RATIONALE OF TRANSFER OF TECHNOLOGY

It is important to understand-what is meant by technology. Technology normally implies a way of producing goods or establishing services; it manifests itself in production process and product development. Modem understanding of technology is more comprehensive than conventional understanding. It also includes organizational, informatory and motivatory areas.

Transfer of technology can be defined as the transfer effected from one agency to the other. There are various levels of transfer of technology. First, when the technical knowledge is transferred from the laboratory and scientific establishment to students of technology; it can be called transfer of knowledge. For example, the principles of physics and chemistry are transferred through teaching to the students. An advanced form of transfer of technology in this category is high level seminars where advancements made in a number of basic science and their applications are discussed. The same is also published for wider use. It must be noted here that there is no relationship between the costs incurred and price paid by the users. 

The second level of transfer is the general knowledge of production of a product. Firms and individuals in this area would be broadly knowledgeable about the process and requirement which constitute part of the general knowledge of a concerned industry. Here again there is no relationship between costs and benefits. 

Third, it can be said when a new product is either introduced in the market or imported, one can get an idea of technological possibilities.

Fourth, which is the focus of this unit is the transfer of technology which is commercially successful and this technology normally is owned by a firm with necessary property protection. Therefore, it can be transferred only through the market transaction, i.e., buying and selling. 

Before identifying the main features of technology market, it is useful to understand the rationale of technology transfer. We are confining here to technology transfer between two firms which are located in two different countries, i.e., international transfer of technology. Over about a century, firms all over the developed world are buying and selling technology. Over the last thirty years in particular the technology transfer is also taking place between the firms of developed and developing countries. In this context, it is necessary to briefly understand the rationale guiding the buying and selling of technology. 

A seller of technology finds that it can earn returns from selling the technology. This is particularly so in view of the fact that life cycle of the technology is short. The advances made in technological innovations are so fast that there is a tendency to sell previous generation of technology. In addition, the proprietorial right in a number of cases is short. Hence, the firm is induced to sell technology. 

Transfer of technology among various units of TNCs, which are globally operating, that is subsidiaries, affiliates and joint venture partners, also takes place at a price and also enjoys the benefits of total production of products and services.

Buyers of technology have three main reasons for purchasing technology. They are: 

i) Innovating a new process or a product by a firm is costlier than buying technology in the market, it is often said that one does not need to invent a wheel again and again, 

ii) Since a commercially successful technology has already proved its utility the buyer finds it very attractive to buy the technology. 

iii) A firm which has no incentive to become a leader in the market either by innovating a new product or a new process would find it more convenient to buy the most modern technology from the owner which is most often a TNC than taking the risk of innovating a similar technology.

Main Features of the Technology Market 

Technology market is a seller's market. The owners of proprietorial technology are a few large TNCs, although there are a few medium and small scale enterprises in the market. So the TNCs control the sale of technology. The buyers of technology are a large number of firms especially from developing countries. Effective purchase of technology can be done only when a buyer knows about the technology. This knowledge includes information on a number of companies owning similar technology like whether it is still subject to proprietorial regulations and what are the terms and conditions under which that concerned technology is traded in the market. In technology purchase knowledge is power. It is, therefore, imperative that a technology buyer makes necessary home work in this regard.