Technology Management

Lecture 15, 16 & 17

Technology Transfer and Acquisition

Types of Technology Transfer Internal and External Technology Transfer Acquisition of Technology by a nation Regulation of Technology Transfers

Technological Dependence

Technology Transfer
Technology transfer is the process by which technology is disseminated. It involves communication of relevant knowledge by the Transferor to the Recipient. It is in the form of technology transfer transaction which may or may not be a legally binding contract.

Types of Technology Transfers

Technology transfer may be categorized as:
1. Scientific Knowledge Transfer
2. Direct Technology Transfer

3. Spin-off Technology Transfer

Types of Technology Transfers

Scientific Knowledge Transfer

is

traditionally associated with transmission of knowledge gained through basic research & development activities. Knowledge transfer usually takes place through information exchange and presentation of technical papers at scientific meetings and symposia.

Direct occurs through formal arrangement between any of the following:

S Enterprise elements i.e. internal transfer,

Types of Technology Transfers Technology Transfer usually

sharing and dissemination within the same organization

S Enterprise to Enterprise

S Government to Enterprise
S Government to Government

e.g. Indo-US agreement on transfer of nuclear technology for civilian use

Types of Technology Transfers

Spin-off Technology Transfer

occurs when technology developed by one enterprise in one technical area, and usually for one purpose, is applied and used for a different technical area, for different purpose or for market application other than those foreseen at the time when R&D was initiated.

are required to be paid in the form of royalties, technical and know-how fees etc over medium to long-term period 2. Appropriateness of technology i.e. its suitability to core competencies and market needs is always a point of discussion and investigation 3. Heavy reliance on foreign technology may make the recipient technologically dependent on external technology S providers/transferors even for small issues
1.

Barriers to Technology Transfer Associated costs - usually high prices

Barriers to Technology Transfer

4. Lack of mutual trust between two parties

may hinder full and timely transfer

5. There is risk of loss of control over

technology and the recipient may use technology in an arbitrary manner

6. Transfer may render existing technology,

and its related products / services / processes, obsolete

7. Transferee may turn a potential competitor S

in future

Barriers to Technology Transfer

8. Mismatch in core competencies of the

transferor and transferee may create difficulties in transfer

9. Different organization cultures may

create difficulties in transfer

10. Lack

of effective communication between the parties may also create difficulties in transfer

Overcoming Barriers to Technology Transfer

1. Proper and well defined technology transfer

agreement should be signed

2. There 3. There

should be proper evaluation of appropriateness of technology should be proper evaluation of compatibility of core competencies of the parties so as to develop mutual trust and S understand the culture of opposite parties

4. It helps to build pre-agreement relationships

Overcoming Barriers to Technology Transfer

5. Seeking cross-cultural training may

be helpful
6. It

helps to communication

ensure

effective

7. Problems need to be anticipated in

advance and adequate measures adopted to facilitate transfer

The verb 'acquire' means:

Differences Between Technology Transfer and Technology Acquisition

S To come into possession of; get as one's own S To gain for oneself through one's actions or

efforts
Technology acquisition is the process of acquiring a new technology, new product, process or service by the efforts of an individual, or an enterprise, or any other macro entity. This process can be conducted S either internally or externally to the enterprise.

Differences Between Technology Transfer and Technology Acquisition

There is a thin line of demarcation between the two words - technology transfer and technology acquisition. Sometimes the two are used interchangeably. Some vague differences between technology transfer and technology acquisition are:

Differences Between Technology Transfer and Technology Acquisition

SNo 1 Technology Transfer Slightly wider in scope Technology Acquisition Slightly narrow in scope

2
3 4

Includes both formal and Usually includes formal informal arrangements arrangements
May or may not have legal boundaries Focus on transfer from transferor to recipient Usually have legal boundaries Focus on the transaction from the angle of S acquirer

Consideration for technology transfer agreements may be paid in cash or in kind. Following modes are generally used for making payment:
S Lump-sum payment or periodical installments S Royalties as a percentage of sales over the

Modes of Payment for Technology Transfer

next few years

S Cross-licensing agreements

S Contracted supply of output

S Issue of equity shares in lieu of technology

Factors Affecting Technology Acquisition by a Nation A variety of factors affect technology

acquisition by a nation, such as:
S Level of economic development of the

nation The current economic position of the nation affects its capability of technology acquisition and absorption. Usually the least developed countries can not afford costlier and advanced technologies

Factors Affecting Technology Acquisition by a Nation S State of technology

It affects technology acquisition in the following ways: S Underdeveloped countries have usually low level of technology development and such countries usually go for medium level technologies S Developed countries have high level of technology development and such S countries usually go for advanced

Factors Affecting Technology Acquisition by a Nation S Appropriateness of the new technology

This refers to the suitability and compatibility of the new technology to existing technologies and environment
S Impact of technology transfer and acquisition

on existing technologies and products/markets; There are likely to be technological discontinuities and S obsolescence

Factors Affecting Technology Acquisition by a Nation S Likely technological dependence on external

sources in the case of technology acquisition from outside and its implications
S Associated costs involved in the technology

transfer and acquisition

S Strategy mix adopted by the nation i.e.

proportion of internalization oriented technology strategy and externalization oriented technology strategy
S Likely benefits through technology diffusion

National Strategies for Technology Acquisition

A nation can adopt any of the following strategy options for acquisition of technology:
1. Internalization Oriented Strategy

2. Externalization Oriented Strategy

Nations usually adopt a combination of the above two strategies as each has its own S advantages and disadvantages

Regulation of Technology Transfer by Nations

The regulation is undertaken in two directions:
S S

Regulation of import technology inflows

of

technology

Regulation of export of technology / technology outflows and setting up of joint ventures (JV) and wholly owned subsidiaries (WOS) abroad

Free inflow of technology has certain advantages and disadvantages. The advantages are:
S Frequency of technology transfer is higher S It leads to expansion of production base S Acquisition of advanced / latest / emerging

Regulation of Import of Technology

technologies may be facilitated

S There

are benefits through technology S absorption and diffusion like cost-cutting

S Boost to exports

Regulation of Import of Technology

S Increase in employment levels

S Boost to industrialization of the nation

S Increase in economic development of the

nation Some of the disadvantages of free inflow of technology are:

S FOREX outflow through technology transfer S

payments

Regulation of Import of Technology

S Adverse impact on balance of payments S Inappropriateness

of technology : Nonsuitability and Non-compatibility with the current technological level and infrastructure. Inappropriate technology may be transferred

S Likely technological dependence on external

sources even for minor technological issues

S Likely

technological discontinuity / technological obsolescence of existing S technology products, services or processes

Regulation of Import of Technology

S Associated costs may be high since the

nation pays not only for the technology but for the whole package brought by TNCs / MNCs including its brand names, finance, skills and management
S Risk of getting old / out-dated technology

Joint statement on Indo-US nuclear deal was signed between US President George W. Bush and Indian Prime Minister Manmohan Singh recently. The joint statement calls for separating civilian and military nuclear reactors in India. Two third of civilian nuclear reactors will be identified and placed under international supervision. In return, India shall be assured of regular supplies of uranium and necessary nuclear technology for meeting its civilian S energy needs.

Indo-US Nuclear Deal

The deal, to become operational, will have to be ratified by parliament/senate of respective countries and nuclear suppliers group (NSG). The deal met with opposition from day one from a section of Indian political parties, a group of Indian scientists and a section of population opposed to USA due to its presence in Iraq and Afghanistan.

Indo-US Nuclear Deal

A section of Indian politicians think that the country's independence and prestige have S been sold out.

Indo-US Nuclear Deal

Some scientists believe that the deal will reduce Indian freedom to carry out nuclear research and pursue an independent path. Some of the important aspects of this deal are discussed in terms of benefits to US and India respectively:

Indo-US Nuclear Deal Benefits to USA Economic Benefits:

A nuclear power plant costs around USD 4 billion each. India will set up 10 large size nuclear power plants in the next 15 years (as intended by India) Orders worth USD 15-20 billion could be placed with the US companies in next 6 to 8 years Remaining orders may go to France, Germany, Canada and UK S Further expansion of business dealings on both

Political Benefits:

Indo-US Nuclear Deal Benefits to USA

A major cold war irritant has been eliminated from the international scene
A major regional power, India's, help can be sought to prevent further sliding of the Middle East into anarchy and in some future military conflict in the region and ensuring safety of sea-lanes of the Indian Ocean

Indo-US Nuclear Deal Benefits to USA Military benefits:

The US considers India as a major military power
40 per cent of worlds' oil and commerce passes through the Indian Ocean sea-lanes. Indian cooperation will be helpful in keeping the sealanes free. USAs assessment that India could be a S counterweight to a 'Rising China' in the region

Indo-US Nuclear Deal Benefits to India Economic Benefits:

The deal strengthens the economic partnership of India with the developed world.
It will further improve sovereign ratings of India The deal will lead to more capital flows to India For the enormous growth, India is undergoing, electricity needs will also grow manifold. As fossil fuels are being depleted at a fast rate, nuclear technology will provide clean and S efficient electricity.

Political Benefits:

Indo-US Nuclear Deal Benefits to India

After 50 years of isolation, India will have the opportunity to say something in world forums like UN, WTO and world monetary lending institutions, and be heard.
It is not clearly stated in the deal but it is an implicit understanding and de-facto recognition of India as a nuclear power. India to become a permanent UN Security S Council member in the long run

Indo-US Nuclear Deal Benefits to India

Military Benefits:

Indian military is in need to diversify its sourcing of military hardware. Russia has been a very reliable source for the past 40 years. This source has to be diversified. The deal will strengthen bilateral relations and will reduce dependence on Russia.

Intellectual Property
S Trade secret

Some Key Terms Related to Technology Transfer

S Invention and patent

S Copyright
S Know-how

Outsourcing Strategic Alliances and Joint Ventures Collaborative R&D / R&D strategic partnership