CHAPTER THREE

International Technology
Transfer and Multinational
Enterprises.
Introduction
Technology is a Systematic knowledge (conceptual,
empirical, “Scientific”) embodied into tools, to simplify
or perform human tasks.
Technology transfer is the process by which existing
knowledge, skill, facilities or capabilities are utilized and
marketed to fulfill public and private needs.
Commercialization of technology
The process of taking an invention from idea to business
concept and then to market and well accepted by society for
solving their problems and when it can adopt to the
environmental condition is called technology
commercialized.

Process of making the new technology for public use through

different business strategies commercialization.
 Levels Of Technology Transfer
Operational Level: Processes form of technology
which involves manufacturing process, quality
controls and maintenance.
Adaptive Level or imitative : Imported technologies
are adapted and advanced skills for more complex
engineering methods are learned.
Innovative Level: it is based on formal research and
development that is useful in constant improvement
in technology and to generate new technologies
Duplicative level: At this level investment capacity is
expanded in order to import technology and integrate
the foreign technology with existing ones
 Techniques of Technology Transfer
Foreign Direct Investment: Through this
technique organization transfer its technology to
target nation through its subsidiary

Licensing: License is provided for the use of

technology to the user under which only a license
holder can use the technology
Cont..
Franchising: It is quite similar to licensing
where organization set up there franchises and
transfer their technology to the franchisee.

Management Contracts: Here technology is

transferred under certain terms and conditions or
by establishing projects for host and training there
personnel to operate it and transfer the control to
hosts
Cont..
Contract Manufacturing: It refers to transfer
of technology to the user and get the product
manufactured from user themselves
Joint Venture: Technology is transferred to
joint venture partner and technology is provided
to host nation through a partner from host nation.
Problems in Technology Transfer:
 Costly: Investment in technology higher than the level of
attained profits. Cast paid for royalty and interest is higher than
that of inflow.

 Inappropriateness: Technology in many cases is not suitable

with the socio economic priorities and conditions
 Affect social culture : when on technology were randomly
accepted without considering and researching the contents of
technology regard on social culture. Appropriate Technology:
Appropriate technology is the appropriate selection of a device or
solution to a problem based on the individual needs of an area, or a
population; which generally utilizes simple and user friendly products
and or systems.
Technology transfer for business development
Technology transfer used in the business development
through:
Cost: Technology can cut costs in many ways: reducing
material, labor or distribution costs.
Speed of delivery: The key competitive priority may be the
speed of delivery, as measured by lead time required to
deliver a product.
Cont..
Quality: Technologies help to improve the quality
and reduce the production costs.

Flexibility and customization: The global market place

is characterized by short product lifecycles, increased
product variety, and extensive customization.
To retain and increase market share in such competitive
environment, firms have to be more flexible in their
operations.
 Technology Absorption
Technology Absorption refers to the acquisition,
development, assimilation & utilization of
technological knowledge and capability by a firm or
some macro entity from an external source.
1. Technology absorbed without changing parameters
of acquired technology is called Technology Adoption.
2.Technology absorbed by changing certain parameters
of acquired technology is called Technology
Adaptation.
Organizations take following steps to manage
technology absorption:-
• Developing good understanding and mutual trust between
technology transferor and technology recipient organizations
• Proper, clearcut and well-defined agreement between technology
transferor and technology recipient organizations
• Developing time-bound and target-oriented schedule for technology
absorption

• Top management support to the technology absportion

• Use of multifunctional teamsby the technology acquiring
organization
• Regular review of the absorption progress by the highest level.
• Installation of effective communication system by the technology
acquiring organization
Multinational Enterprises/Corporations:
Multinational corporation is an enterprise which
own or control production or service facilities
outside the countries in which they are based. Or
Multinational corporations are companies that
manufacture and market the products or services
in several countries.
Features of MNCs:
 Single managerial control:
 Global perspective:
 Integrated worldwide business systems
 Offers new markets for products or services
Role of MNCs for Developing Countries:
 The growth and efficiency of developing countries have opened
their doors to the MNCs.
a. Capital: it is, the means of production is the basic need for
developing countries. It allows for improvement in the
structure of the economic system. Through foreign Direct
Investment (FDI), MNCs are able to diffuse the much needed
resource into developing countries.
b. Transfers of Technology: it is also brought in to the country
with MNCs; the movement of technology to produce goods
as well as for communication purposes. This is not only
important for production and distribution by the foreign
firms, but also for the development of similar, local
companies.
c. Increases level of integration with different countries
Cont..
d. Modern work practices are introduces
e. Improved infrastructure
f. Better access to world-wide market
g. Better access to capital investment
h. Local suppliers development
i. Gaining new products or services
Demerits of MNCs
a. Drain of resources for profit maximization
b. Insignificant in employment potential
c. Influence in culture
 Classification of Innovation outputs
1. Incremental innovation :- occurs when small
improvements are made to a product, or the
processes used in manufacturing product.
Strengthens the firms competitive position and
entrenches the nature of the industry.
cont.…
2. Radical innovation :-occurs when major
improvements are made to a product.
 These changes often make the competencies
involved in the old technologies obsolete
 sometimes require new marketing channels to
be developed
Cont..

3 Transformational innovation:- occurs when the

innovation is of such a fundamental nature that it
enables the development of many other innovations
Destroys whole industries and changes the nature
of society
Cont.…
4. Induced Innovations: -Innovations respond to need
and economic conditions. Investors, and researchers
put effort into solving burning problems, and that leads
to innovations.
– Labor shortages led to mechanized equipment.
– Drought conditions led to improved irrigation.
– Energy crises led to higher efficiency cars.
– Environmental regulations trigger cleaner
technologies
-A tax on carbon will lead to improved stoves and
power plants.
 The process of innovations can also be classified as
Market-pull and Technology-push innovation:

1. Market-pull innovations: advancement of

technology oriented primarily toward a specific market
need
a) Occur when customers are
technologicallysophisticated
b) Occur more frequently with older technologies
c) Tend to be incremental innovations
Cont.…
2. Technology-push innovations:-
advancement of technology oriented primarily
toward increased technical performance
a) Require that the firm‘s scientists, engineers,
and inventors have direct experience with users
b) Occur more frequently with new and
emergingtechnologies
c) Tend to be the major source of
breakthroughinnovations
Market-pull and Technology-push
innovation processes
 The Concept of Intellectual Property
 Property means some material object belonging to a particular
person. The concept of ownership is critical to the concept of
property.

 Ownership means the right to possess, use and dispose of the

property and at the desire of the owner, to exclude the others.

 Generally speaking, intellectual property law aims at safeguarding

creators and other producers of intellectual goods and services by
granting them certain time-limited rights to control the use made of
those productions
Cont..
Protection of Intellectual Property: The Process by which
the private value of the creative outputs of research are
protected.
Countries have laws to protect intellectual property for
two main reasons.
One is to give statutory expression to the moral, economic
rights of creators in their creations and the rights of the
public in access to those creations.
Second is to promote, as a deliberate act of Government
policy on creativity and the dissemination and application of
its results to encourage fair trading which would contribute
to economic and social development.
 Types of Intellectual Properties
..
Industrial property:-Consists of rights relating to
inventions, trademarks, industrial designs and
appellation of origin.
Copyright:- protects rights related to creation of
human mind in the fields of literature, music, art
and audio-visual works.
The copyright is indicated with the symbol ©
 1 Patents
The aim of the patent system is to encourage
economic and technological development by
rewarding intellectual creativity.
 2 Trademarks and service marks
Trademarks and service marks are distinctive
symbols that help the consumer to distinguish
between competing goods or services and are a
major part of the goodwill a company enjoys in the
trade.

A trade name is the name of an enterprise, which

also individualizes the enterprise in the minds of the
customers.
Cont..
• A trademark is indicated with the written word
“trademark” or the symbol TM.
Any confidential business information which provides an
enterprise a competitive edge may be considered a trade
secret. For example, Coca-Cola formula
 3 Industrial design
An industrial design is the ornamental or
aesthetic aspect of an article it may consist of
three-dimensional features such as shape or
surface, or of two dimensional features such as
patterns, lines or colour.

The design serves as a tool for product

differentiation and lures customers by enhanced
visual appeal.
 4 Layout design (topography)
Layout design (topography) of integrated circuits is a
relatively new area in IP, which has appeared with
computer technology and has acquired importance as
the technology makes rapid advances.
The programming instructions on a computer chip are
implemented through a circuitry printed on
semiconductor materials.
Franchise agreement
Franchisees: A system in which semi-independent
business owners (franchisees) pay fees and royalties to a
parent company (franchiser) in return for the right to
 become identified with its trademark, to sell its products or
services, and often to use its business format and system.

The franchisee gets the right to use all of the elements of a fully
integrated business operation.

Benefits of Franchising
 Standardized quality of goods and services
 Proven products and business formats
 Centralized buying power
 Greater chance for success
 Site selection and territorial protection
 Drawbacks of Franchising
Strict adherence to standardized operations
Restrictions on purchasing- Approved suppliers
only
Limited product line
Contract terms and renewal
Unsatisfactory training programs
Market saturation
Less freedom
Happy prisoners