The technology gap is the determinant between rich and poor countries. The solution could be to transfer technologies. However, access to technology and how to use them do not make poor nations rich. They need technology absorption and advancement capability. Subsequently, they need to succeed in generating technology ideas and to profitably integrate them into their products–making them better and cheaper. However, this aspect of necessity is often missing. Subsequently, it raises the question: is technology transfer a development myth?
The predominant doctrine is that technology transfer for development plays a crucial role. Particularly, the recent trade row between China and the USA has drawn significant interest in the technology transfer issue. There has been an allegation that China has been taking over foreign firms by forceful transfer of technology. Automobile making is one of the technologies that has been creating a contentious issue of this trade dispute. Why should advanced countries not help China uplift its technology base? On the other hand, through technology transfer, can China outperform foreign firms in High-tech product trade? However, are there reasons to believe that technology transfer for development is a myth?
In retrospect, many examples indicate that technology transfer for development fails to uplift economic value creation ability. Hence, it raises the question: is technology transfer for development myth? Nevertheless, there are also examples of successes. Hence, we should analyze it a bit deeper to figure out what it takes to drive development through technology transfer.
Is technology transfer for development myth?
The level of access to technology underpins the high income and living standards of advanced countries. From such an understanding, it’s being perceived that if developing or less developed countries are allowed to access advanced countries’ industrial technologies, the gap between rich and poor nations will rapidly erode. But despite such a possibility, poor nations’ technology base has been advancing slowly. There are often complaints from developing countries that advanced ones are reluctant to transfer industrial technologies. There could be many connotations of technology transfer. But one of them could be given training and providing equipment. It may even include opening access to patents to enable developing countries to make industrial products like automobiles. But upon having such access, will developing countries succeed to benefit from technology transfer? Let’s clarify the possibility and difficulty within the context of making automobiles.
Hypothetical scenario: Car-making technology was transferred to Bangladesh
Let’s assume that in 1972, an advanced industrial nation like the USA became very generous. Subsequently, it transferred automobile-making technology to Bangladesh. In showing this gesture, the USA, as a gift, set up an automobile plant in Bangladesh. The plant had the capacity to produce all the components and assemble them to deliver the finished automobile. Bangladesh also received the necessary training for developing a skilled workforce.
Moreover, full access to all the associated patents was also opened to Bangladesh. Does it mean that Bangladesh could have succeeded in developing a profitable automobile business? Could Bangladesh succeed in profitably serving both the domestic and export market
There could have been many underlying reasons. But one of them is the lack of capacity to keep improving automobiles being produced and upgrading manufacturing processes. In the absence of this Incremental Innovation capacity, the transferred technology of making automobiles could have been no benefit to Bangladesh–for improving the income level and quality of living standard. Moreover, there is also the necessity of coping up with and pursuing Creative Destruction out of changing the technology core.
To clarify this issue, which has been hindering the creation of economic benefits out of technology transfer, let’s examine the major advancement of the role of technology in supporting incremental innovations in the automobile. Over the last 50 years, there has been the adoption of 20 major technologies in driving incremental innovations for releasing better cars at regular intervals. It’s worth noting that innovation magics are unfolding through a redesign–by leveraging incremental advancement.
Like many other industrial products, the technology base in the automobile has been growing steadily
Among many features, we are happy with regular cruise control for its service for holding the velocity of our cars steady until the driver intervenes. But such service becomes futile once the car driving in front keeps changing the velocity affecting the inter-vehicle distance. To address it, adaptive cruise control has been a major feature of modern automobiles. Sensors like Radar and/or cameras are fitted to keep producing data about the vehicle’s speed and distance driving in front. Based on the measured speed and distance, software running in your car keeps adjusting your car’s speed.
Another important technology feature is the rearview camera, fitted in almost all new cars and also retrofitted in some older ones. Not long ago, to see what was behind, the driver actually had to turn their head and look. But the addition of a rearview camera and connecting it to the display attached to the dashboard no longer requires the driver to turn their heads to see who is behind.
The automatic liftgate is another useful incremental advancement of automobiles. For many modern cars, simply walk to your vehicle with the key fob, and the car will sense it and automatically open it for you.
Well, having access to car keys is essential to driving, but old-fashioned car keys are on the route of the floppy disc—very soon to be obsolete, clumsy, and forgotten. The electronic key fobs of the newest cars allow drivers to lock, unlock, and start their vehicles from afar. With the help of proximity sensors, fobs can automatically unlock a car’s door when the driver touches the handle, which is quite useful when you have bags and/or children. With the help of a fob, keyless ignition is another useful feature; it immediately increases the car’s perceived value.
Navigation and autonomous driving features are unfolding
Another useful feature is in-car navigation. With the help of GPS, we are very much used to get the driving direction from it. The integration of it with the cellular network has also made it even possible to receive dynamic route planning to cope with the evolving traffic situation.
The integration of smartphones with car has opened a new dimension of incremental innovations. Well, voice recognition may not sound very exciting, but it’s definitely one of the most convenient when used properly. It could be useful for drivers as it initiates calls, gets directions, drafts and reads texts, and even searches for local points of interest without the driver typing a single word. The integration of smartphones with cars has opened a new dimension of incremental innovations. It could be useful for drivers as it initiates calls, gets directions, drafts and reads texts, and even searches for local points of interest without the driver typing a single word.
Last but not least, automatic parking could be very helpful, particularly for parallel parking. This technology feature started to pop up in the early 2000s, most notably in 2006 with the Lexus LS460. With the sonar sensor and rearview camera, such feature-equipped vehicles could parallel park almost completely by themselves.
The necessity of incremental innovation makes technology transfer for development myth
An array of technology features is popping up, increasing automobiles’ functionality, comfort, and safety. In the absence of these features, vehicles with wheels, engines, and seats do not have much appeal. As a result, the technology transfer in the early 70s, enabling developing countries to make cars, would not have developed a sustainable industrial capability in a globally competitive economy. It’s about the ability of incremental innovation to keep improving vehicles and the process of making them, which are vital. Such capability is not amenable to articulation as a readily transferable skill.
It’s quite understandable that science and technology education should be expanded to absorb and adapt technologies. But such absorption capability does not necessarily lead to the capacity of innovations of technology features to improve products and the processes to produce them. Countries with the aspiration to benefit from technology transfer should also focus on diverse technology and innovation management capabilities. Such capability should include technology auditing in clarifying key technologies that the target country, industry, or even firms need to support innovative features to existing productive activities. Such auditing capability should be extended by assessing external technology trends and figuring out how to leverage them.
Technology and innovation management is a missing competence, which makes technology transfer for development a myth
To acquire the capability to keep adding technology features in an incremental manner, the recipient should attain many abilities. It begins with scanning technologies, as many useful technologies for driving automobile innovations would likely develop in diverse areas. For example, RADAR sensor technology was not developed for the purpose of the automobile. Researchers spotted this technology developed outside the automobile industry and adapted it to support adaptive cruise control innovations. Similarly, neither sonar nor voice recognition was developed by the automobile industry, targeting the incremental innovation of automobiles. To take advantage of evolving technologies for releasing one after another better version of automobiles, management and organization capabilities should be developed accordingly.
Technology forecasting matters
Moreover, technology prediction is also an important area to focus on. All underlying technologies in driving incremental innovations are going through changes. These technologies are not only improving but also, in certain cases, they are creating discontinuities. Some of the forecasting attributes are performance growth, substitution possibility & speed, and paradigm shift. It also includes predicting the trajectory of evolution, diffusion rate, and Breakthrough possibility & timing. In the absence of these capabilities, mere technology knowledge and R&D capability would not be sufficient to succeed in the incremental innovation race.
Car-making technology transfer actually did not work: Examples from Malaysia and India
Despite dissatisfaction about the progress, initiatives are in place to open doors to transfer industrial technologies from advanced countries to developing ones. For example, Malaysia set up a car plant in partnership with Japanese Mitsubishi. Through this joint venture engagement, Malaysia succeeded in making many automobile parts and assembling them together to roll out finished cars. But over the decades, this joint venture Malaysian company failed to develop a competitive capacity to keep adding incremental innovations to the product and process to produce it. As a result, Malaysian car-making capability has been losing market value.
Similarly, India had an automobile-making plant producing Ambassador brand cars. In the 1950s, Hindustan Motors transferred car-making technology from a British company and started producing cars in India. But in the absence of incremental innovation capability, Hindustan Motors kept producing the same car over the decades. As a result, this automobile-making technology capability kept losing market value leading to basically closure of the plant. Hence, these examples clarify why technology transfer for development is a myth.
Technology management, absorption, and advancement
Transferring the existing technology alone does not lead to sustainable industrial capability. With the success of having the capability of replicating industrial products, initially, there could be a sense of leapfrogging in attaining industrial capability. But in the absence of technology and innovation management competence leading to consistent progress through incremental innovations, the market value of transferred technology capability keeps drifting downwards.
Developing countries are investing in education and science and technology training. They are also offering incentives to transfer technologies. However, hardly, they are feeling the necessity of acquiring technology and innovation management capability, let alone investing in acquiring it. In the absence of this latter capability, the investment made for education, training, and technology transfer often leads to unsustainable industrial competence. Hence, it does not appear to be unfair to say that technology transfer is a development myth.
Upon detecting the need for technologies, which could be converted into commercial innovations, the next challenge is to figure out how to acquire them. The technology selection and acquisition process should also address related key issues. One key factor affecting technology selection and adoption is anticipating the market receptiveness of targeted technology features. The analysis should determine the technological feasibility of adding those features and assess whether the addition of target features will lead to profitability. It should anticipate the competence needed for the adoption and adaptation and eventually assess organizational suitability. In the absence of these and other relevant capabilities, the technology transfer agenda often does not lead to sustainable capability benefiting from technology and innovation. Besides, there is a risk of making a wasteful investment.
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