[TECHNOLOGY TRANSFER]

Table of Contents
Introduction ........................................................................ 1
Elements of technology ................................................................... 2

Technology Process ............................................................. 4

Explanation ...................................................................................... 5

Policies to attract FDI .......................................................... 8 Policy for foreign technology agreements in India ............ 10 Procedure for approvals - Technology transfers by SIA ..... 10 Case Study ........................................................................ 12
Nuclear Technology Transfer in India ............................................ 13

References ....................................................................... 14

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Technology Transfer Introduction

Technology can either be developed through own research and development or it can be purchased through indigenous or imported sources. India has opted for a judicious mix of indigenous and imported technology. Purchase of technology is commonly called Technology transfer and it is generally covered by a technology transfer agreement. Technology transfer means the use of knowledge and when we talk about transfer of the technology, we really mean the transfer of knowledge by way of an agreement between the states or companies. Transfer does not mean the movement or delivery; transfer can only happen if technology is used. So, it is application of technology and considered as process by which technology developed for one purpose is used either in different applications or by a new user. Thus, we can say that

Technology transfer is the term used to describe the processes by which technological knowledge moves within or between organisations. International technology transfer refers to the way in which this occurs between countries. The technological knowledge that is transferred can assume various forms. It can be embodied in goods (including physical goods, plant and animal organisms), services and people, and organisational arrangements, or codified in blueprints, designs, technical documents, and the content of innumerable types of training. Alternatively it can be communicated through flows of tacit knowledge i.e. knowledge that has not been fully codified, and remains embodied in the skills of people.

Thus, technology generally would comprise the following elements:

Process Know how Design Know how Engineering know how Manufacturing know how Application Know how Management know how

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[TECHNOLOGY TRANSFER] All these forms of knowledge may vary in a further important way. At one end of the spectrum, the transfer involved can be concerned with the knowledge for using and operating technology. At the other end, it can be concerned with the knowledge necessary for changing technology and innovating. In between, transferred knowledge may involve the many different kinds of design and engineering knowledge required to replicate and modify technologies.

Moreover, in international technology transfer there is a distinction between horizontal and vertical transfers. Horizontal technology transfer consists of the movement of an established technology from one operational environment to another (for instance from one company to another). Vertical technology transfer, in contrast, refers to the transmission of new technologies from their generation during research and development activities in science and technology organisations, for instance, to application in the industrial and agricultural sectors. Gaining access to new technologies

Technology transfer is an important means by which developing countries gain access to technologies that are new to them. For example, the acquisition of foreign technologies by East Asian newly industrialised countries, coupled with domestic technological learning efforts to accumulate the capability to change technologies have been key factors in their rapid technological and economic development. However the ability of developing countries to use technology transfers to develop their domestic capabilities, allowing such countries to reap the social and economic benefits of existing technologies, have been mixed. There are wide variations between countries and between sectors within individual countries. The disparities between and within developing countries in benefiting from technology transfer suggest that the relationship between technology transfer and the accumulation of domestic technological capability is far from straightforward. In other words, more technology transfer does not necessarily lead to more technological and economic development.

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Define the Technology Goals - Clearly define objective, quantified goals(measures-of-success) from the very start - Reduce time to market by some per cent? - Reduce cost by some per cent? - Increase quality by some per cent? - Make sure that the goals are attainable - The goals should be accompanied by a business case justification

Choose the Appropriate Technology -Survey the available technologies -Assess the choices in light of the defined goal(s) -Choose the most appropriate technology - Notice that the goal(s) should drive the technology choice, not the other way around Predict the Impact of the Technology

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[TECHNOLOGY TRANSFER] - How big of a change is it to the organization? - How much of the organization will be affected? - How long do you have to fully implement the change? - How motivated are the people to implement the change? - How well can the people anticipate the effect of the change on them? - Does it change the political landscape? Assess Organizational Predisposition to Change - How much change have they dealt with recently? - Are they satisfied or dissatisfied with the current situation? - Who, if anyone, is making the first steps? - What is the existing social system? - What Innovation Adoption types are there? Controlling Impact and Disposition - Many of the factors affecting impact and predisposition to change are probably beyond your control. However some may be under your control - Can you reduce satisfaction with the current situation? - Can you demonstrate taking the first steps yourself? - Can you market it as being for special people only? - Turn the technology into its own reward - Can you package it in a way that emphasizes its - Relative advantage? Compatibility? Complexity (or lack of)? Trial ability? Visibility?

Develop a Technology Transfer Project Plan -Secure the organizational commitment -Develop the infrastructure -Deploy the technology -Support the deployment Defusing the Technology Trap - Plan for the initial drop in productivity - Be aware of the demands placed on you by the new technology - Avoid the Fad-of-the-year Syndrome - Validate the new technology on a pilot Project Follow the Technology Transfer Project Plan
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- Follow the established plan, but be willing to make adjustments - As you learn more about the technology and its impact - As the organizational goals change - As surprises and delays are encountered - For the duration of the Tech Transfer project - Be honest in interpreting your observations - Be honest in reporting the status, including surprises and delays - Communicate during the entire Tech Transfer project - The benefits and costs of the technology - The impact of the technology on those concerned - The current status of the project and the current plan for the project - Listen to the experts, but also listen to those affected by the Technology Institutionalize the Technology - Once the Technology Transfer Project is finished, dont allow the effort to be undone - Continue to advertise the benefits of the technology - Show how previous problems have been reduced - Keep the incentive system in place

From technology transfer to technological learning capabilities

The initial emphasis in the analysis of international technology transfer, in discussions among policy analysts up to the late 1970s, was on the costs of technology transfer, and on whether the choice of technologies was appropriate to the local conditions in developing countries. Little attention was given in this analysis to the absorptive capacities and domestic technological learning of those who acquired foreign technologies in other words, to the processes involved in assimilating imported technologies and putting them to work efficiently. The underlying assumption seemed to be that once a technology was acquired, its absorption and implementation took place almost effortlessly. However it is now widely accepted that this is not the case. The acquisition and absorption of foreign technologies, and their further development, are each complex processes that demand significant efforts from the acquirers. Several factors contribute to this complexity. First, the acquisition and mastery of technology are both costly and time-consuming. Second, acquired technologies often need to be adapted to local conditions. Thirdly, technologies are not commodities that can be transferred as a complete ready-to-use set; they also contain tacit components that are not easily codified and transmitted in written documents, and require extensive learning efforts to be properly understood.

Countries frequently rely on successful assimilation of foreign technology to achieve indigenous technological development. For example, in the initial phases
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[TECHNOLOGY TRANSFER] of development, much of the R & undertaken in Japan was absorptive, aimed at integrating foreign technologies (Blumenthal (1976)). More recently, countries such as Mexico, Brazil, India, and China view foreign direct investment (FDI) by firms from technologically advanced countries as a vehicle of technology transferD .

Two levels of technology transfer occur one state of the art and second poor or lower quality technology transfers. A common fear of many such developing countries is that local affiliates of foreign firms may not transfer the latest technologies from their parent firms. Empirical evidence indicates that such fears are not unfounded; multinational firms generally transfer technologies that, despite being more advanced than indigenous technologies, still lag behind the state-of-the-art (Mansfield and Romeo(1980)). What determines how much FDI from industrialized countries to developing countries transfers state-of-the-art technologies? Multinationals often transfer older technologies to safeguard themselves against future competition. Strategic considerations play a role in determining the quality of technology transferred by multinationals The limited absorptive capacity of such countries must act as a constraint on the ability of foreign firms to transfer state-of-the-art technologies The costs of technology transfer are substantial and decline with the age of the technology being transferred provides more recent evidence.

In countries that lag significantly behind the technology frontier, difficulties inherent in transferring state-of-the-art technology likely outweigh strategic considerations. Countries that are too backward to host frontier technologies are plausibly also too backward to provide much threat of real competition. Technology transferred to Less Developed countries(LDC) through FDI from developed Countries(DC) lags behind the state-of-the- art in a setting where innovation and imitation respond to profit incentives and FDI from the advanced countries to the lagging countries occurs only slightly ahead of the Less developed countries(LDC) technology frontier. This limitation on FDI makes the quality of technology transferred through FDI for each product react to the size of the technology gap between the North and the South for that product. Local R&D in the LDC imitation, by shrinking the technology gap, permits FDI to transfer more advanced technologies while local R&D in the DC innovation, by expanding the technology gap, limits FDI to transferring more primitive technologies relative to the stateof-the-art.

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[TECHNOLOGY TRANSFER] What policies can the government of a potential host LDC implement to attract FDI from DCs that transfers state-of-the-art technologies? Government can encourage domestic Research and Development activities. This can be achieved by levying taxes on low quality production of MNC or subsidy on imitation. Some of the more developed countries among LDC can imitate the state of the art technology without knowledge spill overs, but Least developed countries cannot imitate state of the art technologies even with technology spill overs. Multinational production occurs in a range of quality levels with an average quality level between pure DC production and pure LDC production. Companies in developed countries are at disadvantage in LDC due to alien environment. This can be linked to Cost disadvantage of multinationals to the difference between the technology to be transferred and the present technological ability of the host country. In situations where the LDC technology frontier is far behind the potential technology to be transferred through FDI, DC firms find shifting their production to the LDC prohibitively expensive due to the magnitude of the technology gap. However, as the technology gap shrinks, multinational production using state-of-the-art technology in the LDC becomes attractive as production costs fall due to the lessened expenses from bridging the technology gap. In this manner, imitation investments by LDC firms promote technology transfer by providing the technological base needed to attract FDI. Mere access to foreign technology would not improve growth in LDC if the countries absorptive power does not increase. Investment by the local companies in LDC to improve technology makes it easier for MNCs to transfer state of the art technology to the LDC. This increased understanding of the process of technological development has contributed to shifting attention of academics and policy researchers from the narrow transfer of technology as such to the technological learning efforts and mastery of acquirers. The policy dimension and regulatory frameworks For some, the process of technology transfer is one that can be left primarily to the operation of the free market. But experience has shown that the process is also sensitive to market failures, such as imbalances in bargaining power and information between sources and acquirers of technologies. Trends in the regulations introduced to encourage trade liberalisation also have implications for access by developing countries to foreign technologies. As a result, technology transfer is often the object of policy interventions at the international level, as well as in both developing and developed countries, each trying to tackle these issues from different, and sometimes conflicting, angles.
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[TECHNOLOGY TRANSFER] At the international level, technology transfer is becoming increasingly drawn into political negotiations between developed and developing countries, particularly those involving international agreements on trade and environment-related issues. Provisions on technology transfer, for example, form an important part in several multilateral agreements, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO) and the United Nations Framework Convention on Climate Change (UNFCCC), as well as in regional and bilateral agreements. Policies adopted by developed countries for stimulating the transfer of technologies to developing countries are also becoming increasingly relevant. This is because international policies on trade and environment issues often require such countries to create incentives for the transfer of technologies to developing countries. In this context, according to UNCTAD, 41 agencies and programmes in 23 developed countries offer incentives that directly or indirectly facilitate technology transfer to developing countries. These measures include financing support, training, matching services, partnerships, alliances and support for equipment purchase or licensing. However there is an ongoing discussion about the effectiveness of existing measures. Some analysts, for example, point out that incentives are selective and have limited coverage, and that few such programmes are centrally concerned with technology transfers. With regard to the policies of developing countries themselves, it is widely accepted that their purpose should be to maximise the gains from technology transfer while limiting its shortcomings. But the new international policies on trade such as those adopted by the WTO appear to be ambivalent in this respect. Some aspects of the WTO regime, such as the Trade Related Investment Measures (TRIMS), can constrain the ability of acquiring countries governments to act by excluding the use of certain interventions. However the WTO regime does not rule out all types of interventions. In particular, measures to support training, human resources development and research and development are permitted. For developing countries, therefore, a key question is how to exploit the scope left for pro-active policies that can create the conditions under which technology transfer can be most beneficial. This is particularly relevant in a context of global trade liberalisation, and of the new international rules that govern this process.

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[TECHNOLOGY TRANSFER] Policy for foreign technology agreements in India: RBI accords automatic approval to all industries for foreign technology collaboration agreements subject to

The lump sum payments not exceeding US $ 2 million. Royalty payable being limited to 5 per cent for domestic sales and 8 percent for export, subjected to a total payment of 8 per cent on sales over 10 year period.

Payment of royalty up to 2 per cent for export and 1 per cent for domestic sales is allowed under automatic route on use of trademark and brand name of the foreign collaborator without technology transfer. In case of technology transfer, payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborators. Payment of royalty up to 8 per cent for export and 5 percent on domestic sales by wholly owned subsidiaries (WOS) to offshore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments All other proposals for foreign technology agreements not meeting the parameters for automatic approval are considered on merit by the Project Approval Board (PAB).This is chaired by the secretary, department of Industrial Policy and promotion, Ministry of Commerce and Industry.

Procedure for approvals - Technology transfers by SIA All others proposals of foreign technology agreement, not meeting the any or all of the parameters for automatic approval, are considered for approval, on merits, by the Government. Applications in respect of such proposals should be made submitted in form FC/IL (SIA) to the secretariat for Industrial Assistance, Department of Industrial Policy Promotion, Ministry of Industry, Udyog Bhawan, New Delhi. No Fees is payable. Approvals are normally available within 4 weeks of filing the application.

Scope for foreign collaboration Government of India issues from time to time lists of Industries where foreign investment may be permitted. The list so issued is illustrative only. No doubt, a broad technology base has been created in the country, yet a need to update the production technology may arise due to constant technological advancements in developed countries .Government of India (foreign investment Promotion Board) may consider import of technology

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Nuclear Technology Transfer in India :

It is a well-established but often overlooked fact that the Manhattan Project took the shortest time to build a nuclear bomb of any nuclear weapons program. Despite the dissemination of nuclear knowledge and technological advances over the past sixty years, every other nuclear weapons program has taken at least twice as long. There could be a number of reasons for this anomaly; for example, the scientists at Los Alamos were some of the most brilliant the world has ever seen, and the United States invested incredible human and economic resources in the program. But these explanations do not tell the whole story. The Soviet programwhich also included brilliant scientists and even had access to an American designtook six years to the Manhattan Projects three. Another important factor that may help explain the difficulties experienced in so many nuclear programs is the high requirement for tacit knowledge in nuclear technology. MacKenzie and Spinardi (1995) define tacit knowledge as knowledge that has not been . . . formulated explicitly, and, therefore, cannot effectively be stored or transferred entirely by impersonal means. Nuclear devices in particular demand a high degree of tacit knowledge. Both the relatively simple gun-type uranium bomb and the implosion-type plutonium bomb require tacit knowledge of (among other things) gun or explosive design and refining uranium or casting plutonium

1954 1965 : bhaba and the search for assistance from abroad : During the period between 1954 and 1965, India seriously began developing its nuclear program. It received generous foreign assistance, mostly in the form of nuclear reactors, from Britain, Canada, and the United States. Despite the technology transfers, however, India developed remarkably little indigenous nuclear capability during this period.

1965 - 1974: towards a peaceful nuclear explosive : From 1965 to 1974, India actively pursued a nuclear explosive. Foreign nuclear assistance continued to follow to India during this period, but Indias indigenous nuclear capacity was still constrained by its technology imports.

1974 1988 : An indigenous nuclear program : After 1974, most of Indias nuclear technology imports ceased abruptly. The cessation of foreign assistance was a disaster for the Indian nuclear establishment, which was incapable
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[TECHNOLOGY TRANSFER] of operating or maintaining the technology it had imported. India had to build indigenously all the tacit knowledge it had bypassed via importation. Though it took over a decade, India succeeded admirably, achieving the most advanced nuclear capabilities of any developing nation.

The history of Indias nuclear programs demonstrates the difficulties involved in transferring nuclear technology. During the first ten years that India pursued nuclear technology, it benefited from foreign-built and designed reactors and reprocessing facilities. But the importation of this technology meant that India did not build an indigenous nuclear establishment capable of maintaining or replicating its existing facilities. India continued to receive technology transfers as it pursued a nuclear explosive. However, it still had to make key breakthroughs without help. After India tested a nuclear explosive, most of its foreign assistance evaporated. Over the next seven years, Indias nuclear program suffered dramatically. Decades of technological transfers had failed to produce an indigenous capability. Indian scientists and engineers had difficulty maintaining and expanding their nuclear infrastructure. Beginning in the early 1980s, India had started to develop an indigenous nuclear capability, as evidenced by the progress it made developing the MAPS and NAPS reactors. It was also during this period that India built a nuclear weapon, indicating that foreign assistance was not necessary for India to develop the technology indigenously. The lessons from Indias experience suggest that importing advanced nuclear technology does little to improve a nations long-term nuclear capabilities. This finding implies that illicit nuclear technology networks may be less effective in helping states improve their nuclear programs than previously thought. Unfortunately, the evidence suggests that importing nuclear technology retards a nations indigenous nuclear capability over a long period. In the short-term, a country might bypass entirely some of the tacit knowledge required to build a nuclear device. For instance, by importing weapons grade fissile material, a nuclear weapons aspirant could potentially skip all of the tacit knowledge required to produce highly enriched uranium or plutonium. A crash program to build a nuclear weapon as quickly as possible is a prime example. If the goal were speed and not long-term sustainability of the nuclear program, importing advanced nuclear technology would be very useful. A number of factors might explain the variances in Indias indigenous nuclear capability. The level of resources devoted to the nuclear programs certainly had an impact, and therefore politicians decisions had some influence as well. But these alternatives have little power to explain the general trend that Indias indigenous nuclear capability developed only once technology transfers to India had stopped. The importance of tacit knowledge provides a clear explanation. During the period 1954 to 1974, India built its infrastructure using imported technology. As a result, Indias scientists and engineers failed to develop the tacit knowledge required to build or maintain that technology. When Indias benefactors
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[TECHNOLOGY TRANSFER] withdrew their support following the PNE, the nuclear establishment suffered while it sought to learn the tacit knowledge it had bypassed. As India developed this tacit knowledge, its indigenous capabilities steadily improved. It was able to construct more and more complex reactors, and eventually a nuclear weapon. In Indias case, nuclear technological assistance impeded the development of an indigenous nuclear capability

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References
Blomstrom, M., Kokko, A., 1995. Multinational corporations and spillovers : A review of the evidence. Mimeo. Blumenthal, T., 1976. Japans technological strategy. J. Dev. Econ. 3, 245255. Glass, A.J., 1997. Product cycles and market penetration. Int. Econ. Rev. 38, 865891. Glass, A.J., Saggi, K., 1995. Foreign direct investment and the nature of R&D, OSU w.p. 95 07, ISER d.p. 420, SMU w.p. 9515. Glass, A. J., & Saggi, K. (1996). International technology transfer and the technology gap. Elsevier : Journal of development economics, 55, 369-398. Retrieved from http://econweb.tamu.edu/aglass/GAPJDE.pdf Grossman, G.M., Helpman, E., 1991. Quality ladders and product cycles. Q. J. Econ. 106, 557586. Keller, W., 1996. Absorptive capacity: Understanding the creation and acquisition of technology in development. J. Dev. Econ. 49, 199227. Kokko, A., 1994. Technology, market characteristics, and spillovers. J. Dev. Econ. 43, 279 293 Kumar, N., 1994. Multinational Enterprises and Industrial Organization: The Case of India. Sage Publications, New Delhi. Mansfield, E., Romeo, A., 1980. Technology transfer to overseas subsidiaries by U.S.-based firms. Q. J. Econ. 95, 737750. Stokey, N.L., 1991. The volume and composition of trade between rich and poor countries. Rev. Econ. Studies 58, 6380. Teece, D.J., 1976. The multinational corporation and resource cost of international technology transfer. Ballinger, Cambridge, Massachusetts.

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