Technology and Indian Industry

Due to high tariffs before the liberalization period, most Indian firms enjoyed protection of some kind or the other. Free imports were not forthcoming. Restrictions on royalty payments discouraged foreign suppliers to offer latest technology to Indian partners. Manufactures had a field day as this situation continued for a painfully long time, leading to the creation of artificial scarcity even in basic items such as passenger cars and scooters. MRTP restrictions, FERA barriers,  a restrictive licensing policy, price controls (steel, fertilizers, lubricants etc.), public sector monopolies, entry barriers for MNCs  in power, electronics, mining, infrastructure, aviation, oil, telecom, sectors, capital market restrictions came in the way of investing in technological up-gradation building viable and globally competitive plants and offering goods and services to customers at an economical cost.

Handling Technology Transactions:

Transactions involving technology acquisition and absorption are different from transactions of purchase and sale of goods or services. They are fairly complex in nature and demand a careful scrutiny of multifarious factors and after the transfer of technology.

Multi-disciplinary skills: Carrying out negotiations with the foreign collaborator who has agreed to offer technology is not easy as the issue needs to be examined from various angles: viz., R&D, design, production, marketing finance, training, government policies, product performance indigenisation etc. To be effective the buyer of technology must entrust the job to a multidisciplinary team consisting of experts in the above fields.

Before proceeding further, the buyer should find out details regarding suppliers of technology, their past records, financial strength, market standing, past technology agreements with other people etc. Though the details regarding these issues are not openly available, an attempt  must be made to find these background  details which would certainly help in carrying out negotiations from a position of strength.

Full details regarding the technology to be acquired must be obtained initially: how latest is the technology? How many players use the technology currently? How to indigenise the technology? How difficult is it to carry out modifications from time to time? Will the foreign collaborator agree to keep the local player informed about such changes and carry out modifications from time to time?

The technology life cycle:

All technologies pass through certain distinct stages during their life cycles: embryonic, growth, maturity and decline phases. Many overseas companies try to transfer technology to third world countries after fully exploiting the technology in their own countries – that is after the maturity phase. In such instances, additional precautions need to be taken to see whether there is market for such technology locally, whether other local players have already come out with indigenous versions or likely to flood the market soon after one local player concludes the agreement with the overseas partner; whether  the technology is available at an economical price or not, whether  the technology supplier is the real owner or not etc.

It is quite difficult to fix a reasonable price for the technology to be  acquired as the buyer is not fully conversant with details of the technology. Also, there are no reference points to be used to reduce the price quoted by the seller.  It all depends on the quality of technology being offered, its success in the market place, the relations between both parties etc. Of course it is not always possible to spell out everything on paper in black and white. Both parties must have full confidence in each other and try to sort out problematic things.

Both the licensor and licensee must extend full cooperation to each other and see that the technology agreement works. They must exchange notes continually keeping all channels of communication open. Apart from regular interactions, they must monitor the implementation process closely offer feedback to each other and assess market developments from time to time. Both must understand their roles and responsibilities clearly and share expertise in an atmosphere of mutual trust and good will.

Transfer of technology:

Transfer of technology can be   affected in various ways.

Turnkey approach: The setting up of complete works including the design and setting up of plant and equipment, training of personnel of recipient organization at the factory  site, deputing experts to the site for overseeing operations at the site of the technology recipient.

Joint venture: The setting up of a company in the country of technology recipient in which both transferor and transferee participate in the equity in accordance with the laws of the land.

Licensing agreement: This is the most common method of technology transfer followed in less developed countries. The agreement permits the recipient organization to carry out production utilizing the technology, facilities and other inputs provided by the transferor company for a licensing fee.

The local company, at times may decide to buy the technology that has a bright future for a long time, from the foreign partner by effecting a lump sum payment.

The local company may also buy readymade products in a knocked down condition so as to perfect the design indigenously.