Technology Transfer Essay ⋆ Business Essay Examples ⋆ EssayEmpire

As with technology itself, technology transfer plays a critical role in 21st-century international business. Instances of technology transfer have increased manifold with the advance of globalization. It occurs between companies within different countries as well as within firms, such as between subsidiaries of a multinational firm located in different countries. The technology transfer process impacts the major developments in the world today, including outsourcing, cluster formation, the product life cycle, productivity, and competitiveness.

Technology transfer is the process of sharing skills, knowledge, and methods, and creating and applying new products and processes. Technology transfer can occur between industries, companies, organizations, governments, or countries. Technology transfer should be distinguished from the diffusion of technology. Diffusion generally refers to the penetration into an economy of a given product or process without the expectation that the diffusion process will significantly alter the dominant design. The goal for diffusion of technology is to find markets and a distribution system that can deliver the technology to the markets. In contrast, technology transfer generally results in modification or reformulation of a design as a result of the different context into which the technology finds itself.

For example, when the early electrical systems developed in the United States in the late 19th century were transferred over to Europe, adaptations were made to the U.S. design in order to account for the different technical, economic, and social context that applied to the European context. Technology transfer also can refer to the relocation of research and development (R&D) projects and personnel to other companies and geographical locations for the purpose of creating new technology from the knowledge previously created in the home firm.

Reasons To Transfer Technology

The fundamental questions that surface when considering the technology transfer process are (1) What compels technology transfer in the first place, and what organizational instruments exist for effecting the transfer? (2) Can a given technology that thrives in one economic, technical, and social climate take root in another? (3) And if so, what forces determine the modifications to be made in successfully negotiating the transfer?

There are a number of reasons behind a company’s decision to transfer technology to other companies and locations. These include the desire to share the costs and risks of innovation with a partner firm; the need to be close to critical raw materials, technical personnel, and specialized or hard-to-access markets; the opportunity to take advantage of subsidies and incentives offered by governments looking to entice foreign firms to settle in their countries; and strategic need to avoid high tariff barriers. Government restrictions and regulations can also slow technology transfer, or even stop it in its tracks; such is the case involving the recent trade dispute between the United States and the European Union (EU) over genetically modified seeds, or when the United States restricts the transfer of certain technologies overseas in the name of national security. Periods of geopolitical or civil instability, such as war, need not put an end to technology transfer (although it often does). It was during the French Revolution that important French chemical innovations found their way to England via dislocated refugees. Similarly, during World War II, European research in atomic energy traveled to the United States through scientist émigrés escaping Nazi persecution, eventually leading to the development of the Manhattan Project and the atomic bomb.

Facilitating Technology Transfer

A variety of mechanisms exist for facilitating technology transfer, both domestically and internationally.

The above examples demonstrate the importance of the movement of pivotal personnel from one country to another, either because of troubled times or simply changing jobs. At the firm level, strategic managers generally consider such conduits as licensing, joint ventures, and partnerships as well as “greenfield” operations by which a firm builds a new plant from the ground up in the host country. Technology transfer can also occur through mergers with, or acquisitions of, other companies.

An increasing trend has been the merger or acquisition of a smaller, innovative start-up by a larger, established company for the latter to secure the central patents or licensing rights. The type of technology transfer mechanism to be employed generally depends on risk factors involved. For example, a U.S. company might think twice about licensing its new process to a company operating in a country that either has few piracy laws or is known not to uphold the piracy laws on the books. Or fear of culture clash with the management of a company in another country might steer a U.S. firm from a merger/acquisition strategy and toward a greenfield approach that allows it more control over the new facility in its daily management practices and decisions.

The issue of whether a technology, once transferred, can flourish on foreign soil depends on whether the new environment can supply the requisite resources for technological success, notably raw materials, scientific and technical personnel, complementary industries and companies within the region, transportation and power infrastructure, and appropriate and sufficiently large markets.

Government policy can play a major role in both intra and international technology transfer. Within the United States, state and local governments typically provide tax breaks and other incentives to induce outside high-technology firms to relocate into their areas to create jobs and spur economic growth.

Cultural Factors

Whether the transplanted plant or product can thrive—even with government subsidies—is another question, and depends, in large measure, on economic, technical, and cultural factors. Knowledge-based clusters, such as Silicon Valley, play an important role in attracting technology transfers through firm relocation and, moreover, provide a favorable climate for such transplants. Such clusters offer important location-specific advantages for such firms in the form of agglomeration economies, especially in the creation and diffusion of specialized knowledge and skills within and between companies.

Turning to those forces that determine why and how a foreign technology requires modification is quite complex and still not well understood. Differences in scale and structure of markets can play an important role: what works for one type of demand curve may not be suitable for one rooted in different historical, cultural, and social forces. This was the case (at least in part) with the transfer of electrification technology to Europe in the early 20th century. It also applied to the transfer of mechanical design from England to the United States, where the larger, more homogeneous U.S. market was a key factor in the modification of less efficient European methods of manufacture to what came to be known as America’s mass production system.

Differences in standards, such as technical or environmental, can also play a role as imported technology must be modified to those standards. This factor plays an important role in attempts to transfer information and communications technology from the United States to Europe and Asia. However, the supply side must also be addressed. A transferred technology may have to be adapted to the particular natural resource endowments of a region.

This was the case when, in the first part of the 20th century, the United States adapted German chemical processes, dependent on coal, to more efficient petroleum-based designs. Economic historians often discuss relative, rather than absolute, resource supplies as the critical issue: a society re-creates an imported technology that allows the substitution of more abundant (i.e., cheap) for scarcer (i.e., expensive) factors of production. In this view, for instance, U.S. leadership in mechanization in the 19th century derived from the greater need of U.S. manufacturing to replace more expensive labor with cheaper capital, which induced a need for labor-saving machines.

Studying Technology Transfer

Recent research by management and international business scholars interested in the movement and adaptation of new products and processes within and between multinational firms has examined technical, intellectual, and social factors that can catalyze or derail the technology transfer process. One line of research reveals the importance of “absorptive capacity” of the host (or recipient) party, or the degree of technical capability possessed by the recipient firm or subsidiary that sharpens the ability to recognize the value of new information, assimilate and adapt it, and apply it in commercial ways. The role of “stickiness” of information—the difficulty of transferring knowledge from its place of origin—is a closely related area of interest that impacts understanding of the technology transfer process.

A recent study of a pivotal 21st-century field—the advanced materials sector and its allied industries— shows the difficulty, even in the face of an increasingly globalized world, in successfully transferring the U.S. system of entrepreneurialism and multidimensional “innovativeness” into the European context. As a result, the United States maintains its position as the world leader in the development and application of cutting-edge technology and the economic benefits that accrue from there.

Another line of research sees knowledge and technology transfer as occurring within the social or community context, consisting of a network of relationships existing between and within multinational corporations. From these results, researchers conclude that the factors that aid technology transfer include not simply high absorption capability on the part of the recipient but also mobility of people (e.g., job changes) between firms, as well as strategic use of organizational and social incentive and control mechanisms. Factors, then, that can hinder or limit technology transfer internationally include geographical distance, culture clash, and low mobility of personnel between firms and countries.

Bibliography:

M. Cohen and D. A. Levinthal, “Absorptive Capacity: A New Perspective on Learning and Innovation,” Administrative Science Quarterly (v.31/1, 2000);
Nancy Coppola, Communication in Technology Transfer and Diffusion (Lawrence Erlbaum Associates, 2006);
James Cunningham and Brian Harney, Strategic Management of Technology Transfer: The New Challenge on Campus (Oak Tree Press, 2006);
S. Frost and C. Zhou,“R&D Co-Practice and ‘Reverse’ Knowledge Integration in Multinational Firms,” Journal of International Business Studies (v.36, 2005);
Kotabe et al., “Determinants of Cross-National Knowledge Transfer and Its Effect on Firm Innovation,” Journal of International Business Studies (v.38, 2007);
Gary D. Libecap, University Entrepreneurship and Technology Transfer: Process, Design, and Intellectual Property (Elsevier JAI, 2005);
Adam Liberman and Peter Chrocziel, International Licensing and Technology Transfer: Practice and the Law (Wolter Kluwer, Law & Business, 2008);
Ali Shamsavari and Mehdi Majidpour, Innovation in Technology Transfer: Host-Orientated Strategic R&D Alliance (Kingston University, 2008);
World Economic Forum (WEF), Global Competitiveness Report (WEF, 2007).

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