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Information Technology Landscape in Nations

Technology Transfer: Our primary question is whether technology transfer is having an impact for the host country. Our general assessment is that true technology transfer, that which creates a capacity and capability to be innovative, is uncommon in the technology park model.

Definition

By definition, "Technology transfer addresses the assessment, adoption and implementation of technology." Innovation diffusion theory provides a conceptual background that has frequently been used in the study of technology transfer. Rogers' innovation model (1986) defined diffusion as "the process by which an innovation is communicated through certain channels over time, among the members of a social system" (Fagan). 

High-tech Product Life Cycle

The outcome of innovation is high-tech products that add to a country's wealth.  James M. Utterback in 1970 developed "The Utterback Model of the Technology Life Cycle."  Each stage is shaped by changes in the character and frequency of innovations in technology-based products and processes and by market dynamics (Roberts and Liu).

1. fluid phase - the earliest pioneering products enter the market for that technology amid a high level of product and market uncertainty.  Research and development activities are in high gear.
    
2. transitional phase - the phase starts with the emergence of a dominant design. As product and market uncertainty lessens and research and development efforts become focused on improving the dominant technology, design cycles shrink.
    
3. mature phase - products built around the dominant design proliferate and research and design emphasis shifts from product innovation toward process innovation. Also, the growth rate of market demand slows, but the total volume of demand expands. The once highly profitable market becomes commoditized, a direct result of cost reduction and excess capacity.
    
4. discontinuities phase - The existing technology can be rendered obsolete by the introduction of next-generation technology, a more advanced technology or converging markets. During the discontinuities stage, the marketplace is volatile. A new market develops, taking demand away from the old market and the cycle reverts back to the fluid phase.

Methods of Adoption of Technology

1. Formal Adoption

In the high-tech product life-cycle, companies can acquire technology and/or market opportunities in the following formal ways:

• Merger of two companies to form one, which is common in the transitional and mature phases.
   
• Acquisition as affiliates, subsidiaries, divisions, or product lines of a parent, which is also common in the transitional and mature phases.
   
• Alliances
• Licensing: In its simplest forms, the term "licensing'' means acquiring the rights to a product, technology or service, often for a certain period of time and often limited to a certain market area. These rights can include the right: to manufacture; to partially manufacture; and to market and sell a product.  Licensing agreements are very common in the transitional phase.
   
• Joint venture: two, or more, companies set up a separate entity in which the parent firms have a shareholding. Their objective is to receive dividends or profits from this entity, and often to share technology as well as market coverage.

Spin-offs

Research and development is one of the key functions of technology parks. By our definition of a technology park, the site is linked to educational or research institutions.  Companies acquire new technologies from their own research and development activities or through the work of these educational and research institutions, facilitating the transfer of technology through spin-offs.

A spin-off is defined as a new company that is formed 1) by individuals who were former employees of a parent organization, and 2) a core technology that is transferred from the parent organization.  It is usually formed to commercialize a technology originated in a government, university, or other private research and development setting. A good measure then of success is the number of spin offs that are created, number of formal acquisitions that take place and the amount of informal interaction that takes place among people.

In addition to formal adoption is informal adoption.

2. Informal Adoption

The proximity of the companies and educational and research institutions to each other creates an informal opportunity for technology transfer. Human interactions are at the core of this form of transfer.  In business terminology, this effect is known as synergy. Behind the value of informal adoption is the belief that gains in knowledge creates more opportunities to be innovative.  Also, a belief among tenants of technology parks that it is generally better to be in a technology park rather than being outside.

Impact of Technology Transfer - Does it Work in the Technology Park Model?

Even though advantages are expected through these interactions, that is not always the case. Our research indicates that technology transfer in a technology park setting has varied from having very little impact to a highly successful rate of technology transfer depending on what portion of the high-tech product life cycle is being assessed and what type of knowledge or technology is being transferred. 

Formal Adoption

In the formal mechanisms of technology transfer, firms engage in licensing and joint venture activities in order to build market share, so through this formal activity there is more of an exchange between innovators and established firms (Roberts and Liu).

However, there is a cost to technology transfer, which was first demonstrated by Teece in 1976 and 1977.  He showed empirically that the costs of international technology transfers are often considerable, ranging in his sample from 2-59% of total project costs. Transfer costs are significantly influenced by the sender's experience with prior transfers and with the technology, by the skills and experience of the receiver and by the characteristics of the technology itself (Hakason and Nobel).

These characteristics are not only related to costs.  They also describe human limitations to technology transfer: sender's experience, skills and experience of the receiver, and characteristics of the technology itself.  A high-cost technology would be very difficult for a small developing country to copy or provide the initial investment for cost of development.

In another study on the formal process of technology transfer, investigators found that:

"A significant and growing share of the research and development activities of multinational companies is performed outside their countries of origin (Pearce/Singh 1992, Granstrand/Hakanson/Sj blander 1992, Cantwell 1995). It appears that the bulk of foreign R&D is still devoted to the traditional tasks of adapting parent company technology to local market needs. However, there is growing evidence that multinational corporations are increasingly using their foreign subsidiary networks also as a means of accessing foreign sources of technology (Hakason and Nobel)."

As further evidence that innovation is not taking place, an article in the Economist magazine mentions that in the past decade or two, most developing countries have opened up a bit to free trade and foreign investment. Freer trade has brought in new products, which are taken apart and copied.

In China, for example, Zhongguancun Science Park has become a place of retail sale of technological products rather than a place of technological innovation. In early 2000, more than 80% of workers in the science park were working in trade shops, with the work scientists playing a supporting role.  Also, the domestic firms are serving more as importer or transporter of foreign high-tech products to the Chinese market.

Informal Adoption

When comparing firms in technology parks and those located outside of technology parks: "Results indicate that firms located in science parks expressed a greater interest in close proximity to research but reported no significantly greater access or contact with such actors."  It continues: "The strongest and most consistent difference detected was an image advantage associated with a science park location that firms both expected and felt that they received." (Löfsten and Lindelöf, 2001)

So, technology transfer takes place in many different ways, but in the case of the technology park model, the transfer can be limited to adaptation of products to the local market, a costly adventure, and highly dependent on skills and experiences.