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Slide 1:

Technological Environment

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Technological Environment • J K Galbraith defines technology as a ‘systematic application of scientific or other organised knowledge to practical tasks’

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Classification of Technology Technology can be classified according to any of the following categories :- • State-of-the-art-technologies : Technologies that equal or surpass the competitors. • Proprietary technologies : Technologies protected by patents or secrecy agreements that provide a measurable competitive advantage. • Known technologies : Technologies that may be common to many organisations but are used in unique ways.

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• Core technologies : Technologies that are essential to maintain a competitive position. • Leveraging technologies : Technologies that support several products, product lines, or classes of products. • Supporting technologies : Technologies that support the core technologies. • Pacing technologies : Technologies whose rate of development controls the rate of product process development. • Emerging technologies : Technologies that are currently under consideration for future products or

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processes. • Scouting technologies : Formal tracking of potential product & process technologies for future study or application. • Idealized unknown basic technologies : Technologies that, if available, would provide a significant benefit in some aspect of life.

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The Technology Cycle Following classification, technology management involves carefully implementing five stages :- 1. Awareness phase 2. Acquisition Phase 3. Adaptation Phase 4. Advancement Phase 5. Abandonment Phase (See Fig. Below)

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Technology Awareness of marketable invention Technology Acquisition by self-generation or transfer Technology Adaptation Minor modifications of acquired technology for specific needs Technology Advancement Innovation involving major modifications of acquired technology Technological Abandonment obsolescencing External & internal Environment Factors affecting the technology user Promotion Need driven expectations Justification Installation 1 2 3 4 5 6 Demolition Time

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The Technology Cycle, showing the five basic elements of technology management at any given level (product, service, function, work centre, plant/division, corporation, industry, national or international) applicable to deal with an existing or new technology. The dashed lines represent ‘analysis’.

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Awareness phase • This is the first phase of the technology cycle in which a company has a formal mechanism to become aware of emerging technologies • Some companies from ‘think tank’ with engineers & scientists, who research from around the world & put in short internal report form for the benefit of corporate strategic planners & technology policy markers.

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2. Acquisition Phase • To go from the awareness phase from acquisition phase, the company’s technology group, in collaboration with the industrial engineering group, would conduct technical feasibility, & economic feasibility studies before justifying & acquiring a new technology.

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3. Adaptation Phase • Virtually every enterprise ends up adapting an acquired technology for its particular needs • If the homework done correctly, the transition from acquisition to adaptation becomes much smoother & less expensive • Conversely, this not only frustrates the people acquiring the technology but also slows down the assimilation rate, causes major productivity losses, & results in severe quality problems.

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4. Advancement Phase • When capital is limited one cannot indiscriminately purchase & abandon technologies with scarce money • It becomes imperative to improvise the acquired technologies for one’s home needs.

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5. Abandonment Phase • This last phase of the technology is the most critical • Bad timing in prematurely abandoning a product could result in lost revenues, & on the other hand, waiting too long to abandon might also result in lost revenues because a customer may find a better alternative in competition.

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Impact of Technology • We propose to discuss the impact of technology in general, under three heads :- a) Technology & social change b) Economic effects of technology, & c) Technology & plant level changes (See Fig. Below)

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Technology A. Social implications C. Plant level changes B. Economics implications High expectation of consumers Systems complexity Social systems Social changes Organisation structure Resistance to change Increased regulation & stiff opposition Problems of techno- structure Jobs become intellectual Need to spend on R&D Increased productivity Fear of risk e-Commerce Telecommuting Rise & decline of products & organisations Boundaries redefined Transportation Markets Technology transfers Impact of Technology

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A. Social Implications • Perhaps the most striking influence of technology is found on society as every area of social life & the life of every individual has been, in some sense or the other, changed by the developments in technology.

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A1. High Expectations of Consumers • Technology has contributed to the emergence of affluent societies, who want more of many things than more of same things, like varieties of products, superior in quality, free from pollution, more safe, & more comfortable. • This calls for substantial investment in R&D. • One important compulsion for investing in technological advances in Japan is its customer’s high expectations regarding design sophistication, quality, delivery, schedules, & prices

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• Industry owners in Japan swear by the dictum – the customer is a god who is always right. • High expectations of consumers pose a challenge & an opportunity to the owners of business institutions.

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A2. System Complexity • Technology has resulted in complexity • Modern machines work better & faster no doubt • But if they fail, they need the services of experts for repairs • They fail often because of their complexity • A machine or a system is composed of several hundred components • All parts must work in tandem to accomplish a desired task • Reliable performance of each part, therefore,

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assumes greater significance because of interdependence of systems. • Management is, therefore, under pressure to keep the whole system working all the time.

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A3. Social Change • The role of technology on social change may be observed in more than one way :- First , there is the change in social life, which results from a change in a technological process. Thus, an invention may displace thousand of workers, yet the same invention may result in the creation of a new city some- where else & create even more jobs than it originally destroyed. Technological changes of this sort create a turmoil in society. Secondly , besides uprooting population,

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technology directly changes the patterns of their social life. An invention may open new employment opportunities to women, radically change hours spent at work & in the family, increase available leisure time, open jobs to youth, & deny them to middle-aged or old workers. Technological advance- ment tends to smoothen out differences, as it creates a more freer & egalitarian society. Thirdly , though social differences tend to be ironed out, status differences are likely to be created by technological advancement in developing countries as technology flows to less developed countries mainly through multinational companies. In India,

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the employees in foreign collaborations are paid much more than are paid in other local Indian companies, though they do the same job in the same field. Fourth , the way we cook, communicate,use media & work are affected by technology. Even the language we use is changing, terms that until recently were not even part of our lexicon have become common place. Social changes are also reflected in our vocabularies like, house-husband, surrogate mother, & domestic partner, etc. It is therefore, rightly said that the words are the bugles of social change. when our language changes, behaviour will not be far behind.

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Fifth , technology has its impact on religion in at least two ways, first, religiosity has declined in importance as consumers have come to rely on technology rather than on benevolent deities for their well-being. Secondly, (on the negative side), modernisation pressures against genetically modified foods to wholesale rejection of western technologies by certain religious fundamentalists. Sixth , technology has revolutionalised the education system. The internet makes vast knowledge bases available to a large number of people electronically. It has virtually democratised education by enabling in the very poor & remote countries to access the

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world’s best libraries, instructors, & courses available through the Internet.

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A4. Social Systems • Of particular interest is the knowledge of technology • At this level, technology creates a distinct type of social system, namely, the knowledge society • In the knowledge society, use & transfer of knowledge & information, rather than manual skill, dominates work & employs the largest portion of labour force • The knowledge-worker will have to show why he should be retained, what benefit he can offer to the organisation , & how he can add

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value to whatever the organisation does • He will have to create new jobs in consultation with his employer • A job will then become a joint venture • When this happens, the worker can forget pension plans.

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B. Economic Implications • Developments in technology also have significant economic implications :-

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B1. Increased productivity • the most fundamental effect of technology is greater productivity in terms of both quality & quantity • This is the main reason why technology at all levels is adopted • As a result of productivity improvements, real wages of employees tend to rise & prices of some products decline.

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B2. Need to Spend on R&D • Research & Development (R&D) assumes considerable relevance in organisations as technology advances • Firms are required to consider, decide & take action on at least six issues. First , the allocation of resources to R&D. It enables business improve corporate performance by enabling the firm to better develop synergies among product lines & business units.

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Secondly , technology transfer, the process of taking new technology from the laboratory to the market place is equally important when the company fails to develop much in the way of major innovations. Thirdly , time factor is important in R&D. Companies can no longer assume that competition will allow them the time needed to recoup their investment. Fourthly , as new technology comes in, the old technology needs to be abandoned. The process of old replaced by new is called technological discontinuity. Such discontinuity occurs when a new technology cannot be used simply to enhance the current technology but actually substitutes for that

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technology to yield better performance. The R&D manager must determine when to abandon present technology & when to develop or adapt new technology. Fifthly , the firm must also decide on its own R&D or to outsource technology. As a rule, it may be stated that a company should buy technologies that are commonly available but make (& protect) those at are rare, valuable, hard to imitate, & have no close substitutes. In addition, outsourcing technology may be appropriate when :- • The technology is of little significance to com- petitive advantage

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• The supplier has proprietary technology • The supplier’s technology is better &/or cheaper & reasonable easy to integrate into the current system • The technology development process requires special expertise, & • the technology development process requires new people & new resources. The sixth & the final issue relates to the decision on product innovation or process innovation. In the early stages, product innovations are most important because the product’s physical attributes & capabilities affect financial performance considerably. Later, process innovations such as

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improved manufacturing facilities, increasing product quality, & faster distribution become important in maintaining the product’s economic returns.

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B3. Jobs Become Intellectual • With the advent of technology, jobs tend to become more intellectual or upgraded • A job hitherto handled by an illiterate & un- skilled worker now requires the services of an educated & component worker • Introduction of new technology dislocates some workers • This makes it obligatory on the part of business houses to retrain its employees & to rehabilitate those displaced & untrainable • Equal is the responsibility of the government

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to provide training & educational facilities to its citizens - those who pick up & acquaint themselves with the new technology, the job will be rewarding as they stand to gain through increased productivity, reduced prices, & increased real wages • Along with upgrading jobs, technology has its impact on human relations • Since interaction & activity affect sentiments, & they begin to feel & think about one another & about their work situation.

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B4. Problem of Technostructure • Not only jobs become more intellectual & knowledge-oriented, even the incumbents tend to become highly professional & knowledgeable • Such an enterprise has to face on this account serious problems :- First , motivation of such employees is a difficult task because incentives as attractive remuneration, job security, & just treatment, hardly inspire the enlightened employees to work more. They are instead motivated

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by opportunities which offer challenges or growth or achievement. Secondly , retraining such employees for long is a difficult job. Flighting & not sticking to one company is their culture. The company has to make several exceptions to discourage rootless ness of its professional employees :- • Regular attendance & punctuality have to be relaxed • Dual promotion ladders have to be established so that distinguished technical people can rise in rank • Profit-sharing to be provided to give creative

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persons a financial stake in the ideas they create • Attendance at professional get-togethers has to be sponsored • Writing professional articles has to be encouraged & special assignments & part-time teaching may be allowed. Thirdly, scientific & professional workers constitute, the technostructure . The technostructure tries to control the organisation through influencing management’s decision-making. But they are more action oriented & are yet to learn social problems of business decisions. Management is, therefore, in a

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in a tight position to balance the ruffled feelings of technocrats & the social consequences of business decisions.

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B5. Increased Regulation & Stiff Opposition • A by-product of technological advancement is the ever-increasing regulation imposed on business by the government of the land & stiff opposition from the public as the host govern- ment has the powers to investigate & ban products that are directly harmful or hurt the sentiments of a section of society.

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B6. Rise & Decline of Products & Organisations • Change of technology is a norm & not an exception • This poses another problem to business • A new technology may spawn a major industry but it may also destroy an existing one • Transistors, for example, hurt the vacuum- tube industry & xerography hurt the carbon paper business • A typical product, today, is subject to a cycle : introduction, growth, maturity, decline, &

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abandonment • An organisation that is associated with particular technology will go in sequence through the following stages :- ( i ) birth, (ii) growth, (iii) policy, (iv) procedure, (v) theory, (vi) religion, (vii) ritual, & (viii) last rites.

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B7. Boundaries Redefined Technological changes have significant consequences for industries :- • Technological change is a potent force in the reconfiguring of industry boundaries, it may broaden or narrow generally excepted industry boundaries • As a consequence of its impact on whole industries, technological change can have a significant impact on the prevailing business definition of individual companies. Companies may find themselves in a different business

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due to technological changes that they or others have effected • Technological change is one of the important factors giving rise to product substitution & product differentiation. Technological change is a dominant force in shaping competitive dynamics in many industries. It influences industry boundaries & structure, product substitution & differentiation, & the price quality relationships between products • Technological change in the form of process (as opposed to product) & materials innovations may contribute to many of the impacts noted above • Finally, for multi-product companies (preceding

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discussion applies to single-business units), technological change may have multiple impacts.

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C. Plant Level Changes • The impact of technology at the plant level is also significant.

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C1. Technology & Organisation Structure • Technology has considerable influence on organisation structure, length of the line of command, & span of control of the chief executive • Where companies use technology, which is fast changing, matrix structures are more common • Some companies use a matrix even though the rate of technological change is not fast • Besides technology, other factors that have their influence on organisation structure are history & background of a company & the

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personalities of the people who founded the firm & managed it subsequently, but the impact of techno- logy is considerable • Line of command tend to be lengthy where the production is routine & process based • Decision-making is highly centralised • It tends to be short if the production activities are customised • The use of specialists will be more & hence decision- making gets delegated • In mass production technologies, the number of people whom an executive controls tends to be larger than when the production is unit based

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• Any technological advancement will result in :- a) the expanded availability of a range of products & services b) substitution of capital for labour, leading to higher productivity & lower costs c) increases in sales or power for the innovating organisation relative to its competitors d) initiation of changes in behaviour among customers, suppliers, employees, or society, & e) side-effects on the quality of physical environment.

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C2. Resistance to Change • The manager of a given business unit shall face resistance to change as new technology poses new problems • The resistance to change is often psychological • A typical businessman himself is opposed to adopting new technology as it is expensive & risky • When he is making enough money with obsolete technology why must he worry about new technology?

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Specifically, resistance to change stems from the following reasons :- 1. Psychological or social commitments to existing products, process & organisation, 2. Sizable capital investments in long-life single-use facilities, 3. Low profits & reduced rate of growth, 4. Small size or fragmented activities, 5. Complacent top management, 6. Industry norms & associations or cartels that perpetuate industry-bound thinking, 7. Lack of successful entrepreneurial models to emulate, & 8. Powerful labour resistance to changes in methods.

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C3. Fear of Risk • There is always the fear of risk. • A research oriented-company like DuPont Corfam, an intended substitute for the fore- casted shortage of shoe leather, after an invest- ment of $3000 million, abandoned the project in 1971 because of quality & cost problems.

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C4. E-commerce • The phenomenal growth of the internet & the associated World Wide Web has made e- commerce possible • E-commerce is contributing to a growing per- centage of cross-border transactions • It rolls back some of the constraints of location, distance, scale, & time zones • The Web allows, both small & large, to expand their global presence at a lower cost than ever before, wherever they may be located, & what ever their size • Modern factories are now able to produce

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goods in a shorter period of time (to produce one car it takes less than 10 seconds) & with fewer defects - thanks to the introduction of ‘Six Sigma’ quality programmes • Six Sigma is a statistical term that means 3.5 errors per million, effectively eliminating performance problems & ensuring that products conform to standards • While e-commerce focuses on marketing & sales process, E-business emphasises integration of systems, processes, organisations, value chains, & markets • Integration operate through Internet & helps build

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new relationships between businesses & customers The internet & e-business provide a number of benefits in global business, including the following :- 1. Convenience in conducting business worldwide; facilitating communication across borders which brings markets closer 2. An electronic meeting & trading place, which adds efficiency in the conduct of business 3. Power to consumers as they gain access to limitless options & price differential 4. Efficiency in distribution

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C5. Telecommunications • The obvious dimension of the technological environment facing international business is telecommunications • This growth is welcome as business, domestic or global, cannot prosper without an efficient telephone system, such as, 3G, MMS of NOKIA.

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C6. Transportation • In addition to developments in computers & telecommunications, several major innovations in transportation have occurred since World War II • While the advent of commercial jet has reduced the travel time of businessmen, containerisation has lowered the costs of shipping goods over long distances.

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C7. Gobalisation of Production • Technological breakthroughs have facilitated globalisation of production • A satellite based communications system allows Texas Instruments (TI) to co-ordinate on a global scale, its production planning, cost accounting, financial planning, marketing, customer service, & human resource.

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C8. Markets • Along with the globalisation of production, technological innovations have facilitated the internationalisation of markets • As stated earlier, containerisation has made it more economical to transport goods over long distances, thereby creating global market • Low-cost global communications networks such as the World Wide Web are helping to electronic global market places • In additions, low-cost jet travel has resulted in the mass movement of people around the world

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• This has reduced the cultural distance between the countries & is bringing about convergence of consumer tastes & preferences • At the same time, global communications networks & global media are creating a worldwide culture • Worldwide culture is creating a world market for consumer goods.

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C9. Technology Transfers Technology transfers includes :- i) Internal transfer of technology from the R&D or engineering department to the manufacturing department of a firm based in a country ii) The same transfer of technology from a laboratory or operations of an MNC in one country to its laboratory or operations in another country iii) The transfer of technology from a research consortium supported by many firms to one of

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its members • Simply told, technology transfer is a process that permits the flow of technology from a source to a receiver through published material • Purchase & sale of machinery, equipment & inter- mediate goods, transfer of data & personnel; & interpersonal communication Technology transfer comprise six categories :- 1. International Technology Transfer is across national boundaries. Generally, such transfers take place between developed & developing countries.

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2. Regional Technology Transfer is transferred from one region of a country to another. 3. Cross-industry or Cross-sector Technology Transfer is transferred from one industrial sector to another. 4. Interfirm Technology Transfer is transferred from one company to another. 5. Intra-firm Technology Transfer is transferred within a firm, from one location to another. Intra- firm transfers can also be made from one department to another within the same facility.

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6. Pirating or Reverse-Engineering whereby access to technology is obtained as the expense of the proprietary rights of the owners of technology.

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International Technology Transfer Parties in the Transfer Process i) Home country, ii) Host Country, & iii) The Transaction

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Home country • Argue that the establishment of production facilities by MNCs in subsidiaries abroad decrease their export potential • Some of the MNCs imports stem from their subsidiaries, the volume of imports of the home country tends to increase • Besides, technology transfer tends to effect adversely competitive advantage of the home country • Labour unions in the home country too oppose technology transfer on the ground that the jobs generated from the new technology will benefit the host country citizens.

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ii) Host Country a) Economic Implications b) Social Implications

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Economic Implications • Economic implications include payment of fee, royalty, dividends, interest, & salaries to foreign technicians & tax concessions resulting in loss to the national exchequer • All these are payable to the transferring country & might prove very expensive to the host country • Many times, the type of technology transferred by international business is not appropriate to developing countries, is designed to produce the types of goods that a rich country needs & to do so by methods, which are appropriate to

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resources endowment of developed nations.

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b) Social Implications • Along with the transfer of technology, there is the transmission of culture from the exporting countries • The upper & middle class Indians are a case in point • Majority of these neo-rich people are totally Wester- nised & Americanised in their attitudes, behaviours, food habits, & dress accustomedness • This is because, we import technology from the United States & European countries.

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iii) Transaction • This element focuses on the nitty-grities of the transfer.

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Stager in the Transfer Process The transfer of technology between countries, particularly from rich to developing nations, proceeds in five different, but coordinated stages :- 1. Assignments, including sale & licensing agreements covering all forms of industrial property including patents, inventor’s certificates, utility models, industrial designs, trademarks, service names, & trade names. 2. Arrangements, covering the provision of know-how & technical expertise in the form of feasibility

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studies, plans, diagrams, models, instructions, guides, formulations, service contracts & specifications, &/or involving technical, advising, & managerial personnel, personnel training, & equipments for training. 3. Arrangements, covering the provision of basic or detailed engineering designs, & the installation & operations of plant & equipment. 4. Purchases, including leases & other forms of acquisition of machinery, equipment, intermediate goods, &/or raw materials insofar as they are part of transactions involving technology transfers

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5. Industrial & technical cooperation agreements of any kind, including turnkey agreements, international subcontracting, as well as provision for managements of & marketing services Technology is not a homogeneous phenomenon. There are different types of technology, each posing fundamentally different problems & demanding different solutions in the international transfer process.

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International Technology Issues

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Technology Issues International Technology Issues Terms of Technology Transfer Choice of Technology Creating Local Capability Foreign Technology Acquisition Globalisation Barriers

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Foreign Technology Acquisition • One of the major issues in technology relates to the mode of acquisition • Developing new technology may conjure up visions of scientists & product developers working in R&D laboratories • In reality, new technology comes from many different sources, including suppliers, manufacturers users, other industries, universities, government & MNCs • While every source needs to be explored, each firm

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has specific sources for most of the new technologies. Broadly the acquisition routes are three :- A. Internal Technology Acquisition B. External Acquisition C. Combined Sources

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Internal Technology Acquisition • Internal technology acquisition option have the advantage that any innovation becomes the exclusive property of the firm • In addition, the resulting technology will be tailored to meet the firm’s needs • However, internal development has risks • The development take longer time than acquiring already developed technology from external sources • In addition, internally generated technology is more expensive than the one acquired from outside sources.

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B. External Acquisition • External technology acquisition is the process of acquiring technology developed by other for use in the company • External technology acquisition generally has the advantage of reduced cost & time to implement & lower risks • However, technology available from outside sources was generally developed for different applications • Therefore, external acquisition should contain an aspect of adaptation to the acquiring co. application.

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C. Combined Sources • Many forms of technology acquisition are combinations of external & internal activities • Combined acquisition seek to overcome the limitations of internal & external sources, taking advantages of both the actions at the same time

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Technology acquisition Routes Purely Internal Purely External Seizing Tacit X Knowledge Internal R&D X Internal R&D with X Networking Reverse X Engineering Covert acquisition With R&D Covert Acquisition X

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Technology transfer X & Absorption Contract R&D X R&D Strategic Partnership X X Licensing X Purchasing X Joint Venture X Acquisition of Co. With Technology X

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Choice of Technology Terms & Conditions of Technology Transfer

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Restrict Clauses No. of clauses/ Agreements Export Clause i ) Permission of collaborator for exports ii) Export permitted only to certain countries iii) Export prohibited to certain countries iv) Export prohibited v) Export restricted to certain types of product vi) Export restricted only to collaborators/ Agents/ Distributors vii) Restrictions on use of trade marks for exports 169 37 80 22 18 1 6 5

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Sources of Supply of Raw Materials & Plant & Machinery Payment of Minimum Royalty Restrictions on Production Pattern Restrictions on Sale Procedures Restrictions on Termination of Agreement 94 40 27 5 1 Total Number of Agreements with Restrictive Clauses 213

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Globalisation • The world economy is passing through structural changes • These changes are driven by globalisation of business as well as by the revolution in information, communication, & transportation technology • Nations now have powerful technology in their hands, fundamentally transforming the way in which business is conducted around the globe • The World Trade Organisation (WTO) is contributing to globalisation by removing trade

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barriers between countries & involving mechanism for smooth conduct of trade among nations • the WTO has also evolved a mechanism to manage technology better • The main provision of the WTO that influence technology transfer are included under the following sections :- 1. Trade Related Aspects of Intellectual Property Rights (TRIPs) 2. Trade Related Investment Measures (TRIMs) 3. Subsidies & Countervailing Measures (SCMs) 4. The Information Technology Agreements (ITA)

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Barriers to Technology Transfer The final international technology issue relates to barriers. The problems encountered in transfer of technology are :- • A limited general understanding of the concept of technology, & the lack of consistent framework for its study • Lack of systematic planning for technology in developing countries or misunderstanding of its underlying philosophy • Lack of bilateral scientific/ technology advantage in

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the process of technology transfer (mutual benefits) • Lack of systematic & integrated engineering & sicio- economic approach to the technology transfer process • Lack of a relevant quantitative framework/ approach to the analysis & evaluation of technology transfer to developing countries • Failure to include ergonomic aspects in technology transfer or to accord sufficient value to the human machine interface variable of the transferred technology, or the failure to adjust the technology to the existing socio-cultural system • Lack of attention to environmental consideration &

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assessment of technological impact • Failure to determine whether a national consensus & orientation exist for a transfer • Failure to recognise the local potential (cultural & economic) for adoption of technology (that is, failure to determine the availability of social & economic infrastructures) • Failure to determine if the existing national productive capacity is adequate to support the application of the transferred technology • Restricting the feasibility study of technology transfer to financial assessments (mostly cost benefit analysis)

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• Absence of any substantial effort to review & utilise the potential of technological interchange & socio- technical collaboration for technology transfer between developing countries • Presence of ethnical problems within the technology transfer • failure to evaluate or consider ‘conflict causing’ factors pertaining to the transferred technology. these factors can be categories into :- 1. ‘sector conflict factors’ conflicts that can arise within the techno-economic systems 2. ‘rural urban conflict factors’ arising because of spatial (that is, regional) imbalance in the

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distribution of physical resources needed for specific industry in the long-term (for instance, sacrificing the existing production institutions in an area in order to initiate to new, imported, mostly large scale technology), leading to 3. Factors ‘ disturbing the socio-cultural balance’ that operate with in the social system : due to the nonconformity of the transferred technology with the available potential, & with the inherent objective of development policies & national techno-economic plans in developing countries ; & due to the lack of specific software & any other sophisticated supportive tools for

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technological planning & technology assessment within the technology transfer framework.

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