TRAINING PROGRAMME ON TECHNOLOGY DIPLOMACY JAIPUR 11 – 15 July 2011.
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Transcript of TRAINING PROGRAMME ON TECHNOLOGY DIPLOMACY JAIPUR 11 – 15 July 2011.
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TRAINING PROGRAMME ON TECHNOLOGY DIPLOMACY
JAIPUR11 – 15 July 2011
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TECHNOLOGY SOURCING AND ASSESSMENT
BYDr. Vinay Kumar
Former Advisor/Scientist G, Ministry of Science and Technology
12 July 2011
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MAJOR ISSUES CONCERNING INDUSTRY Shorter life cycles of technology Intense national and international
competition Global markets Quality, cost, delivery, after-sales
service, international standards Intellectual property rights High risks in investment
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MAJOR ISSUES CONCERNING INDUSTRY (Contd.) Shorter time between innovation and
commercialization Research and development important Energy efficient technologies Environment friendly technologies Information and communication networks Socio-economic and socio-political factors Movement of capital across national
boundaries
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SCIENCE AND TECHNOLOGY DIPLOMACY
It refers to provision of science and technology advice to multilateral negotiations and the implementation of the results ofsuch negotiations at the national level. It thus covers activities bothat the national and international levels pursuant to international commitments.
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WHY SCIENCE AND TECHNOLOGY IMPORTANT IN INTERNATIONAL
RELATIONS?
Emerging issues – infectious diseases, environmental concerns, ICT, Biotechnology, use of electronics in crimes..
International trade in commodity and technology
International standard setting in the field of health, safety and environment
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WHY SCIENCE AND TECHNOLOGY IMPORTANT IN INTERNATIONAL
RELATIONS? – Contd.
International cooperation in manufacturing and Research and Development
Foreign Direct Investments Intellectual Property Rights Issues
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Receipts (R) and Payments (P) of Royalty and Licence Fee in US $ million
(Source World Bank –World Development Indicators 2008 and various Issues)
Country
2002R
2002P
2003R
2003P
2004R
2004P
2005R
2005P
2006R
2006P
USA 44,142
19,258
48,227
0,049 52,643
23,901
57,410
24,501
62,378
26,433
JAPAN
10,422
11,021
12,271
1,003 15,701
13,644
17,655
14,653
20,096
15,500
UK 7,701 5,993 10,245
7,382 12,019
8,368 13,303
9,069 13,588
9,962
China
133 3,114 107 548 236 4,497 157 4,398 205 6,634
India 12 350 29 356 25 421 25 421 112 949
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Licensing Receipts and payments for Japan1950-1974 (in million US $)
Source: 1950-1970- Lyn (1985)-Contractor 1981
Year Receipts Payments
Balance Receipts/
Payments (%)
1950 0.0 2.6 -2.6 -
1955 0.2 20.0 -18.2 1
1960 2.3 94.9 -92.6 2
1965 17.0 166.0 -149.0 10
1970 59.0 433.0 -374.0 14
1975 161.0 712.0 -551.0 23
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Number of technology licensing agreements in Japan (1981-2001)
Source: Japanese Statistics Bureau 2004
Year Out-Licensing
In-Licensing Balance Out-licensing/In-licensing (%)
1981 4103 7248 -3145 57
1983 4738 6936 -2198 68
1985 5426 7316 -1890 74
1987 5469 7494 -2025 73
1989 6532 8356 -2004 76
1991 7163 8249 -1086 87
1993 8201 8126 75 101
1995 9099 7618 1481 119
1997 13194 7659 5535 172
1999 9517 6687 2830 142
2001 15067 6445 8622 234
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CHANGING PARADIGM IN R&D
NOTHING IT IS SAID, IS CERTAIN EXCEPT DEATH AND TAXES – YET ANOTHER INESCABABLE CERTAINITY IS CHANGE
Market and buyers driven – organizations can get more out of their research by linking it more closely to market need and customers requirements rather than increased spending elsewhere
R&D on ‘business like’ footing
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Changing paradigm in R&D (Contd.)
Time and cost of R&D is important Expectations from R&D increased
manifold R&D is getting increasingly more
multi-disciplinary in nature Team orientation Creativity and innovativeness of
considerable significance
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Changing paradigm in R&D (Contd.)
Managerial skills in R&D personnel increasingly required
Borderless laboratories Intellectual property rights issues Changing from a strategy of ‘hope’
to a strategy of a more ‘systematic, disciplined and accountable’ R&D
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Changing paradigm in R&D (contd.)
Impact of Information and Communication Technologies. These are impacting R&D management systems and practices in numerous ways, creating new threats and opportunities.
Increased expectations of Head of the Institution
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Changing paradigm in R&D (Contd.)
Success now requires strong competitive advantage in the form of innovation, quality, agility, and or productivity – cost leadership alone is not sufficient
Measurement of performance is being emphasized for every organizational activity. Individuals are required to add value at every level.
Demographic shifts in customer and employee base has directly or indirectly influencing the way managers think and act.
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OPTIONS FOR TECHNOLOGY
Acquisition In-house development To get developed Joint development
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Acquisition preferred where
Too expensive/ too long to develop or get developed
New technology on attractive terms
Customers preferences Many technology gaps
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In-house development preferred where
In-house capability exists Time and cost effective Technology not available from
outside sources High cost of technology acquisition
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TECHNOLOGY SUPPLIERS AND TECHNOLOGY
RECEIVERS -A FEW EXAMPLES
A manufacturing or service Unit
An R&D Organisation
A Technical Institute/University
A Consultant TECHNOLOGY
SUPPLIER
A manufacturing or service Unit
An R&D Organisation
A Technical Institute/University
A Consultant TECHNOLOGY
RECEIVER
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TECHNOLOGY SOURCING
Exhibitions and Conferences International Organizations Industry/Technical Journals Directories Industry Associations Government Sources Patent Literature
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TECHNOLOGY SOURCING (Contd.)
International Agreements Foreign Embassies/ High
Commissions in India Data banks/ bases Experts and consultants Informal meets Indian Embassies/High Commissions
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Assessment of technology supplier/partner Manufacturer/R&D
organization/Technical institute Market share – National and international Financial health R&D set up Ownership of technology Authority to transfer Reputation amongst other technology
acquirers
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Assessment of Technology Suitability to locally available raw
materials Skill levels required Stage in Technology life cycle Input-output ratios Laboratory scale, pilot plant or
commercially proven Safety considerations
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Assessment of Technology (Contd.)
Environmental aspects Status of IPR, Trade Marks etc. National Policy Issues Quantitative Approach
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Capacity building for identification of technology
sources
Awareness of new technologies Identification of technology needs Evaluation of technology and
technology supplier/ partner Net working International Agreements
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Advantages of new technologies
High financial returns Can stay longer in market Name recognition First mover advantage Enhanced value for customers Leveraging organization's capabilities ---
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Disadvantages of new technologies
May not be commercially proven Normally not market tested Risks of failure and commercial returns Safety risks in operation IPR related risks Competitors may bring better products
after watching the performance of new technology
----
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TECHNOLOGY ACQUISITION
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TECHNOLOGY PACKAGE
Specifications of the product/output List of components/parts Details of each component/part Details of assemblies and
subassemblies Operation process parameters Quality parameters
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TECHNOLOGY PACKAGE – Contd.
List of purchased items Details of Plant and Machinery Plant Layout Plant Maintenance Guidelines Safety Precautions ---
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Technology Acquisition Process – Complexities Technology package has many
components Not like buying equipment or raw
materials or components Technology has cost and prices Generally no price list Long term relationship Technology absorption
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Technology acquisition Process – Contd.
Technology Assessment and Evaluation
Negotiations Agreement Implementation Technology is very dynamic Intellectual Property Rights Issues
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MODES OF TECHNOLOGY ACQUISITION
INFORMAL General Hiring of Engineers Reverse Engineering
FORMAL Licensing Outright purchase Joint Ventures Turnkey Projects Acquisition of the
company Training and Experts Consultants Purchase of equipment
with embodied technology
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Price variance – technology life cycle
STAGE PRICE RISK IN OPERATION
Development Low High
Ascent High Medium
Maturity High Low
Decline Low Low
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Price variance – technology status
STATUS PRICE RISK IN OPERATION
Laboratory scale
Low High
Pilot plant Medium Medium
Commercial scale
High Low
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FACTORS FOR SUCCESSFUL ACQUISITION OF
TECHNOLOGY
Good Agreement and Documentation Mutual Trust Competence of Technology Supplier Competence of Technology Acquirer Training Mutual Interest
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FACTORS FOR SUCCESSFUL ACQUISITION OF TECHNOLOGY –
Contd.
Planning Appropriate channel --- ---
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WHAT IS A GOOD AGREEMENT
Should be comprehensive in point of substance and content
Should be written in simple language with short sentences
Ambiguity and multiple interpretations to be avoided
Should be in conformity with law
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WHAT IS A GOOD AGREEMENT (Contd.)
Should avoid disputes In case disputes arise, should
provide for a satisfactory settlement mechanism
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Important clauses in Technology Transfer
Agreements
Definitions Coverage Territory and Exclusivity Scope of documentation Language Training Terms of Payment Currency of Payment
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Important clauses in technology transfer agreements (Contd.)
Schedules Delay in payments Taxation Confidentiality Guarantees Language Third party IPR infringement Governing Law Dispute settlement mechanism
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Important clauses in technology transfer agreements (Contd.)
Price escalation Improvements Environmental, Safety and other
harmful effects Sub-contracting Mergers Expiry and renewal Status after expiry Force Majeure
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ARBITRATION CLAUSE - An example
ICA Arbitration clause :“Any disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made therein shall be binding on the parties.”
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Arbitration Clause (Contd.) Alternative Clause : Any dispute and
differences whatsoever arising under or in connection with the contract will be settled by arbitration in accordance with the Rules of Arbitration of UNCITRAL/The Rules of Conciliation and arbitration of the International Chamber of Commerce (ICC) – (to be retained whichever is agreed to and delete the other)
UNCITRAL – United Nations Commission on International Trade Law
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Arbitration Clause (Contd.) The venue of arbitration will be in India
and arbitration proceedings will be administered by the Indian Council of Arbitration (ICA). The applicable law to the contract will be laws of India or such other as may be agreed to.”
Arbitration and Conciliation Act 1996 (Based on UNCITRAL Model Law of Arbitration)
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OFFER FOR TECHNOLOGYAN EXAMPLE
Technology : Manufacture of Xylitol from bagasse
Process: Bagasse hydrolysis – purification – hydrogenation – concentration – crystallization – drying – packaging
Areas of application- Food industry as sweetener- Pharmaceutical industry-Light industry: as raw material
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OFFER FOR TECHNOLOGY (Contd.)
Advantages -Safe and flexible process line-Simple operation- Low investment-Clean production-Effluent can be easily treated- Waste can be utilized-Discharge as per international standards
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Offer for Technology (Contd.)
Payback period : 5-6 years Stage of development:
Commercialised Infrastructure required : Land…,
Building…, Water…, Power… Manpower required : … Production Capacity …. Byproducts ….
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Offer for technology (Contd.) Main raw materials required …. Economic date : Project cost…, Working
capital requirement…, ……, IRR… Content of technology package … Export possibilities …. Technical document language …. Technology supplier’ profile… Contact ….
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Technology pricing- a case Zeolite ‘A’ – A by-product from
Aluminum industry used in detergents industry
Technology developed by a laboratory in 1990
Technology licensed to two small units in 1991
Price charged Rs. 0.2 million per license
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Technology pricing – a case (Contd.) After a year, one unit returned the
technology, the other could not make any significant progress
During 1993-95, a consultancy firm, up scaled design and engineering from laboratory scale plant
In 1996, technology licensed to a large aluminum manufacturing unit (10,000TPA Capacity) for a license fee of Rs. 13.5 million
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Causes of disputes in Technology transfer Different interpretations of a clause Any one party unable to operate any part
of the agreement for any reason Bad drafting of the agreement Change of ownership Change in business interests Force majeure reasons Delay in project
implementation/technology getting obsolete
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Causes of disputes in Technology transfer (Contd.) Lack of mutual trust Low technology capability of the receiver Non adherence to specified time schedules Non achievement of specified
quality/outputs Delayed payments Unproven/untested technology Exclusivity/non exclusivity Incomplete documentation
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SALIENT FEATURES OF POLICY FOR FDI/TECHNIOLOGY IMPORTS
AUTOMATIC APPROVAL: - FDI up to 100% allowed in all
activities/sectors except in the following:(a) Activities/items that require an Industrial
License(b) Proposals in which the foreign
collaborator has a previous/existing venture/tie up in India in the same field (Press Notes 1 and 3 of 2005 Series refer)
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Technology Import - Contd.
(c) Proposals relating to acquisition of shares in an existing Indian company in the financial services sector and where SEBI regulations are attracted
(d) Proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted
(e)Lump sum payments not exceeding US $ 2 million
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Technology Import - Contd.
Royalty not exceeding 5% for domestic sales and 8% for exports, there is no restriction on the duration of royalty payment
Proposal does not attract compulsory licensing
Item of manufacture is not reserved for the small sector
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Technology Import - Contd,
NON AUTOMATIC ROUTE- All cases which do not fall under Automatic Route
For details refer ‘INVESTINGIN INDIA’ http://www.dipp.nic.in
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SECTORAL FDI LIMITS(As on 12.2.09)
74% in Private Sector Banks 20% in FM Radio 49% in DTH television 26% in TV News channels 26% in newspapers and current
affairs periodicals
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SECTORAL FDI LIMITS(As on 12.2.2009)
74% in Telecom 74% in ISPs with gateways 26% in Defence production
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CASE STUDY
Discussions in the Sessions
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VISION
Vision statements should be designed to be vivid, memorable, inspiring,meaningful, and brief….It is the part that gives direction, helps focus effort and stays etched in one’s mind.
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A FEW VISION STATEMENTS ITC : A commitment beyond the market Dr. Reddy’s Lab : To transform
themselves from change followers to change leaders
DRDO : DRDO will get transformed into a technological leader of world class with corporate structure and with a mission of making the nation independent of foreign technology in critical spheres
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A FEW VISION STATEMENTS –Contd.
CSIR - To provide scientific and industrial R&D that maximizes the economic, environmental and societal benefits for the people of India (Mission statement)
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A FEW VISION STATEMENTS (Contd.)
NTPC VISION: A world class integrated power major, powering India’s growth, with increasing global presence
MISSION: Develop and provide reliable power, related products and services, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society
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A FEW VISION STATEMENTS (Contd.)
NTPC CORE VALUES Business Ethics Customer Focus Organizational & Professional Pride Mutual respect and Trust Innovation and speed Total quality for excellence
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A FEW VISION STATEMENTS(Contd.)
IIT Delhi : To contribute to India and the world through excellence in scientific and technical education and research;to serve as a valuable resource for industrial and social; and to remain a source of pride for all Indians
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A FEW VISION STATEMENTS(Contd.)
Merck : To preserve and improve human life
Walt Disney : To make people happy
Walmart : To give ordinary folk the chance to buy same things as rich people
Stanford (1940s) : Become the Harvard of the West
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SIMULATION EXERCISE ON TECHNOLOGY ACQUISITION
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TECHNOLOGY ASSESSMENT
-A FEW PARAMETERS SAFETY STAGE IN TLC CLEANING CAPACITY WATER REQUIREMENT POWER REQUIREMENT TIME REQUIRED FOR CLEANING DETERGENT BIODEGRADEABLE, SCALE
DEPOSIT,PHYSICAL ABRASION …
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TECHNOLOGY ASSESSMENT
-Contd.
ENVIRONMENTAL IMPACT ITEMS UNSUITABLE FOR
DISHWASHER IPR ISSUES … ….
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ESTIMATION OF PRICE SALES REVENUE OF TECHNOLOGY
ACQUIRER IN 5 YEARS= Rs. 400 crores EXPENDITURE OF TECHNOLOGY
ACQUIRER IN 5 YEARS = Rs. 300 crores. IF ROYLTY RATE IS 8% ON SALES, COST
OF TECHNOLOGY = Rs. 32 crores. AMOUNT AVAILABLE TO TECHNOLOGY
ACQUIRER = 400-(300+32)=Rs. 68 crores
IN % TERMS = 68/400 x100=17%
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ESTIMATION OF PRICE – CONTD.
AMOUNT RECEIVED BY TECHNOLOGY SUPPLIER = Rs. 32 crores
EXPENDITURE AND LOSS ON ACCOUNT OF NON SALE = Rs. 5 crores
NET AMOUNT GAINED BY TECHNOLOGY SUPPLIER = 32-5=Rs. 27 crores
AMOUNT GAINED AS A % OF SALES=27/400 x100 = 6.75%
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ESTIMATION OF PRICE – CONTD.
Royalty rate %
Gain of tech. acquirer(Rs. Crores)
Gain of tech.Acquirer (%)
Gain of tech.Supplier(Rs. Crores)
Gain of tech.Supplier (%)
8 68 17 27 6.75
5 80 20 15 3.75
3 88 22 7 1.75
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THANK YOU