UNIT 3 – GLOBALIZATION

Introduction:
Globalisation is a more advanced form of internationalisation of business
that implies a degree of functional integration between internationally
dispersed economic activities. It denotes the increased freedom and
capacity
of individuals and firms to undertake economic transactions with residents
of other countries. Globalisation is the process of international integration
arising from the interchange of world views, products, ideas, and other
aspects of culture. Globalisation refers to processes that promote world-
wide exchanges of national and cultural resources. Advancement in
transportation and telecommunications infrastructure, including the rise of
the internet, has further catalysed globalisation of economic activities.

Several basic activities like investment (particularly foreign direct

investment), the spread of technology, strong institutions, sound
macroeconomic policies, an educated workforce, and the existence of a
market economy leads to greater prosperity. There is substantial
evidence, from countries of different sizes and different regions, that as
countries "globalise" their citizens’ benefit, in the form of access to a
wider variety of goods and services, lower prices, more and better-paying
jobs, improved health, and higher overall living standards. It is probably
no mere coincidence that over the past 20 years, as a number of countries
has become more open to global economic forces, the percentage of the
developing world living in extreme poverty which is defined as living on
less than $1 per day, has been cut in half.

Meaning:
The term "globalisation" began to be used more commonly in the 1980s,
reflecting technological advances that made it easier and quicker to
complete international transactions – both trade and financial flows. It
refers to an extension beyond national borders of the same market forces
that have operated for centuries at all levels of human economic activity –
village markets, urban industries, or financial centres.

According to International Monetary Fund (IMF), globalisation means “the

growing economic interdependence of countries worldwide through
increasing volume and variety of cross-border transactions in goods and
services and of international capital flows and also through the more rapid
and widespread diffusion of technology”.

Globalisation refers to the process of increasing economic integration and

growing economic interdependence between nations. It means integration
of different economies of the world into one global economy thereby
reducing the economic gap between different countries. This is achieved
by removing all restrictions on the movement of goods, services, capital,
labour and technology by removing all restrictions on the movement of
goods, services, capital, labour and technology between nations.
Globalisation leads to an increased level of interaction and
interdependence among different countries. There is free flow of goods,
services, technology, management practices and culture across national
boundaries. From a country’s view point, globalisation means integration
of the domestic economy of a country with the world economy. In brief,
globalisation implies being able to manufacture in the most cost-effective
way possible anywhere in the world, being able to procure raw materials
and management resources from the cheapest source anywhere in the
world, and having the entire world as one market. The global corporations
of today conduct their operations worldwide as if the entire world were a
single entity. Globalisation also implies emergence of a world where
innovation can arise anywhere in the world.

Features of Globalisation:

The main features of globalisation are:

1. Reduction of trade barriers so as to ensure free flow of goods and
services across national frontiers
2. Creation of an environment in which free flow of capital can take
place among nations.
3. Creation of an environment which permits free flow of technology
between nations.
4. Creation of an environment in which free movement of labour can
take place in different countries of the world.
5. Creation of a global mechanism for the settlement of economic
disputes between various countries.

Essential Conditions Favouring Globalization:

1. Increase in Competitive Strength of domestic industry:

Globalisation exposes domestic industry in developing countries to foreign
competition. This put domestic companies under pressure to improve
efficiency and quality and reduce costs. Under a protective regime
industry lose the urge to improve
efficiency and quality. Globalisation helps to improve the competitive
strength and economic growth of developing nations.

2. Access to Advanced Technology: For a developing country like

India, globalisation provides access to new technology; Indian companies
can acquire sophisticated technology through outright purchase or
through joint
ventures and other arrangements.

3. Access to Foreign Investment: Globalisation has attracted the

much-needed foreign capital towards developing countries like India.
Foreign multinationals have invested billions of dollars in India. In addition,
foreign
institutional investors have brought in huge funds in stock markets in
India.

4. Reduction in Cost of Production: In a globalised environment,

companies can secure cheaper sources of raw materials and labour. For
example, several foreign companies have set up BPOs and call centres in
India due to lower cost of labour. Sometimes, a company may carry out its
entire manufacturing in a foreign country to minimize cost of production.
5. Growth and Expansion: When the domestic market is not large
enough to absorb the entire production, domestic companies can expand
and grow by entering foreign markets. Japanese firms flooded the US
markets with automobiles and electronics because of this reason.
Companies from USA, Europe and other developed regions are increasing
their presence in Asia due to growing population and increasing income
levels in Asian countries.

6. Higher Volume of Trade: Due to globalisation, each country can

specialize in the production of goods and services in which it has a
comparative advantage. It can export its surplus output and import their
items freely
from other nations. This will lead not only to a phenomenal increase in the
world trade but also to better allocation and utilization of resources in
each country.

7. Consumer Welfare: Better quality and low-priced goods and services

will become available to consumers. This along with a wider choice in
consumption will help improve standards of living of people in developing
countries. Over a period of time, the proportion of people below the
poverty line will go down. Consumers also get access to products
manufactured in any part of the world.

8. Other benefits: Globalisation also offers some spin off benefits. It

helps in the professionalization of management. Globalisation brings
people of different races and ethnic backgrounds closer. It helps to
promote mutual cooperation and world peace.

CHALLENGES TO GLOBALIZATION

1. Threat to Domestic Industry: Globalisation leads to increasing role

of foreign companies in the domestic economy of a country. This is likely
to hamper the growth of domestic companies. Small and medium firms in
a
developing country like India are not in a position to compete with giant
firms of developed nations.

2. Unemployment: Globalisation brings about rapid technological

changes. Advanced technology might create unemployment problems,
particularly in developing country.

3. Threat to Democracy: Globalisation requires very fast movement of

capital and labour across national frontiers. These increase the pressure
for conceptual and structural readjustments to the breaking point. The
social and human costs of globalisation may put the social fabric of a
democracy in danger.

4. Economic Instability: Globalisation leads to a tremendous

redistribution of economic power. Such redistribution will translate into a
redistribution of political power. The change is likely to have a
destabilizing effect.

5. Disregard of National Interest: A developing economy might

become excessively dependent on global corporations. This may not be in
the national interest.

MULTINATIONAL COMPANIES/ MULTINATIONAL ENTERPRISES:

Meaning of Multinational Corporation:

International business describes business or operations of firms having

interests in multiple countries. Such firms are called multinational
corporations (MNCs). Some of the as well-known MNCs include fast food
companies like McDonald’s and Yum Brands, vehicle manufacturers such
as General Motors and Toyota, consumer electronics companies like
Samsung, LG and Sony, and energy companies such as Exxon Mobil and
BP. Most of the largest corporations operate in multiple national markets.

The term ‘multinational’ consists of two different words, multi and

national. The prefix multi here means many while the word national refers
to nations or countries. Therefore, a multinational company may be
defined as a company that operates in several countries. Such a company
has factories, branches or offices in more than one country. According to
the United Nations Commission on Transnational Corporations, a
transnational corporation is a corporation which operates, in addition to
the country in which it is incorporated, in one or more countries.

Definition of Multinational Corporation – MNC is a corporation that

has its facilities and other assets in at least one country other than its
home country. Such companies have offices and/or factories in different
countries and usually have a centralized head office where they co-
ordinate global management.

The operations of a Multinational Corporation (MNC) extend beyond the

country in which it is incorporated. Its headquarters are located in one
country (home country) and in addition it carries on business in other
countries (host country). For example, Coca Cola Corporation has its
headquarters in the U.S.A. and it has branches/ subsidiaries in several
countries. A multinational corporation controls production and marketing
facilities in more than one country. Firms that participate in international
business, however, large they may be, solely by exporting or by licensing
technology are not multinational corporations. Nearly all major
multinationals are American, Japanese or Western European, such as Nike,
Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW.

FEATURES OF MULTINATIONAL CORPORATIONS:

The salient features of multinational corporations are as follows:

(i) Giant Size: The assets and sales of a multinational are quite large.
The sales turnover of some MNCs exceed the Gross National Product of
several developing countries. For example, the physical assets of
International Business Machines (IBM) exceed $ 8 billion dollars.

(ii) International Operations: A multinational corporation has

production, marketing and other facilities in several countries. Its
operations through a network of subsidiaries, branches and affiliates in
host countries. It operates through a network of subsidiaries, branches
and affiliates in host countries. It owns and controls assets in foreign
countries. For example, ITI has about 800 subsidiaries in more than 70
countries.

(iii) Centralized Control: A multinational corporation has its

headquarters in the home country. It exercises control over all branches
and subsidiaries. The local managements of branches and subsidiaries
operate within the policy framework of the parent corporation.

(iv) Oligopolistic Power: Multinational corporations are generally

oligopolistic in nature. Due to their giant size, they occupy a dominant
position in the market. They also take over other firms to acquire a huge
economic power. For example, Hindustan Lever Limited acquired Tata Oils
Mills.

(v) Sophisticated Technology: Generally, a multinational corporation

has at its command advanced technology so as to provide world class
products and services. It employs capital intensive technology not only in
manufacturing but in marketing and other areas of business

(vi) Professional Management: In order to integrate and manage

worldwide operations, a multinational corporation employs professional
skills. It employs professionally trained managers to handle advanced
technology, huge funds and international business operations.

(vii) International Market: On account of its vast resources and

superior marketing skills, a multinational corporation has vast access to
international markets. Therefore, it is able to sell whatever product/
service it produces in different countries.

(viii) Multiple objectives: Multinational corporations make investments

in different countries with the following aims:
– to take advantage of tax benefits in host countries or to circumvent tariff
barriers;
– to exploit the natural resources of the host country;
– to take advantage of Government concessions in host countries
– to mitigate the impact of regulations in the home country;
– to reduce costs of production by making use of cheap labour and lower
transportation expenses in host countries;
– to gain dominance in foreign markets;
– to expand activities vertically.
MERITS OF MULTINATIONAL CORPORATIONS:

Multinationals can offer the following gains to host countries:

(i) Foreign Capital: Developing countries suffer from shortage of capital

required for rapid industrialization. Multinational corporations bring in
much needed capital for the development of these countries. These
corporations make direct foreign investment thereby speeding up the
process of economic development. Since liberalization, India has, for eg:
attracted foreign investment worth several billion dollars.

(ii) Advanced Technology: Developing countries are technologically

backward. They lack sufficient resources to carry on research and
development. Multinationals serve as vehicles for the transfer of advanced
technology to these countries. Advanced technological knowhow,
improved skills and consultancy help the developing countries to improve
the quality of products and reduce costs. Through continuous research
and development, MNCs serve as a source of inventions and innovations.

(iii) Employment Generation: Multinationals create large scale

employment opportunities in host countries. They increase the investment
level and thereby the employment and income levels. Multinationals offer
excellent pay scales and career opportunities to managers, technical and
clerical staff.

(iv) Foreign Exchange: Multinationals help the host countries to

increase their exports and reduce their dependence on imports. As a
result, these corporations enable the host economies to improve balance
of payment position.

(v) Managerial Revolution: Multinationals help to professionalise

management in host countries. They employ modern management
techniques and trained managers. Several concepts and techniques like
corporate planning, management by objectives and job enrichment were
evolved by multinational corporations. As carriers of knowledge and
experience, multinationals build up ‘knowledge base’ and thereby assist
the development of human resources in host countries.

(vi) Healthy Competition: Multinationals increase competition and

thereby break domestic monopolies. They compel the domestic
companies to improve their efficiency or withdraw from the market. For
example, many Indian companies acquired ISO-9000 quality certification
due to competition from
multinational corporations after liberalization.

(vii) Growth of Domestic Firms: MNCs stimulate the growth of local

enterprises. In order to support its other operations, a multinational may
assist domestic suppliers and ancillary units.

(viii) Standard of Living: By providing superior products and services,

MNCs help to improve living standards in host countries.
(ix) World Economy: MNCs help to integrate national economies into a
world economy. They encourage international brotherhood and cultural
exchanges through international business.

Multinationals offer the following advantages to the country of

their origin (Home Country):

(i) The home country can obtain raw materials and labour at
comparatively lower cost.
(ii) It can export components and finished products and thereby market is
widened.
(iii) It can earn huge revenue by way of dividends, royalty, licensing fees,
etc.
(iv) It can increase domestic employment due to higher scale of
operations.
(v) It can acquire technical and managerial expertise of foreign nations.

DEMERITS OF MULTINATIONAL CORPORATIONS:

1.Disregard of National Goals: MNCs invest in sectors that are

profitable disregarding the goals and priorities of host countries. They do
very little for underdeveloped strategic sectors and backward regions. Due
to their capital-intensive technology and profit-mindedness, they create
relatively few jobs and fail to solve the basic problems like unemployment
and poverty of host nations.

2. Obsolete Technology: MNCs often transfer outdated technology to

their collaborators in host countries. In many cases technology transferred
is unsuitable causing waste of scarce capital. Repetitive imports of similar
technology led to excessive royalty payments without adding to technical
knowledge in host countries. Sometimes, imported machinery remains idle
for want of repairs and maintenance facilities. MNCs have failed to
develop local skills and talents. MNCs use capital intensive technology
which may
reduce jobs.

3. Excessive Remittance: MNCs squeeze out maximum payment from

their subsidiaries/affiliates and collaborators in the form of royalty,
technical fee, dividend, etc. By repatriating profits, MNCs put severe
pressures on the foreign exchange reserves and balance of payments of
host countries.

4. Creation of Monopoly: MNCs join hands with big business houses and
give rise to monopoly and concentration of economic power in host
countries. They kill indigenous enterprises through strategic advantages
like patents, superior technology, etc. For example, Pearl Soft Drinks and
Kwality Ice Cream Co., had to sell themselves to foreign MNCs in India.
MNCs pose a threat to small scale industries.

5. Restrictive Clauses: Due to their strong bargaining power, MNCs

introduce restrictive clauses in collaboration agreements, e.g., technology
cannot be passed to third parties, pricing of products will be by the MNC,
exports from host country will be restricted and managerial posts will be
filled by parent company. MNCs do not transfer R&D, training and other
facilities to host countries.

6. Threat to National Sovereignty: MNC pose a danger to the

independence of host countries. These corporations tend to interfere in
the political affairs of host nations. Some MNCs like ITI are accused of
overthrowing Governments in countries such as Chile.

7. Depletion of Natural Resources: MNC cause rapid depletion of some

of the non-renewable natural resources in host countries.

8. Disregard to Consumer Welfare: Their main objective of coming to

India is to exploit the big market available here. Most of them are in FMCG
selling fast food (junk food) with no nutritive value e.g., Pepsi Co. and
Coca-Cola selling soft drinks and snacks, Nestle, McDonald.

TRANSNATIONAL CORPORATIONS:

Introduction: A Transnational Corporation product, markets, invests and

operates across the world. It is an integrated global enterprise that links
global resources with global markets at profit. There is no pure
transnational corporation. However, most of the transnational companies
satisfy many of the characteristics of a global corporation. They are more
or less borderless and they do not consider a particular country as their
base.

Meaning:
At the outset it must be made clear that very often the term 'Multinational
Corporations' is used synonymous with the term TNCs. There is, however,
according to some, a difference between MNCs and TNCs. According to
them, MNCs produce commodities/products for domestic consumption of
the countries in which they operate. TNCs, on the other hand, produce
products/commodities to meet the markets of third countries. This fine
distinction is generally not made while referring to either MNCs or TNCs.
Thus, in our context, MNC can also be referred to as TNC.

A Transnational Corporation is defined as an organisation that owns

productive assets in different countries, and has common strategy
formulation and implementation across border. It is engaged in
international production under the common governance of its
headquarters. Factors of production move among units located in different
countries. These systems increasingly cover a variety of activities ranging
from research and development to manufacturing to service functions.
TNCs are also increasingly established through mergers between existing
firms from different countries or the acquisition of existing firms in the
countries by firms from other countries.

Definition:
UNCTAD defines Transnational Corporations as incorporated or
unincorporated enterprises comprising parent enterprises and their
foreign affiliates. A parent enterprise is defined as an enterprise that
controls assets of countries other than its home country usually by owning
a certain equity capital stake. An equity capital stake of 10 per cent or
more of the ordinary shares or voting power for an incorporated enterprise
and its equivalent for an unincorporated one is normally considered as a
threshold of the control of assets. Consequently, a TNC has central control
with the objective of profit maximization. Central decision making is an
important feature.

FEATURES OF TNCS

The main features of TNCs are as follows:

i) TNCs are normally very large in size as measured by the value of their
total sales. The average TNC has billions of US dollars as its total sales
value which is often equivalent to more than the national incomes of one,
two or three large developing countries. In the eighties, and nineties,
however there has been a growth of smaller TNCs from Canada, Japan and
the UK. Even the USA has now some small TNCs.

ii) Many TNCs depend to a large extent on their foreign sales. There has
been a steady growth of the share of foreign sales to total sales.

iii) TNCs are multi product enterprises that gives them tremendous market
power.

iv) The main strength of TNCs is their command over technology and
innovation. They spend sizable amount on research and development (R &
D). Most TNCs spend 5-6 percent of their sales value on R & D which
amounts to billions of dollars. This is the reason for their tremendous
market power.

v) Affiliates of the TNCs are responsive to a number of important

environmental forces, including competitors, customers, suppliers,
financial institutions and government.

vi) TNCs draw on a common pool of resources including assets, patents

trademarks, information and human resources.

vii)The affiliates of the TNCs are linked by a common strategic vision. Each
TNC formulates its strategic plan so as to bring the affiliates together in a
harmonious way.

MERITS OF TRANSNATIONAL CORPORATIONS:

Transnational companies (TNCs) offer several merits, which can be

categorized into economic, social, and technological benefits:

Economic Benefits:
 1. Capital Investment: TNCs bring significant foreign direct
investment (FDI) to host countries, boosting local economies and
creating jobs.
2. Economic Growth: Their presence can stimulate local businesses
and industries through the development of infrastructure and supply
chains.
3. Employment Opportunities: TNCs provide direct employment and
indirectly support jobs in local businesses and services.
4. Market Expansion: They help expand markets for local products
by integrating them into global supply chains and distribution
networks.

Social Benefits:

1. Skill Development: TNCs often invest in training and development

for local employees, enhancing the skill level of the local workforce.
2. Improved Standards: Their operations can lead to improved
standards in working conditions, environmental practices, and
corporate governance.
3. Cultural Exchange: By operating in multiple countries, TNCs
facilitate cultural exchange and mutual understanding between
different regions.

Technological and Innovation Benefits:

1. Technology Transfer: TNCs bring advanced technologies and

management practices to host countries, fostering innovation and
efficiency.
2. Research and Development (R&D): Many TNCs invest in R&D
facilities in host countries, contributing to technological
advancements and innovation.
3. Knowledge Spillover: Local firms and employees benefit from the
knowledge and expertise shared by TNCs, promoting overall
technological progress.

Broader Impact:

1. Global Trade Integration: TNCs help integrate host countries into

the global economy, improving trade balances and economic
resilience.
2. Standardization and Quality: Their global operations often lead
to the adoption of higher quality standards and best practices across
industries.
3. Corporate Social Responsibility (CSR): Many TNCs engage in
CSR activities, contributing to social welfare, environmental
sustainability, and community development.

Overall, transnational companies play a pivotal role in driving economic

development, fostering innovation, and facilitating cultural and knowledge
exchange across borders.
DEMERITS OF TRANSNATIONAL CORPORATIONS:

There is a broad consensus that TNCs, besides being technological giants

and innovators, are efficient allocators of resources in the world economy.
Yet there are a large number of issues on which controversies exist.

They are:
a) TNCs interest and the interest of host countries specially developing
ones, in many areas, conflict with each other. TNCs produce products
which may not be very essential for host developing countries and thus
they divert scarce resources away from production of necessary items.

b) TNCs generally dominate high profit-oriented consumer sectors

monopolising profits in these sectors effectively because the scope for
local enterprises. This is gained through their market power through
promotion, brand name, package, etc

c) TNCs are extremely reluctant to transfer latest technology to the host

country, thus making the developing countries depend on them for
technology. They also preserve all their important R & D in home
countries.

d) In order to protect market share, TNCs take recourse to restrictive

business practices. These include tying imports to specific sources of
interests to them, conditions imposed on technology transfer, price
fixation, restrictions and restrictive use of brand names and trademarks.

e) Through transfer pricing, TNCs avoid paying taxes to government of

host countries and thus transfer resources away from them. TNCs also
deprive the partners from host countries of their legitimate profits.

f) TNCs do not appoint host countries personnel at higher positions.

g) TNCs create balance of payments problems for the host developing

countries through imports and repatriation of huge dividends, royalty,
technical and management fees.

h) TNCs do not create necessary backward and forward linkages. This

failure very often leads to non-industrialization of host countries.

i) TNCs are not necessarily very efficient in their operations. There are
cases of TNCs incurring huge losses.

j) TNCs increase their dominant power through mergers and acquisitions

thus preventing competition.

k) TNCs have a tremendous capacity to influence the policies of home

governments and international organizations. This capacity enables them
to promote national and international policies to their advantage at the
cost of interest of many countries, especially the developing ones.
TECHNOLOGY TRANSFER

Meaning:

Technology transfer is the movement of technical and organizational skills,

knowledge, and methods from one individual or organization to another
for economic purposes.

This process usually involves a group that possesses specialized technical

skills and technology that transfers it to a target group of receptors who
do not possess those skills and who cannot create that technology
themselves. Technology refers to a society's capability to transform
natural resources into products for consumption. Technology transfer in a
narrow definition includes movement of technical equipment, material,
designs, engineering knowledge, techniques, and procedures of
production. A broader understanding also refers to the transfer of the
capacity, knowledge attached to the technology, personal know-how, and
skills of workers. Technology transfer may accelerate economic growth,
regional development, and industry innovation, and by offering
workplaces, reduce unemployment and poverty in developing countries.

Types of Technology Transfer:

There are many types of technology transfer:

1. Horizontal and Vertical:

Horizontal transfer is when established technology is processed from one

environment to another, and its aim is not commercialization but the
dissemination of technology and extending its application. It includes
licenses, sale of patents and designs, know-how, industrial cooperation,
technical services, joint ventures, and turnkey contracts. An example of
horizontal transfer can be a company that tries to maximize the return
from its technology but is unable to do this by directly selling end
products. It occurs in relations between industrial (the global north) and
developing countries (the global South). There is no improvement of
technology unless it is necessary to adapt it to local conditions.

The vertical transfer means moving technology from research to

development and production. This includes progressive stages of
invention, innovation, and diffusion, usually by commercialization. The
vertical transfer takes place within one organization or in the transaction
between different actors, such as a research institute and company.
Examples include contract research and development, scientific and
technical advice, technical staff movement, and spin-offs.

2.Internal and External:

The internal transfer is based on knowledge existing in the enterprise,

which is not documented, and on results of internal research, as well as on
knowledge of company employees and customer relations management.
In contrast, the external transfer includes individuals and inventors,
technology companies, research and development units, joint or
cooperative research and development agreements, research
consortiums, higher education institutions, science and technology parks,
fairs and economic missions, Internet databases, and brokerage events.

3.Commercial and Non-commercial:

The commercial transfer is related to the flow of tangible assets in

commercial transactions between different entities. It is also the
conversion of scientific and technological knowledge into commercial
products or services. For example, trade in goods, foreign direct
investment, licensing agreements, joint ventures, international
subcontracting, turnkey contracts, patents, licensing, spinoffs, cross-
licensing, and strategic supplier agreements.

The non-commercial transfer is a movement of knowledge and capacities

from one place or organization to a recipient country, firm, or community.
Examples are capacity building and training, exchange of personnel,
technical assistance programs, trade fairs, the flow of books and journals,
movement of persons through immigration, academic exchange, project
and study visits, and collaborative research.

4.Passive and Active:

The passive transfer takes place when technology movement is based on

the application of a potential user. It includes only the knowledge, without
transferring the skills connected to it (e.g., reports and manuals).

The active transfer is when the provider of the technology assists with its
application (e.g., demonstration of the technology and training in
developing countries), and in semi-active form when a third-party agency
or broker provides the transfer process to the final user.

ELEMENTS OF TECHNOLOGY TRANSFER

Key elements of technology transfer include:

1. Transfer of Knowledge: Technology transfer involves the

exchange of expertise and know-how, often through training
programs, collaborative projects, or educational initiatives.
2. Intellectual Property Transfer: This aspect involves the licensing
or sale of intellectual property rights, such as patents, copyrights, or
trademarks, from one entity to another.
3. Commercialization of Research: It encompasses the process of
turning research findings or innovations into commercially viable
products, services, or processes.
4. Collaboration and Partnerships: Technology transfer often
occurs through partnerships, joint ventures, or collaborations
between research institutions, universities, government agencies,
and private enterprises.
 5. Innovation and Adoption: The recipient of technology transfer
gains access to new technologies, methodologies, or innovations,
which can lead to the development of new products, improved
processes, or enhanced services.
6. Market Expansion: Technology transfer can facilitate the
expansion of markets for specific technologies or products,
contributing to economic growth and competitiveness.

Issues / Challenges in Technology Transfer:

Technology transfer, the process by which technology or knowledge

developed in one organization or context is transferred to another, can
face numerous challenges. Here are some of the key issues commonly
encountered:

1. Intellectual Property (IP) Rights:

a) Protection and Ownership: Determining who owns the

technology or innovation can be complicated. Protecting IP rights to
avoid infringement and ensuring proper licensing agreements are in
place is crucial.
b) Valuation: Accurately valuing IP for licensing or sale is often
challenging and can lead to disputes.

2. Cultural and Organizational Barriers:

a) Differences in Organizational Culture: The originating and

receiving organizations might have different cultures, which can
affect the acceptance and integration of new technology.
b) Resistance to Change: Employees may resist adopting new
technologies due to fear of job loss, lack of understanding, or
discomfort with change.

3. Technical Challenges:

a) Compatibility: Ensuring that the transferred technology is

compatible with existing systems and processes in the receiving
organization.
b) Adaptation and Customization: Modifying the technology to fit
local requirements, which can be time-consuming and costly.

4. Legal and Regulatory Issues:

a. Compliance: Ensuring that the transferred technology
complies with local laws and regulations in the receiving
country or region.
b. Export Controls: Navigating export control laws that may
restrict the transfer of certain technologies to specific
countries.
5. Economic and Financial Constraints:
a. Cost: The high cost of transferring and implementing new
technology can be a significant barrier.
 b. Funding: Securing adequate funding for technology transfer
projects can be difficult.
6. Knowledge and Skill Gaps:
a. Training: Ensuring that the receiving organization has the
necessary knowledge and skills to effectively utilize the new
technology.
b. Documentation: Providing comprehensive and
understandable documentation for the technology.
7. Communication Issues:
a. Information Asymmetry: Lack of clear and complete
information about the technology can lead to
misunderstandings and misaligned expectations.
b. Language Barriers: Differences in language can complicate
the transfer process, especially in international contexts.
8. Strategic Misalignment:
a. Differing Goals: The strategic goals of the originating and
receiving organizations may not align, leading to conflicts or
suboptimal use of the technology.
b. Lack of Clear Objectives: Ambiguity regarding the
objectives and expected outcomes of the technology transfer
can hinder its success.
9. Market Dynamics:
a. Market Readiness: The market in the receiving region may
not be ready for the new technology, affecting its acceptance
and profitability.
b. Competition: The presence of competing technologies can
impact the success of the transferred technology.

10.Security Concerns:
a) Cybersecurity: Ensuring that the transferred
technology does not introduce vulnerabilities to the
receiving organization’s systems.
b) Data Privacy: Protecting sensitive data during and after
the transfer process.

Addressing these challenges requires a well-planned strategy, clear

communication, and collaboration between all parties involved in the
technology transfer process.

*******************