Issues of International Technology Transfers

International technology transfer is the process by which a technology, expertise, know how or facilities developed by one business organization (MNC in the case of international business) is transferred to another business organization. There are many  issues associated with the international technology transfer.  The most important international technology  transfer  issues are; ways of technology  acquisition, choice of technology, terms of technology transfer, and creating  local capability.

Issues of International Technology Transfers

Modes of Foreign Technology Acquisition

One of the major issues in technology transfer relates to the mode of acquisition.  Developing new technology may conjure up visions of scientists and product  developers working in R&D laboratories. In reality, new technology comes from  many different sources, including suppliers, manufactures, users, other  industries, universities, government, and MNCs . While every source needs to  be explored, each firm has specific sources for most of the new technologies.  For example, because of the limited size of most farming operations,  innovations in farming mainly come from manufacturers, suppliers, and  government agencies. In many industries, however, the primary sources of new  technologies are the organizations that use the technology.  Broadly the acquisition routes are three:

  1. Internal Technology Acquisition: This is result of technology development  efforts that are initiated and controlled by the firm itself. Internal acquisition  requires the existence of a technology capability in the company. This capability  could vary from one expert who understands the technology application well  enough to manage a project conducted by an outside research and development  (R&D) group to full blown R&D department. Internal technology acquisition  options have the advantages that any innovation becomes the exclusive property  of the firm.
  2. External Acquisition: External technology acquisition is the process of  acquiring developed by others for use in the company. External technology  acquisition generally has the advantage of reduced cost and time implement and  lower and risks. However, technology available from outside sources was  generally developed for different applications.
  3. Combined Sources: Many of technology acquisition are combinations of  external and internet activities. Combined acquisition seek to limitations and  external sources, taking advantages of both the actions at the same time.

Making Decision on  Technology Transfers

The technology manager must weigh the advantages and limitations of each  specific route of technology acquisition and then make a decision about its  choice.

  1. Seizing Tacit Knowledge: Taking advantage of knowledge available in- house is  least expensive and has no risks. It will not leave when the knowledgeable  person leaves the firm. Every firm will have employees who are knowledgeable  and it is up to the company to identify and make use of the know-how.
  2. Internal R&D: Technology acquisition via internal R&D consists of having a  research and development group within the firm. The group is responsible for  creating the technology that the firm uses. This source of technology acquisition  enables the firm to become stronger, has the advantage to exclusivity, and may  entail tax or other government incentives. Long time required, high cost and  risk of failure are the demerits of this internal route of technology acquisition.
  3. Internal R&D with Networking: Internal R&D networking has all the same  advantages and disadvantages discussed under internal R&D. The main  difference is the fact that the R&D staff make a fairly concerted effort to keep  abreast of the state of development of the technologies affecting their products.  They network with technology creators at conferences and trade shows.
  4. Reverse Engineering: Reverse Engineering is the determining of the technology  embedded in a product through rigorous study of its attributes. It entails the  acquisition of a product that the firm believes would be an asset, disassembling  it, and subjecting its components to a series of tests and engineering analysis to  ascertain how it works and studying the engineering design criteria used in the  product’s creations.
  5. Reverse Brain Drain: This involves attracting expatriate entrepreneurs and  experts who have gained adequate experience abroad to set up or develop  enterprises in their countries of origin. Taiwan and China are known for this  type of technology transfer.
  6. Covert Acquisition with Internal R&D: It entails finding out the technology  developments being conducted by a competitor that are not open to the public.  Most businesses do this to some extent by questioning suppliers about  components being sold to the competitors or by socializing with the  competitor’s employees. The less scrupulous firms even become involved in  industrial espionage using cameras, binoculars, and break-and-enter techniques  to learn about the happening inside the competitor’s plant.
  7. Covert Acquisition: This without internal R&D, guarantees that the product will  be a copy (generally a poor one) of the competitor’s product. The firm can  introduce it at a lower price because there are no development costs to recover.  However, with the exception of the price, the product will have no other  competitive advantage.
  8. Technology Transfer and Absorption: This route is similar to internal R&D  with networking. The difference is that there is much more effort put into  searching for, learning about, and translating, no-cost technology to the firm’s  applications. Internal technical ability is necessary to understand the  technologies found and to develop them into solutions for the firm’s application.
  9. Contract R&D: Firms resort to contract R&D for more than one reason. This is  the ideal option for those that lack the necessary facilities and expertise to  conduct the required work but still want to maintain control over the  development and own the results exclusively. It is also a good choice for those  that need a specialized set of equipment or expertise for occasional short term  projects. This avoids the investment in these facilities and the on-going  commitment to staff that would be underutilized. It allows short-term access to  world class personnel and facilities for specialized projects that would otherwise  be completely beyond the company’s means. The advantages of this route are no  investment in facilities, and low investment in staff. The disadvantages are: no  hands-on-knowledge in house and  difficulty in keeping information  confidential.
  10. R&D Strategic Partnership: R&D strategic partnerships are almost the same as  contracting R&D. They generally consist of a group of companies with a  common need that collectively contract a research institution to conduct the  work for them. This allows the firms to share the risk and costs. It also creates  a situation where they can learn from each other as well as from the experts  conducting the research.  The advantages of this route of technology acquisition are : shared risks,  reduced cost, and possibility of learning from others. Need to share knowledge  with others and the necessity of adopting research results to own application are  the drawbacks of this route.
  11. Licensing: Another route of technology acquisition is licensing. Its major benefit  is a significant reduction in time to market relative to other forms of technology  acquisition that require development. It also enables the acquiring firm to share  the financials risks of acquiring the technology with the provider because the  bulk of the payments are generally in the form of royalty-a percentage of sales  of product made using the new technology.
  12. Purchasing: A common and effective external technology acquisition method is  purchasing. This is normally done in the form of buying a piece of production  machinery with embedded technology. This is the quickest form of technology  transfer because the technology is already packaged and is ready for use. It is  low risk because the equipment has been proven to be technically competent and  there are already users to evidence the machine’s capability.
  13. Joint Venture: Entering into a joint venture agreement with a technology  provider is another form of external acquisition that can be very effective.  Typically, this is a partnership between two firms, one with a technology and  another with market access. It can take the form of the creation of a new firm  with each of the partners owning shares in the new firm in proportion to the  value of their contribution to the new firm. In this case production facilities are  installed in the new firm with the partners bringing technology and market know  how along with capital investment into the new firm. The distribution and  marketing of the product may use the system that the firm with market access  has in place, or that firm’s know-how may be used to create a dedicated system  for the new firm. The advantages are the technology can be implemented  immediately, as it is already proven. Risk involved is less and there are  possibilities of learning from the provider of technology. The disadvantages are  market risks are high and there are no chances of developing technical strengths.
  14. Acquisition of a Technology Rich Firm: The final form of external technology  acquisition is the acquisition of a firm that has the know how which the  acquiring firm desires. This can happen when one firm has a technological  innovation that is impacting another company’s innovation the second company  negotiates to purchase the entire company. This can result from a defensive  action or it can be deliberate strategy to acquire technology.  The outright purchase has advantages and disadvantages. On the positive side  are: short time to market, low risk, and probability of buying good image. The  problems are the possibility of acquiring negative baggage and merger problems.

Choice of Technology

The second major issue relating to technology transfer is its choice. It is argued  that it is the industrialized countries that develop technology, and the know-how  thus developed will be mainly useful to them. This means that the rich countries  become monopolists in developing, using and managing technology. This also  means that the technologies tend to be designed for the production of high  quality sophisticated goods on a large scale, using as much as possible capital  and higher-level professional skills in place of sheer  labor, and replacing  natural resources by synthetics.

Terms and Conditions of Technology Transfer

The issue relating to terms and conditions of technology transfer and the  question of the suitability of the transferred technology are related to each other.  Some of the restrictive conditions, for example, make technology less suitable  than it would otherwise be. This clearly applies to such restrictions as  prohibitions on the adaptation of the imported technology, preventing the use of  imported technology as a basis for local R&D development, and clauses  stipulating that the results of local technological research and development  based on the imported technology must be transferred to the owner or supplier  of the technology.

Creating Local Capability

Creating local technological capability is essential to absorb imported  technology. This stems from several reasons. Technology, it may be stated, is  not simply a matter of blueprints, which can be transferred without any local  effort, to any part of the world, Each time some technology is installed, some  local adoption to required, which demands local technological capability. The  greater the capacity, the more efficient the resulting operations. The need for  local adaptation arises from the fact that the environment in which any  technology operates is unique in any situation when it is installed and may even  differ radically from the environment for which the know-how was developed in  the first place. This is especially true when technology is transferred from  MNCs to developing countries.

Barriers to International Technology Transfers

The final international technology issue relates to barriers. The problems  encountered in transfer of technology are:

  1. A limited general understanding of the concept of technology, and the lack  of a consistent framework for its study.
  2. Lack of systematic planning for technology transfer in developing countries  or misunderstanding of its underlying philosophy.
  3. Lack of bilateral scientific/ technology advantages in the process of  technology transfer (mutual benefits).
  4. Lack of systematic and integrated engineering and socio-economic approach  to the technology transfer process.
  5. Lack of a relevant quantitative framework/approach to the analysis and  evaluation of technology transfer to developing countries.

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