Technology Transfer

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CHAKRABORTY
 Concept of Technology Transfer

• Technology transfer is a principal means of

industrialization for underdeveloped nations.
• The transfer of technology from developed to developing

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country has grown considerably in last few decades.
• Acquisition of technology cannot be regarded as a neutral

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phenomenon . It is closely bound by the economic policy
at both national & international level.

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 The irreducible constraints

• The irreducible set of constraints on the transfer of technology

from R&D to product environment are:
• Performance

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– Efficiency
– Frequency of operations
–

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Volume & weight
– Bandwidth, power dissipation
• Reliability
– Reliability is the maintenance of functionality (performance
specification) over the life cycle.
• Cost
– Cost is calculated in terms of functionality
– i.e. cost per unit of performance.
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 Application Space

• In the R&D environment we talk of trade off between cost, performance

& reliability.
• In the product environment the specification of cost, performance &
reliability is determined by, and mapped onto, an application. This

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mapping process defines an “application space” having three
independent axes(orthogonal).
• For a given application there is a minimum performance specification ,

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minimum reliability specification and maximum allowable cost, this set
constitutes a point inn the application space.
• The total market them is then the collection of all points in the
application space.
• Any trade-off will define at best a new appilation ,at worst product will
not match any existing application.

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 The Experience Curve
• The experience curve reflects the evolution of unit cost with
cumulative production volume.
• The experience curve, or cost-volume( C-V) curve, teaches that, unit
cost declines with increase in cumulative volume.

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 Return on Investment
• To estimate return on investment we need to superimpose price on the
C-V curve as shown below.

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 Return on Investment

• Initial price determined by market force is lower than cost.

• As producer moves down cost dips below price, profitability starts
rising.

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• A price reduction as shown in the figure may be due to competition
or adaption of technology.
• Hashed line is for stable market.

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 Necessity for Technology Transfer
• First changing competitive environment
• To have competitive advantage.
• To be in a favorable situation than competitors.
• Strategies in business area are established in consideration with some

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fundamental factors and required conditions.

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 Technology Outsourcing
• Subjects of technology outsourcing

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 Technology Outsourcing
• Management environment factors that promotes technology outsourcing

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 Characteristic of Technology

• Assets that have economic value largely can be divided into tangible
assets which have specific form . Intangible assets which does not have

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any specific form
• Technology to be transferred can be included in the intangible category.
• In wider sense it means entire intellectual property which has economic

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value.
• Planning and executing business strategies based on understanding of
various characteristics of intellectual property is a short cut to business
success.

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 Characteristics of Intellectual Property.

• Not visible and does not have any physical form.

• Recovery value is relatively high because of the limitation in creation

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and production due to the high level of intellectual origin.
• Evaluation and valuation is very difficult and transfer price and

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conditions are determined by negotiations rather than market force.
• Life cycle is relatively short.

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 Motive of Technology Transfer

• In case where owner of the patent does not have the capability to
execute and there are no problem in licensing to third party.
• Problem in developing a basic patent into a commercial product.

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• Disposed for early recovery of R&D cost.
• Difficult to produce the finished good based on partial patent.

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• Sales by specialized technology development
• Individual inventor raises research & invention funds.

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 Payment method of the sales price for
Patents

• Methods where the sales price and the patents rights registration are

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exchanged.
• Methods of payment and receipt simultaneously with the notification

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of the completion of transfer.
• 3rd party such as banks.

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 Modes of transfer

According to the International Code of Conduct on the transfer of

technology(UN 1980) ,a number of distinct operations may be
identified, as follows:

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• Assigning or granting of industrial rights.
• Handing over technical or non-technical know how in the form of
documents, plans,diagrams and so on.

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• The communication of technical or other know how in the form of
supply of services.
• Providing technical services related to the selling or leasing of
machinery

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 Modes of transfer

According to Adeboye (1977) who bases his schema on

UNCTAD(1975),wherein the transfer of technology can take place
through one or more of the following means:
• Transfer of published material.

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• Purchase of machinery, equipment and other intermediately goods.
• Transfer of data and personnel.
•

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Granting and licenses and trademarks.
• Direct foreign investment by transnational co operations.
• Technologists’ mobility
• Technological entrepreneurship
• Interpersonal communication.

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 Modes of transfer

Baranson (1975) classifies these mechanisms into three principle modes

• licensing
• subcontracting

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• Supply of equipments and materials..
Goulet adds consultant to the list proposed by Baranson.

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 Modes of transfer
According to M.Sharif (1986) technology transfer is described as
consisting of three elements:-
 Transferor
 Transferee
 Linkage

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• Direct
• The operations of transnational companies
• Licensing arrangements

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• Hiring of experts and contractors
• Training of technical staff abroad.
• Indirect
• Purchase of machinery, equipments, components
• Exchange of information
• Flow of books , journals
• Exhibition and trade fairs.

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 Modes of transfer

UNCTC(1987) classifies technology transfer as

Commercial
 FDI

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 Joint venture
 Licensing
 Franchising

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 Contracts(marketing , technical service)
Non-commercial
 Review of technical publications
 Training of foreign students

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 Modes of transfer

Two more mode of transfer identified as

• Conventional
• Non-conventional

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 Reverse engineering(product imitation)
 Reverse brain drain

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 FDI in industrialized countries
 Adopted by NICs

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 Transfer from Advanced/Industrialized economy

Approach

 Cultural Difference

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 Equipment Specification
 Team approach

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 Planning
 Program focus and execution

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 Product/Processes Transfer

Transfer Procedure
 Discovery of technology

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 Technology valuation and demand selection
 Negotiation and contracting

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 Packaging
 Marketing
 Post Management

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 Product/Processes Transfer

Licensing Methods
 Exclusive license

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 Non-exclusive license
 Sublicense

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 Cross Licensing
 Package Licensing

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 Cost of Technology Transfer

• Direct Cost
• Indirect cost

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