BARRIERS TO TECHNOLOGY TRANSFER IN JOINT VENTURE CONSTRUCTION: A STUDY IN NORTHERN REGION OF MALAYSIA

SALMAH OMAR RUSHANIM HASHIM UUM College of Business Universiti Utara Malaysia

ABSTRACT
The increasing demand for enhanced productivity, quality levels, value for money and client satisfaction are constrained by the growing complexity of large and multidisciplinary management teams, multi dimensional projects and multiple objectives. This situation leads to establish various barriers that retard such growth in construction industries. This research aims to report the findings of survey on barriers to technology transfer through joint venture construction in Northern Region of Malaysia. The objectives of the survey are to identify the possible barriers to technology transfer and to prioritize the barriers in the joint venture construction. Responses from 68 companies are analyzed and presented. Keywords: Barriers; technology transfer; joint venture; construction.

INTRODUCTION
The construction industry constitutes an important element of the Malaysian economy. Although it accounts for only 2.5 % of the gross domestic product (GDP) in 2007, the industry is critical to the national wealth creation as it acts as a catalyst for and has multiplier effects to the economy. Furthermore, it also enables the growth of other industries through its role as a fundamental building block of the nations socio-economic development. Educational institutions, government offices, tourist attractions, transportation infrastructures (airports, seaports, and roads), housing, commercial properties - all the essential element of a healthy, functioning economy, need to be built and maintained by the construction industry (CIDB, 2007). Joint venture appears to be the most widely preferred vehicles of construction technology transfer (Adnan & Morledge, 2003; Shrestha & Kumaraswamy, 2000; Ramanathan, 1995). Construction joint ventures in Malaysia are also becoming increasingly popular in multinational construction firm and local government in order to achieve their individual objectives. Furthermore joint venture is a special type of strategic alliance and it is an important component in gaining competitive advantage. Technology development and transfer can be either accelerated or slowed depending on market conditions, fiscal and regulatory policies, availability of finance, access to information, the legal and institutional framework, human resource capacities, and the condition of infrastructure (UNIDO,2002). Ofori (2006), in his study about future research agendas, emphasizes that efforts have been made to improve the performance of the construction industries in many developing

countries. These have taken many forms but studies shown that the industries continue to face problems including poor cost, time and quality performance; lack of work opportunities; poor level of professionalism and entrepreneurship; obsolescence of some statutes and codes; ineffectiveness of implementation of existing statutes and codes; and bureaucracy in formal procedures relating to project planning and administration. This study also proposes several issues highlighted as being of current relevance to the construction industries of developing countries including effective technology transfer, possible barriers, effective communication, utilization of information communication technology (ICT), culture of construction, strategic alliance, policy and financial. Studies need to be done accordingly for improving the performance of construction industry. The above discussion mentioned that technology transfer through joint venture has been advocated as a catalyst of the improvement required in many construction industries. However, it has been restricted by various barriers to the free transfer of technology. In this connection, this study is attempted to understand the current practices and the possible barriers of technology transfer in the Malaysian joint venture construction.

LITERATURE REVIEW
Joint ventures, a special type of strategic alliance, offer a unique opportunity to combine the distinctive competencies and the complementary resources of participating firms. It is a procedure used to respond to specific business phenomena such as access to new markets, specific government policy, business capacity, technology transfer or economies of scale. A joint venture is a separate legal organizational entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture (Adnan & Morledge, 2003; Ozorhon, Arditi, Dikmen & Birgonul, 2007). Construction technology may be transferred through joint ventures between foreign and local companies, which may either be project specific or of a longer-term in nature (Ofari, 1994). Furthermore, Shrestha and Kumaraswamy (2000) also argue that joint venture appears to be the most widely preferred vehicles of construction technology transfer. Ramanathan (1995) also highlights that joint ventures have the potential of being good mechanism for comprehensive technology transfer. Some features of joint venture highlighted in his study includes, form an alliance to leverage each others unique strengths and not to correct each others weakness, form an alliance around a market opportunity and not around narrow products, form an alliance around unique skills, capabilities, technology, and know-how, and license proprietary technology out liberally to grow the business ecosystem but maintain control over key kernels. Joint venture construction in Malaysia is becoming increasingly popular both in multinational construction firms and local government (Mohammed, 2000). There are already established partnering arrangements involving two or more indigenous contractors (local and local) and also between indigenous and foreign contractors (local and foreign) (Mohammed, 2000). An example of joint venture construction currently running is MMC Gamuda Joint Venture Sdn. Bhd, which was awarded a Malaysian government contract to build an electrified railway track between Ipoh - Padang Besar and Seremban - Johor Bahru.

The feasibility and the desirability of a joint venture must be assembled by careful analysis of the economic, political, social and cultural environment within which the venture will be implemented and managed. A planned approach necessitates a thorough and careful evaluation of these aspects by both partners to ensure successful implementation (Adnan, 2008). Technology does not stand alone, but encompasses political, social, economic, and cultural values that can serve as barriers (Irwin, 2000). Barriers restrict or constrain the success to technology transfer. Besides, the identification, analysis and prioritization of barriers are part of a firm-specific process for formulating particular actions and strategies that lead to overcome the identified barriers. The barriers to technology transfer exist for all innovations, but some transfers are more affected by the barriers than others (Johnson, Gatz and Hicks, 1997). Irwin (2000) also mentions that barriers may be caused by the provider, the intended receiver, or both. From various literatures, there are eight common barriers to technology transfer in joint venture as in the Table 1 below: Table 1: Barriers of Technology Transfer through Joint Venture Barriers Description Sources 1. Lack of Lack of open communication, Li, Cheng, Love & Irani Communication/ lack of information sharing, (2001); Adnan & Morledge information lack of access to information, (2003); IPCC (2000);Ali, lack of technical data or Mohd-Don, Alias, standard, lack of continuous Kamaruzzaman & Pitt interaction and lack of (2010). information communication technology (ICT). 2. Lack of financial Lack of financial resources, Adnan & Morledge (2003); high level of debt, IPCC (2000); UN DESA incompatible prices, subsidise, (2008); Kumaraswamy, tariffs, taxes and insurance, Egmond & Rahman(2002). lack of access to credit, uncertain inflation or interest rate, excessive banking regulation. 3. Lack of Lack of clear agreement among Adnan & Morledge (2003); Agreement/contract parties, lack of clear policies, IPCC (2000); UN DESA terms lack of clear procedures, high (2008); Kumaraswamy, contract risks and corruption. Egmond & Rahman(2002);Ramanatahan (1995);Sridharan (1994). 4. Lack of psychology Lack of understanding between Adnan (2008); Adnan and management partners, lack of trust, lack of Morledge (2003) commitment, lack of coordination, lack of control, lack of cooperation. 5. Social and cultural Differences in social practice, Lin & Berg (2001); Ofori differences beliefs and norms, (2006) national/ethnic, status and social bonds and languages. 6. Lack of Including inflexible cities and Surry (2002); Rogers (1995);

Infrastructural

7.

8.

other settlement design, lack of technological infrastructure, infrastructure obsolescence, insufficient R&D. Lack of It includes inconsistency in political/legal policies, changes in laws and regulations, restriction on fund repatriations and import restriction. Lack of human Lack of expertise, lack of resources/capabilities trained personnel, lack of capable workers, lack in individual attitude (reluctance).

Stockdill & Morehouse (1992); IPCC (2000).

Irwin(2000); Ozorhon,Arditi, Dikmen & Birgonul (2007); IPCC (2000); Surry (2002); IPCC (2000); Kumaraswamy, Egmond & Rahman(2002); Ramanathan (1995)

METHODOLOGY
The Survey A cross-sectional survey methodology is employed for this study. The populations of this study consist of construction companies in Northern Region of Malaysia which experienced joint venture construction at least once in their employment. This study only focused on the G7 contractors which considered actively involved in the mega construction projects (able to tender projects worth more than ten million). The sampling frame was compiled from the directory of Construction Industry Development Board (CIDB, 2006). Since the aggregations of data in subsequent analysis are done at the company level, the unit of analysis for this study is the contractors organization. Therefore, the companys project manager or his assigned representative as a respondent would represents each company. The questionnaire is used to gather the information regarding this study. The number of items or statements is carefully formulated using a five-point Likert scale. Likert scales are used to measure a wide variety of latent constructs, particularly in social science research. In part two, the scales ranged from strongly disagree (1) to strongly agree (5). Respondents are asked to indicate their agreement or disagreement with the statements regarding the barriers faced by their joint venture construction projects. A total of 205 sets of questionnaires are sent to the selected respondents. Out of the number, only 77 questionnaires are returned, resulting in a response rate of 37 percent. However, only 68 respondents (88%) from the returned surveys confirmed their involvement in joint venture construction project. The response rate of 37 percent is quite reasonable compared to other surveys of construction industry, for example 18 percent of 200 samples in Shrestha & Kumaraswamy (2000), 32 percent of 400 samples in Larson (1997) and 35 percent of 350 in Mui et al. (2002). Validity and Reliability Pilot study has been performed to validate the questionnaire (content validity) by an academician and practitioners from two different companies. The reviewers are asked to

critique the content, structure and the length of the survey. This concept is similar to Delphi Technique. A classical measure of reliability, Cronbachs Alpha is used to examine internal consistency and reliability of the items within each scale. Cronbachs Alpha is a reliability coefficient that reflects how well the items as a set are correlated to one another. Cronbachs Alpha is computed in terms of the average inter-correlation among the items measuring the concept. The closer value of Cronbachs Alpha to 1, shows the higher of internal consistency reliability (Sekaran, 2006). The results of the reliability test are shown in Table 2 below. Table 2: Result of Reliability Test Variables

Number of items 6 7 5 6 4 4 4 5

Alpha

B1. Lack of communication / information B2. Lack of financial B3. Lack of policy/ legal B4. Lack of psychology management B5. Social and cultural differences B6. Lack of Infrastructural B7. Lack of political B8. Lack of human resources/capability

0.68 0.73 0.70 0.66 0.65 0.61 0.60 0.73

The results shown in Table 2 indicate that all of the Cronbachs alpha value range from 0.60 to 0.73, which is suggested as being adequate for testing the reliability of factors (Sekaran, 2006).

STUDY RESULTS
Respondent Profile This section discussed the characteristics of surveyed companies or respondents such as specialization area, position at work, and their involvement in joint venture construction projects. All those characteristics were summarized in the following table. Table 3: Respondent Characteristics Item Frequency Percentage

Characteristics

Specialization area

Civil Engineering Construction Building Construction Housing Developer Mechanical & Electrical Others

30 9 14 12 3

44.1 13.2 20.6 17.6 4.4

Position/Designation Project Manager Senior Project Manager

39 8

57.4 11.8

Project Executive Project Engineer Others Numbers of Involvement in JV 1 5 projects 6 10 projects Above than 10

11 6 4 59 9 0

16.2 8.8 5.9 86.8 13.2 0

Referring to Table 3, most of the companies specialized in civil construction (44.1%), followed by housing developer (20.6%), then mechanical and electrical (17.6%), building construction (13.2%) and the rest is other nature of business (3%). Although the surveys are addressed to Project Manager, the responses come from a variety of positions. However, most of the respondents are project manager (57.4%), project executive (16.2%), senior project manager (11.8 %), project engineer (8.8%) and other positions (5.9%). The last question in this part of the questionnaire is purposely to confirm that they involved in joint venture construction at least once in their employment. From the result, most of the respondents have declared joint venture involvement in one to five projects (86.8%) and the rest (13.2%), involve in six to ten projects. None of them involve in more than ten projects. Barriers to Technology Transfer in Joint Venture Construction The respondents are asked to rate their degree of agreement on the listed possible barriers and the descriptive result from the analysis shown in the table below. Table 4: Barriers Perceived Barriers to Technology Transfer through Joint Venture Mean Standard deviation 0.23 0.30 0.28 0.30 0.28 0.36 0.27 0.39 Rank

B1. Lack of communication / information B2. Lack of financial B3. Lack of policy/ legal B4. Lack of psychology management B5. Social and cultural differences B6. Lack of Infrastructural B7. Lack of political B8. Lack of human resources/capability

4.02 3.98 4.01 4.10 4.05 4.06 3.95 4.14

5 7 6 2 4 3 8 1

Analysis of the results presented in Table 4 above, indicate that the responding companies agree that lack of human resource or capability is the most influencing barriers towards joint venture performance. The mean for this variable is the highest (4.14), and the value which is more than 4.00 indicates that the degree of agreement is high. It is followed by the lack of psychological management variables (4.10), lack of infrastructural (4.06), social and cultural

differences (4.05), lack of communication or information (4.02), lack of policy or legal (4.01), lack of financial (3.98) and lack of political (3.95). Table 5 result shows the ranking of priority based on means for the degree of agreement for barriers to technology transfer that commonly faced by the joint venture construction companies. The result indicates that, the lack of human resource or capability is the most influencing barriers towards joint venture performance. This finding reconfirms the statement that humanware or people are the crucial element in technology transfer. The lack of human resource such as incapable workers, inexpert and untrained personnel will lead to decrease the performance of joint venture technology transfer (Surry, 2002; IPCC, 2000; Kumaraswamy, Egmond & Rahman, 2002; Ramanathan, 1995). Second rank criterion is the lack of psychological management, which includes the element of lack of understanding between partners, lack of trust, lack of commitment, lack of coordination, lack of control, and lack of cooperation. This result supports the idea that psychological aspects such as trust between partners in a joint venture have been identified as an important element of a long-term joint venture relationship (Parkhe, 1993; Inkpen 2001; Madhok, 1995). The third ranking is lack of infrastructural; the lack of infrastructure often acts as a constraint on changes in technology and behavior. Lack of investment in research and development, lack of minimal technological infrastructure, inflexible city design, and obsolescence of infrastructure are also believed can constrained success in technology transfer (Surry, 2002; Rogers, 1995; Stockdill & Morehouse, 1992). The fourth ranking is social and cultural differences. This result supports the argument that culture is also one of the most powerful factors affecting the success of technology transfer. Tradition, religion, historical habits, and personal aspirations for a new life were important factors facing technology digestion and absorption (Al-Ghailani & Moor, 1995). Lack of communication or information is another important barriers and is ranked 5th. The ease of communication between the partners is one of the potential problems which should be considered when evaluating a potential partners suitability (Li, Cheng, Love & Irani, 2001; Adnan & Morledge, 2003). Next ranking is lack of policy or legal, it is in line with Irwin (2000) and Ozorhon, Arditi, Dikmen and Birgonul (2007) that argued the political stability have a great impact on smooth transfer of technology. Rank seven is the lack of financial. It is essential to be sure that a prospective partner can generate sufficient financial resources to maintain the ventures efforts (Adnan & Morledge, 2003; IPCC, 2000; Kumaraswamy, Egmond & Rahman, 2002). However the analysis carried out by IPCC (2000) showed that the lack of financial is ranked first place. The lowest ranking criterion of the eight barriers is the lack of political which contradicts the view of Ozorhon, Arditi, Dikmen and Birgonul (2007) who point out that political stability has a great impact on a smooth transfer of technology and imposed for political and ideological reasons rather than economic reasons.

CONCLUSION AND RECOMMENDATION

Indeed, the aim of this study is to resolve the gaps that existed in the related literature. This study contributes to the growing number of empirical research studies on barriers to technology transfer. The result of this study can be concluded that among the eight barriers indentified, the lack of human resources or capabilities is the most barriers that will hinder the transfer of technology. It is followed by the lack of psychology management, lack of infrastructural, social and cultural differences, lack of communication or information, lack of policy or legal, lack of financial and lack of political. From the perspective of the construction firms, these findings would assist in developing a course of action for implementing a technology transfer through joint venture strategy that can potentially assist the firm in enhancing their performance. For the purpose of future research, several research projects can be undertaken to refine and widen the scope of the current research. Future research should include other barriers that would account for the unexplained variance in the joint venture performance, which not included in this study.

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