TRANSFER OF TECHNOLOGY AND KNOWLEDGE SHARING

Chapter 1. Introduction1Chapter 1.IntroductionTechnological learning and innovation areessential for economic growth and developmentand are major determinants of long-termimprovements in income and living standards.While in the more advanced economiestechnological progress involves the generation ofnew knowledge that can be applied toproductive activity, for developing countriestechnological progress is strongly influenced bytheir ability to access, adapt and diffusetechnological knowledge that has beengenerated abroad.For this reason, the implications for trade anddevelopment of the technology gap betweendeveloped and developing countries and thequestion of how to promote transfer anddiffusion of technology have been part ofinternational discussions for decades.The varied approaches to this issue that havedeveloped over time and the rich literature that ithas generated are indicators of the complexity ofthe issue and of the challenges that conceivingand managing the process of transfer oftechnology presents for both firms andpolicymakers.1.1 What do we mean by transfer oftechnology?The literature on transfer of technology uses arich variety of concepts and definitions but noclear consensus exists about the nature of thisprocess. The context in which the process takesplace, as well as the concept of technology itselfthat is used strongly influence the definition oftransfer of technology. For example, indeveloped countries the concept often refers tothe process whereby universities or researchcentres provide access to technologies createdthere through a variety of mechanisms forinteraction with market operators.The term “transfer of technology” may also beapplied to the process by which a technologydeveloped for a specific use or sector becomesapplicable in a different productive setting.Transfer of technology may refer to a processthat takes place within or across nationalboundaries, and on a commercial or noncommercial (concessionary) basis. It may refer tothe physical movement of assets or toimmaterial elements such as know-how andtechnical information, or most often to bothmaterial and immaterial elements. Transfer oftechnology may be linked to the movement ofphysical persons or more specifically to themovement of a specific set of capabilities.The Draft International Code of Conduct on theTransfer of Technology that was negotiatedunder UNCTAD auspices between 1978 and1985 defined technology as the systematicknowledge for the application of a process thatresults in the manufacture of a product or thedelivery of a service. Technology is not a finishedproduct or service as such, although it can becritical for its delivery or performance.Technology does include the entrepreneurialexpertise and professional know-how to deliverproducts and services (UNCTAD, 1985).Similarly, Burgelman et al. (2008) propose that“[t]echnology refers to the theoretical andpractical knowledge, skills, and artefacts thatcan be used to develop products and servicesas well as their production and delivery systems.Technology can be embodied in people,materials, cognitive and physical processes,plant, equipment and tools.”On the basis of the above definition oftechnology, the Code defined transfer oftechnology as “the transfer of systematicknowledge for the manufacture of a product, forthe application of a process or for the renderingof a service and does not extend to the meresale or lease of goods”. From this, five

2Transfer of technology and knowledge-sharing for developmentcategories of transactions could representtransfer of technology as follows:x The assignment, sale and licensing of allforms of industrial property, except for trademarks, service marks and trade nameswhen they are not part of technologytransfer transactions;x The provision of know-how and technicalexpertise in the form of feasibility studies,plans, diagrams, models, instructions,guides, formulae, basic or detailedengineering designs, specifications andequipment for training, services involvingtechnical advisory and managerialpersonnel, and personnel training;x The provision of technological knowledgenecessary for the installation, operation andfunctioning of plant and equipment, andturnkey projects;x The provision of technological knowledgenecessary to acquire, install and usemachinery, equipment, intermediate goodsand/or raw materials which have beenacquired by purchase, lease or other means;x The provision of technological contents ofindustrial and technical cooperationarrangements (UNCTAD, 1985).technological knowledge among users indeveloping countries and pay much attention togeneral issues related to the development oftechnological capabilities. Thus, for example theIntergovernmental Panel on Climate Changedefines transfer of technology as “the broad setof processes covering the exchange ofknowledge, money and goods amongst differentstakeholders that lead lo the spreading oftechnology for adapting to or mitigating climatechange. In an attempt to use the broadest andmost inclusive concept possible, the Reportuses the word ‘transfer’ to encompass bothdiffusion of technologies and cooperation acrossand within countries.” 1 From this perspective,the availability in the economy of the abilities toadapt and master foreign technology become asimportant, if not more, for successful transfer oftechnology than the formal design of the specifictransaction on which the Code focused. Thisbroader concept of technology transfer will bethe one that underpins the analysis in this report.A distinction between the notions of “transfer”and “diffusion” of technology may be necessaryin this context. In general, the literature ontechnology diffusion tends to apply that term tothe progressive adoption of a particular kind oftechnology among a given population and giveto this concept a more passive connotation.Although narrow (for example, this list does not Transfer of technology tends to refer to a moreinclude transactions in the context of non- proactive process in which users seek to acquirecommercialoperationssuchas the knowledge to effectively use a technologyintergovernmental technical cooperation), this and to master its material and immaterialdefinition of transfer of technology has the elements. There is an element of purposefulnessadvantages of being comprehensive and precise. in transfer of technology that may not be presentHowever, the negotiations on the Code never in diffusion processes. Transfer of technologycame to fruition and an internationally agreed also involves the agreement of at leastdefinition of what constitutes transfer of two parties whereas diffusion is not atechnology does not exist. This has implications bilateral transaction.for the interpretation of a number of internationalinstruments that call on developed countries In spite of all these conceptual difficulties, theto engage in, promote or facilitate transfer understanding of technology and the relationshipbetweentechnology,innovationandof technology.development, and policymaking, has improvedIn this context, broader notions about the kind of in the past two decades (ICTSD, 2012).activity that constitutes transfer of technology Discussions on technology transfer havehave emerged since the abandonment of the become a recurring issue in a variety ofwork on the Code. These tend to take a broader international forums, such as the Earth Summitview of transfer of technology, as a process that of 1992 in Rio de Janeiro, and in the Unitedincludes the facilitation of the diffusion of Nations Framework Convention on Climate

Chapter 1. IntroductionChange (UNFCCC). The deliberations at theWorld Trade Organization (WTO), WIPO and theCommission on Intellectual Property, Innovationand Public Health (CIPIH) of the World HealthOrganization (WHO) have addressed theacquisition, use and learning from technologiesthat span from the public domain to the currentscientific frontiers.Following through the early 1990s, the growingimportance of intellectual property and efforts bydeveloped countries to protect the strategicinterests of their rights holders and knowledgeindustries had made intellectual property rights(IPRs) a key component in the GeneralAgreement on Tariffs and Trade (GATT)negotiations and the WTO agreements. Thisresulted in the adoption of the Agreement onTrade-related Aspects of Intellectual PropertyRights (TRIPS Agreement) in 1994 and was astrong indication that IPRs were now the keyelement of trade and technology relations in aglobalized world. Its proponents argued that theTRIPS Agreement would lead to increased levelsof investment, technology transfer, andinnovation, globally and in developing countriesas well.1.2 Context of the discussionFrom early days, the international discourse hasfailed to develop a constructive and ent-relevant technology transfer needs.This reality still holds true today. As a result, anddespite the broad international consensus onthe importance of technological change fordevelopment, the technological divide has beenwidening internationally, regionally and withinnational boundaries, with the technologicalmarginalization of the poor.The technology gap among developingcountries is increasing, with several developingcountries spearheading change (UNCTAD,2012a; Ocampo and Vos, 2009) while manyothers experience technological poverty.The lack, UNCTAD has maintained, of asystematic approach in fostering STI fordevelopment and the resulting lack of tutions and finance, prevent developingcountries from absorbing technology andachieving sustainable development paths(United Nations, 1990; UNCTAD, 2003a, 2003b,2003c and 2004). Furthermore, the fundamentalissue of financing technology transfer has grownmore acute during the last twenty years, giventhe strengthening of intellectual property rightsregimes, the full-blown commercialization ofresearch and development activities and theever-deepening linkages between industry andacademic institutions.As this report will show, while the term “transfer”suggests a unique direction of movement,successful technology transfer in practice isoften a collaborative and complex processwhereby knowledge and information move inmany directions and human capacities evolveand develop to ensure the completion of thetransfer. Technology transfer often requires anadaptation of the technology to the conditionsand circumstance in the transfer destination toimprove its effectiveness and impact potential,commercial or otherwise. Technology transferrarely happens without financial support. It maytake the shape of finance available to risk-takersand entrepreneurs or as incentives provided byGovernments to improve access to technologyin sectors such as health, education and publicinfrastructure.At the most basic level, technology transferoccurs when there are sufficient incentives tocommercialize a given technology in a newlocation through trading products, licensing orinvesting. However, incentives can vary widely:technology is transferred when it makescommercial and financial sense or when itsatisfies institutional interests and requirements,including strategic national interests and socialand economic development policy, as well asregulatory and legal requirements.Technology transfer depends on many factorsincluding the geographical position of origin , commercial prospects, thelevel of development of human capacities andskills, governance, and infrastructure. Several

4Transfer of technology and knowledge-sharing for developmentof these factors are mandates of policymakersand are elements of a national developmentstrategy.There are no sure-fire singular policyprescriptions that can work to ensureincreasing technology transfer to developingcountries in order to fill their technology gap.There is, however, some evidence that someenvironments and practices are moreconducive to technology transfer, resulting inthe creation of economic value throughinnovation. Identifying some of these is themain purpose of this report.1 .3 Outline of the reportThis report reviews some basic conceptsunderlying technology and knowledge transfertheory and practice and presents someconcerns that may inform the policy choices ofdeveloping and developed countries in thisfield.Chapter 2 describes the knowledge andtechnology gaps that exist between developedand developing countries, and analyses thedimensions that determine technologicalcapabilities with the intention of providing aclear contour of the target areas for transfer oftechnology policies. Chapter 3 studies thevarious channels of technology and knowledgetransfer and discusses their relativeperformance and the opportunities andchallenges they present for policymakers.Chapter 4 looks into the importance ofbuilding effective innovation systems andabsorptive capacities in order to enabletransfer of technology and innovation throughthe various available channels. Chapter 5covers the issue of the relationship betweennational and international property rightsframeworks and the effectiveness of transferof technology efforts.Chapter 6 describes the scope of technologyand knowledge transfer needs from thedevelopment perspective in a number of keysectors and applications of technology.Chapter 7 presents a discussion of theprocess of economic discovery that leads fromtechnology transfer to innovation and howproperly understanding and supporting thisprocess is vital for positive developmentoutcomes. Finally, Chapter 8 develops anumber of conclusions.

Chapter 2. Technology and knowledge gaps5Chapter 2.Technology and knowledge gapsTechnological progress and innovation havelong been recognized as fundamental drivers ofeconomic growth and development and haveoften been identified as key determinants ofinternational differences in per capita income(see, for example, Parente and Prescott, 1994).In this sense, explicit or implicit policies topromote technological upgrading have alwaysbeen a major concern of economic policy.However, over the last few decades, acceleratedtechnological change combined with thecompetitive pressures of globalization haveadded to the relevance of technology andinnovation for competitive strategies at the levelof the firm and for development policy at thelevel of the economy.2.1 Development and technologicalconvergenceThe convergence with advanced industrialeconomies in terms of income per capita,economicdiversificationandhumandevelopment experienced by a number ofdeveloping countries in South and East Asia hasbeen linked to their investment in human capitaldevelopment and technology (Nelson and Pack,1999; Yusuf and Nabeshima, 2007; Fofack,2008). The narrowing technology and innovationgap between, first, Japan, then the Republic ofKorea, and more recently China, India andSouth-East Asia, and developed marketeconomy countries, manifests itself as areduction in the overall development divide(Mathews and Hu, 2007; Lucas, 2007).Conversely, a common characteristic of leastdeveloped countries (LDCs) and their economiesis the weakness of their technological andinnovation capabilities. 2 Many LDCs have seenan absolute deterioration of their scientific andresearch and development structures, oftendirectly linked to political disruptions, civil strifeand the consequential weakening publicspending, arising from fiscal deficits s (Teferra and Altbach, 2003). Theensuing generalized deterioration of STI activitieshave become a major constraint for growth andeconomic development, leading many countriesto lower positions on the technology ladder andtowards an increasingly marginalized position inthe global economy.For most developing countries, whoseeconomies operate far from the technologicalfrontier, this greater focus on STI policytranslates into a renewed interest in the questionof transfer of technology. In order to develop afavourable environment where incentivesencourage transactions that transfer technology,many developing countries have enactednational policies and supported international andmultilateral agreements and deliberations aimedat stimulating technology transfer. Yettechnological convergence remains elusive andonly a few developing countries have succeededin building strong STI capabilities. A briefpresentation of the main dimensions of thetechnology gaps that separate developed anddeveloping countries can facilitate the discussionof the possible means to promote transferof technology.2.2 Technology and knowledge gapsMajor aspects of the technology and knowledgedeficits in many developing countries are easilydiscerned by observing such indicators as theshare of gross domestic product (GDP) devotedto scientific and technological research (figure 1)or the low share of manufacturing andtechnology products in exports (figure 2).However, a more comprehensive and actionableperspective can be gained by making anassessment of the development of absorptivecapacities for technology and the functioning of

6Transfer of technology and knowledge-sharing for developmentFigure 1. Expenditure on research and development as a percentage of GDP (2002, 2007 and 2009)Source: UNESCO.the national innovation system. For this,technology and knowledge stocks and flows, aswell as the supporting institutional and policyframeworks, must be brought into the picture.Technology gaps, or distance to the frontier, canbe defined as the differences in technological orknowledge advancements between firms orcountries. In the context of this report, the gaprepresents the differences in technological andinnovation capabilities between developed anddeveloping nations. The identification andmeasurement of the gap can be a good starti

Jan 13, 2013 · iv Transfer of technology and knowledge-sharing for development Acknowledgements This report was prepared by a team of the Science, Technology and Information and Communications Technology (STICT) branch of the UNCTAD Division on Technology and Logistics (DTL), c