VI GLOBALIZATION AND TECHNOLOGY COOPERATION: ALLIANCES, NETWORKS AND

TECHNOLOGY TRANSFER

TECHNOLOGY TRANSFER

Scientists engaged in R%D

93.9%

5,8% 0,3%

Developed countries

Underdeveloped Least developed

R&D Costs

0102030405060708090

100

1st Qtr 2nd Qtr 3rd Qtr 4th QtrDeveloped Underdeveloped Least developed

97,4%

2,5%0,1%

Number of scientists and engineers in the world engaged in R&D: 93,9% developed countries, 5,8% underdeveloped countries, 0,3% least developed countries.

R&D expenditures:97, 4% developed countries, 2,5% underdeveloped countries,0,1% least developed countries.

Open innovationand technology transfer

New concept based on traditional technology transfer;

Emphasizing open global collaboration

Internal researchprojects

Current marketand business model

Basic research New productdevelopment

External researchproject

Venture investing

Technologyin-licensing

Technologyacquisition

Open innovation

• The concept of technology transfer is not new . . .

• In the thirteenth century, Marco Polo helped introduce to the Western world, Chinese inventions such as the compass, papermaking, printing and the use of coalfor fuel.

 • Many argue that it was a change in the US law that

led to the surge of interest in the subject. The passage of the landmark National Cooperative Research Act (NCRA) of 1984 officially made cooperation onpre-competitive research legal.

Background to technology transfer

• Much written about the subject; became extremely popular in the late 1980s.

• Governments believed it could solve problemsof national budget deficits!

• Collaboration on technology development encouraged.• Large companies established technology

transfer units.• Universities also established industrial liaison units and

technology transfer units.• The panacea for industry’s problems did not

materialise.

Introducing technology transfer

Existing R&D projects and developed technology

Transfer to industry andprivate enterprise

It has already been paid for!

The attraction of technology transfer was that companies and industries could benefit from technology that had already been paid for.

Technology transfer

Technology Transfer is the application of technology to a new use or user. It is the process by which technology developed for one purpose is employed either in a different application or by a new user. The activity principally involves the increased utilisation of the existing science/technology base in new areas of application as opposed to its expansion by means of further research and development.  

(Wealth from knowledge, Langrish et al., 1982).

Technology transfer (Continued)

The process of promoting technical innovation through the transfer of ideas, knowledge, devicesand artefacts from leading edge companies, R&D organisations and academic research into more general and effective application in industry and commerce.  (Seaton and Cordey-Hayes, 1993).

Technology transfer (Continued)

• LicensingThe chemical industry has a long and successful history of licensing.

• Ferret modelExperts called “ferrets" were used to search for technology in defence labs.

• Intermediary agency modelRange from RTCs to university technology transfer managers.

• Science parksThe idea is to develop an industrial area close to an

established centre of excellence, often a university.

Models of technology transfer-different approaches-

• They fail to understand the recipient organisation's needs

• Technology viewed in terms of technical attributes

• Underestimate the extent of interaction required

• Assume an ability on the part of organisations to communicate their problem in the form of a technical requirement

Limitations of models of technology transfer

Accessibility Mobility Receptivity

Much more emphasisrequired here

A framework for technology transfer

Technology Transfer: definition and types

(1) vertical R&D activities - from fundamental research, applied research, development, to innovation – practical implementation and commercialization. (2) horizontalTransfer of technological knowledge – tangible and intangible, in any of the phases of vertical technology transfer to new geographical regions, new companies, wherever they can increase value and living conditions

PROCESS 4I

Idea - Invention - Innovation - Imitation

Horizontal technology transfer-different forms in practice:

1. Transfer of foreign more developed technology to domestic firm (international t.t.);2. Diffusion of technological innovation between domestic firms (national t.t.);3. Transfer of technology from domestic to foreign firm (international);4. Reversed t.t. related to experts leaving own country, most often less developed, for more developed countries and environments.

In companies t.t. most often is combination of vertical and horizontal transfer with following activities:

a) Vertical t.t. : R&D, t. adaptation, t. modification;

b) T. implementation;

c) T. adoption;

d) Market introduction.

Horizontal technology transfer modes

• Purchase/sale of equipment (machines, devices, instruments, computers, communication systems, etc.)

• Expert exchange, scientific & professional development programs, cooperation with universities and other organizations, training of personnel provided by technology sellers

• Brain drain/Reverse TT

Horizontal technology transfer (HTT) modes

• Purchase/sale of components (production units, assemblies, subassemblies)

• Transfer of processes, technical solutions and design based on transferring patent rights and documents within licence agreements or other contracting activities

• Diffusion of technological innovation through seminars, exhibitions, conferences, fairs, literature: books and journals

• Consulting and other services

Three types of horizontal technology transfer according to usage purposes • direct transfer: technology unchanged used for

same purpose;

• 2. indirect transfer: technology unchanged used for new, different purpose;

• 3. new application: technology is changed and used in a new field and for new perposes.

Horizontal technology transfer contract types

• Production programme contracts;• Technical services contracts;• Licence contracts;• Longterm production contracts, etc.

Traditional HTT modes

• Purchase/Sale of equipment (from turn-key arrangement to partial purchase of selected equipment)

• Licencing for IPR (patents, seals, trade-mark);

• Licencing know-how; • Cooperation;• Joint ventures.

International Codex of Technology Transfer Conduct, passed in 1975.• Acceptance of the principle of special

treatment of developing countries in technology transfer based on equal rights and access to new technology.

• Reducing any type of restrictions in contracting technology transfer.

Restrictive clauses in international HTT – based on empirical results

• Restricting sales or export of products on certain markets;

• Restrictions of freedom in chosing suppliers, partners;

• Restricting IPR policy and innovated technology protection rights;

Restrictive clauses in international HTT – based on empirical results

• Restricting pricing policy on products based on the technology transferred;

• Restricting the buyer of technology to buy other party technology or engage in any other party technological agreements while contract duration;

• Restrictions on production volume; • Restrictions on R&D activities; • In case of Joint venture, technology transferred

considered as the capital of the other party in the JV and thus diminishing any JV risk.

Restrictive clauses in international HTT – based on empirical results

• Restrictions in the form of obligation for the buyer to engage experts from seller company longer than necessary and thus the transfer is more expensive for the buyer;

• Restrictions in the form of obligation for the buyer to include other components in the technology package being transferred that are not necessary, augmenting the price of technology;

• Restrictions in the form of abolishing the right to selective technology package in transfer;

• Restricting exploitation of technology after contract expiry.

Always have in mind

• DIRECT COSTS• INDIRECT COSTS

Direct costs are related to components of the technology package transferred – tangible and intangible components (equipment, royalties,consulting, training, and other service-fees);

INDIRECT COSTS IN HTT

• a) costs incurred due to increased prices of raw material or other parts and components that we are obliged to buy from predetermined supplier – often the seller of technology;

• b) costs not present in the contract but arising in technology exploitation i.e. when the technology package transferred is not complete. E.g. equipment sold, but training and other services not calculated but are necessary in order to put technology in exploitation.

Internal information in HTT management

• Internal:- Technology in use, existing characteristics; - Existing competencies in organization; - Technological performance indicators;- Business performance indicators;- Technology and Business Strategy;- Financial Capabilities; - Market Potentials; - Supplier relations.

External Information- International terms of trade in technology; - National socio-economic development goals; - National Development Policy and Strategy (social,

economic, technological);- Regional development trends;- Development trends in certain benchmark countries and

for selected technologies and sectors of the economy; - Company Benchmark development indicators; - HR market trends; Education and employment trends;

External Information

• Trends in TT in the economy, sector, technology, forecasting;

• R&D and technology innovation trends, forecasting;

• IPR trends, forecasting; • Global market trends, forecasting; • TT supply and demand trends.

A joint venture dependent on technology transfer• Two loss-making handset businesses• 2001 – formed a JV in mobile phone handsets • Sony's consumer products expertise with Ericsson's extensive knowledge of cell phone networks. • To compete with Nokia and Motorola• Disappointing results in 2003• Problems with alliance• Good news at last in 2004

Case study: Sony-Ericsson

Technology acquisition – internal R&D

Advantages• Company technological

growth• Exclusivity & competitive

advantage

Disadvantages• Takes longer• May lack capability• Higher risk of failure

Technology acquisition - external

Advantages• Reduced time to market• Reduced risk• Addresses internal

capability

Disadvantages• Low technical growth• Give up exclusivity

advantage• Need to adapt technology

Technology acquisition – combination internal & external

Advantages• Share risks• Share costs• Reduce time to market• Can result in exclusivity

Disadvantages• reduced technical growth• Need to share knowledge &

information• Potential implementation

problems

Technology acquisition – Contract R&D

• Advantages & benefits:– no investment in facilities– low investment in staff– own technology

• Disadvantages & risks:– do not have hands-on knowledge in house– harder to keep confidential– same time, cost and risks as internal R&D

• Cost factors:– R&D staff to understand technology, manage contract– fees: may be lower than internal R&D

Technology acquisition – R&D partnership

• Advantages & benefits:– share risk– lower cost investment in staff– learn from partners

• Disadvantages & risks:– have to share knowledge with partners– have to adapt, often, research results to own application(s)

• Cost factors:– company’s share of R&D staff, equipment, facilities– post research implementation costs

Technology acquisition – Licensing

• Advantages & benefits:– lower costs & risks than internal R&D– shorter time to market – support in implementation from licensor

• Disadvantages & risks:– may not have exclusivity– implementation risks & costs– does not develop internal capabilities

• Cost factors:– upfront & royalty/license fee payments– implementation costs

Technology acquisition – Purchasing technology

• Advantages & benefits:– quicker, “ready to use”– proven technology, lower risk – support in implementation from vendor

• Disadvantages & risks:– exclusivity, competitive advantage issue– potential implementation problems– does not build internal capabilities

• Cost factors:– upfront payment– training costs– lower than internal development

Technology acquisition – Joint Venture with technology provider

• Advantages & benefits:– rapid implementation after training– proven technology, lower risk– may get exclusivity, total or partial – learn from technology provider

• Disadvantages & risks:– do not have full control: have to agree with partner– does not develop fully internal technical strengths

• Cost factors:– upfront investment in new business– training & implementation costs

Technology acquisition – Acquisition of technology provider

• Advantages & benefits:– shorter time to market, perhaps already marketed– lower risk

• Disadvantages & risks:– may have to adapt technology to needs– may acquire a lot of unnecessary assets & problems– potential merger integration problems

• Cost factors:– depends on purchase price of company– real value of technological assets hard to estimate

Factors in technology acquisition

• Buyer participation in transfer process is crucial• Technology not on open shelf, but is protected by

secrecy and patents• Technology involves tacit knowledge, understood

only in use, not from recipe• Some technology elements may be non-tradable

Lessons of technology acquisition

• Lengthy process, often many years• Mix of local and external inputs (purchase to fill

gaps)• Lumpiness of technology in multistage process• Challenge of adapting to and integrating imported

technology – NIH & change process• Importance of local learning and adaptation

– Assessing local constraints/capabilities

Technology acquisition process

• Steps (not always sequential):1. Assess local constraints and available technologies2. Evaluate costs and benefits and windows opened by

each technology3. Acquire4. Assimilate5. Use6. Adapt7. Change8. Create