Technology Transfer

Concept of Technology Transfer

• Technology transfer is a principle means of industrialization for underdeveloped nations.

• The transfer of technology from developed to developing country has grown considerably in last few decades.

• Acquisition of technology cannot be regarded as a neutral phenomenon . It is closely bound by the economic policy at both national & international level.

The irreducible constraints• The irreducible set of constraints on the transfer

of technology from R&D to product environment are:

• Performance– Efficiency– Frequency of operations– Volume & weight– Bandwidth, power dissipation

• Reliability– Reliability is the maintenance of

functionality(performance specification) over the life cycle.

• Cost– Cost is calculated in terms of functionality– i.e. cost per unit of performance.

Application Space• In the R&D environment we talk of trade off between

cost, performance & reliability.• In the product environment the specification of cost,

performance & reliability is determined by, and mapped onto, an application. This mapping process defines an “application space” having three independent axes(orthogonal).

• For a given application there is a minimum performance specification , minimum reliability specification and maximum allowable cost, this set constitutes a point inn the application space.

• The total market them is then the collection of all points in the application space.

• Any trade-off will define at best a new appilation ,at worst product will not match any existing application.

The experience Curve• The experience curve reflects the evolution of

unit cost with cumulative production volume.• The experience curve, or cost-volume( C-V)

curve, teaches that, unit cost declines with increase in cumulative volume.

Return on Investment• To estimate return on investment we need to

superimpose price on the C-V curve as shown below.

Return on Investment• Initial price determined by market force is lower

than cost.• As producer moves down cost dips below price,

profitability starts rising.• A price reduction as shown in the figure may be due

to competition or adaption of technology.• Hashed line is for stable market.

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

with some fundamental factors and required conditions.

Technology Outsourcing• Subjects of technology outsourcing

Technology Outsourcing• Management environment factors that

promotes technology outsourcing

Characteristic of Technology• Assets that have economic value largely can

be divided into tangible assets which have specific form . Intangible assets which does not have any specific form

• Technology to be transferred can be included in the intangible category.

• In wider sense it means entire intellectual property which has economic value.

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

Characteristics of Intellectual Property.

• Not visible and does not have any physical form.

• Recovery value is relatively high because of the limitation in creation and production due to the high level of intellectual origin.

• Evaluation and valuation is very difficult,and transfer price and conditions are determined by negotiations rather than market force.

• Life cycle is relatively short.

Motive of Technology Transfer• In case where owner of the patent does not have

the capability to execute and there are no problem in licensing to third party.

• Problem in developing a basic patent into a commercial product.

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

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

funds.

Payment method of the sales price for Patents

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

• Methods of payment and receipt simultaneously with the notification of the completion of transfer.

• 3rd party such as banks.

Modes of transferAccording to the International Code of Conduct on the

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

• Assigning or granting of industrial rights.• Handing over technical or non-technical know how

in the form of documents,plans,diagrams and so on.• The communication of technical or other know

how in the form of supply of services.• Providing technical services related to the selling or

leasing of machinery

Modes of transferAccording to Adeboye(1977) who bases his schema on

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

• Transfer of published material.• Purchase of machinery, equipment and other intermediately

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

Modes of transferBaranson (1975) classifies these mechanisms into

three principle modes• licensing• subcontracting• Supply of equipments and materials..Goulet adds consultant to the list proposed by

Baranson.

Modes of transferAccording to M.Sharif(1986) technology transfer is described as

consisting of three elements

• transferor• transferee• Linkage– Direct

• The operations of transnational companies• Licensing arrangements• Hiring of experts and contractors• Training of technical staff abroad.

– Indirect• Purchase of machinery , equipments, components• Exchange of information• Flow of books,journals• Exhibition and trade fairs.

Modes of transferUNCTC(1987) classifies technology transfer as• Commercial– FDI– Joint venture– Licensing– Franchising– Contracts(marketing , technical service)

• Non-commercial– Review of technical publications– Training of foreign students

Modes of transferTwo more mode of transfer identified as• Conventional• Non-conventional– Reverse engineering(product imitation)– Reverse brain drain– FDI in industrialized countries– Adopted by NICs

Transfer from advanced/industrialized economy

Approach• Cultural Difference • Equipment Specification• Team approach• Planning• Program focus and execution

Product/Processes TransferTransfer Procedure• Discovery of technology• Technology valuation and demand selection• Negotiation and contracting• Packaging• Marketing• Post managment

Product/Processes TransferLicensing Methods• Exclusive license• Non-exclusive license• Sublicense• Cross Licensing• Package Licensing

Cost of Technology Transfer

• Direct Cost• Indirect cost