CONTENTS

1. Introduction ............................................................................................................................................. 2
2. Research Design ....................................................................................................................................... 6
2.1. The Problem ........................................................................................................................................ 6
2.2. Theoretical Approach .......................................................................................................................... 6
2.3. Design of the Study .............................................................................................................................. 7
3. Definition of Fundamental concepts ........................................................................................................ 8
3.1. The Systems Concept ........................................................................................................................... 8
3.2. Technology ...........................................................................................................................................11
3.3. Redefining Technology ....................................................................................................................... 13
3.4. Redefining Technology Transfer ........................................................................................................ 17
4. Technology and Economic Development.................................................................................................. 22
5. The (international technological learning) model ...................................................................................... 24
6. Empirical approach .................................................................................................................................. 27

1
1. INTRODUCTION
Technology transfer from China to Pakistan is primarily a question of knowledge transfer at international scale.
As a phenomenon international and intercultural movement or diffusion of knowledge is as old as human
civilization itself. However, since the onset of industrial age in nineteenth century Europe, modern technology
became a decisive factor in determining the development, enrichment and even sovereignty of nations all across the
globe. Since that time, the world has seen many technological revolutions rise and alter the economic, social and
political structure of the world. Economic and social forces are sometimes considered to be working independent of
technological forces. however it is now widely understood that in order to be affective, knowledge embedded in
technology, as well as other elements of the economy and the society acts as a whole to bring about meaningful
progress. Technologically advanced nations and societies have equally strong business and economic management
skills, embedded in highly qualified workforce that enjoys the buying power and technical skill to adapt complex
new technologies in their everyday lives.
In traditional theoretical frameworks softer concepts like knowledge and the intangible aspects of technology got
only secondary importance as compared to other tangible factors of production like capital and natural resources.
But in recent past “the foundation of industrialized economy is shifting from natural resources to intellectual assets
(Hansen, 1999)1 (D. Teece, 1998)2. As the world gets more interconnected and interdependent, advanced nations
have already realized that technological advantage is now short lived and rapid innovations are transforming markets
overnight; size, control, protectionism and financial capital no longer provide the underpinnings of economic
prosperity. While developing nations face a different set of circumstances. The most fundamental difference is in
stock of knowledge, evident from the low levels of technological advancement and in the fact that contrary to
developed nations, capital is expensive or even unavailable in developing nations while time and labor are cheap.
Huge technological gap between the advanced nations and developing countries presents a mixed blessing for
developing countries. On one hand their technological economic and social backwardness severely restricts their
ability to bring about change, on the other hand this position allows them to learn from others experiences.
For developing countries the first challenge is not to create new and sophisticated technologies, but to learn to
effectively utilize appropriate technologies. The process of sustainable economic catch-up in successful developing
nations has started in many ways, including: “copy-catting” (i.e. Japan, Korea and China first mimicking
manufacturing techniques and then becoming world leaders.); “piggy-backing” (i.e. China and India performing
manufacturing and service work for rich countries and adapting modern manufacturing and information technology
to local needs); and “leap-frogging” (skipping over technologies that are inappropriate in a given place and time and
adopting more sustainable solutions, this form generally occurred in all development processes).
International technology transfer from advanced nations to developing nations has been a subject of great debate at
international platforms like UN World Bank and other international orginzations and in academic circles of
economics, management and other social sciences during the second half of the twentieth century. But the rise of the
new millennium changed the whole context of debate; a new paradigm is taking shape in all spheres of life. Even the
recent global economic crisis marks a devastating success of globalization processes based on free trade and market
based economic structures. The emergent global setting contains many new and significant players on the economic,
political and technological fronts. China leads the new players that include South East Asian nations, India, Russia
and Brazil.
Rise of China marks the end of western monopoly on technological knowledge and financial capital. In effect China
is more suitable as an alternative source of technologies besides the traditional innovating economies. Chinese
products and technology are very cost effective, adapted to a socio-economic setting similar to other developing
nations (in terms of labor intensity and technological sophistication) and are backed by sound economic
management and policies required for this phenomenal success. China serves as a source of affordable technological
hardware was well as models of micro and macro management required to use and develop these technologies.
Provided with the tools of globalization, China is reaching out to other nations both advanced and developing for
advanced technologies and natural resources, investment opportunities and untapped markets. Unlike the previous
experience with the Western development assistance the marginalized developing nations find the Chinese package
as neither politically motivated nor intrusive. This new structure is already taking shape between China and many
developing nations. How Pakistan can ultimately embark on a path to progress by adapting a “Look East” policy, is
the key question of this research work.

1
Hansen et al., 1999 M.T. Hansen, N. Nohria and T. Tierney, What's your strategy for managing knowledge?, Harvard Business Review 77
(1999) (2), pp. 106–116.
2
D. Teece, 1998, Capturing value from knowledge assets: the new economy, markets for know-how, and intangible assets, California
Management Review 40(3), 55–78

2
China is the biggest nation in the world, with a fast growing economy already the second biggest and expected to be
the biggest by mid-century. China's per capita income has grown at an average annual rate of more than 8% over the
last three decades drastically reducing poverty. Actually China has brought almost half the humanity out of the
misery of poverty. Year 2009 marks 60 years if Chinese independence and 30 years of Chinese Reform and Opening
up policy. 2009 is also 80 years since the great depression of 1929, such economic crisis are known to herald a
period of drastic change, restructuring of old systems and rise of new institutions, opportunities and challenges.
Predicting the shape of the world in the days to come is not easy, however a few facts about Chinese economic
resilience and robustness in this turbulent time can shed some light on the shape of days to come. China's economy
expanded by 6.1 percent year-on-year in the first quarter of 2009, China's GDP reached 13.98 trillion yuan (2.06
trillion US dollars) in the first half of this year and China's gross domestic product (GDP) grew 7.9 percent year-on-
year in the second quarter, while the economy grew 7.1 percent in the first half of 2009, according to the Chinese
National Bureau of Statistics (NBS) (People's Daily, July 16, 2009)3. All this could not have been accomplished
without sound policy making, policy implementation and proper disciplining of the forces of change.
The main force of change in modern times is technology and China has made its best use to achieve this success.
Scientific modernization is the mainstay of Chinese reform policy, and importance of knowledge is well understood
by the national leadership, academia, business sector and society as a whole. China is an example of technological
and economic development through technology created indigenously and acquired from abroad by effective
adaptation to domestic needs. Domestically China has come a long way on the path to scientific and industrial
development, in recent years China has built a number of advanced engineering plants capable of manufacturing an
increasing range of sophisticated equipment. China has some of the most advanced scientific capabilities in areas of
space program, aeronautics, electronics, nano-technology and bio technology. Any student of economics and
technology can understand that these icons of advancements are only the tip of the iceberg. The real source of
economic advancement is in the depth of technological application systems, used in solving everyday economic and
social problems of the people. Having developed effective systems for learning and adapting foreign technologies
now China is aiming to become a self reliant innovating economy and like most of its past challenges and ambitions,
China is expected to achieve this goal within the set target of year 2020. China’s development is part of a
fundamental shift in the international distribution of knowledge. Other countries would benefit by responding
positively and constructively to this development and working to better understand China’s innovation system
(Serger & Breidne 2007)4. However learning from Chinese experience remains a challenge and an untapped
opportunity for its close neighbor, Pakistan.
Pakistan won independence from the British colonial power in 1947 around the same time as Peoples Republic of
China was founded (1949) and inherited similar problems and opportunities and challenges in development as China
did. Today Pakistan has the 6th biggest population in the world after China, India, United States, Indonesia and
Brazil and 26th largest economy in the world in terms of purchasing power, and the 47th largest in absolute dollar
terms. Pakistan has been a relative economic success story for much of the past decade however the country is
recently undergoing a punishing reversal of fortune. US war in Afghanistan and its outfall in Pakistan, internal
political instability and global economic crisis have badly affected the economy of Pakistan. In the past six months,
its main stock exchange has lost more than half its value. The national currency, the rupee, stands at historic lows,
even with propping up by the state bank, which also intervened to improve market liquidity. Foreign-exchange
reserves are dangerously depleted, the budget deficit is at a 10-year high, inflation is running about 25 percent
annually and debt obligations are looming large (State Bank of Pakistan, 2009)5.
At only a few occasions in its 62 years long history has Pakistan’s economy shown growth, but these bursts of
activity could never be sustained for a longer period of time. The period from 2001- 2007 was one of such periods,
when economic growth rate reached its highest at roughly 8 %. But the economic fundamentals of Pakistan hardly
changed. It still is a resource based economy, exporting mainly agriculture raw materials, and primary manufactured
goods. Pakistan's industrial sector accounts for about 24% of GDP, Cotton textile production and apparel
manufacturing are Pakistan's largest industries, accounting for about 66% of the merchandise exports and almost
40% of the employed labor force (World Bank, 2008)6.
These basic indicators reveal that Pakistan has a substantial market size but a very underdeveloped economy.
Pakistan has another mixed blessing, its geo-strategic location, it’s a country situated at the mouth of the oil rich

3
Li Xiaochao, the spokesman of the National Bureau of Statistics (NBS) ‘China's GDP up 7.9% in Q2 of 2009’ at a press conference held in
Beijing, People's Daily, July 16, 2009.
4
Sylvia Schwaag Serger & Magnus Breidne, China’s Fifteen-Year Plan for Science and Technology: An Assessment asia policy, number 4, 2007,
135–164
5
http://www.sbp.org.pk/reports/quarterly/fy09/third/Overview.pdf
6
World Bank, World development indicators, July 2008 data

3
Persian Gulf, and the gateway to the landlocked and untapped Central Asian energy reserves and consumer market.
Pakistan is also neighbor to the economic giants like India and China in the East and North. But this region is also a
global hotspot of conflict and instability, it was such in the ancient history, during the colonial age of the Great
Game (Malcolm, 2001)7, during the cold war and recently in the (American) global war on terror.
The difference between the uncontrollable crisis and opportunity is how the subject manages its internal affairs.
Pakistan has to not only recover from the current economic and security crisis but also to plan a comprehensive
economic and social reform process, aimed at converting the threats into opportunities and strengths. One of
Pakistan’s biggest strengths and opportunity is in establishing systems of sharing technological and economic
knowledge with China.
China and Pakistan are geographical neighbors; these regions share a very long history of interaction and mutually
beneficial exchange. From ancient times, these two lands have been at the cross-roads of multiple silk routes.
Buddhist missionaries and monks from China and Gandhara (present day north-west Pakistan) maintained regular
links as far back as Han-dynasty China (202 BC - 220 AD) (Hussain, 1983)8. In recent history Islamic republic of
Pakistan was one of the first countries of the world to recognize China, and since that day the friendship and
cooperation has weathered all sorts of challenges only getting stronger and deeper. These countries enjoy a natural
compatibility and convergence of interests. The people and governments of these nations exhibit great respect and
trust for each other. There exists a tradition of cooperation and collaboration with each other which is dubbed as
higher than the mountains (referring to Karakoram Highway joining the two nations over the high mountain passes)
and deeper than ocean (e.g Gawadar deep sea port built with Chinese help)(add reference). On strategic side, sound
China-Pakistan relations provide a guarantee of peace and stability in South Asia in particular. Pakistan is faced by a
traditional foe 10 times its size on the eastern border, but Pakistan’s civilian and military cooperation with P.R.
China acts as a major counterbalance in maintaining peace in south Asia. Traditionally China is the major source of
Pakistan’s military and defense capability, symbolized in joint research and development of a very advanced fighter
aircraft called JF-17 Thunder (known in China as the Chengdu FC-1 Fierce Dragon)9. Pakistan and China have
successfully collaborated in developing very high tech programs like the Nuclear energy projects, civil and military
aviation, armaments, and IT infrastructure, which indicates an advanced capability to cooperate and collaborate.
China and Pakistan cooperation extends to all levels of international economic interaction, mutual free trade
agreements, banking and financial sector collaboration, investments of industrial corporations and also through
small and medium sized businesses. Recently a new wave of economic, technological and scholarly interaction has
started to emerge; as bilateral trade has risen (Figure 1), thousands of Chinese professionals now are working on
infrastructure and research and development projects in Pakistan and there is an increasing influx of Pakistani
students and scholars into Chinese universities.

Figure 1: Sino-Pak Bilateral trade, Source: UNCTAD Statistical Handbook

7
Yapp, Malcolm, “The Legend of the Great Game,” Proceedings of the British Academy, no. 111, 2001, 179-198
8
Hussain, J. An Illustrated History of Pakistan, Oxford University Press, Karachi, 1983
9
A small and capable light-weight fighter jet with world class capabilities, jointly developed by the Chengdu Aircraft Corporation of China and
the Pakistan Aeronautical Complex (http://www.pac.org.pk)

4
 Year Export Import Balance of Total % share Total % share
trade export of in total imports of in total
Pakistan exports Pakistan imports
2001-02 228.63 575.37 -346.74 9202.218 2.48 10,342.865 5.56

2002-03 244.59 839.00 -594.41 11,160.246 2.19 12,220.253 6.87

2003-04 288.259 1,153.514 -865.25 12,313.285 2.34 15,591.776 7.40

2004-05 354.092 1,842.270 -1488.18 14,391.081 2.46 20,598.114 8.94

2005-06 463.967 2,706.159 -2242.20 16,452.398 2.82 28,586.007 9.46

2006-07 575.903 3,533.794 -2957.89 16,976.243 3.39 30,539.709 11.57

2007-08 684.793 4691.813 -4007.02 19,222.86 3.56 39,968.50 11.73

Table 1: Trade between Pakistan & China (Million Us$)

Source: UNCTAD Statistical Handbook
Technology transfer has always been an important aspect of Pakistan China relationships, and is included in almost
all high-level cooperation agreements between the two nations. Incidents of state (to state) level, strategic and
defense related technology transfer are frequent in Pakistan-China cooperation programs. However, technology
transfer in private sector, lead by market forces and having a deeper impact on the socio-economic condition of
these economies is a relatively new occurrence. As far as economic and technological interaction is concerned, a
simple indicator is that China is the biggest source of Capital goods imports for Pakistan. Chinese Firms are major
investors involving transfer of modern technologies to Pakistan (sometimes regardless of security concerns and pure
economic profits); on the other hand Pakistani businessmen see in China, a trustworthy and affordable source of
appropriate technologies. But at the same time due to its poor technological capability, Pakistan’s exports to China
remain low tech traditional agricultural and natural commodities. One sure method of bridging the trade gap
between China and Pakistan is to increase the value addition in Pakistani exports through technology transfer from
China.

Major items of export from Pakistan to China (US$ Million) Major Items of Import from China to Pakistan (US$ Million)

Commodity 2003-04 2004-05 2005-06 2006-07 2007-08 Commodity 2003-04 2004-05 2005-06 2006-07 2007-08
Description Description
Cotton yarn & 157.358 206.767 213.133 379.219 352.867 Boiler machinery & 161.208 257.74 483.87 618.937 808.22
woven fabrics mech. appl
Organic 33.427 8.487 37.718 19.911 24.71 Electrical/appl./parts 114.668 171.332 327.49 449.72 587.25
Chemical
Leather & 15.08 19.55 28.132 31.639 39.27 Organic Chemicals 62.03 77.838 104.672 128.508 167.81
Leather
Manufacturers
Ores, slag & ash 3.641 8.909 25.615 22.092 27.42 Petroleum products 6.47 22.96 66.83 97.576 127.418
& oil
Fish & fish 18.659 19.604 22.252 29.767 34.94 Misc chemical 44.758 74.5 81.773 75.735 98.89
product products
Table 2: Bilateral Trade by type of commodity (Pakistan & China, Million US$)
Source: WTO Trade data base, World Development Indicators, Federal Bureau of Statistic
Recent trends in technology flows from China to Pakistan are subject to many technical, economic, political and
cultural forces. Some of these forces are general or common to all incidents of international technology transfers
while others are specific to the conditions of these nations only. These forces or factors can be understood in the
light of modern theories of economics and management. In this work the author intends to develop a holistic model
of international technological learning from China to Pakistan that could not only measure and evaluate the given
phenomenon but also serve as tool for policy making at different level, ultimately contributing to the wellbeing of
people of China and Pakistan and other developing nations.

5
2. RESEARCH DESIGN

2.1. THE PROBLEM

The original research question behind this study was phrased as “technology transfer from China to Pakistan”.
However, the traditional research on the issue of ‘technology transfer’ is concerned with incidence of technology
transaction between a transnational transferor and a domestic transferee firm. In generic technology transfer
research, such incidents are studied under the contract bargaining paradigm that emerged in the global technical and
political context of 1960s and 70s (Radosevic, 1999)10. Since 1990s the prevailing global paradigm has changed
altogether. New technologies, new industrial structures and new global institutional settings have undermined the
concerns of traditional approach. And brought forward a new set of challenges termed as ‘the sourcing context’.
Besides that, the theoretical frameworks and even conceptualization of technology and technology transfer have also
transformed and evolved (detailed description of this new paradigm is discussed in latter sections).
Thus the original quest of this study, namely ‘study of international technology transfer from China to Pakistan’ is
also rephrased in the new context and structured on the new theoretical platforms. We reinterpret the given problem
statement as ‘recording and evaluating the magnitude and direction of technological knowledge flows from China to
Pakistan’.
This problem statement can thus be broken down into sub-questions as
• What are the different forms of technological knowledge transitions (flows) from China to Pakistan and
vice versa?
• What is the relative size and worth of these knowledge flows?
• What factors determine the strength and direction of these transitions?
• What is the economic and social impact of these knowledge flows on the two economies?
• How these international linkages have evolved over time and how are they expected to change in the
foreseeable future?
• What is the potential of mutually beneficial learning and how it can be materialized?

Being a pioneering work and an exploratory research, the scope of the current study is wide, holistic and addressing
a long-term perspective. Thus unlike a usual practice in international technology transfer studies, the main focus of
this study is not any one particular incidence, product or industry. Rather; the main focus is the range of interaction
or linkages between China and Pakistan that provide the platform for flow of scientific, technological and business
knowledge in different forms from one economy to another. As these linkages originate from one socio-economic
system of knowledge creation and diffusion (or national learning/innovation system) and are absorbed by another
distinct system, the condition and dynamics of these national systems directly affect the flows of knowledge from
and absorption into the economies and societies concerned. Thus modeling and comparing the national learning
systems of these economies is taken as a holistic determinant of the sub-questions of knowledge flows listed above.

2.2. THEORETICAL APPROACH

There are numerous fields of social science, ranging from Economics to Management, International Relations to
Sociology, which study the nature, dynamics, role and impact of technology transitions from different yet often
overlapping perspectives. These research traditions have established popular theories and models and a rich
knowledge base of empirical facts and case studies. First challenge in this thesis is to identify an appropriate
modeling technique that would help structure the problem, pinpoint weaknesses and propose solutions.
Most of the traditional literature in mainstream economics and management is focused on issues of international
business practices of transnational corporations and on impact of trade in technologies on the firms and economies
involved. Most of these theories and models focus on bits and pieces of a greater whole, but provide only
reductionist explanations, focusing on particular cause and effect factors only. This knowledge base is constantly
being updated and upgraded as new problems arise. To a researcher, policy maker or a business person who operates
within the same socio-economic context where this knowledge is being created, there is abundant information and
expertise available. But for particular and distinct needs and situation of developing nations one needs to reinterpret
the traditional and mainstream theories and models. Unless a model is designed with the problems, needs and

10
Slavo Radosevic, International technology transfer policy: from “contract bargaining” to “sourcing”, Technovation, Volume 19, Issues 6-7,
June 1999, Pages 433-444.

6
capabilities of developing nations in mind, instead of focuses only on conforming to the dominant (western)
standards, its application in resolving a novel, unstructured and broad problem is likely to diminish greatly. Thus the
theoretical approach should be both up-to-date with theoretical state of the art, yet appropriate to the constraints of
the domestic socio-economic context.
One of the most popular modern approaches in study of technology, knowledge and economic growth is the
‘Innovation Systems Concept (IS or NIS)’, propagated since late 1980s by writers like C. Freeman, R Nelson and
B.-A. Lundvall (Freeman, 198211; Dosi et. al, 198812; Lundvall, 199213; Nelson 199314). This concept encompasses
knowledge creation, diffusion and socio-economic change in a systematic manner. It identifies the role of firms,
academia and state and their linkages in a broad framework of institutions for creation, adaption, and diffusion of
innovative knowledge. Innovations are considered distinct from inventions as they include creation of new
knowledge as well as new economic uses of existing knowledge as equally innovative in an evolutionary context.
Though an age old concept, the recent reemergence of innovation studies started with analyzing technological catch-
up of developing countries (i.e. Japan, Korea, Taiwan province of China and recently mainland China). Innovation
systems concept and its variants have successfully explained the technological learning processes in developing
nations and won wide acceptance in emerging economies and developed world alike. Therefore innovation systems
framework is taken as suitable platform for studying flow of technological knowledge from China to Pakistan, in the
light of their internal, mutual and contextual situation.
Among a wide range of new concepts, one class of models is most appropriate for the study of the distinct processes
of technology acquisition by developing countries, this developing country variant of the innovation systems
concept appears in many forms; as in National Learning System (Viotti, 2001)15, National Technological Learning
(world bank)16, National Systems of Economic Learning (Mathews, 2001)17 National Technology Systems (Lall,
2003)18 and Systems of Innovation for Development (Edquist, 2001)19 etc. This class of theories is founded on the
systems concept and treats social, technical and economic problems on a systematic conceptual framework. Detailed
studies on economic progress of Korea, Taiwan province of China and recently main land china are significant
contributions of this approach (Maleki)20. Since the research problem at hand also concerns technological change in
developing nations and international learning, the systematic approaches mentioned above are adapted, modified and
somewhat extended to model the prevailing situation.

2.3. DESIGN OF THE STUDY

This thesis is designed on a simple framework. Figure: 2 depict the structure of thesis as consisting of three
interconnected parts. After the introductory section one, section two focuses on the theoretical understanding of
technology transfer concepts. Chapter 2 of the second part builds an evolutionary context to clarify the meaning,
purpose and limitations of the traditional theories of technology transfer. It summarizes a knowledge base that sets
the foundation for a modern theoretical construct. Second chapter of second section (i.e Chapter 3) explains the
modern paradigm of technology transfer here termed as international learning and the modern theoretical
approaches. The foundation of this section is the global paradigm shift in manufacturing, trade, investment and
learning. The mutual consistency of these two chapters is used to filter out the traditional and modern concepts
applicable in the specific case of China and Pakistan. The end result of this section is the model of technological
learning from China to Pakistan, which shall be used to analyze the prevalent situation of present time and future
prospects of technological learning among the two nations.

11
Freeman, C., 1982. The Economics of Industrial Innovation, London: Pinter Publishers
12
Dosi, G. et al, 1988. Technical Change and Economic Theory, London: Pinters Publishers
13
Lundvall B-Å, 1992. National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning, London: Pinter.
14
Nelson, R. R. (ed.), 1993. National Systems of Innovation: A Comparative Study, Oxford: Oxford University Press.
15
Viotti, Eduardo B. (2001). National Learning Systems: A new approach on technical change in late industrializing economies and evidences
from the cases of Brazil and South Korea. Science, Technology and Innovation Discussion Paper No. 12, Center for International Development,
Harvard University, Cambridge, MA, USA.
16
World Bank Science and Technology Program, Tatyana P. Soubbotina, Generic Models of Technological Learning by Developing Countries,
July 2006
17
John A. Mathews, National systems of economic learning: The case of technology diffusion management in East Asia, International Journal of
Technology Management (2001) Vol 22, Nos. 5/6, pp. 455-479.
18
Lall, S. and Utra, S. (ed.) (2003), Competiveness, FDI and Technological Activity in East Asia
19
Edquist, C. 2001. Innovation policy – A systemic approach. In D. Archibugi and B.-Å. Lundvall (Eds.), The globalizing learning economy.
Oxford University Press: Oxford.
20
Ali Maleki "Applying National innovation systems approach in the context of industrializing countries: methodological unity and
terminological diversity in literature", GLOBELICS Academy, 2005

7
 Chapter 1- Chapter 2- Literature review of Chapter 6-
Introduction: Technology Transfer: (Theories and Practices Conclusion:
(Research in the Traditional and Modern Context) (Technological
problem, Basic Learning from
concepts and China to Pakistan
Research design) Future Prospects
Chapter 3- International Learning: and policy options)
(based on modern Context, Practices and
theories, a Model of International Learning from
China to Pakistan is proposed)

Chapter 4- National Chapter 5-

Learning systems of
China and Pakistan:
(General economic and
technological conditions)
International Learning
from China to
Pakistan: (Current status
of Trade, investment,
education, political and
geographical factors)

Fig: 2 Analytical frameworks for holistic study of Technology Transfer from China to Pakistan
Note: The double ended arrows represent the fact that the models and structure of different sections of this thesis has evolved
during the research process, as new findings and ideas of a later section sometimes necessitated redesigning of the preceding
sections as well.

Section three, consisting of chapters four and five is the core of this research work. The international learning model
presented in chapter three has a general version and another extended version appropriated for the specific
conditions of the two nations in focus. Based on the model presented in previous section, chapter four looks at the
individual internal learning dynamics of both China and Pakistan. In doing so, it aims at assessing the technological
capability and learning (adaption) capacity of the two nations and their positions in the globalizing world economy
which also points to the direction of their socio-technical and economic evolution. This chapter concludes with an
analytical measurement of the phenomenon mentioned earlier.
Chapter five shifts the focus away from individual nations to the mutual interaction and linkages between China and
Pakistan namely, bilateral trade, foreign direct investment, movement of people and ideas and state to state
cooperation. The magnitude and qualities of each as well as the forces that determine the strength and effectiveness
of each are analyzed separately and within the given context. Affects of certain (Sino-Pak) specific aspects of
international learning like the diplomatic relationships, geographical proximity and cultural distance are then
inculcated into the analysis. In this way a holistic and comprehensive theorizing of the problem is proposed and
analytically gauged for consumption of policy makers and other stakeholders.
Chapter six forms the last section which concludes the findings and also proposes a set of options and strategies for
policy making at all levels. Based on previous exploratory analysis and in the light of emerging global patterns, a set
of possible directions of evolution of these two economies is worked out. Policy options are recommended such that
these circumstances would serve the best interest of the two brotherly nations.

3. DEFINITION OF FUNDAMENTAL CONCEPTS

3.1. THE SYSTEMS CONCEPT

The systems concept is a relatively new but fundamental concept of scientific thinking in general and social sciences
in particular. The concept is widely used intentionally and intuitively in explaining and designing natural and social
phenomenon. Systems concept differs with the traditional scientific thinking on its two fundamental assumptions.
The two related assumptions of “scientific thinking” and “scientific method” are that a system can be broken down

8
into smaller ‘independent entities’ and the components arranged in ‘a linier fashion’ can describe the totality of the
system. The systems concept is actually a very old concept as compared to the seventeenth century scientific
thinking and scientific methods that formed the basis of the Economics’ neo-classical school of thought, for example
the ancient Greek philosophy of dialectics (= interdependence), the millennia old Chinese principle of
interdependence, called Yin-Yang and in idealistic dialectics by Hegel, materialistic dialectics by Engels and Marx
etc. (Delgado, Banathy, 1993)21. However in the recent times it was biologist Ludwig von Bertalanffy who formally
claimed that both assumptions of traditional scientific thinking are erroneous. Bertalanffy proposed a ‘General
Systems Theory’, according to which:
• “A system can be defined as a set of elements standing in interrelations” (Bertalanffy 1968)22
• “A system is a collection of parts which interact with each other to function as a whole” (Kauffman,
1980)23
• “Systems are composed of multiple elements interacting with each other in order to perform some
functions. Systems are complex, nonlinear, and dynamic (constantly changing) in nature” (Kelso 1995)24

System
Environment

Component Component Component

Or subsystem Or subsystem Or subsystem

Component
Or subsystem
Component
Or subsystem
Component
Or subsystem Component
Or subsystem

System Boundary

Figure: Fundamentals of Systems Concept

The systems concept distinguishes among the Real systems (any system of matter and/or energy) from the Abstract
(conceptual or analytic) systems. The conceptual representation of a system is a pattern system whose elements
consist of signs and/or concepts. Where the real system can exchange information, abstract systems are information.
The smallest units of analysis in the system are the ‘Element’ (any identifiable entity) and the ‘Interaction’ or
linkage (between two elements). An interacting element in a system is a Component, thus systems are simply
combinations of (interacting elements) components. The simplest system is a combination of at least two
components, functioning as a’ whole’. ‘Wholeness’ is a necessary characteristic of the systems which means they
are simultaneously Indivisible and Complete. Interactions are identified as a situation where a change in one
component induces a change in another component, while Interrelatedness means that components rely on (and
work with) other components
In systems research a variable is identified as any element in an acting system that can take on at least two different
states. All systems possess definite boundaries, defined by the set of its interacting components and its environment.
The elements of a system have both interaction and interdependence, while the elements of the environment have
interaction but not interdependence with the components of the system.
Systems exhibit Hierarchies, defined as a collection of parts with ordered asymmetric relationships inside a whole.
Depending on the level of analysis, every open and acting system can be composed of numerous sub-systems and
could be a part of even bigger systems that define the ‘whole’. Holistic perspective means evaluate system in the
aggregate environment.
Interactions and interdependence of components of a system and its dynamic environment, implies that a
‘perturbation’ (or change) in one would not only affect the other but ultimately the whole system including the
origin of the perturbation itself. This is one of the major ideas of systems concept “feedback”. It also describes the
way one part of a system can affect itself while affecting other parts. The part’s behavior will, by working through

21
Delgado, R. R., Banathy, B. (1993): International Systems Science Handbook. Systemic Publications, Madrid
22
Bertalanffy, L. v. (1968, ed. 1979): The General Systems Theory. Brazillier, New York
23
Draper L. Kauffman, Jr., Systems 1, p1, Future Systems, Inc., 1980.
24
Kelso, J. A. S. 1995. Dynamic Patterns: The Self-Organization of Brain and Behavior. Cambridge, Mass.:MIT Press.

9
the rest of the system, come back to alter itself. This feedback can create different results, varying from an
increasing resonance ultimately misbalancing the systems, in other situations feedback leads in the opposite
direction: to stability, a major feature of many systems.

Another way of defining the interactions and feed back in a system is that of the modern theory of communication

Current
Desired state Gap between State
Current Desired
states
Desired state

Current state Control measures/

adjustments
Time
Delay

Fig:Feedback and Delay in Systems

25
(Miller, K., 2005) .
The general notion in communication theory is that of ‘information’, which includes messages and other forms of
interactions that initiate some reaction of the organism or even machinery. The communication theory’s way to
measure information in a social system is in terms of decisions. A second central concept of the theory of
communication and control is that of feedback. Feedback arrangements are widely used in modern technology for
the stabilization of a certain action, as in thermostats or in radio receivers; or for the direction of actions towards a
goal where the aberration from that goal is fed back, as information, till the goal or target is reached. A very similar
biological phenomenon that corresponds to the feedback model is the so-called homeostasis, or maintenance of
balance in the living organism, e.g. thermoregulation in warm-blooded animals.
Long term effects add another dimension to the systems that is termed as “delays” in study of the systems. A
common way of looking at things bears a tendency to focus purely on events and how to react to them. Systems
thinking allow us to look at the big picture to envision what might happen in the future (Kauffman, Stuart, 1993)26.
There are indeed a large number of natural phenomena which correspond to the feedback model. First, there is the
phenomenon of so-called homeostasis, or maintenance of balance in the living organism, the prototype of which is
thermoregulation in warm-blooded animals.
Systems exist everywhere and examples of systems range from large galaxies and solar systems to smallest atoms,
living things in particular are systems and also part of greater systems like eco-systems. Humans also almost always
organize themselves and their creations on the systematic lines, like social systems, the economy, government and
technological systems, all possess systematic characteristics.
Complex adaptive systems are special cases of complex systems. They are complex in that they are diverse and
made up of multiple interconnected elements and adaptive in that they have the capacity to change and learn from
experience. The term complex adaptive systems was coined at the interdisciplinary Santa Fe Institute, by John H.
Holland, Murray Gell-Mann and others (Weidenfeld & Nicholson, 2002)27
Complexity of a system is related with the number of linkages and elements in the system. As systems become more
complex they exhibit ‘self governance’ and ‘emergence’. An economic system is a mechanism (social institution)
which deals with the production, distribution and consumption of goods and services in a particular society.

Dynamic External
Complex Adaptive Environment
Behavior Negative
25
(dampening)
Miller, K., 2005, Communication Theories: Perspectives, processes, and contexts. 2nd edition. New York: McGraw-Hill
26
Kauffman, Stuart, 1993. The Origins of Order: Self-Organization and Selection in Evolution, Oxford University Press.
feedback
27
Weidenfeld & Nicholson 2002, "What is to Come and How toEmergence
Predict It.", in: John Brockman, editor. The Next Fifty Years: science in the first
half of the twenty-first century, 2002

10
 Positive
(amplifying)
feedback

Component Component Component

Or subsystem Or subsystem Or subsystem
Information
Information
Component
Or subsystem
Energy Component
Or subsystem Energy
Component
Or subsystem Component
Materials Or subsystem

Materials
System Boundary
Dynamic External
Environment Figure ?: Self Organizing-complex adaptive
System (adopted from Steven Johnson, 2001)

The economic system is a complex adaptive system composed of people, institutions and their relationships to
resources, such as the technology, conventions of property. It addresses the problems of economics, like the
allocation and scarcity of resources (David W. Conklin, 1991)28. Friedrich Hayek (1973)29 coined the term catallaxy
to describe a "self-organizing system of voluntary co-operation," in regard to capitalism. While emergence in
complex systems refers to the synergetic combination of attributes, which means that the systems are more than the
sum of their parts (Krugman, 1996)30. Self organization and Evolution is a common phenomenon of the economic
system. In short we can say that economic systems have "Organized Complexity". When some or all elements of a
complex system are intelligent (e.g. humans), who possesses the ability to learn and adapt and control their own (and
thus the system) behavior. "Organized Complexity" proved to be a constructive way of thinking about, business
organizations, governments, urban life and national economies (Steven Johnson, 2001)31.
These systems concepts are deemed suitable for the unstructured and novel problem, as the problem attended in this
thesis.

3.2. TECHNOLOGY
‘…in the study of technology the neophyte and the veteran researcher are easily distinguished. The neophyte is the
one who is not confused…. (Barry Bozeman, 2000)32. There is no universal agreement on a definite meaning of the
term ‘technology’. Scholars and practitioners from different fields try to define it in their own way. Reasons of
ambiguity in the term are numerous and ever changing. Primarily a fact that technology is not a concern of any one
or two areas of scholarship and application, scientists, engineers, economists, businesspeople, social scientists and
philosophers all have legitimate concern with the term technology and they all perceive and define it from their own
unique perspectives (Hansen, Froelich, 1994)33.
The majority of decision makers do not have enough understanding about the technology perspective. They
therefore make decisions which are based on incomplete information and knowledge (Kahen, 1994)34. The obvious
complication in defining ‘technology’ and its relative nature requires that before studying the specific questions
regarding ‘international technology transfer’, it is paramount to settle the definition issue.

28
David W. Conklin (1991), Comparative Economic Systems, Cambridge University Press, 427 pp
29
Hayek, F.A. 1973, Law, Legislation, and Liberty, Vol. 2, pp. 108–9
30
Krugman, Paul (1996), written at Oxford, The Self-organizing Economy, Blackwell
31
Steven Johnson (2001) Emergence: The Connected Lives of Ants, Brains, Cities, and Software P. 24
32
Bozeman, Barry, 2000. "Technology transfer and public policy: a review of research and theory," Research Policy, Elsevier, vol. 29(4-5), pages
627-655,
33
Hansen, Froelich, (1994), ‘Defining Technology and Technological Education: A Crisis, or Cause for Celebration’, International Journal of
Technology and Design Education 4, 179-207, 1994.
34
Kahen, G. & Sayers, B.McA. (1994) “A Comprehensive and Strategic Model of Technology Transfer Addressing The Challenge: Optimizing
Technology Transfer to Developing Countries”, 5th International Conference of the Information Resources Management Association, Texas,
U.S.A.

11
Hayden (1990)35 notes that, “….a plethora of definitions exist but the majority of them are alike only in intent”. The
term 'technology' has several dimensions the very eclectic nature of the literature that proposes to address the topic is
telling. This necessitates that the issue of definition of the term technology should be settled from the onset”.
The initial inquiry technique which often serves a useful purpose in preliminary investigative work and is also a
popular tradition among the researchers is etymology, i.e., an account or explanation of the origin and history of
words.
The word 'technology' comes from the Greek word 'technologia' meaning systematic treatment of art. The derivation
is 'techne' meaning 'art and skill' and 'logis'(logia, logy) meaning 'treatment of'. Fores and Rey (1986)36 found that
the derivative 'technik' as used in some of the European languages, is much more descriptive of what those with
technological backgrounds feel they know technology to be. 'Technik', in the German language, (and its equivalent
in other European languages) means 'the functioning of natural and man-made things and the methods used in their
manufacture' (p. 37). It is unfortunate (according to Fores), that the word 'technik' remains a missing concept in the
English language.
Authentic sources of definition are another means of settling the definition issues in many areas of scholarship.
Following is review of these definitions.
"The practical application of knowledge especially in a particular area" and "a capability given by the practical
application of knowledge" (Merriam-Webster Dictionary)
‘The branch of knowledge dealing with scientific and industrial methods and their practical use in industry’
(Longman Dictionary)
“The science or study of the practical industrial arts; the terms used in a science, technical terminology; applied
science” (The unabridged Webster’s)
These definitions are correct about the relationship between knowledge and its application as being “Technology”,
however they also reflect the popular misconception about technology as being something exclusively concerned
with science and industry, while in economics and social science literature one may find numerous other
connotations of the term.
Another authentic source for a universal definition of ‘technology’ could be the documents of international
organizations like the United Nations Organization. Since these organizations are engaged in formulating
international laws and policies with the help of experts and policy makers from all over the world, their definition
must possess a certain degree of universality.
“A combination of equipment and knowledge” UNO
“The systematic application of scientific or other organized knowledge into practical tasks” UNIDO
"The systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of
a service, including any integrally associated managerial and marketing techniques" OECD
“A technology may be defined as the information necessary to achieve a certain production outcome from a
particular means of combining or processing selected inputs” ICTSD-UNCTAD
One could find a common theme among these definitions, first commonality is that all definitions are functional and
second that “technology” is defined in both human and material terms. The human form being Knowledge and the
material form as Equipment, while both cannot be termed as technology on their own, rather their combination
results in technology. Yet it’s also observable that an urge for universality seems to have rendered them too general.
Lack of a universal definition has lead many scholars to start by exploring the nature of tools, knowledge and skills
as elements of technology and extending the analysis to the outcomes or results of the technology in action; (namely
the products and services) and ultimately its impact on the society.
The first step is to start with looking at the tangible components distinctively from the intangible aspects.
Demarcating the technology (tangible) object from the (intangible) knowledge is not simple, but vitally important;
especially in case of social technologies e.g. social learning technologies, managerial technologies and financial and
accounting technologies etc. (Teece, 2001)37. Sahal (1981; 1982)38 refer to technology as ‘‘configurations’’, and
proposed that “Technology must rely on a subjectively determined but specifiable set of processes and
products…the knowledge and the tool may be distinctly considered but the two cannot be separated”.

35
Hayden, M. A.: 1990 (November), 'Learning Environments for Technological Literacy', in Proceedings of the Technology Education
Symposium XII: Technology Education: The Teaching and Learning Environment, New Britain, CT
36
Fores, M. J. and Rey, L.: 1986, 'Technik: The Relevance of a Missing Concept', in A. Cross and R. McCormick (eds.), Technology in Schools,
Open University Press, Milton Keynes, England, 36-
37
David J. Teece and Ikujiro Nonaka, 2001, Managing Industrial Knowledge, London: Sage Publications,
38
Sahal, D., 1982. The form of technology. In: Sahal, D._Ed.., The Transfer and Utilization of Technical Knowledge. Lexington Publishing,
Lexington, MA, pp. 125–139

12
Among the intangible aspects of technology, the most significant is the knowledge or information that permits some
task to be accomplished, some service rendered, or some products manufactured. Technologies exist in various
combinations of knowledge and tool content, their nature and complexity keeps varying. One needs to look at
technology in its dynamic form (Jervis, 1975)39…..owing to the deliberate attempts by the owner or user, change in
the technical or social environment and high content of tacit knowledge when adopted in personalized application,
Enos (1988)40.
Thus it can be concluded from the above discussion that a search for a formal definition of ‘technology’ is 'a little bit
like the elephant and the blindfolded people' who are all trying to describe it from their own particular perceptions
(Dyrenfurth and Mihalevich 1987, p. 9)41. We do find agreement over a few things, like the fact that technology is
composed of different elements that have both tangible and intangible nature and these elements of technology are
embedded in materials, information, persons and organizations. And that technology is dynamic and ever changing
with the changing elements and the dynamic environment. Based on the systems concept presented earlier, we can
redefine technology and hopefully bring clarity into the subject.

3.3. REDEFINING TECHNOLOGY

Systems have structure, defined by parts and their composition; Systems have behavior, which involves inputs,
processing and outputs of material, energy or information; Systems have interconnectivity: the various parts of a
system have functional as well as structural relationships between each other. Technology has often been identified
as a system. Technology is a combination of subcomponents or elements that stand in interrelation and
interdependence, like machines, tools, skills and knowledge. It involves inputs, processing and out puts and (in a
context of socio-economic background) its seen as a perfect example of self-organizing, complex and adaptive
system.
The earliest systems concepts used in economics were based on the input/output analysis (Leontief , 1941)42. The
earlier input-transformation-output model was liner and technology was seen as a black box. First glimpses of a
techno-economic system concept appeared in the Input-Transformation-Output block diagram and its logical
extensions of feedback control loops proposed by Churchman, (1979)43. The system operates within an environment
set by the system’s boundary. As such it is susceptible to factors that can impact or change the environment. The
transformation still operates as a “black box,” accepting inputs and producing outputs, but with very little known
about the transformation process itself. One proposition about the contents of the black box is that it contains
subsystems that by definition are systems themselves. (Martz, 2005)44.

39
Jervis, P., 1975. Innovation and technology transfer — the roles and characteristics of individuals. IEEE Transactions on Engineering
Management EM-22 _1., 19–26
40
Enos, and Park, W H (1988), The Adoption and Diffusion of Imported Technology: The Case of Korea, London: Croom Hellm.
41
Dyrenfurth, M. J. and Mihalevich, J. R.: 1987, Technological literacy: More than computer literacy! (Paper presented at the National School
Boards Association Conference, Dallas, Texas). ERIC Publication No. ED305901.
42
Leontief, W. (1941): The Structure of American Economy, 1919-1929. An Empirical Application of Equilibrium Analysis, Cambridge, MA,
Harvard University Press
43
Churchman, C. W. (1979). The systems approach (Rev. Ed.). New York: Laurel
44
W. Benjamin Martz, 2005 A Systems Approach to Technology Transfer: Contributions from Reference Disciplines Comparative Technology
Transfer and Society 3.1 60-75

13
 Figure: Generic Techno-economic
economic system (Adapted from Churchman, 1979)

In an organizational context (either public or private), technologies include all kinds of human-made
human helpmates.
Organization or firms are the primary environment surrounding a technology system. Organizations Organization are
essentially business and government systems established to achieve economic and social objectives. These
systems are composed of diverse components or subsystems like financial system, manufacturing system
45
and administrative systems (Niraj
Niraj Verma,
Verma 1994) . Differing with the traditional view of technology as
merely capital goods confined to manufacturing and servicing. The systems concept of technology as
Human-made helpmates considers all the intelligence based created resources (such such as tools, skills, facts,
fact and
methods etc.) that are used as the mechanisms for different transforma
transformation
tion activities and as means for managing
various organizational functions most productively (Kyriakou,
( 2002)46.
47
Earliest attempts to break open the black box of technology were quiteuite general as in Robinson (1988) , technology
is classified as—hard
hard goods ( = embodied technology) and soft goods ( = disembodied technology). However for
this purpose the components of technology are classified on the basis of technology carrier i.e. Product, Process,
48 49 50 51
Person and Organization (Sharif, 1988 ; Mu Rongping, 2001 ; Ahsan 1999 ; Heshmati, 2007 etc.). The so-
called THIO approach to technology assessment was first elaborated by the Economic Commission for Asia and the
52
Pacific (ESCAP, 1989) . THIO stands for the four main embodiment forms of technology, namely: object- object
embodied technology (Technoware); person-embodied
person embodied technology (Humanware); document-embodied
document technology
(Inforware); and institution-embodied
embodied technology (Orgaware).

Business and Public, Organization System

Information
system

Technology
Financial
Administrative
Technoware Humanware System
system

45
Niraj Verma. 1994, Organizations and Their Purposes: A Note on Churchman's
Inforware Philosophy of Management, by Interfaces
Orgaware
46
Kyriakou, D. 2002.
002. “Technology and sustainable growth: towards a synthesis’. Technology Forecasting and Social Change, 69(9), 879
879-9 1 6.
47
Robinson, R.D. 1988, "The International Transfer of Technology: Theory, Issues and Practices", Cambridge, MA: Ballinger Publishing
Publi Co.,
48
Sharif, M.N. 1988. Problems, Issues and Strategies for Science and Technology Policy Analysis. Science and Public Policy. 15 (4): 195-216
49
Mu Rongping (2001), Technology Transfer from Germany to China, Case studies on Chinese Carmakers and part suppliers,
s
Universitatsbibliothek, Abt. Publikationen.
50
Ahasan and Benincasa (1999), "Technology, society and human factors", in Straker, L., Pullock, S., Smith, R. (Eds),Second
(Eds), International
Virtual Conference on Ergonomics,
51
Almas Heshmati, Young-Bock Sohn, hn, Young-Roak
Young Kim, (2007), Commercialization and transfer of technology: major country case studies,
Nova Publishers.
52
Attracting Foreign Direct Investment in Pacific Island Countries: Lessons from East and South
South-East
East Asian Experience (1999)
(ST/ESCAP/1989)

14
 Manufacturing system Other systems

Figure: 2 The four components of technology as a system

Technology can be redefined a complex system with emergence and synergetic qualities, if seen as simply “doing
more with less” and “more than the sum of its parts”. Technological system comes to encompass the business-
organizational system that the technology is housed in.
Technoware is the tangible component of technology, which includes machines, production systems, infrastructure,
tools and also the facilities available to back up the technology used in the production system. This aspect of
technology is embodied in material form. Humanware is the human embedded form of technology seen as the
human abilities, skills, knowledge and experience with respect to a certain task. Inforware contains documented
facts and information concerning a technology, for example in the form of blueprints and technical manuals, as well
as partly un-codified and tacit forms of knowledge. While orgaware relates mainly to organizational ability and
managerial competencies associated with the functioning of technology system.

Material
Transformation Contact
Humanware
Humanware
Technoware

Information Support
Transformation Humanware
Humanware-
Specific
Technoware- Inforware
Work
Specific Work Facilitation
Inforware Convention

Inforware Orgaware
Work
Orgaware- Modification
Specific Work
Inforware Evaluation
Work
Organization

Figure; Subsystems and sub-subsystems of technology in an organizational context

15
Ramanathan, K. (1996)53 explored these four components of technology in depth and identified functions and
examples of multiple subsystems and sub-subsystems. Described in Table: , these subcomponents clearly perform
certain individual tasks while many activities of these components involve interaction and interdependence with
other components. A similar explanation of this structure is given in the popular ‘core competence’ approach. Core
competence is defined as a tapestry, woven from the threads of distinct skills and technologies…it is the collective
learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of
54
technologies” (Prahalad, Hamel 1990) . Companies succeed when they have a capability of blending multiple
streams of technology and organizational skill that comprise their heritage into new, higher order competencies, P
214.

Table: Subcomponents of technology and sub-sub components (compiled from Ramanathan. K, 1996)
Component Subsystem Explanation
Technoware Material Equipments machines and facilities which can transform raw material to be
Transformation a certain production output
Information Collects, Process and Analyze information related to the operation, helps
Transformation the implementation of Material Transformation Subsystem
Humanware Contact Humanware Have direct contact to technoware, for example the machine operator and
material handling operator
Support Humanware Human resources who work in maintenance department, production
planning, quality control, or other relevant support activities
Orgaware Work Convention Culture and philosophy adapted by the company. It is the first priority to
identify before discussing other elements.
Work Organization The role or function of human resources in the company to have an
effective technoware application
Work Facilitation Performance standard to be achieved by the workforce. The objective is to
develop a conducive environment among the workforce and to eliminate all
obstacles to achieve company’s goals.
Work Evaluation Evaluation of work organization elements in order to know which parts are
good or need to be revised
Work Modification Adaptation and modification process to other four elements. Adaptation and
modification process are critical factors to face and anticipate all change
impact in the company that effect workforce performance.
Inforware Technoware- Needed for operating, maintain and fixing technoware in a manufacturing
Specific Inforware system
Attribute inforware (information about technical specification of
technoware),
Operating inforware (standard operating procedure and software which are
used to operate the technoware)
Maintenance inforware (maintain both physical and software to be used in
operating the equipment)
Performance-enhancing inforware (how to solve problem efficiently and to
improve the workforce performance)
Design inforware (the blueprint of technoware, design specification, and
design calculation which are used to produce the technoware)
Humanware- Are needed to design the use of technoware in an effective manufacture
53
Ramanathan, K. (1996) Transfer of technology. Lecture Handout, School of Management, Asian Institute of Technology, Bangkok
54
Prahalad, C.K. and Hamel, G. (1990) The core competence of the corporation, Harvard Business Review.

16
 Specific Inforware system
Humanware foundation inforware (information that provide insights into
the functional requirements of a manufacturing system, the knowledge of
the possibilities, limitations, and manipulability of various natural processes
and structures which might be used in technical practice; and a range of
design concepts of various functions)
Humanware back-up inforware (organized technical information which is
needed by the industry, such as technical data, documentary standards,
standardized calibration methods, and international standard of physical or
chemical measurements, and so on)
Orgaware-Specific Needed to assure that the interaction of technoware and humanware can
Inforware reach the objective
Orgaware back-up inforware ( information needed to design and to control
the work activity)
Orgaware enhancing inforware (information and software to improve the
planning and controlling value-added activities)

Viewing technology as a system composed of the four basic components is easily applicable to other implications of
technology in a business or public organization, like the evolution and life cycle of technology and firm, its
innovation, acquisition, adaptation and diffusion at firm, industrial, national and even global level. It works as a
framework for analyzing technology exchanges among business organizations and research institutions, industries,
value chains and clusters of manufacturing. All such concepts are systems composed of business and other forms of
organizations (i.e governments, institutions and culture). These super systems could all be broken down into
organizational components and the synergetic advantages of their mutual interactions and interdependence can be
mapped all the way to the minute details of sub and sub-sub components of technology defined above.
Technology as a system conception exhibits far reaching connections with the social, economic, political and
cultural factors surrounding it. The Actor-Networks theory posits a heterogeneous network of humans and non-
humans as equal interrelated actors. Key concepts include the inscription of beliefs, practices, and relations into
technology which is then said to embody them (Latour, 1999)55. Actor-Network theory provides a deep insight into
technology as a self-organizing complex adaptive system that exhibit, emergence, development and stabilization
dynamics (Callon, 1999)56. It strives for impartiality in the description of human and nonhuman actors and the
reintegration of the natural and social worlds. Social construction of technology argues that technology does not
determine human action, but that human action shapes technology". Technological artifacts are culturally
constructed and interpreted ... By this we mean not only that there is flexibility in how people think of or interpret
artifacts but also that there is flexibility in how artifacts are designed."
Redefining technology based on the systems concept provides us with a holistic outlook of technology in resolving
the problem of technology transfer in general and the case of Pakistan and China in particular. It provides a logical
framework for determining horizontal and vertical linkages among systems. This concept covers technology all the
way from the micro perspective of an organization to the broad level of multiple societies. International technology
transfer involves looking at the dynamics of technology as it survives in different national and systems and cultures.

3.4. REDEFINING TECHNOLOGY TRANSFER

Technology transfer is the original subject area of this research, although it’s fraught with taxonomic ambiguity,
interpretations and overlapping of ideas, the problems originate from the varied definitions and conceptualization of
technology itself. First of all it is suggested that in using the term technology ‘transfer’ only one aspect of the flow
of technological knowledge is represented. This is because when one uses the term ‘transfer’ implying that there is a
‘donor’ and a ‘recipient’, we are simply encouraging wrong (altruistic) propositions and wrong (wishful)
expectations (LE Goc, 2002)57. In this sense, there is little pure technology transfer especially international
technology transfer happening in the world. Over the past centuries we have seen that advanced countries retain
their supremacy in technological fields. Instead of trading products for products, advanced countries increasingly
55
Latour, Bruno (1999). On recalling ANT. In J. Law & J. Hassard, eds. Actor network theory and after. Malden, MA: Blackwell.
56
Callon, Michel (1999). Actor-network theory: The market test. In Law, J. & Hassard, J., eds. Actor network theory and after, pp. 181–95.
Oxford: Blackwell.
57
Michel Le Goc, Westport, CT, 2002, Development Techniques for International Technology Transfer. Quorum Books

17
pay for imports of industrial goods from developing countries through the sale of technical expertise. Sales of
technical expertise, is often treated as technology transfer in traditional terms. But this process of sale and purchase,
or exchange has not resulted in altruistic transfer of technology to developing nations; rather these nations have
become increasingly dependent on the advanced nations.

18
 Table: Location of world’s high-technology
manufacturing output: 1990–2003
Percent
United Asia-
States EU-15 Japan China 8
1990 24.6 26.7 25.3 2.4 8.1
1991 24.0 26.8 25.6 2.7 8.6
1992 24.5 27.4 23.7 3.0 9.7
1993 24.4 26.7 22.6 3.4 10.6
1994 23.9 26.5 22.4 3.8 11.7
1995 24.7 26.1 21.8 4.2 12.9
1996 26.4 24.5 21.4 5.3 12.6
1997 28.9 23.0 20.4 5.4 12.4
1998 33.4 22.9 17.4 5.8 11.1
1999 35.9 21.2 15.4 6.6 12.3
2000 37.8 20.2 13.9 7.0 13.0
2001 38.7 20.6 12.6 8.1 12.2
2002 39.5 19.1 10.9 10.2 13.0
2003 38.9 18.0 10.8 12.3 13.2
Global Insight, Inc., World Industry Service database
(2005). Historical data from United Nations Industrial
Development Organization, United Nations System of
National Accounts, Organisation for Economic Co-
operation and Development, and country sources.
Science and Engineering Indicators 2006

LE Goc further proposes that we should refer to the process as technology ‘‘transaction.’’ Like everyone else in the
developed countries, the author states ‘‘A transfer of technology involves both an offeror and an offeree, or
recipient’’ (p. 13). There is no free lunch in the business world. Technology being the most important means for
international business competition, no business entity is expected to give away useful technology for free. To the
entrepreneurial community, ‘‘technology transfer’’ simply means transfer from laboratories to production units—
which I think, is better known as ‘‘commercialization of research results.’’ It is the international consulting firms,
foreign aid agencies, and United Nations’ organizations that are continuing to use the term ‘‘transfer’’ to refer to
‘‘international transactions.’’ The result is not just misunderstanding, but unnecessary north–south polarization.
Therefore, I strongly feel that we should not use the phrase ‘‘international technology transfer’’ because it is
problematic. It is better to call it international ‘‘technology transaction,’’ ‘‘technology trade,’’ or ‘‘technology
business.’’
As mentioned earlier, the processes and concepts of technology transfer as perceived in the traditional literature have
undergone a sea-change, more so than the exchange of goods, the exchange of technology among the nations has
increased dramatically. The words used in this study would treat technology transfer as the altruistic donation, while
other forms of technology transitions would be termed as exchange, sale, trade, and export, not transfers.
As we have redefined technology on a systems concept of interaction among components of technology, the same
conception provides a ground for simplifying the conception of technology transfer as well.
Based on the THIO components of technology, seen as ‘Transferable elements of Technology’ (Huria,V.K, 2000)58,
a system can be developed to assess technology levels in relation to each of the four components and presented in
the form of an organizational ‘technology profile’. Different organizations exhibit different levels of sophistication
in different aspects of the technology components, and an interaction based on transition of these elements from one
to another organization can be termed as technology transfer.

58
Huria,V.K (2000). Technology Transfer in the Developing Countries: Issues and Experiences, CEPERT International Conference proceedings,
95-106

19
 Technoware

Humanware

Orgaware

Technology Profile of Organization A

Inforware
Technology Profile of Organization B
Combined Synergetic Profile of the
organizations
Figure: Technology Profile of organizations involved in technology exchange

The overall profile of a company or organization could consist of financial strength, personnel, technology and
organizational skill and experience. As far as the technology system is concerned its four components exist in
different combinations in different organizations. For technology exchange, spillover and even transfer (donation) to
happen, there must be a difference in level of sophistication of any or all of these components. Figure illustrates the
combination of the technology profiles of two organizations A and B. This presentation elaborates the most
significant aspect of technology exchange in systematic manner, projected synergistic potential of technology
exchange between A and B. a synergetic potential is that complements the weaknesses of one with the strengths of
the other. For example, a blending of the organizational ‘knowhow’ and human resource pools of a local partner -
with the equipment-related ‘knowhow’ and international/ technical information networks of a foreign partner.
This simple presentation does not represent a general or complete model of technology transactions, as inter-
organizational exchanges are of many different types. Edwin Mansfield, the noted American economist, makes a
useful distinction between vertical technology transfer and horizontal technology transfer: “Vertical technology
transfer occurs when information is transmitted from basic research to applied research, from applied research to
development, and from development to production. Such transfers occur in both directions and the form of the
information changes as it moves along this dimension. Horizontal transfer of technology occurs when technology
used in one place, organization, or context is transferred and used in another place, organization, or context. Edwin
Mansfield, (1975)59.”
Different forms of international technology transaction (regardless of any classification scheme) include;
Export of goods and services or Buying Machine: this mechanism is commonly used to acquire the technoware and
facilities to work. It ranges from arms-length inter-firm trade to the delivery of machine to a local subsidiary from
the principal in abroad. Buying foreign products is also a mechanism to reverse engineering then establish R&D
activities to have the technology and innovate new products. To do this, the manufacturer must have a good and fast
R&D department. Licensing mechanism involves purchasing the rights to use inforware and technoware as well as
orgaware and in some cases humanware from the original legal owner of an advanced technology. It is used by
many developing country manufacturers usually such manufacturers have good initial innovative capability.
Turnkey operations: is traditionally a popular form of technology transfer where the complete technology system is
delivered entirely by the technology supplier, usually with little involvement from the purchasing organization until
the installation and trial operation of the system is complete.
Management contracts and Technical Assistance mechanism is usually implemented together with Buying Machine
mechanism, including installing, operating the machine and training the operator. Franchises and Joint Ventures
mechanism is a favorite channel of technology exchange by multinational companies. The principal in abroad
becomes the owner of the domestic manufacturer and supply the technology needed. Sub-contract mechanism is also
59
Edwin Mansfield, (1975) International Technology Transfer: Forms, Resource Requirements, and Policies The American Economic Review,
Vol. 65, No. 2, Papers and Proceedings of the Eighty-seventh Annual Meeting of the American Economic Association, pp. 372-376

20
favored by the advanced nation corporations as a means to benefit from resource cost advantages in developing
countries. Technology exchanges involve synchronizing the operational capabilities of the recipient sourcing firm in
all four ware of a technology system.
Organizations use many other means of technology system advancement such as hired consultation, attending
seminars, conducting advance studies and joint research, student and staff internships, university partnerships,
attending industrial and scientific exhibitions, learning from books, journals, being member of industrial and
academic associations and above all, through internet.
This loose list of mechanisms of international technological knowledge flows can be classified as commercial
(transaction) and non-commercial (transfer), market driven (pricing mechanism) and state sponsored, intentional and
un-intended (diffusion). But, any classification has its limitations, but the above ‘‘quadruple component’’ concept or
the THIO concept can be used to classify technology transactions in a clearer manner.

Technoware transactions: Humanware transactions:

Purchasing, leasing, and renting object-embodied Training, seminars, and workshops for person-embodied
physical facilities (machinery, equipment, factory, skill development (know-how demonstration and
computer hardware and software, transport systems, emulation, problem solving exercises, research and
communication systems, security systems, etc.) development experimentation, temporary posting of
staff and engineering and management consultants, etc.)
Inforware Transactions Orgaware transactions
Intellectual property (copyright and patent) licensing Franchising specific trademarks and industry trade
for specific use (exclusive and nonexclusive rights secrets (procedural handbooks, guidelines for turnkey,
through payment of royalty or fees for manuals and BOT systems)
containing intellectual property)
This type of international technological knowledge flows are primarily transactions usually undertaken through legal
contracts and require payments in one way or the other. Legal aspects of the contracts have to be negotiated but
since market based pricing mechanisms fail as the transactions involve higher intensity of technological knowledge,
the price is generally determined by the relative bargaining position of the two parties (buyer and seller). Direct
foreign investment (wholly owned, subsidiary, or partnership–joint ventures) involves either relocation/outsourcing
and/or transactions of a combination set of technology components (technoware, humanware, inforware, and
orgaware). However, sales agents are normally involved with technoware transactions only. For all of the options,
there are different ways of payment and cash flow (including transfer pricing).
From the above discussion it can be concluded that the term ‘technology transfer’ in a traditional context covers all
the different forms of knowledge transfer in general, but in effect it is a fundamental error of interpretation that has
plagued the developing nation’s policies over the years. In modern context and based on the popular system’s
approach, technology transfer is seen one of many forms of synergetic interaction and interdependence among two
or more organizations. Similarly ‘International technology transfer’ involves two or more organizations from
different countries. And the term ‘transfer’ here also refers to the altruistic donation of technological knowledge
only while other forms of knowledge flows like transactions and non-commercial spillover and diffusions are treated
not as transfers but transitions.
The significance of international technology flows in relation to domestic technology transitions: is that primary
focus is on macro level differences among nations, e.g. different economic and market conditions, political system
or policies, geographical and demographic factors and cultural forces. These factors are seen as having an impact on
international transit of technologies and that actually determines the existence of international potential for
transitions. Based on a priory that, if all nations had equal mastery of technological skill, then there would probably
be no need for international transfer or transitions; but we see that technologically advanced nations exhibit more
frequent international technological transitions and interactions (than advanced nations and developing nations).
This notion points to the fact that technology transitions, transactions, and transfers occur not only due to potential
created by level of advancement, but also other macro-level factors.
The four components of technology system provide a basis for evaluating national or macro level forces as well.
Nature and level of national technological advancement includes advancement of technoware, inforware,
humanware and orgaware. These components can be roughly connecting to national system as individual
organizations in a national economy form the sub-components of the whole, where the whole is seen as more than
the sum of its parts. Physical infrastructure, especially large technological systems, industrial clusters, innovation
networks, national research and academic institutions and governments, are all organizations composed of many
subsystems, technology system being one of them. National level technological creation, maintenance, acquisition
and promotion systems are sometimes referred as national innovation systems and national learning systems.

21
International technology transitions are interaction among these national systems; international inter-firm
transactions are only a part of a greater whole. In this thesis our prime interest is holistic, attempting to capture the
essence of international technological transition, in the synergetic effects of interaction at international level.

4. TECHNOLOGY AND ECONOMIC DEVELOPMENT

To establish the ultimate objective of this research, relationship between technology transition (transfer) and
economic development must be understood. All the questions of international technology transfer to developing
countries are ultimately concerned with impact of domestic and foreign technology on economic development.
The definition of ‘development’ has always been a contentious issue. Income level is of course one of the most
widely accepted single measure of development, but most people would agree that development is something more
than providing higher material standards of living (Khan, Christiansen, forthcoming 2010)60.
One of the earliest known development models is the Harrod-Domar Model (1930) initially created to help analyze
the business cycle, it was later adapted to explain economic growth. Its implications were that growth depends on
the quantity of labor and capital; more investment leads to capital accumulation, which generates economic growth.
The model also had implications for less economically developed countries; labor is in plentiful supply in these
countries but physical capital is not, slowing economic progress. The Harrod-Domar model in the early postwar
times was commonly used by developing countries in economic planning. With a target growth rate, and
information on the capital output ratio, the required saving rate was calculated. The same model is also considered
the precursor of the more widely known ‘exogenous growth model’ (or neoclassical growth model) of Robert
Solow.
The neo classical development model for the first time places emphasis on the role of technological change, the
original Solow (1957) study showed that technological change accounted for almost 90 percent of U.S. economic
growth in the late 19th and early 20th centuries. The sources-of-growth measurement obtained from this model
highlights the relative importance of both the capital accumulation and technological change in economic growth
61
(Chen, E.K.Y. 1979) . More recent analysis (Choi, 1987)62 attribute over 87% of productivity growth in the United
States between 1950 and 1980 was due to technological improvements, while another (Hirono, 1985)63 estimates it
to be between 30% and 56%. It may be said that technological progress has enabled the developed nations to
become highly industrialized and wealthy. In the case of Japan, it has been estimated that nearly 29% of growth in
the manufacturing industry between 1955 and 1979 could be attributed to technological advances. The same study
also shows that the corresponding value for the machinery industry was 40%. It has been futher estimated
(Subramanian, 1987)64 that technological progress could contribute as much as 65% to the economic growth of
Japan in 1980s.
Besides the direct impact of technological development on a nation’s economic development and growth, the
stretigic importance of technology has other reasons as well. Technology is a key component of the national defense
mechanism and internal security and it determines the quality of public service infrastructure ranging from health to
education, transportation to communication. Culturally, the introduction of modern media has not only promoted
awareness among masses it has also created market for increasingly sophiticated and larger varied of manufactured
goods, that cannot be always imported. Although economic performance in recent years has been particularly
impressive for many developing countries, sustaining higher growth rates will require achieving competitiveness in
high technology content products that are becoming increasingly important in world trade (Sharif, 1988)65.
“Since the work by Abramovitz and Solow in the 1950s and by Denison, Kendrick and many others in the 1960s, it
is commonly accepted that technological change is a main determinant of economic growth. Yet, because of the
difficulty of studying technological change using neoclassical models which predominate in the analysis of
economic growth today and which treat technological change as an exogenous factor, the causal connections
between technological change and economic growth are still poorly understood” (Carlsson, 1991)66.

60
S. Khan & J. Christiansen (eds.), forthcoming 2010, Towards New Developmentalism: Market as Means rather than Master, Hamlet without
the Prince of Denmark: How development has disappeared from today’s ‘development’ discourse, Routledge, Abingdon
61
Chen, E.K.Y. (1979), Hyper-growth in Asian Economies, Macmillan, Basingstoke
62
Choi, Hyung Sup, (1988), "The Role of the Government and R&D Infrastructure for Technology Development", Technological Forecasting
and Social Change, 33 (March), 23-32.
63
Hirono, R. 1985. Integrated survey Report in “Improving productivity Through Macro-Macro Linkages. Tokeyo: Asian Productivity
Organization
64
Subramanian, S.K. 1987. Technology, Productivity and Organization. Technological Forecasting and Social Change. 31 (4): 359-371
65
Sharif, 1988a. M.N. Sharif, Problems, issues and strategies for S&T policy analysis. Science and Public Policy 15 (1988a), pp. 195–216
66
B. Carlsson, R. Stankiewicz. (1991), On the nature, function and composition of technological systems, Journal of Evolutionary Economics
1:93-118

22
The recent conception of economic development has seen an increasing focus on capabilities rather than resource
endowments as the main instruments and values in development. This tendency can be exemplified by work by
noble laureate Amartya Sen. Sen's revolutionary contribution to development economics and social indicators is the
concept of 'capability' developed in his article "Equality of What." He argues that the country’s development should
be measured against the concrete capabilities of their citizens. Provision of basic necessities of life, human rights
and freedom from poverty for the general populace is considered as a prime source of economic development. This
view is different from previously held view where a capitalistic economy would first increase wealth by a few of the
whole population and later a trickledown effect and income distribution functions would allow the rest of the
population to share the benefits. The most well known in this respect is the UNDP’s human development index
(HDI) and its variations, which try to incorporate non-income dimensions of human welfare, such as education,
health, and gender equality. The ‘humanistic’ dimension of development emphasized by these indicators is
absolutely correct in concluding that material progress is only the means and not the end of development.
However, capabilities, especially technological capabilities of a country reside in its production system. Therefore
capability enhancement must necessarily be considered in the production context, where the purpose of technology
is to transform available inputs (natural resources and samifinished goods) into desirable outputs (consumer goods,
semi-finished goods and capital goods). This is the ‘production’ side of development. Before the rise of neo-
liberalism since the late 1970s, there was a general consensus that development is largely about the transformation
of the productive structure (and the capabilities that support it) and the resulting transformation of social structure –
urbanization, dissolution of the traditional family, changes in gender relationships, rise of labor movement, the
advent of the welfare state, and so on. This was mainly (although not exclusively) to be achieved through
industrialization. Even though they radically disagreed on how exactly this was to be done, most commentators
ranging from Walt Rostow on the right and the Dependency Theorists on the left – shared the view that development
is something centered around a process of transformation in the productive sphere (Khan, Christiansen, forthcoming
2010)67.
The Millennium Development Goals of the United Nations, the Doha Development Agenda (DDA) of the WTO
(World Trade Organization), and the discourse on micro-finance also promote the comparative advantage argument,
which emphasizes the need for developing countries to stick to their existing specializations in agriculture and
textile/clothing. These discourses have a view of ‘development’ that lacks a vision of transformation in productive
structure (and the development of social and technological capabilities that are both the causes and the consequences
of such transformation).
Under development in backward countries is best explained by a systematic concept called the "vicious cycle
theory" of economics (Hirschman, 195868; Samli, 198569). Essentially, this theory holds that economic
underdevelopment in the less developed countries results from and is perpetuated by a configuration of factors,
including low levels of income, savings, investment and productivity, and acute shortages of capital. One strategy
for breaking the vicious cycle is through the infusion of venture capital to stimulate business startups. Another
typical strategy is through the transition (transfer) of technology, often from the developed countries to the
developing economies. Such technology transition arguably would promote entrepreneurship and foster economic
development (Baranson, 196970, 197071; Balasubramanyam, 197372).Baranson (1969) argues that the transfer of
technical know-how from the industrially advanced countries to the developing countries is essential to upgrading
the quality of human resources necessary for effectively utilizing available physical capital and other input factors.
One aspect of the traditional technology transfer conception advocated import substitution and protection for infant
industries, but ever since mid 1970s with the dominance of neo-classical theorizing, this trend has slowly withered
out. It should be recognized that development through technological capability enhancement is a progressive process
starting with the utilization of existing mature technologies; adaptation of evolving technologies; introduction of
emerging technologies; and eventually leading to the production of state of the art technologies.
With the rise of globalization the new conceptual framework for socio-technical change and development is based
on the revival of Innovation concept. It’s now widely believed that the process of developing ideas into products and
services is a major driving force in global economic growth and development. Innovation has been moving from a

67
S. Khan & J. Christiansen (eds.), forthcoming 2010, Towards New Developmentalism: Market as Means rather than Master, Hamlet without
the Prince of Denmark: How development has disappeared from today’s ‘development’ discourse, Routledge, Abingdon
68
Hirschman, A. 1981. The Rise and Decline of Development Economics in Essays in Trespassing, Cambridge University Press, Cambridge.
69
Samli, A.C. (Editor). Technology Transfer: Geographic, Economic, Cultural and Technical Dimensions. Quorum Books, Westport,
Connecticut, 1985.
70
Baranson, J. (1969). Industrial Technologies for Developing Economies. New York: Praeger.
71
Baranson, J. (1970). Technology transfer through the international firm. American Economic Review, 60, 435-40.
72
Balasubramanyam, V. N. (1973). International Transfer of Technology to India. New York: Praeger

23
“closed”, inward-looking or “supply”-driven process to a more open and networked process: open to new ideas,
knowledge, resources from outside the institutions from external advisors, from enthusiasts (“the crowd”), from
other fields, from overseas (even outsourcing is in a sense “open”), and from customers and end-users. “Creative
knowledge is widely diffused, and innovation structures that support a solely internally oriented, centralized
approach to research and development are becoming obsolete. Our connectivity today offers an unprecedented
opportunity to harness global creativity and add value for products and services” (Henry Chesbrough, 2003)73.
Innovation systems concept turns to the role of institutions at the state and society level in explaining the prevalence
of entrepreneurial activities and resulting economic development.
This new trend in development thinking lead by the Schumpeterian innovation thinkers like Howitt, P. and Mayer-
Foulkes, D. (2005)74 have now established after two decades of research that differences in income per capita
between countries are mainly due to differences in technology. Thus considering economic development and growth
as mainly a process of knowledge generation or acquisition and its effective application through which technological
levels of production would rise. Since Schumpeterian analysis of endogenous technological change first
concentrated on R&D in developed countries as the source of economic growth (Aghion and Howitt, 1989)75 and
convergence (Howitt, 2000)76 it can also explain prevailing trends in economic development namely convergence
77
clubs, underdevelopment and divergence (Howitt and Mayer, 2005) .
We conclude from this discourse that technology plays a vital role in economic growth and development,
but no single dominant model or theory fully encompasses the complexities of development. The
production or material side of development as propagated by the earlier models is as important as the
modern humanistic approach to development. Domestic technological effort and importation of advanced
technologies are equally important, for this matter, more linkages within and outside the national
boundary are of required based on appropriate institutions for learning and innovation. The modern
sustainable development concept and the recent rise in environmental concerns also pose a challenge for
policy makers, who can avoid the damaging effects of industrialization through adoption of most modern,
efficient and environment friendly technologies.

5. THE (INTERNATIONAL TECHNOLOGICAL LEARNING) MODEL

The core of this research is the proposed ‘international technological learning model’: following is a brief
introduction to the structure of the technology transfer model, while a detailed discussion is continued in chapter
three.
First of all we need to model the reality and then we need to test this model against indicators and data.
Zaltman (1979:518-520), defined the properties of a model as follows: (1) capable of explanation as well as
prediction, (2) general, (3) high in heuristic power, (4) high in unifying power, (5) internally consistent, (6) original,
(7) plausible (have face validity), (8) simple, (9) supported by facts, and (10) testable or verifiable (at least in
principle). The purpose of the model dictates the degree to which each property is met within any given model.
Several authors have identified criteria for assessing models. Davis & Salasin (1979, as referenced in Glaser
1983:418-419) proposed 12 characteristics for a good model of change. Those characteristics are: practical,
manipulable, economy of use, ease of communication, comprehensive, synergistic, phased, individual components
workable, flexible and versatile, basis for subsequent evaluations, recognizes human characteristics, and calls
attention to how the change process influences the rest of the system.
While models help simplify the relationships between factors, they also can sometimes mislead. Zaltman warns us
that since models simplify, it is easy to "draw artificial distinctions between concepts which in actuality are
inseparable" (Ibid, 517). Glaser, Abelson, and Garrison (1983:418) remind us that models are often hypothetical and
heuristic and do not usually represent established laws or verities. Models, they say, may stem from theory,
experience, or validated evidence.
First of all this model differs from the traditional approach as it is intended to be a holistic model, that uses the
available knowledge to present a general structure of international technology flows from a relatively successful

73
Henry Chesbrough, 2003, Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press
74
Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs,"
Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-77
75
Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904,
University of Western Ontario, Department of Economics.
76
Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic
Association, vol. 90(4), pages 829-846
77
Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2005. "The Effect of Financial Development on Convergence: Theory and
Evidence," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 173-222

24
developing nation to a relatively backward developing nation. While traditional models tend to reduce out any factor
that has a general or indirect impact on the phenomenon at hand, which usually helps clarify the concept at a micro
level but limits the application of the findings at a macro level of decision making or in an altered situation of micro
level implication.
Secondly this model is based on the systems concept that is a promising approach to solving problems of social
nature, especially those problems that involve change and dynamism. Thus this model inculcates the traditional
technology transfer knowledge summarized in the first chapter of section two but treats international technology
transfer as a systematic concept based on innovation systems concept.
Its main premise is that the innovation systems concept is the most suitable platform for studying technology
transfer that contributes to economic development of a developing nation. National systems concept has its roots in
study of economic catch-up as far back as 1841 when Friedrich List78 studied German catch-up and introduced the
concept of National System of Political Economy. Recently this concept has gained huge favor, owing to the works
of Freeman (1982)79, study of role of institutions in innovation and economic growth, Freeman (1987)80 then studied
post war Japan as an early case of technology transfer based economic catch-up model. Nelson (1993)81 introduced
the concept of NIS in a study of five developing countries in a narrow sense, while broad definitions were delineated
by Lundvall, (2001)82 and further refined for developing nations by Shulin Gu (Gu, 1999)83.
Our model considers China as an ‘active learning economy’ that is poised to become a complete ‘national
innovation system’ as it evolves over time. This concept is based on popular versions of innovation system,
generally referred to as learning systems, i.e. National Learning Systems (Viotti, 200184, 200385), National Systems
of Economic Learning (Mathews, 2001)86, National Technology Systems (Lall, 2003)87, Systems of Innovation for
Development (Edquist, 2001)88 and National Innovation Systems for Rapid Technological Catch up (Wong, 2001)89.
While Pakistan is also a developing economy but with a much weaker learning system, termed as a ‘passive learning
system’. An up close study of China and Pakistan at present and over the recent history reveals how national
learning systems evolve as nations and societies develop. Over and above that, this model attempts to relate the
individual systems with their mutual interaction and explain the flows of technological knowledge between them.
The analysis of these systems in a globalizing world economic background, especially with reference to advanced
innovation systems of the developed nations puts the whole picture in right context.
The detailed discussion on the model and its explanatory power is presented in later sections, for the introductory
purpose here, we discuss only the general modeling of the concept based on Eduardo B. Viotti’s, 2001 model of
national learning (see figure below) and how it would be extended to include interaction among two developing

78 The National System of Political Economy, by Friedrich List, 1841, translated by Sampson S. Lloyd M.P., 1885 edition
79
The economics of industrial innovation : Christopher Freeman, (2nd edn.) London: Frances Pinter, 1982
80
Freeman, C. 1987. Technology Policy and Economic Performance: Lessons from Japan, London, Frances Pinter
81
NELSON, R. (ed.) (1993), National Innovation Systems. A Comparative Analysis, Oxford University Press, New York/Oxford.
82
Lundvall, B.-Å. (2001), ‘Innnovation policy in the globalizing learning economy’, in Archibugi, D. and Lundvall, B.-Å. (eds.), Europe in the
Globalising Learning Economy, Oxford University Press.
83
Gu, S., 1999. Implications of National Innovation Systems for Developing Countries: Managing Change and Complexity in Economic
Development. UNU-INTECH, Maastricht.
84
Viotti, Eduardo B. Indicadores de Inovação Tecnológica - Fundamentos, Evolução e sua Situação no Brasil, Curitiba and Brasília, IBQP-PR
and MDIC, 2001
85
Viotti, Eduardo B. Fundamentos e Evolução dos Indicadores de Ciência, Tecnologia e Inovação, Chapter 1 in Viotti, Eduardo B. and Mariano
Macedo (eds.), Indicadores de Ciência, Tecnologia e Inovação no Brasil, Campinas, Editora da Unicamp, 2003
86
John Mathews 2001, National systems of economic learning: The case of technology diffusion Management in East Asia, International Journal
of Technology Management
87
Lall, S. and Utra, S. (ed.) (2003), Competiveness, FDI and Technological Activity in East Asia.
88
Edquist, C. (2001), “Systems of innovation for development,” Background paper for Chapter 1: “Competitiveness, Innovation and Learning:
Analytical Framework” for the UNIDO World Industrial Development Report (WIDR)
89
Wong P K, 1999, "National innovation systems for rapid technological catch-up: an analytical framework and a comparative analysis of Korea,
Taiwan and Singapore", paper presented at the DRUID Summer Conference on National Innovation Systems, Industrial Dynamics and
Innovation Policy, Rebild, Denmark

25
nations.

Inventions and Absorption,

Disruptive Diffusion and
Innovations Utilization

Incremental Incremental
Innovation, and Diffusion and Innovation, and
Adaption Utilization Adaption

National Innovation system National Learning System

FIGURE 2: VIOTTI 'S INTERACTION BETWEEN NATIONAL INNOVATION SYSTEMS OF INDUSTRIALISED NATIONS AND
NATIONAL LEARNING SYSTEMS OF LATE INDUSTRIALISING NATIONS

Incremental
Innovation, and Absorption,
Adaption Diffusion and
Utilization

Absorption, Inventions and

Diffusion and Incremental
Disruptive
Utilization Innovation, and
Innovations
Adaption

National Learning System (Passive)

National Learning System (Active)

FIGURE 3: VIOTTI 'S INTERACTION BETWEEN NATIONAL INNOVATION SYSTEMS OF INDUSTRIALISED NATIONS AND
NATIONAL LEARNING SYSTEMS OF LATE INDUSTRIALISING NATIONS

These models recoginse that national learning systems are unique and differnt from national innovation systems as
communication across borders is still more uncertain and risky than domestic communication. And successful
adoption requires special instituions, state involvment in domestic, diplomatic and trade policy, proper
infrastructure, suffceint investment in adaptive R&D, and intensive connectidness with the source national
innovation system.
We extend this model to include, what we call the passive learning system, and also the dynamics of evolution. In
this case the advanced nations keep innovating and expanding the technology frontier, the learning nations keep
adapting aquired knoweldge. But as learning nations are chatching up, and learning stage is transitory, as the
accumulated knowledge and other resorces mature, these nations start building thier own innovation system. At the
same time, the learning nations engage in trade and technology transfer with passive learning nations (the case of
China and Pakistan). These nations can transfer both mature and open technologies as well as thier own innovation
(first classification of China Pakistan technology transfer).
This concept explains the current and potential technology transfer by taking into account the necessary
environmental variable (usually mentioned in NIS literature) and comparing them as indicators for both China and

26
Pakistan. It also forms a framework for passive learning nation like Pakistan to adapt more appropriate technologies
and diffusion practices from the active learning nation like China.
Mentioned above is only the international perspective of the model, in chapter 4 and 5 detailed analysis of internal
and mutual dynamics of the two systems at a more detailed sub-system level (regional, industrial and firm level)
shall be discussed.

6. EMPIRICAL APPROACH
Besides understanding the nature of these international linkages, the study also covers the elements subject to these
forces as well as factors that determine and affect these linkages. Since this study is concerned with an emerging and
novel problem that is somewhat unstructured, direct reference materials and secondary date are scarce, yet we intend
to make best use of available second hand data and prepare grounds for future research at a finer level of analysis.
Different sets of date and indicators are available at national and international institutions, which represent both
direct and indirect factors of technological knowledge transfers. These indicators and their mutual correlations are
expected to present a very clear picture of the phenomenon at hand. It is also recognized that the case of
international technological learning from China to Pakistan bears a huge untapped potential for future. Estimating
the potential of such learning and means to tap this potential is yet another motive of this study. In technical terms,
the central premise of this study is to work out the correlation between the mutual interactions (international
technological learning) and the structures of the two economies (national learning systems). Systematic evolutionary
patterns are sought as a determinant of the present trend and future shape of affairs and as a policy instrument to
chart a sustainable course of action for enhancing their mutual interests.
First and far most important contribution expected from this effort is to bring to light a new trend in technology
transfer from a relatively successful developing country to a less developing country. Although south-south trade,
investment, technology transfer and scientific cooperation have been a focus of attention for quite some time, the
recent paradigm shift in technologies, economics and international relations has altered the whole scheme of things.
Traditional approaches to solving problems and making policy decisions have also been affected by this paradigm
shift and inevitably the scholarly disciplines have also evolved and emerged. This new paradigm of actual
occurrences and of theoretical explanation has not yet been inculcated in study of south-south technology transfer.
Purporting that, unlike natural sciences, there are no general rules or laws of nature in social sciences that could be
taken as universal principles and applied in any situation what so ever. This necessitates that every region, nation,
industry and technology has to be studied in its specific condition for a more realistic and pragmatic explanation.
China and Pakistan are also two unique nations and their mutual interaction is even more situation specific than any
other two nations. This uniqueness limits application of traditional knowledge and demands specific attention. This
study is the first of its kind in this regard and is thus deemed very significant and useful.
Technology transition as a phenomenon is taken as one of the most important in catching-up of developing nations
and elimination of economic backwardness. But technology transfer as a subject has not been able to elucidate the
complications and uncertainties of technology transfer process to a degree where developing nation’s decision
makers could trust a set of guidelines and successfully embark on a path of technological, economic and social
development. Confusions and disagreements start from the very basic definition of the term ‘technology’ and
‘technology transfer’ and spread all the way to benefits of protectionism vs open markets, unchecked investments vs
tight government controls, and whether developing nations should focus on technological advancement in the first
place. The subject of international technology transfer enjoyed huge debate and discussion in the decades prior to
1990s but has recently been receding into the background. This study identifies that most of the modern disciplinary
innovations have evolved out of the decades of scholarly research in traditional technology transfer, which is still as
invaluable source of understanding. And this study is an attempt to revisit the accumulated knowledge base, filter
out the complexities and build a refined base for future research work on technology transfer.

"Scientific research is as much the product of the society that enables it, as of the individuals who author it."
David Dorling, 2006

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