Technology Transfer Foreign Direct Investments and Global Value Chains - Assignment Example

Technology Transfer Foreign Direct Investments and Global Value Chains Name: Course: Institution: Date: Technology Transfer Foreign Direct Investments and Global Value Chains a. Explain what you understand by technology transfer: Elaborate on what criteria might be used to establish whether technology transfer has taken place? Technology transfer is a process that involves the movement of technology from an entity to another. The process of technology transfer can be deemed successful when the transferee, the receiving entity, is able to engage in effective use of technology transfer and ensure its eventual assimilation (Ramanathan 2007). The process of moving technology involves technological knowledge, physical assets and know-how. In some situations, technology transfer may be confined to the relocation and exchange of personnel of moving of specific set of capabilities. Technology transfer has been used in referring to movement of technology from laboratory to industry, developed to developing countries or from one application to another domain. From a restrictive perspective, technology transfer is perceived as movement of information and the application of information into use (Ramanathan 2007). There are economists who have analysed technology transfer based on the properties of generic knowledge, which focus on variables related to product design. There have been attempts to broaden the definition where they perceive technology transfer as the movement of skills, knowledge, values, organization and capital from their sources to their sites of adaptation and application (Smarzynska 2004). Technology transfer can also be perceived in the context of diffusion of innovations. This makes technology transfer a proactive process of dissemination or acquiring knowledge, experience and related artefacts. This means that technology transfer is an intentional and goal oriented approach but not a free process. Technology transfer process further presupposes the existence of an agreement between the transferring and the receiving entity (Ramanathan 2007). Technology transfer can be classified as vertical or horizontal. Vertical technology transfer model refer to the movement of technology from basic research to applied research for enhancing development initiatives. These research initiatives are then transferred to the production process. In horizontal transfer, there is movement and use of technology used in one location, an organization or context to its relocation, a different organization of context. Vertical technology transfer is an internal technology transfer while horizontal is an external technology transfer approach (Kaplinsky & Readman 2001). It is possible to perceive vertical technology transfer as a managerial process used in moving technology from one phase of its life cycle to another. This is considered a valuable elaboration because it seeks reinforcement of the understanding that it is possible to ensure horizontal technology transfer at any stage of the technology cycle. There are also three types of transfer, which include material, capacity and design transfer. Material transfer is the movement of new material product while design transfer relates with the transfer of blueprint and designs which can plays the role of facilitating the manufacturing of the product or material by the transferee. Capacity transfer entails the transfer of know-why and expertise to adapt and modify the product or material to suit numerous requirements (Ramanathan 2007). With the increasing trends in globalization, technology transfer is considered necessary because of the existence of different paths of development. There is a close relationship between technological levels and technological development paths. This means that different markets, countries and economies depend on one another for the realization of a unified worldwide standard of technology, worldview, culture and civilization (Morrissey & Almonacid 2004). Successful technology transfer in the context of an economy happens when a developed economy succeeds in transferring skills, knowledge, resources to an underdeveloped economy. When the undeveloped economy or market succeeds in the development of implementation strategies, and develop a work plan on how to ensure success in the execution of technology transfer demands. In the context of agriculture and economics, technology transfer can be considered to have occurred when the transferee begins mechanization and computerization of agriculture. This is regarding the process of developing measures that focus on the providing knowledge and skills to farmers in the form of training. In addition, it also involves development of collaborative initiatives between the transferee and the transferring country to ensure the acquisition of the right and most appropriate machinery for the realization of the technology transfer objective. The process technology transfer adoption requires deliberations into the possible challenges that may be faced in the transfer process and the development of effective mitigation approaches (Jagoda & Ramanathan 2005). Successful technology transfer is also considered possible when the transferee adopts and is willing to embrace the technology to ensure development. One of the ways through which developed countries have succeed in ensuring successful technology transfer in developing countries is through digitalization of economic and education processes. In the eductaion sector, developed countries have been active in advocating for bridging the technological divide from a global perspective (Jagoda 2007). This has been abled by transferring technology in the form of knowledge, skills and equipment. Technology by itself without an appropriate culture transfer is ineffective. This makes it important to ensure that before engaging in technology transfer, the technology is designed to correspond to specific ideals of security. This will enhance the level of trust among the users or the target environment. In any society therefore, the success of technology transfer process will be determined by its ability to adhere and respect the prevailing societal culture (Ramanathan 2007). Before accepting to engage in technology transfer process it is important for the parties concerned to develop a criterion of the requirements that the technology being transferred must meet. Strategic alignment is one of the criteria that are considered necessary for the acceptance of technology transfer. This criterion is important because it seeks to develop a relationship between the needs of the economy or organization receiving the skills Knowledge or technological expertise. Through this criterion, the top management involved in the technology transfer process have the responsbility of assessing the benefits of the technology transfer initiative with the strategic goals of the economy or the organization. This means that it will be important for the technology being received to contribute to advancing the goals and objectives of an organization or an economy (Potterie & Lichtenberg 2001). Magnitude of opportunity is also another criterion that the management of the transferee uses in assessing the effectiveness of technology transfer process. In the context of an organization or an economy, the management has the mandate of assessing the extent to which the technology transfer process will provide chances of development. These chances can be in the form of employment opportunities, education opportunities, capacity-building opportunities, or opportunities of improving the standards of living. In the context of an organization, technology transfer, for the transferee must be able to contribute in the establishment of an effective competitive edge in the market. This means that the management of such an organization will assess technology transfer in terms of its ability to improve on the level of market attractiveness for the products or services resulting from knowledge, skills or technology received (Bozema 2000). Regulatory, legal and policy factors are essential aspect to consider during technology transfer process, whether in the form of material, design or capacity, the management of the transferee must assess the legal aspect related to the technology transfer process. This is because through such consideration, it will be possible to assess the extent to which a technology set of skill or body of knowledge adheres to the existing laws. The consideration of different criteria of technology transfer is beneficial because it provides the parties concerned with a platform of negotiating and developing compromises depending on the existing demands and the ability of the technology transfer process to meet the demands (Aitken & Harrison 2009). b. How have the forces that have given rise to the advance of globalisation facilitated technology transfer and what role do multi-national corporations play in this process? The development of globalization was based on the understanding that the world economy was becoming increasingly interdependent. There were additional factors that accelerated globalization such as improved trade, capital mobility, increased labour and improved technology. Improved transport has been instrumental in improving technology transfer initiatives facilitated by rapid growth in air travel, which has enabled greater movement of goods and people across the world (Steenhuis 2000). Other factors such as improved technology have made it easier and improved communication and sharing of information around the world. Through improved technology, globalization has made technology transfer possible in the form of information because people separated by different geographical barriers have the ability of bidding and proving their services through internet technology (Smarzynska 2004). Improved trade has contributed to the growth of globalization and technology transfer by introducing multinational corporations, which have a global presence in different economies. Through these corporations, economies have been able to receive and share varies aspects of technology with the objective of realizing economic growth. Improved capital mobility is also a factor that has not only enhanced globalization but also facilitated technology transfer processes. Through this factor, there has been a general reduction in capital barriers, which have made it easier for capital to flow among varieties of economies (Potterie & Lichtenberg 2001). In terms of technology transfer, improved capital mobility has enabled companies to receive financial resources while improving on the level of international connectedness of global financial markets. An additional benefit of globalisation is that it has allowed for increased labour mobility. This is because of improved levels of willingness among individuals and organizations with different capabilities to move between countries. Through different elements of global trade remittances, it has become easier for organisations to facilitate technology transfer from developed to developing counties (Steenhuis 2000). Multinational Corporations play an essential role in enhancing technology transfer because of their role as major players in the global production process, foreign direct investment flows, research and development and innovation. Multinational corporations are essential players in technology transfer because they are the technological producers of the world. This explains why these companies initiate a large percentage of research and development investments. In the process of engaging in technology production, multinational corporations also develop strategies for controlling technology on a global scale. Existing studies indicate the role of MNCs as predominant decision makers in technology, global economic systems, research and development and innovation. This makes them the creators, sources and diffusers of new technology and facilitators of technology transfer process in many countries (Potterie & Lichtenberg 2001). It is possible to perceive technology transfer as a process of intentional transmission of technology transmitted between firms or economies. This makes technology transfer a direct type, which occurs, voluntarily from the source of technology such as MNCs to the recipient, which includes local firms, or affiliates of MNCs in the host countries. The process of technology transfer is realized through an embodied approach of equipment supply of disembodied approach in the form of patents, software, education activities, and transfer of skills through training, knowledge and expertise (Steenhuis 2000). Technology transfer using FDI often occurs through MNCs in a host country. These organizations may engage in the transfer of some of its technology in the form of production process, products, and organization to the recipient organizations in the host countries, which are often affiliates, or local suppliers of the multinationals. In the contemporary economic environment, economies do not only engage in economic transfer by attracting MNCs but also through contractual agreements between the source and transferee for the movement of specific technologies. These include technological assistance agreements, licensing and management agreements, brands and patents, and recruitment of foreign specialists. It is possible to engage in technology transfer of experiences, skills, technical assistance for knowledge acquisition, labour mobility and expertise agreements (Smarzynska 2004). Together with the processes of globalization, FDI and the presence of MNCs is considered an essential factor of technology transfer since they facilitate development of strategy and economic growth especially in developing countries. This explains why governments in these countries, which do not intend to reinvent the wheel, are involved in competition with the objective of attracting more FDI flows through the liberalization of FDI regulations and the creation of favourable conditions such as offering incentives to a wide range of MNCs (Potterie & Lichtenberg 2001). There are other international institution such as World Trade Organization (WTO), which has been involved in the promotion of FDI with the objective of helping counties attract more MNCs through advice and training. The need to ensure economic development has made the relationship between governments and MNCs to gain impetus with the role of MNCs in developing countries experiencing a significant growth. This makes developing countries dependent on MNCs for their technological development and for the transfer of advanced technology (Aitken & Harrison 2009). For developing economies, MNCs associated with foreign direct investment guarantee the provision of superior technologies in the form of modern and advanced products, production processes, marketing and distribution methodologies, skills and expertise in terms of organizational management, export contacts, designed and established systems of relationships with customers and suppliers. The use of MNCs as agents of technology transfer by host countries is often based on hope that they will have an opportunity of gaining access to advanced technology through the invitation of foreign investments. These countries also consider that FDI will generate benefits such as improved national income productivity, foreign trade and technology structures. These technology transfer initiatives are aimed at improving on technological capability and the levels of productivity of the host countries through interactions with MNCs (Osman-Gani 1999). Technology spillovers, which are products of technology transfer, have a relationship with the indirect or direct benefits assoiled with MNCs. This is because they generally occur in situations where the entry of MNCs results in an increase in the levels of productivity of the domestic firms in the host countries. Direct benefits associated with technology transfer resulting from MNCs include increase in employment levels, physical capital and the use of advanced machinery in the production and service provision processes. Technology transfer, which is a major contributor of technology spillovers, is inclusive of externalities provided by MNCs in host countries to local ones. This is considered as one of the most effective channels of diffusion of technology in the modern society because through the establishment of relationships between governments and MNCs it becomes easier to develop techniques of reducing unemployment levels, and improving the level of capability of domestic human capital. In most cases, MNCs succeed in the technology transfer initiative by providing on job or off job training and education where individuals in the host countries learn by doing activities as a knowledge transfer mechanism (Zhang 2000). c. Does technology transfer inevitably involve a direction of travel from so-called advanced counties to relatively less developed countries, or can the process sometimes run the other way? The aim of technology transfer is to ensure improvements in different sectors of an economy or in the performance level of an organization. This will be perceived with regard to the ability of the recipient of technology transfer to ensure that it embraces and puts its resources into meaningful use with the objective of realizing organization or economic goals of a country (Morrissey & Almonacid 2004). In the context of developing and developed countries, for technology transfer to occur it is important that the transferring country must have better skills capacity, expertise, machinery, technology, and knowledge compared to the recipient country. This means that from an ideal perspective, technology transfer can happen from advanced economies to developing economies, or form developing economies to developed economies. The recipient country in the transfer process is often operating with the objective of realizing some level of competition and competitive advantage with regard to improved economy and improved standards of living for its citizens (Osman-Gani 1999). Despite the ideal view that technology transfer can also happen from developing to developed countries, the emergence of MNCs and the proliferation of FDI as an establishment of economic growth have made technology transfer a common feature that defines the relationship between developed and developing countries. This is because developed countries are perceived to be in possession of abundant resources in the form of skills, knowledge, technology, and expertise on the operationalization of different activities related to management of organizations and resources. The need to establish a competitive advantage within their markets and the desire to attain the standards of production and operationalization existing in developed countries explains the existence of relaxed laws on FDI regulations and policies (Morrissey & Almonacid 2004). The existence of firms is based on the understanding that frequent access to the market can result in heavy transaction costs. The need to hire employees, negotiate prices, and draft contracts makes a firm an instrument of crating long-term contracts when short-term contracts are less profitable. Firms such as MNCs are formed with the objective of imposing their own transaction costs, which often rise, as they grow bigger (Lundquist 2003). Firms are also created to facilitate the process of establishing a balance between hierarchies and markets. This is often with the objective of recalibrating forces of competition and the cost of production. Firms are not only formed to ensure operationalization in accordance with the demands of economies of scale but also to marshal a wide range of resources capable of ensuring the establishment of an effective corporate culture and collective knowledge in markets (Mayer & Blaas 2002). When the reasons for the creation of firms is assessed in relation to the channels of technology transfer, it is possible to assert that established firms such as MNCs in the process of establishing their presence and competitive advantage on the international market often engage in the organization of production initiatives and creation of knowledge in unique ways. These processes are enabled by their ability to access and use resources in engaging in long-term innovation initiatives that will not only satisfy existing demands but also redefine their markets (Markusen & Venables 1999). When the channels of technology transfer are perceived in relation to the concept of global value chains, it is possible to assert that companies such as MNCs often engage in a range of activities that help in the development of products or services from their conception to their end use and beyond. This means that in the design, production, marketing, distribution, and support to the final customer processes, MNCs are often involved in the assessment of markets that provides an environment for effective execution of their activities (Mittleman & Pasha 1997). When perceived in relation to its role in technology transfer, global value chain provides companies and workers in different locations with a platform of engaging in interactions in the form of collaborations. For instance, through technology transfer it is possible for a company in less developed countries or any other country to contract with a firm in another country with the objective of coordinating production processes in plants owned by another company in a third country (Mittleman & Pasha 1997). The benefits of global value chain in modern economies are that it provides detailed information on the regulations, standards, technologies processes, and products in different places and industries. For MNCs, the technology transfer processes in developing and developed countries are determined by the policies and regulations in different markets and the availability of tools essential in assessing and predict possible market changes (Schmitz & Humphrey 2002). The existence of effective polices and the availability of markets for the products and services of MNCs from developed countries are some of the reasons for the success of technology transfer. Technology transfer can also fail especially when there is an insufficient pool of scientists and researchers in a specific domain to engage in effective research and development initiatives (Zhang 2000). Brain drain where developed economies attract a pool of experts from developing countries may also contribute to insufficient skill capacity in developing countries hence making it relative difficult for these economies to transfer technology. Small market sizes incapable of attracting larger industries and an ineffective bureaucratic climate affect the ability of a transferring or a host country to engage in the development of policies and procedures that can attract MNCs and other governments. For developing countries, technology transfer often fails because most of the new technologies are capital intensive and these countries do not have sufficient resources for the implementation of technology transfer requirements. Developed countries are considered as the first adopters who get the benefits because of abundance of different types of resources (Schmitz & Humphrey 2002). References Aitken, BJ & Harrison, A 2009, “Do domestic firms benefit from direct foreign investment? Evidence from Venezuela,” American Economic Review, 89 (3): 608-618. Bozeman, B., 2000. Technology transfer and public policy: A review of research and theory. Research Policy, 29, pp. 627-655. Jagoda, K. I., 2007. 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