Part II: Technology Transfer Process in Emerging Innovation Systems

 In my earlier article on Demystifying Technology Transfer, I aimed to dispel misconceptions surrounding the technology transfer process. It was established therein that technology is not about the “cool” modern gadgets or tools, but also the knowledge and methods behind them. Also, the “know-how” and “know-why” components of knowledge were fleetingly addressed.

In this follow-up piece, my focus shifts to providing a clear understanding of what the technology transfer process entails. A brief clarification is in order, as by Transfer of Technology (ToT) here, I specifically refer to international transfer, excluding ToT within the local context which involves transfer from R&D institutes to local industry. The concept of triple helix or n-helix and its implications on private sector competitiveness and development will be discussed in some later posts.

Technology Transfer Process:

To get started, let’s unpack the ToT process first. It involves acquiring, absorbing, adopting and renovating of the technology. An interesting marker of the process success is when the current receiver/importer turns into tomorrow’s giver or exporter of the technology.

 

Figure 1: Technological Learning Capabilities Curve (aka ToT Process)

Acquisitive Capability

The acquisition capability within the ToT process primarily involves interventions to gain access to and/or purchase of a given technology. Various strategies such as imports, licensing, and strategic alliances, including joint ventures and supply chain relationships or any other mechanism can be employed to secure access to the desired technology. This task may prove to be complicated, requiring a spectrum of knowledge—from understanding machines and technologies to evaluating potential suppliers with their merits and demerits. Additionally, financial arrangements and negotiations of purchase terms add complexity to the process.

Absorptive capability

The absorptive capability is an intricate process involving understanding the “set of procedures” and “know-how” of the technology operation. On the capability spectrum, it involves operative capability of the machines or tools acquired, and also the supportive capability such as repair & maintenances of the machines involved, project planning & implementation, human resources development and much more.  With absorptive capability, the organizations can improve the technical efficiency of the system.

Adoptive Capability

As for the Adoptive capability within the ToT process, it involves tailoring the imported technology to fit the nuances of the targeted market(s). The Toyota Production System (TPS), Lean Methodologies, and other process technologies, initially developed and promoted in Japan for operational efficiency, faced challenges in being readily implemented in the U.S. and Europe due to cultural differences, distinct work ethics, and entrenched legacy systems, among other factors. This difficulty resulted in Western companies lagging behind their Japanese manufacturing counterparts on the operational front for quite some time. In the product localization to respond to globalization, Matsushita Japan failed to perform well in the American market due to a lack of product responsiveness to local tastes and aesthetics, as noted by Nathaniel Agola, the author of “Technology Transfer & Economic Growth in the Sub-Saharan Countries”.

Innovative Capability

Last but not least is the innovative capability of the system within which the technology operates. Innovation necessitates research and development (R&D) at both the firm level and beyond, taking the forms of incremental, radical, or disruptive innovations. In the context of technology transfer, incremental innovation is particularly relevant, as enhancing existing technologies to adapt to changing business contexts is relatively less challenging. This has been practiced with relative ease in the catch-up process of technology capabilities by latecomers. Industrial history is replete with examples of technologies imported and incrementally improved (innovated) in host countries, such as the Electronics Industry in South Korea, Semiconductor in Taiwan (Province of China), Biofuel in Brazil, renewable energy, railway, telecom, e-commerce, and a myriad of technologies that have undergone incremental improvements in China over time to successfully navigate the marketplace.

Implementation Challenges

Now that we have defined the technology transfer process, it becomes pertinent to explore its successful implementation. Case studies related to ToT across Japan, NICs and even China thoroughly explain the process, surely with nuances to fit both the temporal evolution and diverse context of these countries.

The concept of 'context' holds significant importance in the learning process of technological capabilities, which is another nuance of the ToT process, aptly referred to as such. Since ToT occurrence may have varied implications within different economic, technological, political, and social contexts at both the national and international levels, the process must be tailored accordingly.

Consider the examples of Japan and South Korea. Japan, with a notably higher absorptive capacity—characterized by relatively high-quality human resources and well-established institutes/ToT infrastructure, indicative of a well-performing economy at the time—leapfrogged the process compared to South Korea. In Japan, the robust linkages of leading firms with SMEs and micro-SMEs, reflecting a strong social network, stand out as another distinguishing factor in the ToT process, setting it apart from South Korea. The extensive backward linkages allowed Japan to swiftly and sustainably build domestic technological capabilities.

While South Korea's approach was riskier initially, it underwent structural adjustments to compensate for a less advanced industrial base. It's noteworthy that the international political context, coupled with opportunities 'made available' by the United States and Japan to counter the influence of the communist regime in North Korea, significantly supported the ToT process in the region. However, credit is also due to all the hardworking entrepreneurs and state functionaries for navigating the technological learning curve.

Now that the 'context' is constantly evolving, marked by the enforcement of WTO rules and regulations, shorter product life cycles, and, most importantly, paradigm shifts in the manufacturing arena with the emergence of the Industrial Internet of Things (IIoT) or Industry 4.0—paving the way for re-shoring of light industry, which once served as the starting point for any country on its industrial development journey. All of this, combined with emerging challenges like climate change, political and policy instabilities, and calls for a more just liberal labor market are making things hard for aspiring economies to move ahead on the technological front.

These and many other challenges cast doubt on the efficacy of the old recipe of ToT in the new environment. While the steps may remain the same, the implementation of each step requires more innovative levers, and the process should be armed with new strategies, tools, and techniques to tap into the sea of technological innovations happening at breakneck speed.

Possible Strategies for ToT Process Implementation

It has been a well-established fact that ToT is a multi-faceted process involving interactions at multiple levels: international, national/regional, and firm levels, with each level having its own variables affecting or influencing others in different ways in various spatial and temporal contexts. Keeping this in view, strategies must be developed for the local context, surely with ideas from international best practices.

Following can be a few strategies (not exhaustive for sure) for technological learning and upgradation of the country through ToT mechanism:

• Redefine the Technology Transfer Process:

First and foremost, it is crucial to redefine the technology transfer process as the current term is a misnomer and does not fully capture the essence of the process. Moreover, the technology transfer debate in any venture would raise eyebrows on the part of the donor of the technology. Licensing, for example, is not a technology transfer but a business and legal arrangement to obtain the rights to use the technology in a defined geographic location for a definite period of time in return for loyalty payments. The appropriate term can be innovation cooperation or technological learning cooperation or any other word coined for the purpose.

• Create Awareness and Increase Know-How:

Create awareness and increase know-how among stakeholders of the technological transfer ecosystem and elaborate on the process through programs such as management courses (for bureaucrats) and joint workshops (bureaucrats and the private sector).

• Develop Absorption Capacity:

For meaningful technology transfer, it’s mandatory to develop some level of absorption capacity, starting with the “know-how” of the technology through skill development programs. Each project would require technology-specific skills, and the responsibility of the process should be shared among the stakeholders depending on the novelty of the technology and the prospects of diffusion in the wider economy. Know-why of the technological learning curve involves delving deeper into the science and other knowledge behind the technology embodied in the process or product.

• Plan National Technology Transfer Infrastructure/Ecosystem:

The technology transfer infrastructure/ecosystem should be fully planned at the national level. For instance, the China International Technology Transfer Centre facilitates innovation collaborations and connects Chinese industries with international innovation resources. Technology Upgradation & Skills Development Company (TUSDC) is just one initiative of the MoIP in Pakistan for such a purpose, which can be strengthened to achieve the desired objectives. Organizations in the private sector must be developed, encouraged, and nourished to gain access to the wider innovation resources available globally to help support technological learning locally.

• Enact Content Laws:

Content laws can be enacted in specific sectors like automotive (as is the case in Pakistan); however, enforcement of the law with the collaboration of private sector actors must be ensured.

• Incentivize R&D Units in Host Countries:

Corporations often house the R&D units in the home country/headquartered countries. In such scenarios, there is little possibility of technology transfer to the host country as far as core technologies are concerned. In some cases, the production network is so fragmented, making little leeway for the host country enterprises to fully grasp the technologies involved. In products as simple as a leather wallet, if stitching is done in Sialkot or anywhere, then the zip or buttons will be added elsewhere or in another country. Strategies such as this are a deliberate attempt on the part of the MNCs to prevent the flow of technology to local firms. For basic R&D to be carried out in the host country, Malaysia, for example, incentivized firms to establish their operational headquarters in Malaysia.

• Establish Coordination between Stakeholders:

Lastly, effective coordination among stakeholders in the ecosystem is paramount for the sharing of information and best practices. Small and Medium Enterprises (SMEs), in particular, often face resource constraints that hinder their ability to engage in such collaborative efforts. Therefore, the establishment of an institution dedicated to sharing information and knowledge on the technology market becomes imperative. This institution (if it could be SMEDA) would play a pivotal role in supporting SMEs in their journey towards technological upgrading.

Post Note: The ideas presented above on this subject aim to initiate an inclusive debate, contributing to the discourse on how developing and least-developed countries can effectively approach the ToT process. I welcome constructive comments and insights from interested readers to further enrich the discussion and foster collaborative learning.