In my last post, Technology Transfer, I
had discussed various aspects related to transfer of technology. Transfer of technology
can take place through a number of mechanisms or modes. These may vary from a sales and service agreement either
as an agent or sole distributor, to a subcontracting arrangement, an Original Equipment Manufacturing arrangements (OEM), production licensing, joint ventures, to Original Design Manufacturing (ODM) arrangement, production licensing to even joint
R&D and production, university – industry licensing, Government R&D
institute – industry Licensing etc.
However,
in each of the transfer modes, detailed planning and coordination is required
between the technology transferring agency and the technology receiving agency.
It is very important that the two agencies understand each other’s capability,
processes and competencies very well before even the deal for transferring
technology is signed. If this planning and due diligence is not undertaken, the
technology transfer process is bound to fail.
So what
are the activities that go into planning the transfer of technology. In this
article, I intend to make and attempt to explain the same.
The
first activity that needs to be undertaken is to assessing the need of the
technology transfer. A comprehensive analysis of this need is required, because,
if there is no need for the technology to be transferred, the whole act would
be in vain. Here, we need to understand that this need is different from
demand. There may be a need for a technology but no demand because demand is
related to the paying capability of the customer. If the need is established,
the demand can be created by making the technology more affordable.
Once the need has been established, the
feasibility of transfer of technology should be assessed. The feasibility study
would take into consideration the pricing of the technology at which the
transferring agency is ready to part with the technology. The capability of the
receiving agency to accept and absorb the technology and the existence of a
commercial market for the technology.
Both the agencies should follow a
process approach for transfer of technology. The complete process of technology
transfer right from technology search to post transfer implementation should be
studied, understood and accepted between the transferring and receiving
agencies.
When
planning and implementing a technology transfer project, the managers of
technology must gain good insights into the technical and business environment
at the receiving firm, transferring firm, and general technical and business
environment in the country and the world itself. For example, satellite phones when
introduced by Iridium failed because the environment was not ready to accept
them.
The
receiving agency must explore a number of suitable partners before it zeroes on
the transferring partner. Further, the receiving organization must be involved
by the transferring organization right from the beginning in the planning and
execution for the transfer to succeed. While at the same time, the receiving organization
must develop sound engineering and project management skills to be able to
successfully absorb the technology.
While planning
for the transfer of technology, it is important that milestones and decision
points are clearly demarcated so that activities can be strengthened, mistakes
corrected, or even the project terminated at any point in time based on the
progress. This would also assist in close monitoring and control of the transfer
process and help in cost control.
During
the process of planning the technology transfer on the side of the transferring
agency, the following aspects need to be studied and found suitable by the
transferring agency. :-
The terms and conditions for transfer of
technology.
- Technological capability of the receiving agency.
- Relative newness of the technology. This would determine both the demand for the technology as well as the cost at which technology would be transferred.
- Strategic importance of the technology to the transferring firm. If the technology being transferred is of strategic importance to the transferring firm, chances are that it may not be transferred at all. Even if it is transferred, the price sought would be usually very high.
- Level of intellectual property protection needed. If the technology is critical and new, then the robustness of the IPR regime sought, in the country where the technology is being transferred, is high. However, if the technology is nearing end of patent period, it may be transferred to countries where the IPR regime is not very robust also. Cost of transfer is also dependent on these factors.
It must be understood that a technology
transfer project does not end with commencement of production at the receivers
premises. On the contrary, the success of a technology transfer project is determined by the extent
to which the transferring and receiving agencies manage the barriers that
impede transfer and strengthen initiatives that facilitate it.
In a
future post, I shall discuss the effect of IPR regime on the transfer of
technology as well as the various commercial aspects of technology transfer.
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