CHAPTER 9

TECHNOLOGY TRANSFER
By
Department of Management and Technology
Faculty of Technology Management and Business
University Tun Hussein Onn Malaysia
 Chapter Outline

• Definition and concepts

• Stages in technology transfer
• Success factors of technology transfer
• Types of technology transfer
• Barriers to technology transfer
• Technology transfer channels
• Benefits and drawbacks of transfer channels

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 Definition of Technology Transfer

• Technology transfer:
– A process that permits the flow of technology from a source to a receiver (Khalil, 2000).
– The source is the owner of the technology and the receiver is the beneficiary of the technology.
– A process by which science and technology are transferred from one individual or group to
another that incorporates this new knowledge into its way of doing things (Jain & Triandis, 1990).

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 Concepts of Technology Transfer

• Person-to-person interaction is the most important in a transfer process.

• Smaller firms have most to gain and least to lose in a technology transfer due to
their size and flexibility.
• Proper absorption can be achieved when the culture and goals of both source and
receiver are similar.

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 Concepts of Technology Transfer
• Technology transfer is a 2-way process, which can be explained by parallel transfer.
• Due to its importance, some firms are created mainly to manage technology transfer
processes.
• Operating globally means operating with partners.

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 Concepts of Technology Transfer

Parallel transfer is done mainly to:

• Train personnel who will utilize technology to assist recipient.
• Educate technologist who can extend knowledge and skills to utilize technology to solve
different problems.
• Exchange ideas on production methods and management technology to best utilize
particular technology.
• Empower and involve employees of both organization in new technology, product
development and innovation.

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 Stages in Technology Transfer Process

• The flow of conceptual knowledge must be parallel with the flow of the “hard”
technology in the transfer process.

• Basically technology transfer process can be described in two stages:

1. Relocation phase
2. Absorption phase

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 Relocation Phase

This phase involved:

1. Identification of a specific technology and a donor organization.
2. Negotiations between the parties involved.
3. Legal arrangements to accomplish the transfer.
4. Actual relocation of the “hard” technology to a foreign site.

Can be measured by:

– Fees & royalty payments for imported/exported technology.
– Figures for direct foreign investment.

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 Absorption Phase

• The stage is often lengthier.

• Has no specific breakdown.
• Usually subjectively measured.
• Begins after a technology arrives in foreign country.
• Completed when receiver masters the technology, which is the most
important aspect of the entire transfer process.

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Stages in Technology Transfer Process

• The relocation/absorption model is applicable to whatever channel

used.
• The most common channels are:
– Direct investment in wholly owned subsidiaries or joint enterprises;
– Licensing contracts;
– Turnkey projects; and
– The installation and servicing of purchased equipment.

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 Success Factors of Technology Transfer

• Top management recognizes the importance of technology transfer.

• Direct face-to-face contact.
• Capability to commercialize & to relate products to market needs.
• Manager’s broad skills & knowledge.
• Controlled diffusion of technology in product realization chain.

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 Japan’s Success Story
• In gaining competitive advantage from technology, one must not only acquire the
best technology in the world but also improve on it.

• Japanese companies are the best example of practicing successful and effective
technology transfer.

• Japan’s large corporations have a well-deserved reputation for aggressiveness in

gathering competitive technology information worldwide.

• In many industries, the Japanese are steadily changing from imitation to innovation.

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 Types of Technology Transfer*

1. International technology transfer – across national

boundaries.
2. Regional technology transfer – from one region to another.
3. Cross-industry or cross-sector technology transfer – from one
industrial sector to another.
4. Interfirm technology transfer – from one firm to another.
5. Intrafirm technology transfer – within a firm.

*read text: Khalil (2000) p. 343 - 344

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 Barriers to Effective Technology Transfer

• According to Steele (1989), there are 2 general types of barriers to

effective technology transfer:
1. Technical
2. Attitudinal

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 Technical Barriers

• It is impossible to transfer technology without “people transfer”.

• Organization must understand and assist in development of staff & foster
commitments by overcoming the “not invented here” syndrome.
• Difference in perceptions of R&D and production staff.

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 Attitudinal Barriers

• Significant difference in attitudes of personnel towards, for example, time.

• Knowledge vs. action oriented, differently perceived by researches and managers.
• These differences disturb communication of these two groups and reduces the
success of transfer.

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 Technology Transfer Channels

• A channel is the means of transferring the technology from source to recipient.

• These channels include:
1. General
2. Reverse-engineering
3. Planned – licensing, franchise, joint venture, subcontracts, turnkey, FDI, consortia
& joint R&D.

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 1. General channel

• Done unintentionally and may proceed without the continued involvement of the
source.

• Information is made available in public domain with limited or no restrictions on its

use.

• Could also be in the form of informal understandings which

exists as long as either party finds a benefit.

• Examples: education, training, publications, conferences, study missions, and

exchange of visits.

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 2. Reverse-engineering Channel

• Occurs with no active contribution from the source (reverse-engineering and

emulation).

• Must be capable of breaking the code of technology and developing the capability
to duplicate it in some way.

• Quite beneficial, providing that the receiver knows how to do so and there are no
legal violation of intellectual or property rights.

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 3. Planned Channels
• Done intentionally, according to a planned process and with consent of the
technology owner.

• Can be in the form of:

1. Licensing
2. Franchise agreement
3. Joint venture
4. Consortia
5. Turnkey projects
6. Foreign Direct Investments
7. Subcontracts

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 Planned Channels – Licensing
• Receiver purchases right to utilize someone else’s technology, either by an outright
purchase or an initial lump-sum amount plus a percentage of sales.

• Source will lose the right to control various aspects of the product, such as pricing
and how the product is marketed, when produced or sold by the licensee.

• There is commonly an agreement between the parties, but the contract only
specifies what is to be sold and what the licensee is to receive for licensing the
product.

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 TUTTI FRUITTI (M) SDN BHD
• NAZA TUTTI FRUTTI (M) SDN BHD is a Master License Holder
for Tutti Frutti Frozen Yogurt in Malaysia, Singapore, Cambodia,
Brunei, Thailand, Middle East and African countries. It was
incorporated in October 2009 with first corporate outlet in
Sunway Pyramid

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 Planned Channels – Franchise agreement

• A form of licensing, however source provide some type of continual

support to receiver – direction on operation and sets standards.
• A contract between the company (franchisor) and the individual
who buys the business unit (franchisee) –
– Time period
– Geographical region to conduct business.
– Initial payment and continuing royalty to be paid.
• Sell a given product or conduct business under the company’s
trademark.

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 The case of Burger King

• Founded in 1954 by Miami entrepreneurs James McLamore and David Edgerton with a simple concept: to
attract the burgeoning numbers of postwar baby boom families with reasonably-priced, broiled burgers served
quickly.
• By 1959 McLamore and Edgerton were ready to expand beyond Florida, and franchising seemed to be the best
way to take their concept to a broader market. Franchising was booming in the late 1950s because it allowed
companies to expand with minimal investment.
• Like many other franchisers, McLamore and Edgerton attracted their investors by selling exclusive rights to large
territories throughout the country.
• McLamore and Edgerton took their initial payments (which varied with the territory) and their cut (as little as 1
percent of sales) and left their franchisees pretty much on their own.

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Planned Channels – Joint ventures
• 2 or more firms combine their equity and form a
new third entity.
• Level of equity can vary from very small amounts
to large multimillion dollar investments.
• It is common to have very detailed agreements
covering what each party is to provide, what each
can expect, and how each is to operate in the
joint venture.
• Share knowledge and resources to develop a
technology, produce a product or use their know-
how to complement one another.
• Also share the rewards of the venture.
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 Planned Channels – Joint ventures
Beijing Automotive Group
• In February 2013, Daimler acquired a 12% stake in Beijing Automotive
Industry Holding Co Ltd (BAIC), becoming the first western car
manufacturer to own a stake in a Chinese company.
• Daimler works with China's Beiqi Foton (a subsidiary of BAIC) to build
Auman trucks.
Denza
• In 2010 BYD Auto and Daimler AG created a new joint venture Shenzhen
BYD Daimler New Technology Co., Ltd. In 2012 a the new marque Denza
was launched by the joint venture to specialise in electric cars.
Fujian Benz
• In 2007 Daimler created a joint venture with Fujian Motors Group and China
Motor Corporation and created Fujian Benz (originally Fujian Daimler
Automotive Co.).
Renault-Nissan and Daimler Alliance
• On 7 April 2010 Renault-Nissan executives, Carlos Ghosn and Dr. Dieter
Zetsche announced a partnership between the three companies.The first fruits
of the alliance in 2012 included engine sharing (Infiniti Q50 utilising
Mercedes diesel engines) and a re-badged Renault Kangoo being sold as a
Mercedes-Benz Citan.
 Planned Channels – Consortia
• Characterized by several organizations joining together to share expertise and
funding for developing, gathering and distributing new knowledge.

• Due to the resources of one is inadequate to affect the direction of technological

change.

• Typically takes place between several countries or very large conglomerates.

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 The case of Web manufacturing

• Web refers to high technology manufacturing of extremely thin materials that are processes in a
continuous, flexible strip form.

• Web materials cover a broad range of plastics to paper, textiles, metals and composites.

• The Oklahama State University Web Handling Research Center is made of 15 industrial partners, 3
departments in OSU College of Engineering and several government agencies.

• The knowledge gained through the consortium has helped decrease the number of defects in web-
manufactured materials and has reduced losses for the industrial partners.

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 ABB consortium
• The Government of Malaysia announced on June 13, 1996, the Award to an
international consortium led by ABB, the international electrical engineering
company, to construct a 2,400-megawatt hydro-electric power generation plant and
transmission system at Bakun on the Balui River in Sarawak. The project is valued at
over US$ 5 billion, of which the major share would be carried out by ABB, and would
be the largest single project ever handled by ABB

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 ABB consortium
• ABB`s consortium partner for the civil works will be Companhia Brasileira de
Projetos e Obras (CBPO) of Brazil, a large civil engineering company belonging to the
Odebrecht Group, responsible for the construction of the dam and power house. In
addition, substantial work will be carried out by Malaysian companies and other
groups from Asia, Latin America and Europe. ABB has agreed to follow the Malaysian
Government policy of transferring and sharing technology.

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 Planned Channels – Turnkey Project
– A country buys a complete project from an outside source.
– The project is designed, implemented & delivered ready to operate.
– May have special provisions for training or continued operational support in the
agreement.
– Example:
– Arkitek Jururancang Malaysia-
AJM pioneered the concept of offering architecture and urban planning on a
corporate scale. Over the years, AJM has built up a proven track record in
architectural, town planning, urban design, landscaping and interior design
projects in Malaysia, Singapore, Philippines, Vietnam, China, Pakistan, Saudi
Arabia and other countries.
– Turnkey project : Hospital Sg. Buloh, KLIA, Uitm Medical faculty, Sg. Buloh.

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Planned Channels – Foreign Direct Investment (FDI)

– A corporation (multi-national company, MNC) decides to produce its products or

invest some of it resources overseas.
– The technology is transferred to another country but remained within the firm.
– Investors get: labor force, natural resources, technology, or markets.
– Hosts get: technological know-how, employment opportunities, workforce
training and investment capital.
– Both investor and host will gain tax advantages.

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 Planned Channels – Subcontracts
• Firms subcontract certain technical activities to other firms who specialize in those
activities due to difficulty in keeping up-to-date with innovations in the area.

• The firms that provide the outsourced activity are specialized firms with developed
technologies that allow them to be more efficient and effective.

• They are better at processing information about new laws and knowledge about
their specific areas than the firm that is contracting for their services.

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 Benefits and drawbacks of transfer channels
Advantages Disadvantages
Type of channel Duration
(Strategic Implication) (Transaction Costs)

Specifies contribution and

Strategic drift; Culture clash
Joint Ventures Long term obligations; New entity created
possible within new entity
to specifically carry out activity
Known technology; Long payoff
Franchise
Usually long term for already developed Contract and monitoring costs
Agreements
technology

Term mixed – payoff Expertise, standards, and share

Consortia Knowledge leakage
determines funding

Licensing Defined term of Contract costs and contract

Technology acquisition
Agreements agreement constraints

Cost and risk reduced – ideally Little control over quality issues
Exists as long as
Subcontracts allows world class firms in that – difficult to enforce even if in
contract in force
area to conduct the activity contract
Exists as long as
Informal Opens new opportunities to the Easily disbanded and not
either party finds a
Understandings parties enforceable
benefit

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THE END

Thank you.

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THE END.

Thank you.

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 CONTACT ME

+60-0127421076

hadilah@uthm.edu.my

Fb:

Department of Management and Technology,

Faculty of Technology Management and Business
Universiti Tun Hussein Onn Malaysia
THANK YOU
Universiti Tun Hussein Onn Malaysia (UTHM)
86400 Parit Raja, Batu Pahat
Johor, Malaysia

Tel: +607-453 7000

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