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The Al-Invest Contribution to the Resilience of the Chemical Company: Development Cooperation

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This article aims to identify the contribution of the Al-Invest program to resilience and economic growth in companies in the chemical sector. The study sample consists of 596 European and Latin American companies that benefited from Al-Invest. It was found that Knowledge Transfer was not the main interest in the collaborations. The economic dynamics of the chemical industry pressure companies to compete, having a low impact on local development when it comes to knowledge transfer. Al-Invests contribution is oriented to the company in four aspects: relational capital with foreign agents, geographic openness, open innovation, and greater technological and marketing capacity. These four elements increase the resilience and economic growth of the company, accompanied by a favorable impact on economic development in the region.
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Research Article
© 2021 Tania Elena González Alvarado.
This is an open access article licensed under the Creative Commons
Attribution-Non-commercial 4.0 International License
(https://creativecommons.org/licenses/by-nc/4.0/)
Received: 2 September 2021 / Accepted: 5 October 2021 / Published: 5 November 2021
The Al-Invest Contribution to the Resilience of the
Chemical Company: Development Cooperation
Tania Elena González Alvarado
Universidad de Guadalajara, Mexico Periférico Norte N° 799,
Núcleo Universitario Los Belenes, C.P. 45100,
Zapopan, Jalisco, México
DOI: https://doi.org/10.36941/jicd-2021-0009
Abstract
This article aims to identify the contribution of the Al-Invest program to resilience and
economic growth in companies in the chemical sector. The study sample consists of 596
European and Latin American companies that benefited from Al-Invest. It was found that
Knowledge Transfer was not the main interest in the collaborations. The economic
dynamics of the chemical industry pressure companies to compete, having a low impact on
local development when it comes to knowledge transfer. Al-Invests contribution is oriented
to the company in four aspects: relational capital with foreign agents, geographic
openness, open innovation, and greater technological and marketing capacity. These four
elements increase the resilience and economic growth of the company, accompanied by a
favorable impact on economic development in the region.
Keywords: International cooperation; economic development; investigation and development;
SMEs; competitiveness
1. Introduction
Analyzing the links between companies in the chemical industry in programs such as Al
Invest
1
–development cooperation– contributes to the construction of new paths to
1
The AL-INVEST Program is one of the most important of the European Commission in Latin America. It emerged in 1994 to
attract European investment to Latin America. It changed to promote the internationalization of micro, small, and
medium-sized companies in Latin America. The program pursues the development of Latin American regions through the
insertion of companies into international networks.
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development. With this, international cooperation programs can be adjusted to
contribute to economic growth; increase resilience, and generate effective responses to
the industry to the restrictions derived from mitigating mechanisms for climate change.
Additionally, understanding the dynamics of companies in the framework of
development cooperation contributes to the creation and adoption of new business
models that, in turn, generate sustained growth. All of this applies to the chemical
industry. It is an industry that adapted to the changes of the last year with less impact
compared to other industries. (Deloitte, 2021)
The flexibility to adapt is due to the combination of various articulating
mechanisms. These mechanisms are partnerships, cooperation, tolling arrangements, or
more broadly designed research programs -as well as the design of smaller, more-
flexible production units, since they have been already adopted by other industries, such
as pharma companies (Hilton, 2021). For example, chemical companies in the United
States have responded to the crisis by focusing on operational efficiency, asset
optimization, and cost management to succeed in this shifting industry landscape,
chemical companies should consider implementing a series of targeted, strategic
initiatives across major functional areas such as R&D and technology (Deloitte, 2021).
Now, the industry faces a possible decrease in the demand for chemical products
due to deglobalization and regulations to face climate change (Hilton, 2021).
The article aims to identify the contribution of the Al-Invest program to resilience
and economic growth in companies in the chemical sector. This document is divided into
three parts, the first one deals with the theory of cooperative links, company networks,
and their importance for business resilience. The methodology is described in the
second section. The third presents the discussion of the results of the Al-Invest program,
with support from the situation of the chemical sector and its importance for other
industries, as well as the triangulation with other research results.
2. Theoretical Framework
The internationalization of the company and its contribution to local development has
been studied intensively in recent decades (Rozo, 1993; Stumpo, Katz & Alarcón, 1996;
Rojo, 2001; Kosacoff, 2009; Perrotta, Fulquet & Inchauspe, 2011; Felzensztein, Deans &
Dana, 2019).
Prebisch (1986) indicated that you cannot have economic growth based only on
exporting companies. The local development that accompanies economic growth
depends on how, not on internationalization itself.
It is important to note that technology transfer in the chemical industry does not
agree with the theoretical explanation. Technology transfer in this industry has more
barriers rather than facilities to impact in low-income countries. A possible explanation
is that research and development (R&D) requires large long-term investments,
investments that are only supported by intellectual property and industrial secrets.
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Local development based on technology transfer is complicated for many
industries. The challenge is even greater. If one considers that large companies
correspond to other regions of the world; their commitment to the destination location
is usually low. In this case, the transfer would only take place within the specific
framework of a program for international cooperation. Even in this last circumstance,
since they are global companies collaborating with smaller local companies, the
asymmetries would present limitations to the transfer. If the results are not transformed
into a common good, then the R&D projects are not sustainable.
The chemical industry is made up of large corporations that interact with small and
specialized industries. Europe, the United States, China, and Japan concentrate more
than three-quarters of the market; and receive the main investment flows (Duran-García
& Durán-Aponte, 2011). This scenario shows that smaller companies focused on local
consumption - but linked to exporting or transnational companies - contribute to
economic development.
In this way, indirect internationalization has a positive impact on the Welfare State.
For this reason, studying business linkages is important to understanding local
development (Evans, 1979; Butler & Hansen, 1991; Zcan, 1995; Pietrobelli & Sverrison,
2005; Helmsing, 1999; Schmitz, 1999; Sternberg, 2000; Trigilia, 2001; Kantis, Ishida &
Komori, 2002; Sverrison, 2005; Alburquerque, 2006; Abramovay, Magalhães & Schröder,
2008). Foreign Direct Investment (FDI) is also important in sectors with Research and
Development (R&D), (Patel & Pavitt, 1991; Florida, 1997; Kuemmerle, 1999; Frost, 2001;
Kumar, 2001; Chung & Alcácer, 2002; Le Bas & Sierra, 2002; Von Zedtwitz & Gassmann,
2002; Cantwell & Mudambi, 2005).
The relationship between FDI and regional development has received more
attention than other factors (Ozawa, 1992; Borensztein, De Gregorio & Lee, 1998;
Moran & Moran, 2000; Mortimore, Vergara & Katz, 2001; Moran, Graham & Blomström,
2005; Wei & Leung, 2005). But it has been shown that FDI alone does not guarantee
development (Aitken & Harrison,1999; Alburquerque, 2001; Lall & Narula, 2004;
Corrales, 2006; Elías, Fernández & Ferrari, 2006; Jimenez & Rendon, 2012; Gil, López &
Espinosa, 2014; Rogerson, 2019).
An important factor is a way in which economic agents are articulated. For this
reason, the study of international business cooperation networks arises (Eriksson &
Johanson, 1996; Holm, Eriksson & Johanson, 1996; Fritsch & Lukas, 2001; Contractor &
Lorange, 2002; Haahti et al., 2005; Holm, Wright, Westhead & Ucbasaran, 2007).
According to Pérez (2012), there are three types of channels for the dissemination
of technology and/or knowledge: informal, formal, and commercial. The informal
channel includes established personal interactions without formal organizational
relationships. (Dahl & Pedersen, 2002; Pérez, 2012).
The formal channel refers to the transmission of knowledge (i) encoded by formal
means, such as publications, technical reports, and conferences; and (ii) tacit, via human
capital, such as formal organizational agreements for staff mobility and workforce
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training. (Arvanitis, Kubli & Wörter, 2005; Pérez, 2012).
The commercialization channel is based on scientific activities with a commercial
orientation on specific processes or products: science-based companies, research
contracts, consultancy, patents, and licenses. (Perkmann & Walsh, 2007; Pérez, 2012).
Knowledge transfer is easier when it comes to cooperation (creating value to share)
between companies. Cooperation leads to the creation, integration, transfer, and
absorption of knowledge. Knowledge is created in long-term cooperation (conflict and
tension) and integrated. Sometimes it's scattered and disjointed, but the conflict and
tension create channels of communication. Thus, a permanent negotiation process is
built that gives logical order to the collective knowledge for its application.
The longer a network of companies has, the greater the transfer of knowledge
because the appropriate channels exist, and the collective absorption of knowledge is
favored. This theoretically explains the international networks in the Chemical Industry.
Enterprise networks are based on adaptive systems. The properties of the adaptive
system are 1) aggregation, as companies contribute to the Gross Domestic Product; 2)
flows, feedback from production, and the multiplier effect; 3) non-linearity, as there are
catalysts; and 4) the diversity (Holland, 1992). The properties allow flexibility to adapt to
changes. Adaptation sometimes leads to better circumstances than the previous ones,
even though the scenario is highly negative and unstable. In other words, the
relationships that companies establish contribute to resilience and economic growth.
3. Methodology
The original data were provided by the Nafin Euro center (Nacional Financiera, Spanish
name). Al-Invest's chemical industry database includes 596 participating companies
from 2002 to 2009. Actually, the companies have a website, collaborate with foreign
companies, and appear in various electronic directories. After eleven years, the data of
the Web-based companies was updated without the need to interact with the
entrepreneurs. The companies continue their international activities.
Krippendorff (2018) defines content analysis as a research technique for making
replicable and valid inferences from data to their context. Qualitative content analysis is
like textual analysis in that it is primarily interpretive in nature and does not utilize
statistics for data analysis (Kim & Kuljis, 2010). This method requires analysing each
company as a case study. This makes the research work more laborious, but the
information is obtained that statistics sometimes do not offer (Flyvbjerg, 2006).
4. Discussion of Results
The chemical industry grew rapidly from the end of the 19th century to the present day,
based mainly on oil and its derivatives. Most of the growth has occurred in the Asian
region. In the last years of the 20th century, complementary industries were developed,
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such as polymers, semiconductor materials, pharmaceuticals, and agrochemicals.
Nanotechnology has contributed in recent years to the transformation of the chemical
industry. (Montes-Valencia, 2015).
The strategies of transnational companies are complex, due to the diversity that
characterizes them, as well as the different economic scenarios to which they adapt
(Deloitte, 2016).
Chemical industry transnationals had a difficult operating environment in 2015. The
decline in global commodity prices put demand pressure on chemical companies serving
these final marketplaces and created a more challenging environment for biochemical
companies competing with petroleum-based substitutes (Deloitte, 2016).
Global chemical companies with stable balance sheets and continuous cash flows
sought acquisitions in 2015 to achieve growth (Deloitte, 2016). Business cooperation is
encouraged in crisis time. The acquisition becomes survival and growth strategies
2
.
Graph 1 shows the sales volume of the most important companies worldwide. If the
origin of the transnationals is considered, instead of the regions in which they operate,
then Asia abandons its prominent place, and the transnationals of German and
American origin are shown as the main parts of the world scene.
Graph 1: Chemical Companies ranking in 2018 (Billions of Dollars)
Source: Sevilla (2019)
Germany accounts for five percent of world turnover. It is the fourth largest chemical-
producing country, with China, the United States, and Japan being the first. The German
2
In November 2015, Air Liquide announced the $ 13.4 billion acquisition of Airgas, bringing together two complementary
businesses to provide greater value, service, and innovation to its customers. (Deloitte, 2016)
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chemical-pharmaceutical industry is highly exporting, and its export share has increased
considerably in recent years. (Bilbao, 2015)
German transnationals employ more than 50,000 people. Companies with more
than 1,000 workers, which represent 3% of the total number of companies, invoice 46%
of the sector. The German chemical industry includes 1,931 companies employing
444,800 people. In this group, there is a greater number of small and medium-sized
companies (Bilbao, 2015).
Germany has strategically combined local and international networks. It has
chemical parks, extensive industrial areas in which companies that produce the chemical
sector are located, and which are complemented by a complex transport network, which
makes its operation more efficient. It is also a pole of Know-How and innovation (Bilbao,
2015).
International networks prolong local development, as the catalytic companies of
the local network become increasingly global. In this way, expansion to other markets
has a positive impact on the locality of origin. The transfer of knowledge derived from
R&D favors geographically close companies, within the local network of the country of
origin.
A competitive disadvantage for the German chemical industry is it dependence on
fossil fuel imports. This has led to direct investments to other more profitable sectors, to
relocate production (Bilbao, 2015). According to development cooperation, Al-Invest
participating companies from the chemical industry should focus on knowledge transfer.
Mainly because in this industry, the transfer is key for local economic development
linked to international networks.
However, the international business cooperation network is not exempt from the
pressure to increase profitability, therefore, between one region and another,
companies differ in the way they are articulated with “the local”.
Transnational companies protect knowledge and create barriers to knowledge
transfer in regions that are attractive for cost reduction. This knowledge is related to
research and development (R&D) and is key to international competitiveness.
The German Chemical Industry has strengthened the local network in Germany and
articulated its activities to international networks. This combination of local and
international creates international competitive advantages because it provides
intangible resources that are not very imitable that guarantee the economic
sustainability of the business.
The Mexican and Argentine companies in Al-Invest are numerous compared to
those of other participating countries (Tables 1 and 2). This may be because there are
more young and smaller companies in the Latin American region than in Europe. Europe
is a leading R&D region. Europe is the region that provides knowledge and Latin America
is the recipient. Unfortunately, Latin America is a consumer of products and services
offered by European industry rather than a recipient of knowledge. The reality for Latin
America seems far from the Spanish one. Raposo (2004) identified that leading R&D
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companies support the innovation of Spanish companies.
Table 1: European companies by event for the Chemical Industry
Year 2002 2003 2005 2006 Total
Germany 11 24 19 15 69
Spain 10 16 14 17 57
France 7 18 10 12 47
Finland 1 8 0 0 9
England 3 6 1 0 10
Italy 14 19 16 12 61
Sweden 9 0 1 0 10
Switzerland 0 4 0 0 4
Austria 0 0 1 0 1
Netherlands 0 0 1 0 1
Total 55 95 63 56 269
Source: Own elaboration.
Table 2: Latin American companies by event for the Chemical Industry
Year 2002 2003 2005 2006 Total
Argentina 4 11 15 8 38
Guatemala 1 0 0 0 1
Mexico 98 19 149 10 276
Chile 0 3 0 4 7
Colombia 0 1 0 2 3
Venezuela 0 1 0 0 1
Brazil 0 0 0 1 1
Total 103 35 164 25 327
Source: Own elaboration
Global companies have business units in destination countries. In this way, they
maintain a relatively small size, and with this, they combine the advantages granted by
their global operation with the flexibility that being a small company provides.
By combining the sizes and using the transfer media (informal channel, formal
channel, and marketing), the market-leading company gains greater control over the
transfer and its benefits. This possibly explains the results presented in table 3. This
shows that, in Al-Invest, companies favor representation agreements (41.44) compared
to knowledge transfer (10.07%).
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Table 3: Type of cooperation in Al-Invest
Type Frequency %
Knowledge transfer 60 10.07
Business consulting 5 0.84
Joint Venture 21 3.52
Outsourcing 36 6.04
Franchise 11 1.85
Alliance 33 5.54
Association 17 2.85
License 16 2.68
Financial co-investment 22 3.69
Investors 13 2.18
Concessions 1 0.17
Commercialization 71 11.91
Import 12 2.01
Distribution 169 28.36
Product search 219 36.74
Product offer 132 22.15
Turnkey project 18 3.02
Representation agreements 247 41.44
Equipment 26 4.36
Source: Own elaboration
The most frequent barriers to transfer in the chemical industry are technical ignorance
when selecting, negotiating, and acquiring a technology; absence of a previous systemic
study for the selection and acquisition of technology; the obligation to keep the
knowledge transferred secret, beyond the term of the technology commercialization
contract; legal aspects on the part of the country where the industry that transfers the
technology is located (Durán-García & Durán-Aponte, 2011). Knowledge transfer in the
chemical industry requires strong and long-term links, due to the complexity of the
transfer and the possibility of acts of opportunism. Attending a business meeting to find
partners to enter a market easily translates into asymmetric relationships
Innovation in these companies follows a different pattern than technology transfer.
Table 3 shows the following: representation agreements, product search, and
distribution. Thus, innovation develops in other dimensions, both within the company
and among the members of the network. This is consistent with the results achieved in
other projects in the last year. The triangulation between the results of this project and
those of third parties offers a proposal that contributes to the business resilience and
economic growth of the company.
The capabilities in the use of technologies and marketing development have
dominant and positive effects on the performance of the company in international
markets. (Davcik et al., 2021) In addition, the dynamics of Al-invest offer the company
inclusion in groups. Membership of an international group influences the geographic
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openness of SME innovation (Deltour, Le Gall & Lethiais, 2021). Innovation capacity and
competitive advantage also significantly influence business performance (Mulyana &
Wasitowati, 2021).
Ryu, Baek & Yoon (2021) consider that SMEs cooperate with external partners to
strengthen their technological innovation capabilities and thus improve their
international performance. From the perspective of open innovation, these scholars
explore the effects of relational capital and technological innovation capacity on
international performance, with a particular focus on the moderating effect of linkage
proactivity. They were based on 175 SMEs. The analysis showed that, first, relational
capital had a significant effect on the capacity for technological innovation. Second, the
capacity for technological innovation has a significant influence on international
performance. Third, the capacity for technological innovation catalyzed the relationship
between relational capital and international performance. Finally, they found that the
proactivity of the link moderates the relationship between technological innovation
capacity and international performance. The key findings of their research imply that
relational capital and the proactivity of alliances are the key drivers of international
performance. (Ryu, Baek & Yoon, 2021).
Jee and Sohn (2021) used a Heckman selection model to analyze 1,020 Korean
SMEs engaged in product innovation. They found that formal intellectual property rights
have a lower contribution to appropriation than the expected level. Instead, they found
some positive links between SMEs' affirmative perception of informal means of IP
protection, especially complex design, and its appropriation in both complex and
discrete sectors. They analyzed the management of intellectual property and the policy
implications to improve the value appropriation of SMEs (Jee & Sohn, 2021).
Considering the results on Al-Invest, the current context of the chemical industry,
and the results of third investigations, it is considered that the Al-Invest program
contributes to the resilience and economic growth of the company in four aspects: (1)
Relational capital with international partners; (2) geographic opening with an incursion
in foreign markets; (3) Open innovation and collective intelligence; (4) high technological
and marketing capacity (Figure 1).
Figure 1: Contribution of the Al-Invest program to the resilience and economic growth of
the chemical sector company
Source: Own elaboration
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1. Relational capital: greater diversification in collaborations, greater
multiculturalism, and social inclusion. All this contributes to the best adaptation
to unexpected changes
2. Geographical opening: better use of the territory combined with social inclusion,
better and more jobs.
3. Open innovation and collective intelligence: builds learning communities with
the appropriation of knowledge and collaboration for new forms and lifestyles
that respond to climate change and economic crises.
4. High technological and marketing capacity: the result of the resilience and
growth of the company, which, in turn, maximizes the use of relational capital,
geographic openness, and open innovation.
These four contributions support the following research proposal: the direct benefit
for the target regions in terms of local development may be employed. It is important to
analyze the quality of these jobs. Graph 2 shows the creation of jobs in the chemical
industry worldwide. In this graph, the Asian region takes a prominent position compared
to other regions and countries.
Graph 2: Contribution to jobs in the chemical industry by region (in millions)
Source: ICCA (2018)
5. Conclusion
The dynamics of the chemical industry press for companies to compete rather than
cooperate. The analysis shows that Knowledge Transfer is not the main objective. This
does not depend on multilateral organizations or governments. Even with this scenario,
the international business cooperation networks invested in the resilience of the
companies. While it is true that these networks are created within the framework of
development cooperation, it is also true that they are characterized by the center-
periphery logic.
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Al-Invest provide benefits to companies: resilience and economic growth. In
addition to job creation. New lines of research are proposed: analysis of the quality of
the jobs created; description of the relationship between resilience and growth in
companies during the pandemic; analysis of the adoption and development of collective
intelligence.
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