Technology Transfer

In this section, the definition and the process of technology transfer are presented. From the discussion in Section 3.4, it can be seen that technology transfer is a key concept causing the development of technology capabilities. In addition, in this section, some factors supporting the process of technology transfer have been shown by other researches to have the effect on technology capability development. Promisingly, companies in developing countries can benefits from the process of technology transfer after multinational companies come to set up their business.

3.6.1 Definition of Technology Transfer

“Technology transfer” is difficult to define because the term is used differently by various groups. The term ‘technology’ which comes from the Greek terms techne and logos (UN ESCAP Training Manual, 1992) refers both to the skill or craft required to make something, techne, and the knowledge of something, logos. Technology can therefore be described as an aggregation of knowledge concerning activities such as marketing and manufacturing (Dodgson, 2000; Stewart, 1979). Technology can also be defined in broader terms as a means of skill formation resulting from exposure to new information. The researcher concurs with Seaton and Cordey-Haynes (1993) who described technology transfer as “the process of

52 promoting technical innovation through the transfer of ideas, knowledge, devices and artefacts from leading edge companies, R&D organisations and academic research to more general and effective application in industry and commerce”.

3.6.2 Technology Transfer Process

The process of technology transfer is only considered to have been completed if the recipient is able to understand and make effective and sustained use of what has been transferred (Cohen & Levinthal, 1989; Jensen & Meckling, 1992). An increase in employee knowledge as well as enhancements in the efficiency of production processes, for example, could constitute successful transfer.

Figure 3.2 Technology Transfer as a Knowledge-Internalisation Process (Adapted from Nonaka & Takeuchi, 1995 and McKelvey, 1998)

For the recipient, technology transfer can be looked at as a process of knowledge internalisation proceeding as illustrated in Figure 3.2.

Regarding the effects on the recipient, several factors must be demonstrable for technology to be considered to have been transferred successfully. For instance, regarding the case of the establishment of a new overseas project, the effect of technology transfer might be identified as a specific objective such as the enhancement of productivity which could take a range of forms including a reduction in defect rates, production time, and cost.

53 Although technology transfer is easily demonstrated to have taken place, it is not so easy to determine the exact nature of the processes governing it. To ease this difficulty, it is important to establish a clear scope of investigation and to collect data according to appropriate methods. It is for this reason in particular that the field survey and case-study approach are considered suitable for this study, especially concerning its “inter-firm technology transfer” aspect.

3.6.3 Factors Regarding Technology Transfer Affecting Technological Capability Development in the Thai Automotive Industry

Research studies show that to achieve the objective of technology transfer, the company needs to consider three factors as follows: The first factor is “the type of industry.” When considering the ratio of technology transfer level between overseas affiliates and Japanese parent companies around the world, the electric machinery industry is found to have the highest level of progress in technology transfer. General machinery, textile, and chemical industries follow (Urata & Kawai, 2000). The second factor is “the need for foreign

technicians or expert assistance” which can support the technology transfer process. The

evidence suggests that technology transfer can take place through the visiting of foreign experts (Padilla-Perez, 2008). The third factor is “sources of component parts.” Technologies can be transferred from technological leaders to companies in developing countries through intermediate products. Then, these companies can modify their production or product design using foreign technologies embedded in these imported parts (Hakura & Jaumotte, 1999). Also, Tatikonda and Stock (2003) note that in the product development process, technology transfer from new products outside the company can support new projects. The company can access modern technologies and improve their ability to introduce a variety of products. In this study of the Thai automotive industry, all three factors are expected to have an effect on technology capability development and are discussed as follows:

3.6.3.1 Type of Industry

At present, many multinational companies use internationalized strategies, and as a result, their knowledge and technologies are unequally transferred to different industries (Alvarez &

54 Molero, 2005). Consequently, different industries are expected to have differences in technology capability development.

In order to produce a car, a variety of components made from plastic, metal, or rubber are needed. Technologies in different industries producing these parts for car assembling plants therefore tend to require specific production expertise. Industries classified as participants in technology transfer tend to be those which intentionally seek new innovation through organisations, collaborators, or innovators. The type of industry involved and its associated technologies then are relevant factors in technology transfer affecting technological capability development. In this study, the relationship between the type of industry and technology capability development needs to be demonstrated for the Thai automotive industry.

3.6.3.2 Sources of Components

While there might be benefits for technology importers from transferred technology, the process of localisation of foreign technology might actually obstruct their progress (Wei, 1995). A low level of local content in production processes based on imported technology means the technology importer needs to rely on foreign suppliers for inputs that local suppliers and technology importers cannot produce themselves to required standards of reliability, quality and cost (ibid.). Local suppliers import some intermediate parts for sub-assembled components. The suppliers can learn from the design of these parts, and then imitate or modify them (Hakura & Jaumotte, 1999). In this study, sources of components are conceptualised as an index defining domestic technology development since the purchasing of raw materials and components indicates the obtainment of newly transferred technology and know-how by Thai suppliers. It is hard for the suppliers to make improvements from purchasing general local auto-parts.

3.6.3.3 Need of Foreign Technicians or Expert Assistance

The assistance of foreign experts can help to develop technology capabilities as the firm adopts these technological skills and then moves to a higher level (Dahlman et al., 1987). Without expert assistance, the technology recipient would be limited to using and maintaining capital-

55 embodied technology. Their ability to plan and design products, and evaluate the design of potential products would be very limited as a result.

In order to reach the goal of dynamically strengthening a firm’s technological capacity for long term development, five stages of assistanceare needed as follows:

(1) Installation and start up: The first stage of required assistance for technology importers

(2) Maintenance: The second stage of required assistance for technology importers which have already transferred technology. A lack of knowledge on how to maintain the technology still exists at this stage.

(3) Quality control: The third stage of requirement for technology importers. The ability to maintain the technology exists, but production is not yet stabilised.

(4) Training programs: The fourth level of requirement for technology importers. The ability to control all areas of production exists, but more skilled workers are required. For example, it might be the case that a company needs to improve their technicians to be ready for the new technology.

(5) R&D support: The last and essential stage of for companies able to take control of all production areas. In this stage, there are a sufficient number of skilled workers who are ready to be assisted in developing their own technology.