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An ecosystem-based analysis of design innovation infringements: South Korea and China in the global tire industry

Abstract

Formal intellectual property right (IPR) protections under global agreements are a policy linchpin of the new global knowledge economy. However, we observe that while some emerging-economy firms have successfully transitioned from imitation to innovation, others persist in imitation, sometimes resulting in IPR violations. In this paper, we study design innovation in the global tire industry, focusing on South Korean and Chinese firms, and uncover IPR violations by both groups. However, by the 2000s, Korean tire firms had transitioned to developing their own design innovations while Chinese firms persisted in imitation, as evidenced by continuing IP lawsuits. We trace this difference to the fact that South Korea is home to globally successful multinational automobile manufacturers, whereas China is not. These automobile multinationals function as “keystone organizations” in a national industry ecosystem and are critical to facilitating the transition to innovation. Our study emphasizes the importance of linkages to keystone organizations as crucial elements supporting operations that comply with global IP regulations.

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Correspondence to Ram Mudambi.

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APPENDIX

APPENDIX

Interview Summary

To triangulate the insights from the analysis on tread design with academic manuscripts, books, magazines, press articles, and corporate websites, a series of semi-structured interviews were conducted during June 2018 (Table 1). One senior-level executive, two tire sales experts, three strategic planning managers, and two R&D engineers working for global tire and car makers were interviewed to collect contextual knowledge of the tire industry. We also conducted email interviews with a former executive of a Korean auto maker to learn more about the history of Korean tire-making. All the face-to-face interviews lasted 45 min to 1 h.

 Question categoryQuestions
1Value of tread design1. How important are tread designs in tire performance?
2. How tricky is it to create and/or innovate tread designs?
3. Why have tire makers started patenting more often?
4. Has your firm commercialized an unpatented tread design ever? Why?
2Relationship of tire makers with car makers1. Do automobile makers recognize unique tread patterns? Why?
2. If a car maker finds that its original equipment (OE) tire maker copied the tread designs of others, would it affect the OE partnership? Why?
3. Since when have your tires been equipped on (exported) automobiles?
4. It is known that OE tires transfer to the purchase of the same tire brand for replacement (RE) tire. Does it still work that way? Why?

The interviewees were asked to describe two main issues in the history of tires: the value of tread design and the relationship of tire makers with car makers. The interviewees from tire makers confirmed that tread design for tire performance is one of the key sources of functional differentiation (Clark, 1981). For example, tread design offers differential performance measures such as traction (Novopolskii and Tretyakov, 1963), braking friction (Allbert & Walker, 1965), longevity (Tretyakov and Novopolskii, 1969), and noise reduction (Clark, 1981). Furthermore, the interviewees reported that the tread design requires complex trade-offs among the different performance measures, thus giving each tire a unique quality. These interviewees stated explicitly that litigation regarding tread design infringements cannot be treated as minor. A tread design infringement is a major attempt to imitate the core product performance of advanced tire makers and is a strategic action to catch up with advanced players in the tire industry.

Another key implication of the interviews concerns the relationship of tire makers with car makers. The role of car makers as innovation drivers is clear. The R&D engineer who researches tread design stated that car makers request a set of specific tire features for a new car 2–3 years before its commercialization. Tire makers then research and develop a tire tread design that satisfies the requirements of the new car, sometimes collaborating with the car maker. The development of tread design requires complicated trade-offs among the performance measures, mandating a high R&D capability to keep up with car makers’ standards.

The former head of European operations at a Korean automobile maker stated that when Korean cars were initially exported to the US in the late 1980s, they were NOT equipped with Korean tires. Only in the early 1990s did Korean auto manufacturers finally equip their exports to the US with Korean tires. The sales director and assistant sales director corroborated the fact that the timing of Korean tire makers as OE suppliers to their US-exported cars was around the early 1990s (they stated the first year when this happened as either 1992 or 1993).

All in all, the interviews imply the following:

  1. 1.

    Tread design is one of the key innovations for tire performance.

  2. 2.

    In the process of R&D on tread design, car makers are an innovation driver.

  3. 3.

    Korean tire makers started to supply their tires to US-exported Korean cars in the early 1990s, which coincides with when they began patenting their own innovations.

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Kim, J.K., Mudambi, R. An ecosystem-based analysis of design innovation infringements: South Korea and China in the global tire industry. J Int Bus Policy 3, 38–57 (2020). https://doi.org/10.1057/s42214-019-00038-5

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Keywords

  • intellectual property rights
  • property rights infringements
  • global tire industry
  • China
  • Korea
  • TRIPS