&D partners in addition to Hyundai. LG, conducted joint research with KAIST in 2009, developed PLA production technology using bacteria. Thus, ‘Nominal partners’ in Hyundai’s portfolio promote more joint R&D with other partners.

Desco and Hyosung are classified as ‘Diligent partners’ because these partnerships have a higher level of joint research cooperation. Hyosung offers a fiber created to make yarn from corn for materials for the KIA “Soul EV”. However, since Desco does not conduct R&D related to bioplastic, it had no significant effect on patent quality.