TECHNOLOGICAL ADVANCEMENTS IN I.B

PRESENTED BY:

PRASHANTH KUMAR

BHARGAV SEERAM

RISHIKA SHETTY

RAKHI AIL

ERROL

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THE SHRINKING GLOBE

Firms are Compelled to Internationalize

• In today’s business setting, interest in the profitable exploitation of a firm’s technological assets, through technology transfer, has intensified.

• Firms implement internationalization proactively are more successful than those reactively engaging.

• E.g., Vodafone has established production and marketing operations all around the world. Has some 200 million customers in 30 countries.

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Technological Advances as a Driver of Market Globalization

• Advances in technology provide the means for internationalization of firms

• Advances in technology:

• Reduces cost of doing international business;

• Enables even small firms to go international

• Helps coordinate worldwide activities;

• Mitigates geographic distance

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Communications Technology

• Especially important. Includes telecommunications, satellites, optical fiber, wireless technology, and the Internet.

• The Internet, and Internet-dependent systems such as intranets, extranets, and e-mail, connect millions of people across the globe.

• The Internet opens up the global marketplace to all firms, large and small

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Societal Consequences of Market Globalization

• Positive consequences • More jobs

• Economic development and growing prosperity

• Technology and knowledge transfer

• Negative consequences• Natural Environment

• Disruptive effects in national economies

• Human rights violations abroad (e.g., sweatshops)

• Job losses at home

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Technology Transfer

• A technology developed by an organization for a particular purpose was further given to other entities in order to exploit its potential in some areas.

• A transfer/ transformation/ transition process between the technology originator/ possessor and the receiver

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Knowledge

Management

Patents &

Licenses

Technology TransferTechnology Acquisition

Skill Development - Know

How

Technology Adaptation

Dissemination

Forms

Phases

Increases Production Efficiency - Long Term Competitiveness Of

SME’s

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Technology Transfer

The Transferring Level

• International — From the DCs to NICs or LDCs

• Regional — Indigenous vs. Foreign

• Industrial — The threat of outsiders

• Corporation — Licensing program

• Internal — The issue of transferring price

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Channels of Technology Flow

• Public Dissemination

• Reverse Engineering

• Purposeful Acquisition• Licensing

• Franchise

• Joint Venture

• Turkey Project

• Foreign Direct Investment

• Technological Consortium & Joint R&D

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Technology Consortia

• Some European technological development consortia coordinated by EC/EU

• RACE (Research in Advanced Communication in Europe)

• ESPRIT (European Specific Programs of Information Technology)

• JESSI (Joint European Submicron Silicon program)

• EUREKA (European Research Coordination Agency)

• Airbus (Mercedes-Benz & British Aerospace, etc)

• ITC consortia for developing and marketing of IT & communication technologies

• The term of fair and non-discrimination licensing for necessary patents

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International Technology Transfer

• Global sourcing was encouraged not only by trade liberalization but also by technological developments which reduced trans-port costs.

• Competitive Collaboration, each company's participation spreads the costs and risks both of developing new technologies and of combining existing technologies to develop new products

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International Technology Transfer (cntd)

• In the initial phases of development, much of the R&D undertaken in Japan was absorptive, aimed at integrating foreign technologies

• Countries such as Mexico, Brazil, India, and China view foreign direct investment FDI by firms from technologically advanced countries as a vehicle of technology transfer

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Technology Competitiveness in Developing countries - Factors

• Technology Imports• Small number of developed countries provide most of technological

innovations. Most of the developing countries are neither innovating nor adopting.

• Lacks capability to create globally competitive technologies

• Lack of access to information on new technologies and innovations

• Technology Infrastructure• R&D institutes and testing facilities in developing countries fall short of

quality when compared to industrialized countries

• Lack of collaborative research

• Isolation of universities and R&D from Industry

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Technology Competitiveness in Developing countries - Factors

• Pace of Technological Change• SMEs lack the capability to constantly upgrade technologies in view of

rapidly changing technologies in developed countries

• Easier in Process industries

• Technology Acquisition• Unit level technology absorption is low

• Lack of incentive, direction and capability to update existing technologies

• Lack of ready access to capital

• Relatively high transaction cost

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Technology Competitiveness in Developing countries - Factors

• Unit Level Interventions

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

• Low participation in network of organizations and institutions involved in diffusing information on technologies. (specially SMEs)

• Availability of Skilled Manpower

• Shortage of trained personnel

• Lack of continuous capability development of manpower in technical dimensions

• New technologies are not adopted due to lack of skilled people thus widening the technology gap.

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Technology Transfer – Main Issues

• Slow uptake of technologies that support sustainable development, despite many initiatives for increased and effective transfer of technologies.

• Need to emphasize on specific and practical methodologies and tools for promoting the adoption and use of latest technologies.

• Absence of ubiquitous approach. Need to prioritize initiatives for developing countries depending on their needs and status.

• Multinationals often transfer older technologies to safeguard themselves against future competition

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Technology Development - Challenges

• Can be met through innovations management

• To be able to invest in technology creation at the risk of failing

• Adequate infrastructure required for technology creation

• IPR issues

• Adequate information relevant to strategic planning and market development

• Developing countries have already lost precious time

• Creation of useful and usable technologies is a major factor in ensuring that there is opportunity to make informed and confident choices in technology investment projects

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The macro view of international technology transfer

• Counterparts

• the private enterprises of developed countries, LDs (transferor), vs. the governments of less developed countries, LDCs (transferee)

• The transferor

• economic gains of technology by strategically taking the advantage of LDCs (transferees)

• The transferee

• the governmental interventions for GDP growth contributed from the expected technology externalities of transfer

• prevent the indigenous resources and employment from being exploited

• The processes of technology transfer are more political than economic negotiation

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Technology Absorptive Capacity

• Resource endowment, people talent, education system, path dependence, infrastructure/property law/business managerial practice/social norm

• Appropriate technology—criteria defined by political, social, and economic development and progress

• Availability of complements: the trade-off between the broadly low-end and the scarce high-end cluster

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Technology Up gradation – Key Focus Areas

Skill upgradation

Capacity building

Technology Dissemination

ICT Applications to Technology &

Management Processes

Market access

Global Benchmarking of Quality

Technology Innovations/R&D

Others

Key

Drivers

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Transfer Pricing 30

Transfer Price: What and Why?

• Transfer Price means the value or price at which transactions take place amongst related parties.

• Transfer Price are the prices at which an enterprise transfers physical goods and intangible property and provides services to associated enterprises

• Transfer Price gain significance because these can be used by the controlling party to their advantage to minimize tax incidence.

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Transfer Price: What and Why?

• Approximately 60% of the total transactions across the world are between related parties.

• If the transactions are across different tax jurisdictions, where tax rates are different, shifting is beneficial.

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Factors Affecting Transfer Pricing

• Internal factors: Performance Measurement and Evaluation

• External Factors:

• Accounting Standard

• Income Tax

• Custom Duty

• Currency Fluctuations

• Risk of Expropriation

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Transfer Price Regulations

International

• OECD formulated “Guidelines on transfer pricing”. They serve as generally accepted practices by the tax authorities

India

• The Finance Act 2001 introduced the detailed TPR w.e.f 1st April 2001

• The Income Tax Act

• AS-18

• Other Relevant Acts

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Revenue Profit

Capital Gain

Royalty

Inter Company

Control System

cost centres

revenue centres

profit/Investment centre

Intra Company

Internal(Within the country)

Non-Related:

Profit/Dividend/Royalty

Forex Fluctuations

Accounting

Related

Profit/Dividend/Royalty

Transfer PricingForex/Accounting

Inter Comapny

Control Systems

Forex Fluctuations

Accounting

Transfer Pricing

Intra Company

External(outside the country)

Transactions35

Uses of Technology

• Manufacturing, Health Care, Services

• Improves GDP/ NI; Modernization

• Development of IF & Villages

• Entertainment

• R&D

• Studies

• Tracking & Monitoring; Detection

• Increase in Employement

• Increases Reln with other Countries

• Forecasting

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THANK YOU 37