Dept.

of Management of Technology
University of Moratuwa, Sri Lanka

Why Transfer Technology?

Most firms has not invented the

technology that they use
Diffusion of the technology is
essential for value creation
Accelerated Phase of Change: Speed to
market is a critical factor to success

Why Transfer Technology Contd

Network Effect of technology :

Number of individual users
Value of the technology increases exponentially
Ex : Microsoft Vs IBM

What is Technology Transfer?

Movement of technology from one entity to
another, and if the transfer is successful,
the proper understanding and effective use
of the technology by the receiving entity.

If the receiver does not understand and

use the technology to obtain the desired
objectives and impacts the transfer is
considered incomplete.

Schematic Representation of Technology Transfer

Transferor
Transferor

Public and
private sector
firms
R&D institutes
Universities

NGOs
Foundations
Specialized
international
agencies

Technology Components

Machinery, peripherals,
instrumentation, materials

Skills for operation,

maintenance, making minor
improvements

Transferee
Transferee

Capability to operate
and maintain the
Operating capability
acquired
technology

Information for operation and

maintenance
Information for design and
development and to enable
Independent upgrading
independent
Knowledge to gain holistic
Insights into the technology
insights

Capability to
Innovative
absorb,
assimilate,
capability
and make major
improvements to
the technology

Categories of Technology Transfer

International technology transfer
Regional technology transfer
Cross-industry or Cross- sector
technology transfer
Inter-firm technology transfer
Intra-firm technology transfer

Understanding of TT

Lack of understanding until about mid 1960s

Eternal dependence due to large technological gap
Belief of free flow of technology
Lack of clear understanding of the role of S&T in

economic development

Change of attitudes due to privatisation,

liberalisation, globalisation and success stories
Acceptance of the importance of TT and its
assimilation for competitive advantage

Present Understanding of TT
No free flow of technology and existence
of an international market
TT is viewed a international trade
Has features of commodity, available in
international market and subject to
commercial transactions
No donors and recipients but sellers and
buyers

Motivations of Transferee

Technology is strategic for growth

Not possible to develop all required technology
Lower costs learning from transferors
experience
Reduce R&D and D&E costs by imitation
Learn buyer needs from transferors experience
Generate employment and investment
opportunities
Enhance competitive strength of exports
Meet defence requirements and other political
needs
Catch up latest technology by leapfrogging

Motivations of Transferor
Getting the most out of technologies
developed
Technologies developed does not fit to
strategy
Fear of imitation
Fear of competitor selling technology
Inability to exploit technology due to
organisational problems
Tapping unavailable but attractive markets
Antitrust legislation

Motivations of Transferor...

Rapidly standardise technology

Creating good competitors
Use cheaper labour in DCs
Reinforce technology dependence
Political factors, especially security related

Technology Transfer Process

Data Banks
Directories
Exhibitions
TIS

Standing of
Suppliers,
Quality of
Technology

Planning
Technology
need
assessment

Implementation

Identification
sources of
Technology

Acquisition

Identification
of mode of
Technology
Transfer

Negotiation

Technology
Evaluation

Technology Need Assessment

Business
Needs
Technology Package
Organizational
Capabilities

Technology Package
Hardware/machinery
Documented knowledge

Skills

Identification Sources of
Technology & Suppliers

Sources
Data banks
Technical information services

Technology brokers
Agencies
Directories
Exhibitions

Identification Sources of
Technology & Suppliers

Basic forms of information in technology

transfer
Scientific information freely available.

Technology information intended for use to

produce added value and profit. Hence it

has a price tag on it.
Industrial information - is much broader term
than technology information and refers to all
parameters influencing the techno-economic
success and financial viability.

Identification Sources of
Technology & Suppliers

Type of information required for

International Technology Transfer
Technology specific information
Available technologies
Potential product market
Infrastructure requirements
Specific labour requirements
Financial involvements
Potential suppliers of the technology

Identification Sources of
Technology & Suppliers

Problem faced by developing countries

firms in collecting above mentioned
information
Developed countries have technical information

services (NTIS in USA and JICST in Japan).

Enterprises in these countries avail themselves
of these information services. They know where
and how to get information on techno-economic
matters.
Developing countries No such information
services; lack of awareness in accessing
required information for ITT

Technology Transfer Mechanisms

Market-oriented
mechanisms
Purchases of plant

and machinery
Expert services
Licensing (exclusive
and non-exclusive)
Sub-contracting
Turnkey contracts
Production sharing
Joint ventures
FDI

Non-market-oriented
mechanisms
Published

books,
journals, and related
literature
Patent databases
Internet
and
ITenabled tools
Personal contacts
Formal
training,
conferences,
workshops etc.
Imitating

Purchase of plant and equipment

Buying from the OEM - easy
Buying from the user - difficult
Mostly used in manufacturing industry to
support indigenous technology
Widely applied in consumer goods Textile,
garment, food processing, leather
Generally mature technology

International Joint Ventures

Jointly commit assets to joint enterprise
Share management responsibilities
Share risks as agreed
Attractive and politically acceptable
Share of equity of local partner and his
power to decision making affect TT
Reduced costs and risks for foreign
partner

Licensing
Relates to specific process/product
invented by the licensor
Payment may include, lump sum, royalty,
share of profits, good brought back &
others
Once & for all or continuous transfer of
knowledge
More control and leverage by the licensor
Not involved in operations

Technical services agreement

Special form of licensing
Includes other technical services such as
setting up, training etc.
No significant control over operations

Franchising
Special form of licensing/technical
services agreement
Have to use trade name
Payment as in licensing

Subcontracting
Usually subcontracting of manufacturing
parts
TT depends on the HR
capabilities/capacity of the subcontractor
TT in the installation of plant and
operation
No marketing technology is transferred

Turnkey Contracts
Transferor undertakes the full range of
technical and management control of the
enterprise until the transferee acquires
sufficient knowledge and then turns over
All the skills are provided by the transferor
Risk of not learning and fore-ever
dependence
Turnkey plant export used extensively in
chemical, pharmaceutical, petroleum
refining, steel industries,

Product-in-hand Contracts
Special type of turnkey contract
Ensures effective training of transferee staff

Management Contracts
Operational control is vested in a separate
entity
Transferor retains control without risk and
committing capital resources
Functional control may be taken away from
the transferee despite ownership

Product Sharing
Common in extracting sector
Transferor is like the contractor and invest
on feasibility
If project is successful transferee joins
Transferor recovers cost and earn profit
before handing over
Management responsibilities by a social
body

Joint Research Ventures

Exchange and diffusion of technological
information
Training in laboratories
Sharing investment and risk
Generally happens between DCs

Foreign Direct Investment

MNC s Fund to carry out business overseas
Technology remains within the firm
boundaries

Expert Services
Individual experts or organisations
Transfer many elements of technology
depending on the scope and expertise
Tends to be biased to own experiences and
familiar manufacturers etc.

Technical Information Services

Not general libraries
Deals with techno-economic aspects of
products, processes, equipment, markets,
etc., and is used mainly by investors, firms
or entrepreneurs
Low capabilities in developing countries
Widely used in developed countries (NTIS
in USA and JICST in Japan)

Non-market Oriented
Mechanisms
Not subjected to the market conditions
and done unintentionally or without the
continual involvement of the sources
Information availabble in public domains
Limited or restricted access

Imitation

No active participation of the source

Product inspection
Reverse Engineering
De compilation
Inability to transfer the tacit knowledge
Both Legal and illegal

Data In Patents

Products and Processes developed based on the

available patent information
Direct Licencing
Indirect Inspection

Non Market Oriented Method

Books Academic Journals Business Magazines

and Sales Literature
Industrial Fairs and Exhibitions
Purchase Equipment
Contracts
Details and Consultation

Training
Conferences Seminars and Exhibitions
Employees
Informal Contacts

Non-market Oriented
Mechanisms
Does not result in transfer of
commercially useful technologies
Assist in upgrading of 4 components of
technology
Valuable information may not be
published
Published information may be too late
Some will provide the clue for searching

Selection of Appropriate
Mechanism
Novelty ,Complexity ,Tacitness

Technology Uncertainty

Joint research
Joint venture
Product-in-hand
Turnkey
Contract
Facilitated
Purchase
Arms-Length
Purchase

Organizational Interaction
(communication, coordination, and cooperation)

Technology Evaluation & Selection

Strategic Criteria

Technical importance
Business objectives
Competitive advantage

Economic Criteria

Risk factors

Financial risk
Organizational capability
Technology obsolescence
Stand of transferor

Payback period
Return on investment
Internal rate of return
Net present value

Negotiation in TT

Negotiation Strategy
Good to aim for a win-win situation in which the

agreement provides benefits for both.

When formulating international agreements it is
essential to have a good understanding of the culture of
the other party in order that the arguments put forward
and interests of each are clear.
It is essential that both parties understand the style,
preferences, performance, financial conditions, ethics,
expectations from the deals of the other party. This will
help in formulating objectives and negotiating strategy.

Negotiation Team
Technical expert
Financial expert
Legal expert

Problems in Negotiation
Differences in negotiation approaches and

strategies
Lack of trust between the transferor and
transferee
Goal incompatibility during negotiations
Inability to reach agreements on pricing and
other terms of transfer (including intellectual
property protection)
Both parties try to reach results in an
unrealistically short period of time

Technology Acquisition
Planning

Legal Aspects

Business

Agreements

Management

Contracts

Financial

IPR

Marketing

Funding
Grants
Equity
Debt
Incentives

Problems in Technology Acquisition

Transferor
(seller)
underestimates
the
problems in transferring the technology to a
developing country setting

Transferor does not fully understand transferee

needs

Transferee managers are not involved in the

planning which is carried out only by the
transferor

Too much attention is paid to the machinery,

plant and equipment to be purchased and not
enough attention is paid to skills and
information acquisition

Technology Implementation
Implementation team: representatives of
all stake holders
Project Management approach
Adaptation
Hardware & skill development

Problems in Technology Transfer

Implementation
Shortage of experienced technology transfer managers
Lack of training of transferee personnel
Lack of trust in transferor developed systems by the
transferee and language barriers
Inability to achieve desired levels of operation
Delay in obtaining supplementary materials, needed for
quick implementation, from the local environment
High cost and poor quality of locally available materials
needed to use the technology transferred
Obsolescence of technology while the transfer is in
progress
Cost overrun due to poor implementation
The technology needs considerable adaptation to suit
local conditions

45

Technology Adaptation

Does adaptation improve the performance of

imported technology?
Improved Performance
A
d
a
p
t
a
ti
o
n
Imported Technology

Imported Technology
A
d
a
p
t
a
ti
o
n
Degraded Performance

Adaptation & Capability Development

Imported Technology

Adaptation

Degraded Performance

Improved Performance

Adaptation
+
Capability development

Imported Technology

Proper balance between adaptation and development of

local capabilities is important for the best results.

Technology capability status of transferee

Some
Technology
Transfer is
Possible

Technology
Transfer
Most Effective

TT possible
but unlikely
due to market
rivalry

TT unlikely
to succeed due
to lack of
Absorptive
Capacity

Simple TT
may be
successful

Some TT is
possible

Very High to High

Moderate
Low to Very Low
Technology component gap between Transferor and Transferee

Relationship between effective technology transfer and technology gap

Reasons for Ineffective

Transfer

Lack of generic framework for product/process

technology elements
Incomplete and poor specification causing

mismatch
Poor scanning of international shelf and ineffective
assessment
Erodes basis for negotiations affecting price
Selection of unsuitable mechanism

Influence of Transferor
Environment
Immediate set of operating conditions of
the transferor, individual, organisation or
national level
Involves economic status, technological
status, inward vs outward orientation,
stability, attitude, policies and commitment
towards TT

Influence of Transferee
Environment

Absorptive capacity
Physical & organisation infrastructure
Availability of skills
Attitude and commitment to change
Economic and technological status
Political stability
Transparent and developed legal systems etc.
Attributes of the transferee

Influence of The Greater

Environment
Environment surrounding the transferor
and transferee environments
Political relationships, investment climate,
exchange rates, balance of trade
problems, technological levels,
international competition

The Greater Environment - Examples ...

Political relationships with India, China and the

West
Japans prohibition to transfer know-how of 200
technological components and materials to
Korea to avoid boomerang effect