TECHNOLOGY TRANSFER

Technology transfer is a complex and multi-faced process. Initially, transfer occurs from research laboratories such as universities to the market. Prior to 1980 when The Patent and Trademark Laws Amendment Act, more commonly know as the Bayh-Dole Act was passed, there was limited flow of government-funded inventions to the private sector. In 1980, the federal government held title to approximately 28,000 patents. Fewer than 5 percent of these were licensed to industry for development of commercial products (U.S. Government Accounting office, 1998). The Bayh-Dole Act permitted universities to retain title to inventions developed under government funding and encouraged universities to collaborate with companies to promote the utilization of invention arising from federal funding. Since the passage of this Act, partnerships between universities and industry have moved new discoveries from the laboratory to the market place for the benefit of society.

There is substantial evidence to suggest that the Bayh-Dole Act has promoted a considerable increase in the technology transfer from universities to industry, and ultimately to the people around the world. However, it is obvious that economic interests were the driving forces for the change in governmental policy. Licensing by universities, National Institutes of Health or other governmental agencies in life sciences has yielded substantial profits to pharmaceutical companies, sometimes at the cost of human suffering. If the public good is not served by, or is undermined by technology transfer, then it is ethically justified to change public policy.

Historically, and to a large extent even in the early twenty-first century, the transfer of technology occurs between and among developed nations. However, new forms of multi-national enterprise imply a dispersion of production tasks across globe. In the case of developing countries, the technology must meet the local needs and be socially accepted. If the technology is not appropriate it may cause negative economic, social, and environmental impacts. The chemical disaster in Bhopal, India, is a case in point. Methylisocyanate (MIC) leaking from a Union Carbide corporation pesticide plant immediately killed more than 2,000 people and injured or disabled more than 200,000 others. The death toll has reached 20,000 since December 3, 1984, when the accident occurred. Information about hazardous technologies was lacking, workers were poorly trained, and major safety equipment was inoperative because of poor maintenance. In this case the technology should have been modified to make it adaptable to the new environment.

Mechanisms of Technology Transfer

The most important legitimate channels for technology transfer are licensing, foreign direct investment, and joint ventures. Most technology transfer takes place in the form of licensing under specific terms and conditions agreed to by both suppliers and recipients. The suppliers gain monetary rewards, whereas the recipients expand their economic opportunities.

Foreign direct investment refers to a process by which multinational corporations (MNCs) transfer production operations to the developing countries through wholly owned subsidiaries. In this context, the transfer of technology takes place internally between parent MNCs and their branches and subsidiaries in different countries. This enables MNCs to retain technology within the corporations.

Joint ventures have emerged as an alternative to foreign direct investment because most developing countries have issued investment laws that regulate foreign investment. These laws promote joint ventures between local and foreign partners. Consequently, with greater emphasis on national participation and control by the developing countries, technology transfer has assumed a new meaning, although control over proprietary technology and know-how has remained with MNCs.

Technology Transfer and Ethical Issues

Given these basic mechanisms of technology transfer, one may nevertheless ask: Why technology transfer? Can technology transfer improve the economic conditions of people living in the developing countries? Can technology transfer create global equity?

Proponents of globalization have suggested that technology and its diffusion can improve living standards, increase productivity, generate employment opportunities, improve public services, and create competitive markets for products. Have these goals been achieved? There are two contending theories: the dependency theory and the bargaining theory.

DEPENDENCY THEORY. Proponents of this theory (Cardoso and Faletto 1979) claim that, because of the insistence of multinational corporations on foreign direct investment (which transfers technology from the parent companies to the foreign subsidiaries), developing countries are denied access to modern technologies. These theorists contend that technology is key to development and, if denied, developing countries will remain dependent on developed countries. This will create negative economic outcomes, such as increased inequality and wage stagnation. Consequently, the balance of trade between developed and developing societies will remain unequal and therefore exploitive. Sunil K. Sahu (1998) suggests that such technological dependence creates an enclave economy for the developing countries, and that it will be difficult for their economies to expand or even survive.

BARGAINING THEORY. This theory takes a view opposite that of dependency theory. Bargaining theory recognizes the potential benefit that MNCs can bring to their host countries. In other words, the technologies of the advanced countries do not have adverse effects on the economy of the developing societies. Raymond Vernon (1971), an advocate of this theory, has developed a concept known as "obsolescing bargaining" that explains the relationship between MNCs and host countries. The bargaining power of the developing countries tends to increase after a certain period, specifically when technology becomes stabilized and competition for the same technology by other developed countries intensifies. The competition among developed countries increases the choices available to the developing countries. Additionally, once the foreign investment is "sunken," the host country is in a much stronger position to negotiate a better deal, and at this point MNCs cannot credibly threaten to withdraw (Stepan 1978). Vernon also suggests that the monopoly of the innovator is not permanent because most products tend to pass through a transition from "monopoly to oligopoly to workable competition" (Vernon 1971, p. 91). This is also known as the product life-cycle theory.

Can Technology Transfer Create Global Equity?

Technology transfer has accelerated the process of globalization, and it is suggested that it may lift all people and raise their living standards. The Industrial Revolution brought new wealth first in Europe and then in the United States. Since the Industrial Revolution, the difference between the rich and the poor in the world has increased. It is estimated that the difference between the per capita incomes of the richest and poorest countries was 3 to 1 in 1820, 11 to 1 in 1913, 35 to 1 in 1950, 44 to 1 in 1973, and 72 to 1 in 1992 (UNDP 1999). The gap is further reflected in how the world's wealth is distributed. The wealthiest 20 percent of the world's people—all from developed countries—control 85 percent of global income. The remaining 80 percent of people share 15 percent of the world's income. Such disparity has led to greater poverty in the developing countries. Statistics show that the number of people who are living on less than $1 per day (a frequently used poverty line) was rising in the late twentieth and early twenty-first centuries. The number of these people grew from 1.2 billion in 1987 to 1.5 billion in 2000, and there could be nearly 2 billion poor people by 2015. In addition, approximately 45 percent of the world population live on $2 per day (World Bank 2000). Some countries such as South Korea, Taiwan, Singapore, Hong Kong, and China have benefited from global economies, but others have not. The growth of proprietary technology, covered by patents and industrial property rights, has served as a major barrier to new entrants, and it will continue to do so unless proprietary rights are modified.

MURLI M. SINHA

SEE ALSO Development Ethics;Technological Innovation.

BIBLIOGRAPHY

Cardoso, Fernando Henrique, and Enzo Faletto. (1979). Dependency and Development in Latin America, trans. Marjory Mattingly Urquidi. Berkeley and Los Angeles: University of California Press.

Rosenberg, Nathan, and Claudio Frischtak, eds. (1985). International Technology Transfer: Concepts, Measures, and Comparison. New York: Praeger.

Sahu, Sunil K. (1998). Technology Transfer, Dependence, and Self-Reliant Development in the Third World: The Pharmaceutical and Machine Tool Industries in India. Westport, CT: Praeger.

Stepan, Alfred. (1978). The State and Society: Peru in Comparative Perspective. Princeton, NJ: Princeton University Press.

United Nations Development Programme (UNDP). (1999). Human Development Report, 1999. New York: Oxford University Press.

United States Government Accounting Office. (1998). "Technology Transfer." Report to Congressional Committees. Administration of the Bayh-Dole Act by Research Universities.

Vernon, Raymond. (1971). Sovereignty at Bay: The Multinational Spread of U.S. Enterprises. New York: Basic.

Vernon, Raymond. (1977). Storm over the Multinationals: The Real Issue. Cambridge, MA: Harvard University Press.

World Bank. (2000). World Development Report, 1999–2000. New York: Oxford University Press.