Enablers and Barriers for Implementing Technology ...

Enablers and Barriers for Implementing Technology Transfer Projects: A Study of SMEs in India

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======== _=_ _0_0 ==0==== Sonal Khurana' Javed Khafi! Bisma Mannan'

ABSTRACT The study focuses on orqanizaticns in the manufacturing industry, particularly the automobile manufacturers in the Indian context. The vehicle manufacturers, which are large enterprises, are supported by a network of vendors iuhich.are small and Medium Enterprises (SMEs) whose role lrt technology transfer is vital. Several studies confirm that. a nation's growth is dictated, to a large extent, by the performance oj small businesses. However, the reality is that SMEs are constantly struggling to survive and maintain their schedule of activities [Sutuannapirom, 2008). This is evident in the track record of the majority ofSMEs in the developing countries: t.1.eyhave been unable to reap the benefits of globalization (SME-IIP2007). This unfortunate predicament may be attributed to the fact that many developzng countnes face major challenges in suitably developing, attracting, and using modem technologies (Suwannapirom. 2008). The productive entities that have been most affected by problems specific to technology transfer are the SMEs. It IS, therefore, inevitable that a large majority of micro and small firms In countries in the Asian and Pacific region have focused on traditional industries (Benjamin, 2000) where the activities are mostly characterized by low technological complexity and extensive use of unqualified labour. In India, the Ministry of Industry and the Department of Science and Technology (DST), alonq with other agencies, introduced specific programmes for SMEs and cluster development it t the recent past, which are directed towards networking their needs alld demands with knowledge institutions [Suuiannapirom, 200R). Keywords: Enablers & barriers, technology transfer, SMEs, technology management.

INTRODUCTION The dynamic engine of a nation's economic growth is driven by a collective of small and medium enterprises (SMEs) whose activities are the spur to aggregate economic and social benefits. The limited availability of technological, human, financial, and management resources on the one hand, and the weaker capability and bargaining power of SMEs on the other hand, are amongst the most crucial barriers that must be overcome when it comes to dealing with factors in their external environment, including suppliers, clients, the labour market, development agencies, and fund providers. Several studies address the problems faced by SMEs in their development at the macro, and micro levels in an enabling environment. (Chandra, 2007) These problems include

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limited access to finance; cumbersome bureaucratic procedures in setting up, operating, and sustaining a business; poor infrastructure; and the lack of effective institutional structures. While acknowledging the importance ofthese issues, this study limits its focus to the problems faced by SMEs in the technology transfer process. Methodology of Study The study does a review of literature on technology transfer and technology management concept and the identification of key issues and strategic risks in technology transfer.

TECHNOLOGY TRANSFER

AND MANAGEMENT: RELEVANCE

What does technology transfer mean and why do people get involved in it? The Association of UniversityTechnologyManagers defines technology transfer as 'the process of transferring scientific findings from one organization to another for the purpose offurther development and commercialization.

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ASSESSMENT OF TECHNOLOGY TRANSFER

Figure 1: Basic model of Technology Transfer (Sushil, 2007)

Technologytransfer is the transfer of systematic knowledgefor the manufacture of a product or provision of a service. (SME-IIP2007) And the management of technology is acquiring a distinctive character and increasingly being recognized as an activity that complements other managerial functions in providing the necessary inputs to the decision-making process. The manufacturing scenario has undergone a rapid change in the last decade, more so in the last few years. The arrival of new materials and products, customers' changing needs, and such other factors have revolutionized the area of manufacturing of

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goods: product life cycles have been shortened; the variety of products for manufacture in a single production unit has considerably increased; and existing/new products have to be constantly modified to remain competitive. Consequently, more flexible machines, equipment, and systems are being acquired to fulfil these needs. (Sushil, 2007) Technology management is the capacity of a firm, a group, or a society to master the management of the factors that condition technical change with the purpose of improving its economic, social, and cultural environment and increasing its wealth quotient. The overall process of technology management can be divided into the following eight phases. (Khamba, 2001) • Forecasting and Assessment • Planning and Strategy • Acquisition and Development • • • • •

Transfer Adoption and Adaptation Diffusion and Substitution Utilization Phasing-out.

STEPS INTECHNOLOGY

TRANSFER

The terminology defined below describes the progression from the transfer of minimal information to that of core details. Show-how: The recipient at this stage is a sub-contractor with limited technical assistance, allowing only the most meagre transfer of technology. Know-how: The transfer of technology accelerates, as there is full technical aid with scientific assistance, adaptation, use of materials, and transmission of results and formulas. At the same time, the attendant risks also increase. Know-why: In this step, existing research is shared, with the supplier of technology transmitting concepts and explaining formulas. Know-everything: Here the core technology is transmitted, Intensifying the risks, with a boomerang effect perhaps already in place. (Rosenberg, 1985)

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TECHNOLOGY CHARACTERST1CS

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Figure 2: Factors influencing the strategies for technology transfer (Sushil, 2007)

Small and Medium Enterprises and Technology Acquisition A 2004 survey of OEeD countries revealed that SMEs accounted for over 90% of total number of enterprises in Emerging Economies (EEs). (Sushil, 2007) Furthermore, 60%) of all companies in emerging economies are SMEs. According to a recent report of Citigroup and Economist Intelligence Unit (ElU), SMEs in EEs are becoming more competitive and increasingly crucial for economic growth. The report, based on a survey of 670 Asian organizations, revealed that almost one-half of the SME entrepreneurs expect to grow significantly in the future as "they think they can react and innovate more quickly and have closer customer relationships than their large corporate competitors". Research has shown that Small and Medium sized Enterprises (SMEs) play an important role in the economic development of countries worldwide. (Jones, 2002) However, in order that SMEs survive for more than a fewyears in markets monopolized by large competitors, they must nullify the disadvantages arising from their limited size either by forming alliances with similar firms to increase the rate of their market penetration and reduce financial risk, or by utilizing technology to overcome diseconomies of scale and produce innovations that carry their own stamp in the competitive market. Because of the SMEs' limited resources and relative inability to absorb the costs and risks associated with in-house technology development, they must often utilize the process of technology transfer to take advantage of the benefits gained by technology and innovation.

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Figure 3: Definition of Indian SMEs (SME-IIP 2007)

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In view of the fact that SMEs have the potential to contribute positively to a country's economic development and that their ability to innovate has an impact on their capacity for survival in the long run, it is important to identify the primary obstacles they face with regard to new technology development and acquisition and to create tools and policies designed to help them meet these specific challenges.

CHALLENGES

FACED BY INDIAN SMES

Financial Aspects of Technology Choice The most crucial barrier for SMEs in choosing appropriate technology is the high cost of acquisition and installation of technology (Bhalla, 1987). After a consensus is reached within the firm on the specific technology to meet their objectives, the market price of the chosen technology is often found tu he exorbitantly high, necessitating a redraft of the SME's objectives and also a search for other sources of finance. The studies reveal problems in seeking venture capital/early stage funds in the case of start-ups. (Suwannapirom, 2008) In a similar context, problems arise due to the lack of incubation units. SMEs face considerable difficulty due to the management's poor clarity on the capital requirements; it's mistiming of expenditures, and inability to carry out a financial analysis, for exampJe, in the form of input-output ratio calculation, and related subjects. The consequences of such lapses are that the management takes expedient rather than rational decisions. (Chandra, 2007)

Lack of in-house Technological

Capabilities

A technology developed in one country can only be partially transferred to another country. A recipient country needs to learn the functioning of the transferable part as well as the parts that cannot be transferred. The importation of technology does not imply full understanding and mastery ofthat particular technology. In spite of massive flow of foreign technology, most developing countries have yet to develop a strong indigenous technological capability. (Rosenberg, 1985)

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Organizational Resistance and Communication

Barriers

The basic elements for successful technology transfer include reliable sources of useful information, commitment ofinformation disseminators, and flexibleconduits for information transfer. The need for transition from single-function focus to multi-function focus is stressed. Transition to multi-function orientation requires a radical transformation of the firm's management: changes in the mindset, personality, and skills of key managers; adjustments in the organizational culture and power structure; and revision in the information system, rewards, and incentives, and in decision-making systems and organizational structures. (Rosenberg, 1985) Lack of Infrastructure

and Technical Professionals

In the assessment of technology transfer to developing countries, (Pau, 1988) identified the lack of a well established industrial infrastructure as the most serious problem. He also noted that the second most important requirement was the need for an adequate number of local technical professionals to tailor the newly introduced technology to local applications. Hurdles in New Technology Commercialization New technology during its up-scaling, proving, and commercialization are encumbered with inherent risks, and demands considerable inputs in terms of time and money. Notwithstanding these constraints, the benefits that may accrue from a new technology generally outweigh the costs/ investments. (Rosenberg, 1985) Partner Selection for Technology Choice Inadequate information about the transferor; the lack of easy access and linkages to technology transfer agencies, and to other intermediary organizations, as also to the transferor's bank references, balance sheets, and/ or annual reports slow down, or at times even stall, the technology transfer process. (Suwannapirom, 2008) Suggest that the indecisiveness on the nature of partnerships (joint venture, strategic alliance) as also the lack of surety about the mechanisms of technology acquisition (licensing, sub-contracting, acquisition of company, imitation, foreign purchase, or informal means) often thwart the transfer of technology. Obstacles to successful foreign affiliations are another major concern for SMEs. It was found that the global SMEs were adept in adjusting to international market standards, but less skilled in forging ties with local sector networks. (Chandra, 2007) Ma~ket Forces and Combating Competitiveness The failure of SMEs to conduct a professional market research deprives them of an accurate evaluationof the acquired technology's market potential. This is especially so in the case of start-ups, which are at a disadvs..itage because of their limited or complete absence of focus on marketing channels comprised of distributors, wholesalers, retailers, and such other entities. It is observed that SMEs concentrate too much on immediate sales, and

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show scant attention to the importance of collating and analyzing broad-based information and formulating a long-term strategy for dealing with major fluctuations in the business environment. In the case of combating competitiveness, the major shortcoming of SMEs is the total disregard of an assessment of suppliers and competition in their limited research efforts (Chandra, 2007). Intellectual Property (IP) Rights and Other Legal Factors The most commonly stated problem of SMEs in respect of intellectual property rights (IPR) is the substantial expenditure required to file and maintain Intellectual Property (IP).The high costs involved, especially in the case of patents, are considered by SMEs to be the primary barrier to using the formal system of IPR more intensively. (SME-IIP 2007) The SMEs' apparent lack of interest in IP protection, the high cost of obtaining a patent, and the prospect of larger litigation costs - these factors combine to discourage SMEs from investing in patents, particularly in foreign countries. (Xueyi, 2007) Government Support The limited incentives provided by the government to acquire technology place SMEs at a disadvantage. Further, governmental support in the technology transfer process is inadequate, government approvals and certifications are impeded by long delays, and excessive interference by the government often adds to the existing problems. Some SMEs are also unaware of the regulatory norms. (Chandra, 2007)

STRENGTHENING TECHNOLOGY

TRANSFER IN SMES

Training Employees Qualityrelated training has been emphasized in the effectiveuse of advanced manufacturing technologies. The training of employees acts as a cushion to absorb the shocks of technology transfer. In this fast-moving environment, the major objective should be to keep people abreast of change, increase productivity, and find new ways of offering a competitive advantage. As the world economy is getting more global and technologies more complex, cooperation between donors and recipients has become increasingly critical to successful technologytransfers. Training employees is an investment for quality improvement, product innovation, and client service. From an employee's point of view, tailored training for hightech jobs is appealing, because it directly promotes career development and her Ihis value to the firm. (Sushil, 2007) Vendor participation The form of socialization occurs through the joint understanding of how buyers and seller can successfully work together, particularly the transmission of organization goals and values through informal interactions to create a value congruence or alignment. Informal socialization tactics can increase the level of trust between the members of the relationship and given them greater time, opportunity, and motivation to strengthen and broaden their relationship. (Sushil, 2007)

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Financial Support Apart from governmental support, SMEs need to expand their network to seek support from the financial sector: bankers, financiers, including domestic and foreign investors. At the intra-organizational level, cost-cutting measures need to be adopted - a requirement that is superfluous if financial planning is undertaken in advance, and reassessment is carried out at periodic intervals of the technology transfer process. (Chandra, 2007)

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Supporting Agencies and Government Linkages SMEs must explore their association with academic institutions, research laboratories, and large private firms to help ensure that the knowledge provided to them and in clusters is constantly updated, that it reflects international best practices, and is as market-driven as possible. This can be possible through public-private partnerships. In their association with academia, joint training programmes, which may include courses such as small business administration programmes for SMEs, would help in ensuring that curricula in academia reflect market needs. (Chandra, 2007)

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CONCLUSION The SME's contribution to the development of a nation's economy is significant is evident in terms of SMEs being the largest constituent sector in the production system in their capacity for generating employment. SMEs also have an aptitude for innovation, creativity, and flexibility, enabling them to respond with more alacrity to structural changes and to adapt quickly to the dynamic demand patterns of consumers and customers.

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State

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