Final Research1

The scope of the study is as follows:
 The study will focus on the technological strategies and transfer processes of VIETDUC
Coffee Company- a state owned and DAKMAN Company- a joint venture by which they
upgraded their technology capability.
 It will concentrate on technological aspects of technology transfer in a resource
perspective.
One of the major limitations of the study was time limitation. So we just focus on two
companies to conduct the research. Among Vietnamese coffee companies, VIETDUC and
DAKMAN are chosen to carry out the research. They are two typical companies for most of
Vietnamese coffee industry.
There are a lot of factors which affect the success of a technology transfer such as the
Government's policies and diplomatic relations, maturity of technology and degree of
sophistication of the transferred technology but these are not focused in this study.
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Chapter 2
Literature Review
2.1 Concepts of technology transfer
It is not easy to clearly define “ technology transfer”. Different philosophers often employ
different concepts for their literature and, sometimes, they seem to have contrast conclusions.
In some points of view, technology transfer is just the transfer of machines and equipment to
a new environment but others take into accounts both hardware and software of technology.
These points of view basically stem from different perspectives such as " technology as a
transformer", " technology as a tool", technology as Knowledge" or " technology as
embodiment form". Mingsarn [1981] used four concepts of technology transfer, which can be
often found in the literature:
 Technology is transferred only when the local work force has ability to use and
responsible for the imported technology and do it efficiently.
 Technology is regarded transferred when it is used effectively in a new environment
regardless of the origin of inputs of production. For this concept, technology is only
considered transferred to other constitution when it is assimilated and adapted in new
condition even if every thing is done by outside people. As long as the technology is
employed efficiently, technology is considered transferred.
 Technology transfer occurs when technology spreads to other local productive units in the
recipient economy.
 When imported technology is fully understood by local workers, and when these workers
begin to adapt the technology to a local environment for particular needs or modify it for
other purposes.
Therefore, technology transfer can be understood according to one of all the four concepts.
For example, when local workers acquire all skills needed to operate the machines properly
or they can solve all problems probably happening, technology is actually transferred.
Depending on the requirements of transferees, technology transfer is recognized when some
technological capabilities demanded are gained and improved.
Robinson [1988] firstly used the term of “technology transfer package”. It is shown in the
following diagram:
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Finance
Marketing
Processes
product
Social OrganizationManagement
Know-how transferred
Manuals
Engineering & skilled workers
Machine
tools
Blue prints
Figure 2.1: The technology transfer package
(Source: Michael Z. Brooke, selling Management Service Contracts in International Business.
The technology transfer package concept is widely used and covers many areas of
technology transfer. Marketing may not be included in technology transfer even though it
seem not to be a part of technology, unless in very special cases. In manufacture of industrial
goods like machinery and equipment, marketing may be viewed as a part in technology
package. In this case, marketing is also included because the marketing staff needs to have
certain technical and engineering skills to introduce how to install and offer after sale service
for such goods.
 Technology transfer consists of one or more indivisible technology modules, which may
be core technology or peripheral one. " Core technology" is indispensable to a process or
the use of a product or performance of a service. The modules may also contain
peripheral technology, which may not be necessary for a process. These modules may be
transferred via technical documents and blue prints and/ or personal explanation,
demonstration, or training or “ know how” assistance.
 Permission to use various rights, knowledge, or assets (that is, under license, franchise,
or lease).
 Hard goods- "embodies” technology which may take the form of Capital Equipment
 Intermediate goods
 Final goods
 Soft goods- “disembodies" technology, which may take the form of written documents,
computerized package, and photographs, or oral transmission whether telephonic,
recorded or face to face.
The embodiment forms of technology -UNCTAD, Geneva, [1990] are described as follows:
 The embodied form Includes capital goods and intermediate goods as presented in plant,
machinery and equipment. It also includes human labor… skilled and specialized
manpower to use equipment and technique accurately and to resolve problems that may
occur in production process or in the implementation of a plan, design or activity.
 Disembodied technology consists of information recorded in tangible form, whether in
words such as the written description of a production process, or in a diagrams or some
other forms of graphic presentation, such as production drawing, specifications or plan,
figures symbols and so on. Technology can be said to encompass the thousands of
detailed steps that are necessary for the development and manufacture of a product
including the design and development of manufacturing processes and equipment.
As Baranson [1976] defined it, knowledge transmission enables the recipient enterprise to
manufacture a particular product or provide a specific service.
Other researcher e.g. Teece [1977] defined technology transfer like the transfers of know
how. As distinct from the sale of machinery and equipment which embodies technology, they
argue that the transfer of technology, in most cases, calls for a sustained relationship
between two enterprises over a period of time. So the receiving enterprise can reproduce the
product with the desired level of quality standards and cost efficiency. This relationship model
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of international technology transfer is consistent with the work of Contractor [1980] Robinson
[1988].
Chesnais [1986] argued that the transfer of technology implies the transfer to the recipient not
only of the technical knowledge needed to produce the products but also of the capacity to
master, develop, and later produce autonomously the technology underlying these products.
The transfer of “ know how” and “know why” component of technology is rarely defined in
detail in philosophies. Ramanathan [1994], has considered technology as the “ hardware” and
“software” components in detail through the definition of Polytrophic components of
manufacturing technology, which can be used for mapping the technology transfer
successfully.
2.2. The Polytrophic components of manufacturing technology
Traditionally, technology can be viewed as basic forms of tool or “technology as a tool”
perspective. In this perspective, there is an emphasis on the importance of machines and
human-machine interactions. Technology is also defined as knowledge or “technology as
knowledge “ perspective. This perspective highlights the importance of “ know why” and
“know how” and implicitly gives out the role of human skill in gathering, using and upgrading
knowledge. Finally, “technology as transformer” perspective is used to stress on the
importance of organizing activities in order to achieve desired transformations. In general,
they are viewed as comprising two major parts: “ hardware” and “software”.
Hardware: The physical items related to the task of technical production.
Software: The work roles and division of labor, which surrounds it.
The definitions given by the Technology Atlas Team [1986], Asian and Pacific Center for
Transfer of Technology [1987] and Sharif [1989] made a further step and break down these
two major parts into four components:
 Object-embodied form or “ Technoware”
 Human embodied form or “ Humanware”
 Documents/ record embodied form or “Inforware” and
 Institution Embodied form or “orgaware”
Ramanathan [1994] defined these four elementary and interacting components in detail and
the importance of them at the firm level. In fact, he confines these comprehensive forms of
technology in a comprehensive definition of manufacturing technology.
Technology embodies the four components, which are hardly transferred well especially the
software because the software of technology is often associated with human being such as
skill of employees, skill of manager and the communication and information system as well.
2.3 Concept of appropriate Technology
Bourrieres [1979] from a micro-system perspective, suggested that appropriate technology
should be defined in the context of complex system and five levels have to be considered:
The objective of the decision making unit, resource available, the action intended, the actors
and the results.
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From an economic perspective, suggested that appropriate technology should be defined as
one that makes possible the production of a given good at a price not exceeding the current
world price, taking into account the scarcities and opportunity cost of production, exchange
rate, and the rate of interest or discount.
From the financial perspective, the World Bank defined appropriate technology as one that
provided the highest net present value relative with capital investment.
Although there are various definitions of appropriate technology, there is general agreement
that such technology must be efficient, not be obsolete, and that it must vary according to the
particular situation of each country under that consideration. There is not an appropriate
technology for all countries but the appropriateness of a technology with one circumstance.
2.4 Concepts of Technological Capability
Many researchers give typologies of technological capabilities. From a social perspective,
Dunning [1981] identified five elements of technological capability: people, operation
experience, an effective organization, a problem sensing and solving mechanism, and
necessary values and attitudes.
Westphal, L. E. Kim and Dahlman [1985] made a functional classification of capabilities
(production, investment, and innovation).
Baranson and Trends [1985] distinguished four types of technological capabilities: capability
in purchasing technology, plant operation, duplication and expansion, and innovation.
Ramanathan [1994] based on an extensive literature review has pointed out six types of
technological capability that will be needed by a transferee: Acquisitive capability, operative
capability, adaptive capability, innovative capability, marketing capability, and supportive
capability. These conceptual distinctions, although not always easy to make in practice, are
helpful in interpreting inter-industry and cross-country differences.
Technology transfer is not as simple as purchasing a capital good or the acquisition of its
blueprints. The transferees have to devote substantial resources to assimilate, adapt, and
improve upon the original technology. The successful trends of transferred technology use
are to be dependent upon transferor firms and countries to develop their own technological
capabilities.
2.5 Acquisition of technological Capability
Many studies proved that acquisition of a technology does not automatically lead to
acquisition of technological capability.
Katz [1985], based on his studies of six Latin American Countries, concluded that the kind of
technological capability that emerges and develops in any given social setting depends on
the type of economic agents in such a setting, the resource endowments. They are affected
over time. He further pointed out that the size of the firm, its field of activities, type of
production organization, the degree of product standardization, and type of ownership are all
important determine the factors in the development of indigenous technological capability.
Dunning [1981] said that, after more than two generations of control of the local Trinidad-
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Tobago oil industry by foreign MNCs, a local technological capability still does not exist over
the whole range of activities necessary for running the industry. Mytelka [1985], in his study of
the textile industry in Africa, concluded that substantial technological effort is essential to the
acquisition of technological capability. Lasserre[1983] emphasized the importance of training.
They correctly pointed out that the geographical transfer of technology might be of little use
unless the appropriate human resources are simultaneously available.
The transferee countries pay a lot of effort towards the continuous adaptation of imported
technology to local conditions and to the firm’s operational characteristics and productive
constraints. Empirical studies have showed that adaptation takes place through changes that
stretch the capacity of existing plants, break bottlenecks in particular processes and product
designs. However, such positive actions do not take place easily or cheaply in any
environment.
2.6 Problems of international technological transfer encountered by LDCs
Balasubramanyam [1987] has pointed out lack of efficient sources of components as a major
problem in adapting and using imported technology. Poor quality of components supplied,
lack of adherence to delivery schedules and lack of continuity in supply were cited.
Thomas [1973] pointed out that the transfer of technology to the African countries is usually in
the “embodied” form in imported technology. Lack of appropriate manpower to exploit these
technologies to meet local conditions and needs and the obstacles by the mechanism of
transfer have fostered complete dependence on foreign technology and limited indigenous
technological initiative. For example, agricultural technology (for food production and
processing) “embodied” in imported tractors, irrigation systems, fertilization processes, new
cropping, canning, and refrigeration have not been advantageously used due to improper
adaptation to tropical agriculture, lack of effective organizational know how, and requisite
marketing techniques.
Imported technology needs to be restructured to suite indigenous labor needs, the climate
and the culture. The imported design and equipment may have to be restructured to fit the
local needs and conditions.
2.7 Main elements of technology transfer process
The main elements of technology transfer process are Transferor, transferee, Technology,
linking mechanism, Transferor environment, transferee environment and the greater
environment (see figure 3)
Transferor: Supplier of technology
Transferee: The receiver of technology
Technology: Includes tangible parts as well as intangible part such as “know how”, “know
why” suitable to the technology.
Linking mechanism: the means by which technology is transferred from the transferor to
transferee. The linking mechanism may be as indirect or direct one. Direct mechanism refers
to a case when transferee is in direct contact with the transferor of the technology. Indirect
mechanism is the one when an intermediary partner engaging for acquiring the technology.
Market oriented mechanism: these are initiated with profit motive as a major consideration in
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technology transfer. It includes: purchase of plants, equipment and product, direct foreign
investment (FDI), joint venture, turnkey contract, subcontract, licensing, and technology
information service
Figure 2.2: Schematic Presentation of the Technology Transfer Process
Gougeon & Gupta(ed.), [1997]
Transferor environment: the immediate set of conditions under which the transferor is
operating: at the individual, organizational and national level.
Transferee Environment: this is mainly determined by the absorptive capacity of the
transferee (physical and organizational infrastructures, skill availability, commitment to
change, etc.).
Greater environment: The factors that can influence beyond transferee and transferor
environment. For instance, transfer of technology between two nations may depend on some
factors such as political relationship, exchange rate, trade negotiations, technological level of
each nation and the competition in the international market.
Market oriented mechanism: These are initiated with profit motive as a major consideration in
technology transfer. It includes: purchase of plants, equipment and product, direct foreign
investment (FDI), joint venture, turnkey contract, subcontract, licensing, and technology
information service
2.7.1 Comparison of major Technology Acquisition Methods
Depending on specific condition, a technology transfer mechanism will be selected and
applied. The comparison of five main mechanisms of technology transfer is presented in the
following table:
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Transferor’s environment
Transferor
Transferee’s environment
Transferor
Technology
GREATER
ENVIRONMENT
Link Mechanism
Table 2.1: Comparison of Major Technology Acquisition Methods
Major Characteristics Dependent Independent
JV P L I R
Cost - Cost of technology acquisition
- Cost of R&D
- Royalty Payment
H
VL
-
VH
VL
VH
M
L
H
L
L
-
VH
VH
-
Manpower – Need for local R&D manpower
- Possibility of training specialist before
start- up
L
L
L
L
M
M
H
H
VH
VH
Time - Advantage in shortening development
Time (early start-up time)
VH VH M * H
Technological Considerations
- Technological self-reliance
- Availability of key technology
- Automation/ Adaptability of technology
Utilization
VL
VL
VL
L
VL
L
M
L
M
H
M
VH
VH
VH
VH
Market - Expected return on success * * * * VH
Risk - Technological risk
- Commercial risk
VL
*
VL
*
L
*
M
*
VH
VH
Where JV: Joint venture, P: Purchase of technology, L Licensing in, I: Imitation, R: indigenous
R&D, VH: very high, H: high, M: medium, L: low, VL: very low.
Source: Hand outs, Professor Young-suk Huyn [1999].
Based on the needs of transferee and characteristics of technology, a suitable mechanism
will be selected in order to satisfy the needs.
According to Ford [1988], factors affecting technology acquisition decision are company’s
relative standing, urgency of acquisition, commitment/ investment involved in, technology life
cycle position and categories of technology. They are illustrated in table 3.
Depending on specific condition of company and characteristics of technology acquired, a
suitable method is selected. It is very important to select a right method because it can affect
your competitiveness in the market.
Table 2.2: Factor Affecting Technology Acquisition Decisions.
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Acquisition
Methods
Company’s
relative
standing
Urgency of
Acquisition
Commitment/
Investment
Involved in
Technology
Life Cycle
Categories of
technology
Internal R&D High Lowest Highest Earliest
Most
distinctive or
“Critical”
Joint Venture Lower Early
Distinctive or
basic
Contract-out
R&D Low Early
Distinctive or
basic
License in High Lowest Later
Distinctive or
basic
Non-
acquisition Low High
No
commitment All stages external
Highest
High
Source: Ford [1988]
2.8 Joint venture and purchase of Technology in developing countries
According to the report of the International Development Research Center (web:
http://www.idrc.ca/books/focus/873/chapt3.html), most technology transfer mechanisms used
were Joint Venture, BOT, FDI and purchase of technology. In post harvest industry, Purchase
of technology and joint venture are normally used. Each mechanism has their own
advantages and disadvantages but both of them need a careful selection of technology or
partner and good management of technology transfer. For State owned companies, purchase
of technology is mostly preferred because it is easy to handle the transfer and the transferees
have autonomy in running their business. Joint venture is also considered as an effective way
to acquire technology in case of shortage of resource or facing difficulties in finding market for
output.
Purchase of technology seems a simplest form of technology transfer but sometimes it is
difficult to handle successfully especially in the adapting process of the new technology. It
seems the only transfer of physical machines and equipment but actually other components
such as humanware, and inforware much be embodied when the machines and equipment
are transferred.
In short, managing a transfer of technology through purchase of machine and equipment or a
joint venture is not easy. Software of the technology transferred must be an indivisible part to
ensure a proper transfer of technology.
2.8.1 Purchase of technology
2.8.1.1 Reasons to engage in buying and selling technology
Motives of technology seller
There are many reasons for a company to sell its technology to the other. According to Hyun,
J.H. and J.K.Oh [1996], the reason for the seller engaging in selling its technology are
financial, market entry, selling obsolete technology or avoiding imitative competition.
Some possible reasons for selling technology may be:
 The first reason is that the seller can obtain immediate financial benefits from the buyer
for the technology sold.
 The second reason may be the seller wants to exploit good sources of raw material.
 Technology sold is not valuable or competitive advantage creating but it is still new and
competitive in other market.
 Gain access to a new market
 Testing or improving its existing technology
Among these reasons, financial gain and market entries are the most frequent reasons for the
sale of technology. One other important reason is the obsoleteness of technology in the
primary market. The seller wants to change its technology and sell the existing one to other.
Motives of technology buyer
Some possible reasons for buying technology:
• The buyer lacks capability to produce technology locally due to both skill and resource
constraints
• Reducing time needed for upgrading company’s technology and improving its capability
• Having autonomy in doing business
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There are many main factors affecting the buyer’s decisions. Ford [1988] noted that
companies choosing purchase of technology as mechanism of technology often has full
autonomy in control on the technology. This is a strong point over other mechanisms and it is
also the main reason why transferee wants to choose purchase of technology than other.
2.8.1.2 Problems and difficulties with purchase of technology
Purchase of technology is the simplest method of acquiring technology but it has to face a lot
of problems and difficulties. First, there may be no real need for the plant or equipment
purchased because the existing technology is not out of date in the company environment.
The second is the inadequate infrastructure facilities for the new technology such as water,
power, transportation and so on. Sometimes obsolete technology is bought because of the
lack of experience. This problem mostly occurs in transfer of technology from Developed
Countries to the third ones where the transferees often lack experience, knowledge and
information of technological market. Problems may come from the lack of intangible
technological components because the buyer just focuses on the physical components of
technology.
Because the commitment of transferor is not obliged in long term with buyers so the problem
may arise after the sale such as in repairing or maintenance.
In order to avoid these problems or reduce their impacts, the buyer of the technology must
carefully manage the technology transfer and the adaptation to the company’s environment.
2.8.2 Transfer of technology through joint venture methods
2.8.2.1 Definition of joint venture
There are some definitions of a joint venture. They are somehow different but a joint venture
usually has three elements: a separate legal entity, joint ownership of the legal by the joint
venture partners and joint management of the joint venture partner.
Tomlinson [1970] defined Joint venture as one where there is the commitment, for a more
than very short duration, of fund, facilities, and services by two or more legally separate
interests, to an enterprise for the mutual benefit.
UNIDO [1971] defined joint venture as follows: “ joint ventures are enterprises in which there
is significant, and typically an initial sharing of equity between the principal parties to the
ventures or some substantive and continuing contractual arrangement of a technological
and / or trading nature”
Both definitions of joint venture emphasize the three elements above of joint venture. For a
joint venture between foreign and local parties, there are some characteristics as follows:
 The establishment of a new enterprise in the legal form of a separate entity
 Participation of local partner(s) and foreign partner(s)
2.8.2.2 Reasons to engage in joint venture
Joint venture is particularly appropriate when complementary needs exist between firms and
when the partners’ strategies are compatible. This ensures the participating companies have
a reasonable and effective degree of cooperation and commitment throughout the life of the
agreement.
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