Technology Acquisition,

Absorption and Diffusion ;

Technology Exports / Joint venture
Abroad

Technology Acquisition
2

What Is Appropriate Technology?

Addressing basic needs?

Latest, most advanced?
Standard technology (most common)?
Obsolete technology (cheapest)?
Best fit with factor endowment (labor-intensive etc.)?
Best fit with other local conditions (climate, suppliers, repairs, etc.)
Greatest scope for learning, building competencies?
Buy versus grow your own?

Technology not just a product to be bought and sold, or a physical

transformation process. Quality of implementation is more important

than mode of acquisition

Charu Gupta

Technology-Acquisition
3

Steps (Not Always Sequential)

1.
Assess local constraints and available technologies.
2.
Evaluate costs and benefits of each technology.
3.
Acquire.
4.
Incorporate.
5.
Use.
6.
Adapt.
7.
Change.
8. Create

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Factors In Technology Acquisition

4

Seller differences

European suppliers more generous on basic industry

technology.
US suppliers more generous on consumer goods technology.

Buyer participation in transfer process is crucial.

Technology not on open shelf, but protected by secrecy

and patents.
Technology involves tacit knowledge, understood only
in use, not from recipe.
Some technology elements may be non-tradable.
Charu Gupta

Lessons of Technology Acquisition

5

Lengthy process, often 10 to 20 years.

Mix of local and external inputs (purchase to fill gaps).
Lumpiness of technology in multistage process.
Challenge of adapting imported management techniques.
Importance of local learning and adaptation

Assessing local constraints

Capacity stretching solutions
Ability to scan world for need technology.

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Technological Change Environment

6

Incentives (market mechanisms)

Institutional infrastructure
Technological agents
R&D centers.
Government roles
Appropriate macroeconomic framework
Encouraging technological agents
Facilitating information access
Competition policy or regulations to prevent abuse of monopoly
power
Selectivity important in national technology policy, nation cant
do everything.
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Channels of technology flow & acquisition

7

General Channels -education, training,

conferences, study missions & Exchange of visits

Reverse Engineering Channels
Planned Channels- with the consent of Tech.
owner

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Types
8

Licensing
Franchise
Strategic Alliances
Joint Venture
Foreign Direct Investment (FDI)
Turnkey Project.
Purchase of capital goods.
Purchase of technical assistance.
Sending people abroad
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Licensing
9

Licensor(Patent Technology Inventor) grants to

Licensee for the term of an agreement, a

nonexclusive, non-assignable, right and license to
use its Technology. It may entail an outright
purchase or a lump sum amount initially plus a
percentage of sales
IBM / Applied Micro - Patent License Agreement,
Hewlett Packard / Lexmark International Group Patent Cross-license Agreement, IBM / Applied
Micro - Patent License Agreement
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Franchise
10

The Franchise Agreement is the cornerstone document of

the Franchisee--Franchiser relationship.

This agreement formalizes the conditions of the
Franchisee agreement, including the term length,
franchise fee and royalties, as well as a number of other
issues such as technology developmental assistance,
training, and marketing.
In a Franchisee Agreement, an entrepreneur buys a
license to use another business technology products,
brand, proprietary knowledge, and trade secrets. McDonald
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Franchising Model
11

A franchise is a license issued to someone to operate a business using a

common brand name, a common operating support system and

involving the payment of initial and/or ongoing fees.
For example, when you buy a copy of Microsoft Office you are not
actually purchasing Office--you are entering into a license agreement
that allows you to use the product under the specified terms and
conditions they have outlined in the license agreement (all that fine
print that no one reads).
In a franchising model, the franchisee uses another firm's successful
business model and brand name to operate what is effectively an
independent branch of the company.

Charu Gupta

Cont
12

The franchiser maintains a considerable degree of control over the operations and
processes used by the franchisee, but also helps with things like branding and marketing support
that aid the franchise. The franchiser also typically ensures that branches do not cannibalize
each other's revenues.

Under a licensing model, a company sells licenses to other (typically smaller) companies to
use intellectual property (IP), brand, design or business programs. These licenses are usually
non-exclusive, which means they can be sold to multiple competing companies serving the
same market.

In this arrangement, the licensing company may exercise control over how its IP is used
but does not control the business operations of the licensee.

Both models require that the franchisee/ lincensee make payments to the original business that
owns the brand or intellectual property. There are laws that govern the franchising model and
define what constitutes franchising; some agreements end up being legally viewed as franchising
even if they were originally drawn up as licensing agreements

Charu Gupta

STRATEGIC ALLIANCE
13

AA
M
FFIR
M
R
I
FFIRM B
IRM B

Partnership between the firms where their

RESOURCES

CAPABILITIES

CORE
COMPETENCIES

are combined to pursue mutual interests to

DEVELOP

MANUFACTU
RE

DISTRIBUTE

GOODS AND SERVICES TO CONSUMERS

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CC
M
FFIR
M
IR

Benefits of Strategic Alliance

14

Access to unfamiliar or untapped market

Risk sharing

Economies of scale
Shared Technology
Decreased cost

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Strategic alliance
15

Strategic alliance is sharing of capabilities between

two or more firms with a view to enhance their

competitive advantage and creating a new business
without losing their respective strategic autonomy.
Alliances or cooperative agreement can involve a
joint research efforts, technology sharing, and joint
use of production facilities, marketing one anothers
products or joining forces to manufacture
components or assemble finished products.

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Strategic alliance categories:

16

Strategic alliance can be grouped into three broad

categories:
Non equity alliance
Equity alliance
Joint Venture

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Benefits of Strategic alliance:

17

Strategic alliance can provide or attain:

Cost reduction
Access to complementary skills
Joint contribution to marketing and promotion costs to

enter new markets.

Access to capital and grants
Access to required plant and equipment
Increased bargaining power
Cooperation in undertaking training
Improved performance and efficiency and thus chances
of survival.
Charu Gupta

18

Charu Gupta

Alliances
19
Alliances are formed for the purpose as to organize joint R&D, technology

sharing, marketing others products.

Prior to forming an alliance or strategic partnership, the status of alliance
partners is that of uncertainty and instability, often deepening into crisis.
But the partners seek to overcome the crisis that might abort the efforts to
form an alliance.
They employ short term strategy and save the intended alliance from
collapsing. These efforts are represented by broken lines running above the
crisis point before and after time zero. The short term intervention might
help convert the crisis into an opportunity.
The task of converting the crisis into opportunity may take at least one year.
The alliance partners shall consolidate with the same short term
interventions.
With the consolidation stems the possibility of alliance partners becoming
complacent and even slipping back to the comfort zone, the stage at which
alliance partners were placed prior to the efforts to entertain strategic
partnering.

Charu Gupta

MOTOROLA & IN-FOCUS

20
Motorola and In-Focus Systems saw an opportunity to gain a share in the burgeoning
worldwide market for high-performance video display panels.
In-Focus developed a new technology that lets it make passive matrix displays that
are almost as good as active matrix displays but cost much less.
Motorola purchased a 20% interest in In-Focus for $20 million. They then formed
an equally owned joint venture to build display panels incorporating In-Focus's
technology Motorola's integrated circuits.
In-Focus got the capital it needed, a key customer, and access to Motorola's
international distribution manufacturing capabilities.
Motorola locked in a strategic technology that it was unable to develop internally.
The technology permits Motorola to leapfrog past rival Japanese competitors.
It also created a captive customer for its integrated chips while getting an equity that
could rocket in value.
Charu Gupta

Joint Venture
21

A contractual agreement joining together two or more

parties for the purpose of executing a particular business
undertaking by sharing resources, knowledge & technology
Since the cost of starting new projects is generally high, a
joint venture allows both parties to share the burden of the
project, as well as the resulting profits.
In a joint venture, both parties are equally invested in the
project in terms of money, time, and effort to build on the
original concept.
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JOINT VENTURES
HOME COUNTRY

HOST COUNTRY

MULTINATIONAL
ENTERPRISE

LOCAL FIRM

Inputs

Share of Profits
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22

JOINT
VENTURE
COMPANY

Limitations of Joint Venture

Potential loss of proprietary knowledge
23
Potential conflicts between partners

Neither partner has full performance incentive

Neither partner has full control

Charu Gupta

MARUTI SUZUKI

24

Maruti Suzuki India Limited a partial subsidiary of Suzuki Motor Corporation of

Japan, is India's largest passenger car company, accounting for over 45% of the
domestic car market.
The company offers a complete range of cars from entry level Maruti 800 and Alto, to
hatchback Ritz, A star, Swift, Wagon-R, Estillo and sedans DZire, SX4, in the 'C'
segment Maruti Eeco and Sports Utility vehicle Grand Vitara.
It was the first company in India to mass-produce and sell more than a million cars.
It is largely credited for having brought in an automobile revolution to India.
It is the market leader in India
On 17 September 2007, Maruti Udyog Limited was renamed Maruti Suzuki India
Limited.
The company's headquarters are located in New Delhi.
Charu Gupta

SONY ERICSSON
25
Sony Ericsson Mobile Communications AB is a joint venture established on
October 1, 2001 by the Japanese consumer electronics company Sony Corporation and
the Swedish telecommunications company Ericsson to manufacture mobile phones.
The stated reason for this venture is to combine Sony's consumer electronics expertise
with Ericsson's technological knowledge in the communications sector.
Both companies have stopped making their own mobile phones.
The company's global management is based in Hammersmith, London, and it has
research and development teams in Lund, Tokyo, Mexico City, Beijing, and Redwood
Shores in the US.
By 2009, it was the fourth-largest mobile phone manufacturer in the world after Nokia,
Samsung and LG.
The sales of products largely increased due to the launch of the adaptation of Sony's
popular Walkman and Cyber-shot series.
In 2010, its market share had fallen to sixth place behind Research In Motion and
Apple.
Charu Gupta

Turnkey Project
26

A turnkey or a turnkey project (also spelled turnkey) is a type of project that is constructed so that it could
be sold to any buyer as a completed product.
This is contrasted with build to order, where the
constructor builds an item to the buyers exact
specifications, or when an incomplete product is sold with
the assumption that the buyer would complete it.
All that the customer has to do is turn the key in the lock
to open the door and start operating. Everything has been
done and is ready to go.
Charu Gupta

Foreign direct investment

27

Foreign direct investment is defined as a company from

one country making a physical investment into building a
factory in another country.
The direct investment in buildings, machinery and
equipment acts as a source of new technologies, capital,
processes, products, organizational technologies and
management skills, which can provide a strong impetus to
economic development.
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Foreign Direct Investment

28

It is in contrast with making a portfolio investment, which is

considered an indirect investment.
It may take many forms, such as a direct acquisition of a foreign
firm, construction of a facility, or investment in a joint venture
or strategic alliance with a local firm with attendant input of
technology, licensing of intellectual property

Charu Gupta

29

Charu Gupta

Technology Diffusion & Market Growth

30

Technology Diffusion is a process by which an

innovation is communicated over time through

certain channels to members of a social system

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Diffusion of Technology is Dependent

on:
31

Degree to which innovation offers better

advantage than does existing practice

Degree to which innovation is compatible with
values and needs of users
Degree to which innovation is considered
complex and difficult to use

Charu Gupta

Diffusion of Technology is Dependent

on:
32

Degree to which innovation can be used on

trial before commitment to its adoption

Degree to which innovation seen, results
observed by potential adopters

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The Diffusion-Communication-Channel
Relationship
33

Adopters of an innovation are influenced by

two types of communication channels

- interpersonal word of mouth
- mass media channels
Mass media influence greatest in early phase
& is continuous throughout diffusion
Number of users who adopt the innovation
due to interpersonal channel expands during
early phase then decline during second half of
diffusion process

Charu Gupta

The Diffusion-Communication-Channel
Relationship
34

Adopters of an innovation are influenced by

two types of communication channels

- interpersonal word of mouth
- mass media channels
Mass media influence greatest in early phase
& is continuous throughout diffusion
Number of users who adopt the innovation
due to interpersonal channel expands during
early phase then decline during second half of
diffusion process

Charu Gupta

35

Process technology-techniques of producing &

marketing goods & services. i.e. work methods,

equipments distribution & logistics. E. g. Henry
Ford-assembly lines, Japanese Quality circles.
Product technology- embodied in goods & services of
the firm either invention or innovation. It is related
to volume of output.

Charu Gupta