26th International Association for Management of Technology Conference - IAMOT 2017

This paper investigates how medium-size engineering service companies working traditionally in national markets have engaged with challenges of globalization and competition from multinationals. The Scandinavian region has many smaller domestic engineering companies in the industry, which are under pressure in their established national and wider international markets. The paper uses strategic management of technology as a framework and is predicated on the proposition that strategies such as outsourcing, strategic partnerships, joint venturing and technology/knowledge transfer enable them to compete on a more equal footing. The research uses mixed-methods with empirical data from a desk study of sector development supplemented by qualitative studies of individual companies. The paper includes a case study of a medium size engineering service company based in Denmark with around 100 offices worldwide. The analysis shows the engineering service market has become a disruptive area dominated by a few large global players compared with the past where companies have operated in protected local markets. It reveals an array of strategies combining local, regional and global elements resulting in unique strategic “bundles”. Among the companies studied there is a plethora of strategies and diversification into other revenue generating activities. Mergers and acquisitions are the most important strategies among the largest companies. Also there are a number of network strategies involving local resources from sister companies etc. As with many other industries in the service and manufacturing sectors, there has been a tendency towards outsourcing of engineering services with currently the largest destination being India, with about 25 percent. China is also an important location with its role expected to increase in coming years. Several other countries also host offshored engineering, including for example the Philippines and Malaysia. An important question, given the industry’s high labour intensity and need to work closely with customers, is whether outsourcing provides the responsiveness necessary to counter the drive towards synergy and economies of scale. Consequently Scandinavia has tended to become a single “domestic” market. The case company illustrates many of the findings. It has a multidisciplinary profile in Scandinavia while establishing a more limited presence in North America and elsewhere in Northern Europe. And it is developing a global business focusing on separate areas such as large bridges, environmental consulting and developmental consulting. The paper adds to strategic technology management concepts and approaches by identifying the strong role of emergent strategy moves made by senior managers in the companies. It complements established theory and practice concerning the Resource Based View and Knowledge Based View as well as on network operations and extended enterprises.