Technology Transfer (Encyclopedia of Management)
Technology transfer is a fast-growing activity in the U.S. research and development system, and one which has received substantial attention from governments, industry, and universities. The exact nature of this activity is difficult to pin down, partly because the term has many different connotations. Some of the varieties of technology transfer commonly discussed in business periodicals (such as the Wall Street Journal) include:
- International technology transfer: the transfer of technologies developed in one country to firms or other organizations in another country. In the U.S., this issue is often associated with the undesired transfer of weapons technology to "hostile" nations.
- North-South technology transfer: activities for the transfer of technologies from industrial nations (the North) to less-developed countries (the South), usually for the purpose of accelerating economic and industrial development in the poor nations of the world.
- Private technology transfer: the sale or other transfer of a technology from one company to another.
- Public-private technology transfer: the transfer of technology from universities or government laboratories to companies.
While all four types of technology transfer are of concern to businesses, this overview will deal mostly with the first two types. International technology transfer and North-South technology transfer these activities tend to be driven directly by foreign policy and national defense concerns, while the other two types are driven by a balance of corporate and policy interests.
WHAT IS TECHNOLOGY TRANSFER?
Technology is information that is put to use in order to accomplish some task. Transfer is the movement of technology via some communication channel from one individual or organization to another. Technology is the useful application of knowledge and expertise into an operation.
Technology transfer usually involves some source of technology, group which posses specialized technical skills, which transfers the technology to a target group of receptors who do not possess those specialized technical skills, and who therefore cannot create the tool themselves (Carayannis et al., 1997). In the United States especially, the technology transfer experience has pointed to multiple transfer strategies, two of which are the most significant: the licensing of intellectual property rights and extending property rights and technical expertise to developing firms.
The major categories of technology transfer and commercialization involve the transfer of:
- technology codified and embodied in tangible artifacts
- processes for implementing technology
- knowledge and skills that provide the basis for technology and process development.
WHY TRANSFER TECHNOLOGY?
Most technology transfer takes place because the organization in which a technology is developed is different from the organization that brings the technology to market. The process of introducing a technology into the marketplace is called technology commercialization. In many cases, technology commercialization is carried out by a single firm. The firm's employees invent the technology, develop it into a commercial product or process, and sell it to customers. In a growing number of cases, however, the organization that creates a technology does not bring it to the market. There are several potential reasons for this:
- If the inventing organization is a private company, it may not have the resources needed to bring the technology to market, such as a distribution network, sales organization, or simply the money and equipment for manufacturing the product (these resources are called complementary assets). Even if the company has those resources, the technology may not be viewed as a strategic product for that firm, especially if the technology was created as a byproduct of a research project with a different objective.
- If the inventing organization is a government laboratory, that laboratory is forbidden in general by law or policy (in the United States) from competing with the private sector by selling products or processes. Therefore, the technology can only be brought to market by a private firm.
- If the inventing organization is a university, the university usually does not have the resources or expertise to produce and market the products from that technology. Also, if the technology was developed with funding from the federal government, U.S. law strongly encourages the university to transfer the technology to a private firm for commercialization.
From a public policy perspective, technology transfer is important because technology can be utilized as a resource for shared prosperity at home and abroad. As a resource, technology (1) consists of a body of knowledge and know-how, (2) acts as a stimulant for healthy competitive international trade, (3) is linked with other nations' commercial needs, and (4) needs an effective plan for management and entrepreneurship from lab to market.
From a business perspective, companies engage in technology transfer for a number of reasons:
- Companies look to transfer technologies from other organizations because it may be cheaper, faster, and easier to develop products or processes based on a technology someone else has invented rather than to start from scratch. Transferring technology may also be necessary to avoid a patent infringement lawsuit, to make that technology available as an option for future technology development, or to acquire a technology that is necessary for successfully commercializing a technology the company already possesses.
- Companies look to transfer technologies to other organizations as a potential source of revenue, to create a new industry standard, or to partner with a firm that has the resources or complementary assets needed to commercialize the technology.
For government laboratories and universities, the motivations for technology transfer are somewhat different:
- Governments or universities may transfer technology from outside organizations if it is needed to accomplish a specific goal or mission (for example, universities may transfer in educational technologies), or if that technology would add value to a technology the government or university is hoping to transfer out to a company.
- Government laboratories and universities commonly transfer technologies to other organizations for economic development reasons (to create jobs and revenues for local firms), as an alternate source of funding, or to establish a relationship with a company that could have benefits in the future.
HOW DO YOU TRANSFER TECHNOLOGY?
The first requirement for an organization to transfer a technology is to establish legal ownership of that technology through intellectual property law. There are four generally recognized forms of intellectual property in industrialized nations:
- patents, dealing with functional and design inventions
- trademarks, dealing with commercial origin and identity
- copyrights, dealing with literary and artistic expressions
- trade secrets, which protect the proprietary capabilities of the firm
Under U.S. law, a patent is granted only by the federal government and lets the patentee exclude others from making, using, selling or offering an invention for a fixed term, currently 20 years from the date the patent application is filed. The number of patents granted by the U.S. government is up by 21 percent in 2003. A trademark, as defined under the Trademark Act of 1946 (The Lanham Act) is "any word, name, symbol, or device, or any combination thereof (1) used by a person, or (2) which a person has a bona fide intention to use in commerceo identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others, and to indicate the source of the goods, even if that source is unknown."
A copyright seeks to promote literary and artistic creativity by protecting, for a limited time, what the U.S. Constitution broadly calls writings of authors. The general rule in the United States for a work created on or after January 1, 1978, whether or not it is published, is that copyright lasts for the author's life-time plus 50 years after the author's death. The copyright in a work made for hire or in an anonymous work lasts for 75 years from publication or 100 years from creation, whichever is shorter.
A trade secret is information that an inventor chooses not to disclose and to which the inventor also controls access, thus providing enduring protection. Trade secrets remain in force only if the holder takes reasonable precautions to prevent them from being revealed to people outside the firm, except through a legal mechanism such as a license. Trade secrets are governed by state rather than federal law.
The second step in technology transfer is finding a suitable recipient for that technologyne that can use the technology and has something of value to offer in return. Firms are now studying more systematically the process of licensing and technology transfer. There are five information activities needed to support technology transfer:
- technology scoutingearching for specific technologies to buy or license.
- technology marketingearching for buyers for a technology, the inverse of tech scouting; also searching for collaborators, joint venture or development partners, or for investors or venture capital to fund a specific technology.
- technology assessmentvaluating technology, aimed at answering the question "what is this technology worth?" Includes research of any intellectual properties, and market and competitor assessments.
- transfer-related activitiesnformation about the transfer process itself, such as licensing terms and practices, contracts, conducting negotiations, and how to do the transfer most successfully.
- finding expertso assist in any of the above areas. A common saying in the field is, "technology transfer is a contact sport."
These information needs are often supported by service companies, such as licensing consultants, and by electronic media, including databases and online networks. Some new online networks use the Internet to help firms in these information activities.
The information-transfer process is one of the most critical steps in technology transfer. New licensing practices are designed to address this process. For example, many licenses now bundle both the basic technology and the equipment needed to utilize that technology in a single agreement. A license may also include a "know-how" agreement, which exchanges relevant trade secrets (with appropriate protections) to the licensee to help in exploiting technology. In some industries, such as petroleum exploration, firms even practice wet licensing, whereby employees of the licenser are loaned out to the licensee to teach how a technology should be properly used.
The major barrier to the increase in technology transfer among firms is organizational behavior. In the past, cultural blocks such as the "not invented here" syndrome prevented firms from even showing interest in technology transfer. New concepts along the lines of knowledge management are changing behaviors and beliefs, leading firms to realize the enormous gains to be made through the active pursuit of licensing.
Once the organization has at least started to establish ownership of the technology, there are several possible legal and/or contractual mechanisms for transferring technology from one organization to another:
- licensinghe exchange of access to a technology and perhaps associated skills from one company for a regular stream of cash flows from another.
- cross-licensingn agreement between two firms to allow each other use of or access to specific technologies owned by the firms.
- strategic supplier agreement long-term supply contract, including guarantees of future purchases and greater integration of activity than a casual market relationship. One prominent example is the second-source agreements signed between semiconductor chip manufacturers.
- contract R&Dn agreement under which one company or organization, which generally specializes in research, conducts research in a specific area on behalf of a sponsoring firm.
- joint or cooperative R&D agreementn agreement under which two or more companies agree to cooperate in a specific area of R&D or a specific project, coordinating research tasks across the partner firms and with sharing of research results.
- R&D corporation or research joint venturehe establishment of a separate organization, jointly owned by two or more companies, which conducts research on behalf of its owners. A notable example is Bellcore, which originally was established by the seven Regional Bell Holding Companies of the United States and which would conduct research and set standards for the local telephone system.
- research consortiumny organization with multiple members formed to conduct joint research in a broad area, often in its own facilities and using personnel on loan from member firms and/or direct hires. The Microelectronics and Computer Technology Corporation (MCC) and Semiconductor Manufacturing Technology (SEMATECH) are examples of such organizations.
The choice of which mechanism to use in a particular technology transaction depends on many factors, including the stage of development for that technology, what the company receiving the technology is willing or able to pay, what technology or other assets it might be able to offer in place of money, the likely benefits of establishing a longer-lasting partnership between the organizations instead of a onetime transfer; and the exact legal status of ownership over that technology. For example, if a small firm simply wants to sell its technology to a large firm in exchange for money, it will probably choose to license the technology. If the small firm also wants access to the large firm's complementary assets, such as its production facilities and distribution network, it will try to negotiate a more substantial and permanent relationship, such as an R&D contract or a cooperative R&D agreement.
PRIVATE TECHNOLOGY TRANSFER
Technology transfer between private companies is most commonly accomplished through licensing, although other mechanisms such as joint ventures, research consortia, and research partnerships are also quite popular. Licensing is a big business by itself. In 2002 U.S. companies received over $66 billion in payments on technology licenses from other organizations, of which $58 billion was from domestic sources. Data from the U.S. Department of Commerce compiled in the mid-1990s indicated that international technology licensing was rising at approximately 18 percent per year, and domestic technology licensing was rising at 10 percent per year.
Another growing mode of private technology transfer is the formation of research joint ventures (RJVs) between companies in the United States. For years, such joint ventures were rare, mostly due to fears among companies that joint ventures would provoke antitrust litigation from the government. Passage of the National Cooperative Research Act (NCRA) in 1984 and the National Cooperative Research and Production Act in 1993 relaxed antitrust regulation of such partnerships, leading to a substantial increase in RJVs.
Studies of the filings of RJVs registered with the Department of Justice under the NCRA shows some interesting trends:
- Although multi-firm consortia such as SEMATECH and the Microelectronics and Computer Corporation (MCC) attract the most interest, about 85 percent of RJVs involve only two firms.
- Most RJVs focus on developing process technologies rather than product technologies, as processes are viewed as pre-competitive technologies in many industries.
- The largest concentration of RJVs focus on telecommunications, while software and computer hardware are also leading industries for RJV activity. These industries have significant impact on technological advances in other industries, and therefore attract much interest for partnering firms. Not surprisingly, RJVs are less common in the chemical and pharmaceutical industries, probably because process technologies have greater competitive impact in those industries than in others.
Research joint ventures are an advantageous means of acquiring high-risk technologies, for several reasons. First, joint ventures enable the risks and costs involved in early research in technology to be shared across multiple firms, reducing the burden on each individual company. Second, the resources and expertise needed to develop certain technologies may be distributed across multiple firms, so RJVs are the only way to combine those resources in one effort. Third, in industries where technology advances quickly, RJVs are an effective way to keep up with new developments. Finally, RJVs are often used to develop and set critical technical standards in certain industries, especially telecommunications. These reasons indicate that RJVs will continue to increase in significance as a tool for technology transfer.
TECHNOLOGY TRANSFER FROM GOVERNMENT TO INDUSTRY
In an effort to increase the application of government research results to industry technology problems (and therefore fuel technology-based economic growth), the United States government has passed a series of laws since 1980 to encourage the transfer of technologies from government laboratories to industry. Technology licensing was the earliest focus of activity, based on the notion that government laboratories were like treasure chests of available technologies that could easily be applied to corporate needs. In fact, government technology licensing activity is extremely limited, except in the National Institutes of Health. The NIH has been the source of several groundbreaking therapies and other medical technologies and enjoys close relations with the pharmaceutical industry, enabling the agency to gain large amounts of licensing revenue.
Other agencies face substantial difficulties in licensing technologies. Often, their technologies require substantial development before commercialization, reducing their value to firms. Also, most government laboratories do research in areas where there is no clear, consistent path to commercialization as exists in the pharmaceutical industry. The uncertainty of commercialization also diminishes the willingness of firms to purchase technology licenses from laboratories.
Instead, most agencies have focused on signing Cooperative Research and Development Agreements (CRADAs), a mechanism developed under the 1986 Federal Technology Transfer Act. CRADAs are contracts to conduct joint R&D projects, where the government laboratory contributes personnel and equipment, while the partner contributes these assets and funding as well. The number of CRADAs signed by government agencies has increase steadily in recent years.
There are several potential benefits and potential difficulties involved in CRADA research relationships:
- Transfer of product and process technologies can have a significant impact on recipient firms' business performance. For example, the invention of an improved method for delivering the medication paclitaxel was licensed by the National Institutes of Health to Bristol-Myers-Squibb as the product Taxol, which has since become a leading treatment for breast and ovarian cancer. However, there is no data to show what portion of transfers are successful versus those which are not.
- Technology transfer may or may not result in commercial products. A survey of 229 technology transfer projects at 29 federal laboratories, conducted by the Georgia Institute of Technology, found that 22 percent of the projects resulted in new commercial products, while 38 percent contributed to products under development. Interestingly, in 13 percent of the projects, new product development or product improvement was never a goal.
- Laboratories' views on technology transfer can affect success. Now that most of the legal barriers to technology transfer have apparently been eliminated by congressional legislation, the true barriers are generated by the culture of the laboratories and the attitudes of researchers and laboratory administrators. For example, in several cases firms have complained that laboratory researchers were not used to meeting the strict timetables on project completion that private sector researchers must observe.
- Technology transfer, especially in joint research, can aid the government laboratory as well. A report by the GAO examining ten CRADA projects found that the laboratories can also benefit from technology transfer, for example, through enhanced expertise for researchers, development of technologies that also support the laboratory's mission, acquisition of sophisticated equipment and infrastructure, and increased laboratory revenues from industrial sources.
UNIVERSITY-INDUSTRY TECHNOLOGY TRANSFER
One of the original pieces of U.S. technology-transfer legislation, the Bayh-Dole Act, directed government agencies to encourage universities and other research organizations to license out technologies developed with federal funding. Since 1980, this activity has become a small but growing source of revenue for universities. Technology transfer from academia and other research institutions to industry continues to grow, according to the annual survey of the Association of University Technology Managers. The 2003 survey shows that increasing numbers of research institutions are forging licensing agreements with commercial entities to bring newly developed technology and products to the market. In 2003, the 165 institutions of higher education responding to the survey reported receiving close to $1 billion in licensing revenue in 2003, a 1 percent increase over 2002.
Commercial institutions pay royalties for the right to put inventions and discoveries from universities to commercial use in products such as computer-imaging technology, medical diagnostic testing, and treatment of disease. Institutions of higher education, in turn, can use the revenue to increase investments in research and development. This technology transfer also leads to sponsored research agreements between firms and universities, often to undertake additional research needed to commercialize technologies. Universities now receive approximately 7 percent of all research funding from industry, compared to about 3 percent in the 1970s. Institutions of higher education also reported spinning off nearly 350 companies and receiving 3,450 U.S. patents for new technologies and inventions. Since fiscal year 1998 when the question was first asked, 178 U.S. survey respondents have reported a total of 2,230 new products introduced to the market place.
For industry, universities offer the best way to acquire basic technological research as those activities are curtailed within firms. Universities also house experts in very focused fields of study that are likely to have benefits to a small number of firms. Finally, joint industry-university research is viewed as an important recruiting tool in today's competition for scientific talent, since industry-funded projects are often carried out by graduate students who later go to work for their former sponsors.
Technology transfer is a valuable mechanism by which industry can accelerate its innovation activities and gain competitive advantage through cooperation. Technology transfer can also boost overall economic growth and regional economic development. While further study is needed to estimate the exact benefits gained from technology transfer and ways to achieve those benefits, it is clear that this is an activity that is becoming a central feature of the U.S. research and development system.
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Technology Transfer (Encyclopedia of Business)
Technology transfer is the dissemination of technical knowledge, skills, and products from a point of origin into a broader sphere of use. The term can describe any number of such actions, but the main two stages of technology transfer are as follows:
- Noncommercial to commercialhe transfer of knowledge from research settings such as universities, institutes, and government laboratories to the commercial sector.
- Industrial economy to developing economyhe spread of knowledge from wealthier, developed economies to less developed economies.
In general, these stages occur in this sequence, although they can also happen in reverse order or simultaneously.
As the definitions above highlight, the most important aspect of technology transfer is the underlying knowledge of how technology works and how it can be applied to real-life problems. The skills needed to implement this knowledge in a practical form are also crucial, and it may be beneficial to physically transfer technology as well, but the physical transfer is usually least important from a technology-transfer perspective.
MECHANISMS FOR TECHNOLOGY TRANSFER
Technology transfer takes place through a number of different channels. Key among these are foreign direct investment, licensing agreements, joint ventures, and research collaboration between private companies and universities or government agencies. The choice of mechanism for individual companies depends largely on business strategy, risk tolerance, and available resources. A combination strategy may also be used. For instance, when technology has implications for more than one industry, the originating company or research center may choose to license its innovation for certain uses outside its expertise while directly developing the technology for those areas it is most competent in. In addition, multinational corporations, particularly those based in the United States, Western Europe, and Japan, act as major transferrers of technology to LDCs.
NONCOMMERCIAL TO COMMERCIAL TRANSFER
Universities, research institutes, and government-sponsored agencies are a major source of new technology that is ultimately exploited in the commercial realm. By one late 1990s estimate, university technology transfer alone is worth more than $21 billion a year in the United States.
ENCOURAGED BY LEGAL REFORMS.
Since the late 1970s, American universities have played an increasingly important role in the development and transfer of new technologies. This shift was strongly encouraged by the 1980 passage of the Bayh-Dole Technology Transfer Act, which allowed nongovernmental organizations (universities, companies, nonprofits) to use federal dollars for research and still retain the patents to their innovations. Before then, government agencies commonly claimed at least some of the rights to such inventions and proved lethargic and inefficient managers of the intellectual property, impeding technology transfer.
A series of additional laws throughout the 1980s helped to further stimulate research for technology transfer to the commercial sector. Noteworthy acts included the National Cooperative Research Act of 1984, which loosened restrictions governing research collaboration between for-profit competitors, and the Technology Transfer Act of 1988, which enabled government research laboratories to form cooperation agreements with private-sector organizations to facilitate technology transfer.
UNIVERSITIES CENTRAL TO THE PROCESS.
The emphasis of the top U.S. research universities on the commercial applications of research also resulted in part from a widespread perception that the United State was losing out to its international competitors in both basic and applied research. This led government, industry, and university representatives to undertake initiatives to develop new linkages between companies and top research universities. Among these linkages were university ownership of equity in firms established on the basis of university research, liaison or technical assistance programs, research partnerships, and the establishment by universities of patent and technology licensing offices. Many top research universities in the United States took the route of equity ownership in start-up companies. It was argued that this method facilitated technology transfer, created the possibility of large financial gain for universities, and helped to attract and retain faculty who might otherwise be tempted to join the commercial venture themselves.
Federal funding to universities continues to play a paramount role. Of the 1,500 or more patents in all fields issued to universities each year, some 80 percent come from projects that receive federal funds. The federal government has provided two-thirds of total university research funds, with private industry providing a relatively small though rapidly growing share. To a lesser extent, federal funds also target small businesses through such initiatives as the Small Business Administration's Small Business Technology Transfer (STTR) program.
DEVELOPED ECONOMY TO DEVELOPING ECONOMY
While technology is transferred internally in developed countries and LDCs alike, studies of technology transfer are often concerned specifically with transfers from the more advanced economies to LDCs. In this sense, technology transfer is central to the study of newly developing economies.
In his essay "International Business and the Transborder Movement of Technology," Denis Simon defined three classes of technology transfer: material transfer, design transfer, and capacity transfer. Material transfer refers to physical goods ranging from product parts to fully operational plants. Design transfer refers to blueprints or other types of information used to build products or production facilities. Capacity transfer refers to education and training not only to operate existing plants but also to develop innovations in products and processes.
Japan is often referred to as a case of an advanced country that developed in large part through technology transfer. Previously developed capitalist countries such as Britain, the United States, and Germany relied to a larger extent on domestically produced technologies.
Japan's developmental success in the postwar years provides a contrast with the patterns observed in many LDCs. In particular, many LDCs have depended heavily on exports of raw materials, which often suffer from unstable prices in world markets, and have consequently run up large trade deficits and suffered from crushing debt burdens. Part of the appeal of technology transfer is that it creates the possibility for development that is less reliant on native sources of raw materials and is more self-sustaining. The newly industrialized countries of the Pacific Rimncluding Taiwan, Hong Kong, South Korea, and Singaporelong with Brazil and India have recently emerged as significant beneficiaries of transferred technologies.
APPROPRIATENESS OF TECHNOLOGY TRANSFER.
One of the central problems regarding technology transfer is whether the technology is "appropriate" for the recipient country. For example, technologies that are highly capital intensive may be transferred to a country in which there is substantial underemployment of labor. Transferred technologies may also require technically sophisticated workers and managers or natural resources that are in short supply in the recipient country. The problem of appropriate technologies suggests that substantial planning is generally required for technology transfer to be beneficial. At the same time, the problem highlights the potential conflicts between the interests of multinationals and the long-term development of recipient countries.
Thus, the viability of technology transfer is determined by the general level of industrial development in LDCs. New technologies are more readily able to be implemented if similar or complementary technologies have been previously established. Key among these considerations is the capacity of producers within an LDC to serve as suppliers of parts or services. Whether a transferred technology can be supported by suppliers within the country has a potentially large impact on the competitiveness of production, given the potentially higher costs of relying on parts from abroad as well as the greater lead times involved. In addition, toxin-producing industrial processes are potentially much more problematic in LDCs. In order to control environmental damage, these processes require pollution-abatement technologies, which are generally less developed in LDCs.
IMPORTANCE OF EDUCATION.
Education is a vital part of the technology-transfer process and of the development process more generally. A gap often exists between the technical education levels in source and recipient countries. Employees must have sufficient training to efficiently operate and maintain machinery. More than that, innovation and research and development typically require highly educated technicians. LDCs often attempt to minimize their technical dependence on outside sources such that they are able to generate innovation from within, creating the possibility of a more self-sustaining development process.
The role of education becomes increasingly critical with the expansion of electronics-based and other medium- to high-tech goods. Accordingly, new product and process development generally requires a higher level of technical knowledge. At the same time, a larger share of all manufacturing production is beginning to be controlled by computers in highly integrated processes.
ROLE OF MULTINATIONAL CORPORATIONS.
Multinational firms engage in technology transfer through licensing arrangements with non-affiliated firms or through foreign direct investment with affiliated firms. These are sometimes referred to as external and internal technology transfer, respectively. Multinationals generally prefer internal technology transfer. In his essay "Contractual Agreements and International Technology Transfer," Bernard Bonin described this preference as follows: "Foreign direct investment is normally preferred since the owner of the technology is thus in a position to capture all the rents attached to his technological advantage, while licensing is more risky in this regard. Contractual agreements will be entered into only when the potential benefit from intangible assets cannot be otherwise exploited."
There are a number of factors that impede technology transfer within a firm, making external transfer more viable. Smaller firms may lack the resources to engage in direct investment. Firms may have inadequate managerial experience in overseas production and marketing. In other cases, the host country may restrict foreign direct investment, leaving licensing as the only option. More generally, firms are more inclined to license older products and processes, for which the relative technological advantage and profitability are generally less.
EVALUATING TECHNOLOGY TRANSFER'S SUCCESS.
One of the contentious issues surrounding technology transfer is the means by which the success of such transfers should be evaluated. Traditionally the success of development has been measured in terms of the growth rate of gross national product (GNP) or per capita gross national product. This measure has been criticized on several grounds. For one, it does not take into account income distribution. In his Strategic Planning in Technology Transfer to Less Developed Countries, Christian Madu summarized other limitations of national income measures as follows: "Understanding the LDC's socio-economic structure and how it differs from that of the developed countries will help in the development of appropriate standards for measuring growth. For example, a major flaw of GNP is that it fails to take into account social costs due to industrial waste, crime, congestion, and different perceptions of the inhabitants about their changing environment in evaluating the nation's performance." New "quality of life" measures have been developed in recent years to complement GNP-based measures in evaluating technology transfer and other economic development policies.
The pace of technology transfer increased rapidly after the 1970s. This resulted from the growth of foreign direct investment by multinational corporations as well as from the increased outsourcing of product components in the international market. More generally, the growth of technology transfer reflects the increasingly international perspective of corporations. The growth in recent years was also an outcome of earlier technology transfers, in that those transfers enabled a greater number of countries to act as important sources of technology. Technology transfer has been greatly facilitated by improvements in international transport and communications, enabling firms to more readily control operations across the globe. Finally, the establishment of free trade agreements within North America, Europe, and Southeast Asia created more favorable financial environments for technology transfer.
Government policy plays a large role in technology transfer. The advanced capitalist countries typically have policies that restrict the outflow of certain technologies. Among these are military equipment or technologies with potential military applications. Exporting technologies may also be restricted in an effort to protect competitive advantages in certain high-tech goods. Among these goods are supercomputers and superconductors. The government policies of LDCs vary widely in the extent to which they regulate technology transfers. While many LDCs compete with each other to accommodate multinational corporations, others restrict foreign ownership, foreign investment, and joint ventures.
U.S. government regulation of technology transfer in the postwar years was shaped in large part by the Cold War. The Export Control Act of 1949 authorized the president to regulate exports on the grounds of short supply and national security, as well as to achieve foreign policy objectives. In that same year, the United States and six European countries formed the Coordinating Committee for Multilateral Export Controls (COCOM) in an effort to carry out strategic embargoes, particularly against China and the Soviet Union. COCOM was not strongly effective in Cold War years since some of these European countries sought to increase trade with the Communist powers. Consequently the United States relied on the Export Controls Act to attach restrictions to technologies licensed to allied and neutral countries in an effort to control the re-export of these technologies. Congress extended the act in 1953.
Exports to the Warsaw Pact countries increased during the Nixon administration with the Export Administration Act of 1969 and with detente. With the Soviet invasion of Afghanistan in 1979 and the election of Ronald Reagan in 1980 came the move toward greater restriction of technology transfers. The U.S. Department of Commerce came to play a leading role in the regulation of nonmilitary exports, and the staff of the Export Administration unit of the department increased by fourfold through the 1980s. Similar expansions occurred in the export-control divisions of U.S. Customs and the departments of Defense and State. Many U.S. businesses complained that these regulations substantially hurt their sales and their capacity to develop new technologies. Restrictions on technology transfer were progressively loosened in trade legislation enacted after the mid-1980s. New laws and regulations sought to situate the issue of export controls in light of general trade considerations as well as national security interests. Entering the 1990s, the collapse of the Eastern Bloc and the expansion of U.S. trade with China created possibilities for substantial increases of technology transfer from the United States and other advanced capitalist countries. However, particularly in the case of China, which in the late 1990s was embroiled in a scandal involving spying on U.S. defense laboratories and contractors for military technology secrets, the dichotomy between permissible and impermissible technology transfer remained a cornerstone of the U.S. foreign relations regime.
SEE ALSO: Intellectual Capital; Intellectual Property
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