International Business

Technology Transfer
Presented By Abhishek BPT-09020 R S Yadav - BPT-09021 L D Singha BPT09022
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Structure of the Presentation

Definition of TT Overview of TT Parties Technology Transfer Technology Transfer Insight Stages of Technology Transfer Issues of Technology Transfer Technology Competitiveness in Developing countries Factors Technology Development Challenges India Case studies Technology Transfer Way Ahead
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Definition:
The term technology transfer can be defined as the process of movement of

technology from one entity to another.

The movement may involve physical assets, know-how, and technical

knowledge .
Technology transfer in some situations may be confined to relocating and

exchanging of personnel or the movement of a specific set of capabilities.

Contd.
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Definition:
The transfer may be said to be successful if the receiving entity, the

transferee, can effectively utilise the technology transferred and eventually assimilate it Comprises six categories: International technology transfer Regional technology transfer Cross-industry or cross-sector technology transfer Inter-firm technology transfer Intra-firm technology transfer Pirating or reverse engineering

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An overview of technology transfer :

Interest in technology transfer goes back to over six decades. During the colonial era, technology transfer was mainly in the primary

sector such as mining, plantation and agriculture .

The transfers were aimed at the development of methods and techniques for

such industries.

Contd.
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An overview of technology transfer

After independence, in the late 1940s and early 1950s, many governments

in the newly independent countries showed great interest in acquiring technology.

They often relied heavily on firms from their former colonial rulers to gain

access to the technologies needed .

Transfer of technology by multinational companies (MNCs) became

common.

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Parties in the technology transfer

International technology transfer has both horizontal and vertical dimensions Three basic elements of TT from horizontal perspective1) Home country 2) Host country and 3) Transactions
Vertical dimensions refers to issues , specific to the nation state, or to the

industries or firms within the home and host countries.

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Forms in Which Technology May Be Transferred

First, it can be transferred via machinery or other intermediate

goods.
Technology can also be transferred through individual experts. Finally, technology can be transferred through technical know-

how , patented or unpatented, or other information subject to proprietary rights

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Methods of Transferring Technology

Direct foreign investment : MNCs invest in developing

markets in order "to protect the existing market, to create new markets, to bypass prohibitive barriers and import restrictions, to take advantage of cheap labor and skills, and to discover or protect raw materials.

Turn-key packages :MNCs sold the entire technology package, giving the developing countries no opportunity to select only the parts of that package that they actually needed.
contd.
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Methods of Transferring Technology

Technology license agreements :Licensing covers the broad

spectrum of permissions that are granted for the use of patents, technology, and trademarks.
Joint ventures :Joint ventures are long-term relationships

involving the pooling of assets, joint management, profit and risk sharing, joint marketing, servicing, and production. In a typical agreement, technology is transferred primarily through technical liaisons, training, and continuing operational support. contd.
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Methods of Transferring Technology

Purchase of equipment : The outright purchase of equipment is one of the dominant methods of transferring technology. Management contracts : Employment of foreign experts usually involves management contracts. International organizations :A growing number of international organizations now exists to facilitate technology transfer. For example, the United Nations Conference on Trade and Development ("UNCTAD") was established to help deal with the problems caused by the technological gap that existed among member states of the United Nations.
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Methods of Transferring Technology

Government aid :Technical assistance is also provided by

governments of developed countries. The most significant sources of this assistance are technical cooperation grants, the major components of which are technical assistance and fellowships for students. Such assistance has increased in recent years but is relatively insignificant when compared to the transfer potential of MNCs.

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Technology Transfer
Technology acquisition

Phases

Technology Transfer Skill Development Know How Technology adaptation

Forms

Knowledge Management

Patents & Licenses

Dissemination

Increases production efficiency - Long Term competitiveness of SMEs

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Technology Transfer - Process

Technology Creation Technology Sourcing

Knowledge
Innovation Development Testing Design Identification Modification Testing Evaluation

Verification Awareness Decision Making Application

Brokering

Technology Transfer is the suite of processes encompassing all dimensions of the origins and uptake of know-how, experience and equipment amongst, across and within countries, organizations and institutions.
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Main stages of TT:

Technology assessment, Technology agreement, Technology implementation, Technology evaluation and adjustment, and Technology replication.
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According to Dahlman and Westphal Model stage of Technology Transfer:

Carry out pre-investment feasibility to gather information and

carry out a techno-economic analysis to establish project viability. Carry out a preliminary identification of technologies needed, based on the feasibility study. Carry out basic engineering studies that involve the preparation of process flow diagrams, layouts, material and energy balances and other design specifications of the plant and machinery and the core technology to be transferred. contd.
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According to Dahlman and Westphal Model stage of Technology Transfer:

Carry out the selection of suppliers for equipment and

subcontracting services to assemble the plant and machinery and plan for the co-ordination of the work among various parties Prepare and execute a training and education plan, in consultation with the suppliers of technology, for the workers who would be employed in the technology transfer project. Construct the plant. Commence operations. Develop trouble-shooting skills and put in place arrangements to solve design and operational problems as they arise, especially during the early years of operation.
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Issues of TT
(a) Technology Transfer Process Issues Problems during the technology justification and selection stage.
Wrong selection of technology based on misjudgements when

preparing a business case for a TT project

The cost of buying, installing, operating, and maintaining the

technology is too high.

The technology selected is too complex for easy understanding

and assimilation of the transferee

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Problems during the planning stage:

Transferor (seller) underestimates the problems in transferring

the technology to a developing country setting.

Transferor does not fully understand transferee needs. Transferee managers are not involved in the planning which is

carried out only by the transferor.

Too much attention is paid to the hardware to be purchased and

not enough attention is paid to skills and information acquisition.

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Problems during negotiations:

Differences in negotiation approaches and strategies.
Lack of trust between the transferor and transferee. Goal incompatibility during negotiations. Inability to reach agreements on pricing, product, and marketing

strategies.
Both parties try to achieve results in an unrealistically short

period of time.
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Problems during technology transfer implementation:

Shortage of experienced technology transfer managers. Lack of trust in transferor developed systems by the transferee Inability to achieve quality targets. Delay in obtaining supplementary materials, needed for quick

implementation, from the local environment.

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(b) Corporate Capability Issues:

Inability of the transferee to attract the required skills due to

financial and industrial restrictions. Lack of experience of the transferees workforce and absence of required skills at the industry level Lack of training of transferee personnel Absence of incentive systems at the transferee firm for learning and assimilating new technologies Language barriers that inhibit effective communication between transferor and transferee personnel and restrict effective transmission and assimilation of relevant information

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(c) Operating Environment and National Innovation System (NIS) Issues

Shrinking of local markets due to adverse changes in the

economic levels of the country Poor physical infrastructure Inadequate supportive institutional infrastructure to provide support in terms of finance, information, skill development, and technology brokering Inadequate mechanisms for intellectual property protection Lack of local suppliers who can deliver quality supplies and lack of policies to develop such suppliers
contd.
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(c) Operating Environment and National Innovation System (NIS) Issues

High dependency on foreign suppliers and imports Lack of good education and training institutions to upgrade

skills Ineffective legislation and incentives such as tax holidays, tariff adjustments, and industry parks to promote technology transfer. Bureaucratic delays at various levels of government in obtaining approvals and clearances for finalizing technology transfer agreements Ineffective and sometimes excessive government intervention and regulation contd.
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(c) Operating Environment and National Innovation System (NIS) Issues

Foreign exchange restrictions Inability of new ventures to compete with former monopolies,

often owned by government Uncertain tax environments The technology needs considerable adaptation to suit local conditions. Obsolescence of technology while the transfer is in progress.

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Programs of Technology Transfer

ICTSD (International Centre for Trade and Sustainable Development) Trends in technology transfer and their implications for national and international policy. It is one Programme on Intellectual Property Rights and Sustainable Development to a better understanding of the proper role of intellectual property in a knowledge-based economy. contd.

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Programs of Technology Transfer

It is to explore how technology is transferred to developing

countries and barriers that affect its transfer.

It identifies policy approaches that might be of assistance in

overcoming barriers by addressing the flow of human resources, the flow of public-sector technology support, and the flow of private technology embodied in goods and services.

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United Nations Conference on Trade and Development (UNCTAD):

It is implementing a work programme on international

investment agreements.
It seeks to help developing countries to participate as effectively

as possible in international investment rule-making at the bilateral, regional, pluralateral and multilateral levels.

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Asian and Pacific Centre for Transfer of Technology (APCTT)

It is currently developing, based on the Life-Cycle Approach, to

help technology transfer capacity building in the Asia- Pacific region.

Technology transfer capacity-building training of

trainers programme contd.

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Asian and Pacific Centre for Transfer of Technology (APCTT)

Preparation of a business case, based on market assessments,

realistic forecast demands of the finalproduct, and reasonably accurate operating costs, to show how the proposed TT project can enhance competitiveness, profitability, and growth. Construction of technology roadmaps in priority areas to define future trends to avoid the pitfalls of buying outdated, inappropriate technology and ensure non-obsolescence of technology; Preparation of a detailed technology transfer agreement contd.
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Asian and Pacific Centre for Transfer of Technology (APCTT)

Negotiation in todays global business setting; Preparation of a detailed technology transfer implementation

plan based on the decisions reached during negotiations; and

Preparation of a scheme to assess the impact of a technology

transfer project from market, financial , technological and organizational perspectives.

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UNIDO
United Nations Industrial Development Organization. The organisation is Assessing Needs - Promoting Action" to be launched on Sustainable Development. Technology transfer from industrialised to developing countries Summarise the current understanding on the process of technology transfer and its contribution to adaptation and innovation.

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UNIDO
Identify linkages between technology transfer and trade, taking

account of Trade Related Intellectual Property Rights (TRIPs)

Assess the UNIDO technology transfer operations in general

and

Based on the above, prepare a Technology Transfer Framework Linked to Trade for UNIDO Action.

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UNIDO
The UNFCCC technology transfer framework defines five key elements for meaningful and effective actions: Technology needs and needs assessment Technology information Enabling environments Capacity building and Mechanisms to facilitate institutional and financial support to technology cooperation, development and transfer.

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International issues in technology development and technology transfer

Human resource development Institutional development. Information development. Partnership and networking and Collaborative research and development (R&D).
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Technology Competitiveness in Developing countries Factors

Technology imports
Small number of developed countries provide most of technological
innovations. Most of the developing countries are neither innovating nor adopting.

Lacks capability to create globally competitive technologies Lack of access to information on new technologies and innovations

Technology infrastructure
R&D institutes and testing facilities in developing countries fall short of
quality when compared to industrialized countries

Lack of collaborative research Isolation of universities and R&D from Industry

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Technology Competitiveness in Developing countries Factors

Pace of technological change

SMEs lack the capability to constantly upgrade technologies in view of
rapidly changing technologies in developed countries

Easier in Process industries

Technology acquisition

Unit level technology absorption is low Lack of incentive, direction and capability to update existing technologies Lack of ready access to capital Relatively high transaction cost

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Technology Competitiveness in Developing countries Factors

Unit Level Interventions

Smaller firms find difficult to finance and coordinate the requisite level of
technological activity

Low participation in network of organizations and institutions involved in

diffusing information on technologies. (specially SMEs)

Availability of Skilled Manpower

Shortage of trained personnel Lack of continuous capability development of manpower in technical
dimensions

New technologies are not adopted due to lack of skilled people thus widening
the technology gap.
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Technology Development - Challenges

Can be met through innovations management To be able to invest in technology creation at the risk of failing Adequate infrastructure required for technology creation IPR issues Adequate information relevant to strategic planning and market
development

Developing countries have already lost precious time Creation of useful and usable technologies is a major factor in ensuring that
there is opportunity to make informed and confident choices in technology investment projects

Technology Creation should be best left for developed countries. Developing countries should focus on adapting, learning and dissemination.
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Machine Tools sector in India

A holistic programme implemented by UNIDO-ICAMT (International Centre for
Advancement of Manufacturing Technology).

Emphasis on Technology dissemination through sensitization workshops, unit level

interventions, participation in International fairs, Technology missions, skill upgration and market development activities.

Growth in 2004-05 was 47% Annual growth of over 90% in the number of CNC machines production in the last
two years.

50% increase in production of components and accessories. 101% increase in export of target group of machine tools from USD 6.6 million to
USD 13.3 million
While the Technology innovation is still low, the sector has done extremely well due to Technology dissemination, Skill upgradation, Unit level interventions & market development activities.

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Auto Components sector in India

Indian auto component industry has grown from US $ 3.9 Billion to US $ 6.7
Billion in 3 years

Exports have increased from US $ 578 Million in 2001-02 to US $ 1000

Million in 2003-04.

India has become the 2nd largest two wheeler manufacturers in the world Increased competitiveness is due to increased capability of latest
technologies for continuous improvement when compared to other countries.

Emphasis on process engineering skills, product engineering and continuous

improvement capability.

While the Research & Development activities are still at low level, the sector has witnessed phenomenal growth due to application of ICT tools, Technology dissemination, Skill upgradation, Knowledge management in the area of Engineering Design. 05/03/12 45

India: Fast Growing Market

India Hardware Industry projected at US $ 69 billion by 2008
4 million PC Shipments 2004 65 million mobile subscribers - 2004 2.5 million broadband in 2004

14 Mil PC Shipments - 2008 200 M Mobile subscribers by 1 million Set Top Box 2004 2007

10 million broadband in 2008

9.25 million TV Sets 2004

15 million Set Top Box - 2008

More than 3 million cell phone subscribers added every month Sub $ 40 Mobile Phone Sub $ 225 PC s would increase PC penetration. 16 million TV Sets 2008

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Industry Turnover (2004-05) Hardware Domestic: Hardware Exports: Software Exports: Software Domestic: Industry Turnover by 2008:

US $ 27.75 billion US $ 5 billion US $ 1.25 billion US $ 17 billion US $ 4.5 billion More than US $ 100 Billion

While the Research & Development activities have been low, the sector has witnessed boom due to knowledge workers, Skill upgradation & capability development.
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Indian Telecom Sector

From
s

To
s

Monopoly service providers

Competition

Competitive regime with multiple players (public & private sector) across service segments Rs.2-3 per minute ($ 0.04-0.07/minute) Rs.1-2 per minute ($ 0.02-0.04/minute)

Tariffs
s

Peak long distance tariff from Delhi to Mumbai of Rs.30/minute ($ 0.65/minute) Peak cellular outgoing tariff of Rs.16/minute ($ 0.35/minute) 18 mn fixed line subscribers in March 1998 <1 mn cellular subscribers in March 1998 Total industry revenue of US$ 4 bn in FY98

Subscribers
s

48 mn fixed line subscribers including FWT and Limited mobility CDMA-34.4mn up to July11 56 mn mobile subscribers-840.28 mn ,JULY11

Industry Size

~ US$ 18 bn for FY05

Penetration

<2% telephony penetration in March 1998

9.37% penetration, tele-density 73.11% up to July11.

Regulator

No regulator

Independent and active regulator (TRAI) and appellate tribunal (TDSAT) 48

05/03/12 TRAI: Telecom Regulatory Authority of India; TDSAT : Telecom Disputes Settlement and Appellate Tribunal

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Technology Transfer in Developing countries Road Map

Establishment of International Technology Centers Adopt demand-driven approach Focus on specific industrial sectors Establish Technology Trackers in leading industrialized countries Encourage application of technologies at the enterprise level through
rapid build up of awareness of need, diagnosis of economical requirements, technology transfer management etc

Emphasis on capability development Establishment of cooperative and collaborative partnerships between

key stakeholders
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Technology Transfer in Developing countries Road Map

Implementation of technology driven programmes Focus on technology areas of core competence and with cross sectoral
impact demand of developing countries, thus increasing the international activities.

Design and implementation of technology transfer plans and specific actions Dissemination of technology information access to reliable and relevant
information

Skill development activities Provide outreach programmes for SMEs for effective dissemination. A system that minimizes contractual and other legal risks. Access to Decision Support Tools.
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Thank You

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