A Theoretical Paradigm for Importing Technology

Globalization of business in the recent years has accelerated transfer of technology across national boundaries. Although traditionally popular with less developed countries, technology importation has rapidly gained popularity over domestic development of new methods of production in industrial nations. This trend is partially due to increasing economic and technological interdependence among countries of the world, as well as increasing cost of domestic R&D. Since the appropriateness of the new technology to the recipient environment determines its chances of acceptance, systematic planning for importation becomes a pre-requisite to success. Ironically, there has been little methodical study of the transfer process. This paper presents a conceptual model which identifies five phases in the process of technology importation (see Figure 1). The result is a normative paradigm which provides a planning tool for the importer of technology. The need for a theoretical paradigm to map various phases of the technology transfer process stems from two main sources: growing popularity of technology transfer and importance of appropriateness of new technology to the recipient environment. These issues are explored in the following sections. Literature on technology transfer commonly reflects two problems: comprehensiveness (mostly partial models) and perspective (mostly exporter's view). The section on methodology of transfer studies elaborates on these problems. What is needed is a comprehensive theoretical construct which reflects user's perspective. This paper presents such a construct. 1. Growing Popularity of Technology Transfer Decade of 1980's witnessed an augmentation of popularity of new technology importation as a vehicle of economic growth (Garland, 1986, p.88; Mansfield, 1982). Globalization of national economies in the Western world combined with rapid political and social reforms in eastern block countries signals further enhancement of technology transfer in following years. Retrospectively, developing countries generated the primary source of demand for technology importation. To pursue the end of speedy economic development, these nations mainly relied on importing technology from the industrial world (Burch, 1988). The evidence suggests that the rate of technology transfer to these countries has increased. During the 1960-68 period about 27 percent of the technologies transferred by U.S. firms to their subsidiaries in developing countries were less than five years old. This proportion for 1969-78 had increased to 75 percent. Developed economies, until recent years, depended on internal R & D to generate the new technology required for their economic growth. Due to a number of developments in recent decades, this tendency no longer persists. The U.S. economy has been no exception to this rule. Imported machines accounted for 40 percent of the U.S. machine tool market in 1983, up from only thirteen percent a decade earlier (Garland, 1986, p.2). Increasing demand for compact cars, combined with increasing car imports and the lack of sufficient domestic R & D, attracted the American automobile manufacturers to the profit potential of the imported small-car manufacturing technology (Nag, 1983). An examination of consumer products reveals that many components of American-made products are imported. Remington electric razors include parts from Mexico and the Far East, although the company has emphasized their U.S.-made appeal in their commercials in past. Acceleration in the rate of technology transfer is prompted by the fact that many major companies have shifted an increasing share of their R&D overseas. In the pharmaceutical industry, for instance, about one-half of the total R&D in Canada and about one-seventh of R&D in the United Kingdom were done by U.S. firms (Mansfield, 1982). The increasing cost of R&D has also contributed to sharing of technology. A fall in rate of innovation in many industries (Grabowski, 1976), a shift away from long-term and risky R&D projects in many profit-seeking companies (Nason, 1978) and a decline in R&D share of GNP (Mansfield, 1982) are some other factors which promote the substitution of transferred technology for domestic development. A central issue in the transfer of technology is its suitability to the new environment. The following section elaborates on this matter. 2. The Question of Appropriateness The history of negative consequences of inappropriately imported technology serves as another justification for further study of the technology transfer process. Examples of such negative impacts are more easily traceable in many developing countries, where hastily imported technologies to meet rapid-economic-growth objectives have led to undesirable effects. Fatehi and Derakhshan (1982) used the examples of social problems created by introduction of "Lorena" stoves in Guatemala's Indian villages to emphasize the importance of sociocultural study of the expected effects of technology transfer before a fullscale transfer could begin. They suggested that planning, integrated with an adaptive management style, could help predict and deal with even unusual problems such as the mass hysteria among the female employees of semiconductor factories in Malaysia caused by "spiritual possession" (Fatehi and Derakhshan 1982). In a more recent work the same authors examined the ecological damages caused in some Asian countries due to inappropriate planning (Derakhshan and Fatehi 1999). To reduce the undesirable consequences; therefore, to enhance its chances of success, transferred technology should be well selected, properly planned, and systematically implemented. "If new economic activities are introduced which depend on special education, special organization, and special discipline, such as are in no way inherent in the recipient society, the activity will not promote healthy development but will be more likely to hinder it (Schumacher, 1973). " The viability of imported technology also requires a continuous adaptation to the concurrent changes in the surrounding environment. In this respect, importation of appropriate technology involves a systematic and dynamic process. It simply is not a random or a one-shot venture. The emphasis placed on "appropriateness" of technology once again calls for a systematic study of the transfer process. Increasing professional interest in the subject has generated some academic research in various fields. Researching the subject is often a difficult and ponderous task. Difficulties in inquiring into the nature of the transfer process stem from its multidisciplinary nature and the diversity of direction in research. None of the works reviewed by the authors has provided a comprehensive picture of the process of technology imp ortation. Part of the difficulty in constructing such a framework lies in highly abstract nature of the subject (technology), and the other part is due to the normative approach (application orientation). What is needed is a general theoretical framework to guide the decision maker on the transfer of technology. The following section presents a model which provides an integrative picture of the transfer process. 3. A Theoretical Construct Figure 1 presents a framework for systematic importation of technology. Five phases outline the process of technology importation and adaptation. These steps in order of sequence are: need generation, feasibility study, technology selection and planning, implementation, and adaptation. 3.1 Need Generation Need generation (Figure 2) is a prerequisite phase which creates the demand for new products or services which cannot be sufficiently and/or efficiently provided by existing technology or internal R&D. The desire for autonomy causes many countries to favor internal development over importation (Dahlman, 1981). In many developing economies this residual demand is generated and responded to within the framework of their economic development programs. Within such an environment, it is not unusual to find the role of key government and business figures to be much more important than that of the consumer. The same political and economic mechanism which determines the need for the new technology is often instrumental in establishing a decision agent responsible for organizing a feasibility study, selecting the importing technology and often planning to implement the new technology. The fact that the decision agent should represent and take into account a wide spectrum of interests ranging from political to economic, makes this position very delicate, burdensome, but yet a powerful one. Whether the head of the decision agency would be a politician, a bureaucrat or a businessman is primarily determined by the nature of the ownership of the technology-importing organization, of course. 3.2 Feasibility of Adaptation Study Feasibility of adaptation study (Figure 3) precedes the decision on what an appropriate imported technology will be. This phase begins by determination of the type of transfer. Hayami and Ruttan (1971) have identified three types, or phases, of transfer. Arranged in the order of depth of transfer, "material transfer" aims at local production, "design transfer" enables local duplication of new technology, and "capacity transfer" involves importation of R&D capacity. Using examples from agriculture technology, transfer of seeds and plants, copying equipment, and movement of scientists represent these three types correspondingly (Pray, 1981). In our example, the choice of the type is based on the agroclimatic similarity of the adopting country with country of origin and also on the sophistication of the research system in the recipient country. After selecting the type of imported technology, a checklist of major attributes of culturally, technically and politically appropriate technologies is produced to serve as an aid in the forthcoming decision making process. No list of criteria