Describe the non-equity forms of
technology transfer by Transnational Corporations and Small and Medium
Enterprise
Answers
Describe the non-equity forms of
technology transfer by Transnational Corporations and Small and Medium
Enterprise✌✌❤❤
Outright Sale Purchase of Technology:: Firms at times prefer outright purchase of technology while the seller also opts for it. The advantage of this mode of transfer to the purchaser is that the buying firm gets technology at one goes and has freedom to use the technology without the interference of the seller. Further, it is argued that the buyer can find it economical. But there are certain disadvantages as well.
Sub-Contracting: Many foreign enterprises sub-contract the purchase of inputs to host country’s producer. This is called supplier user relationship. Under this arrangement the TNC's affiliate, for instance, not only assists the local firm technically but also provides information which is important in increasing its ability to coordinate the production of components and other intermediate products.
Management Contract: A number of firms also sign management contracts with firms in the host countries. Under these contracts foreign enterprise advises the host company about various management practices which are in use in its parent compan
Answer:
There are a number of mechanisms other than equity participation through which technology transfer takes place. It includes outright-sale of technology, sub-contracting of production of parts, components and services, management contracts, franchise exports, strategic alliances and technology collaboration agreements.
Outright Sale Purchase of Technology: Firms at times prefer outright purchase of technology while the seller also opts for it. The advantage of this mode of transfer to the purchaser is that the buying firm gets technology at one goes and has freedom to use the technology without the interference of the seller. Further, it is argued that the buyer can find it economical. But there are certain disadvantages as well. First, outright purchase may not be adequate to transfer technology without the support of the seller. Further, the buyer will be deprived of advances that would be subsequently made. In addition, in the absence of well planned R&D, the technology absorption by the firm may not be adequate. The firm may in the ultimate analysis depend on outside source for all technological inputs.
Sub-Contracting: Many foreign enterprises sub-contract the purchase of inputs to host country’s producer. This is called supplier user relationship. Under this arrangement the TNC's affiliate, for instance, not only assists the local firm technically but also provides information which is important in increasing its ability to coordinate the production of components and other intermediate products. (This should not be mistaken for licensing agreements.) Technology passes to sub-contractors or suppliers coming in the form of technical assistance, material handling, product and process technology, and general information with regard to production and finance, etc. This form of technology transfer is widespread in automobile industry, radio, television, shoe, etc. This form of technology transfer has also expanded to highly sophisticated products such as those of the semiconductor industry.
Management Contract: A number of firms also sign management contracts with firms in the host countries. Under these contracts foreign enterprise advises the host company about various management practices which are in use in its parent company. Occasionally, under this contract the entire management is handled by the foreign firm. For this the host company has to pay management fees, either lumpsum or in installments.
Franchises: Under this owner of a specific technology allows a host company under franchise to use its specific knowledge for a franchise fee. This is a widespread practice in food industry, hotels, etc.
Exports and Technology Transfer: National firms will be able to acquire technology through exports. Let us learn this concept with the help of the following case. This case has been taken from World Development Report, Vol. 18, No. 2 (Young Wheel Rhee, The Catalytic Model of Development: Lessons from Bangladesh's Success with Garment Exports, pp. 333-346.)