Technology Capabilities Chapter 5

2 Chapter objectives Dose the possession of technology alone help a firm to become technologically advance? What is the role of technological capability? What are the interrelationships between the components of technology and technological capabilities ? What does a firm should do to improve its technological capabilities?

3 I-Introduction Availability of all four technology components is a necessary but not a sufficient condition for competition. Technology capability is also essential. Technology capability is often confused with the ability to carry out research and development (R&D) only. Technology Capability come from "doing" and "learning“.

4 II-What are the technological capabilities? Often owning technology is confused with having technological capability. Actually, to compete, a firms must have the ability to: Use the technology very effectively Buy or sell useful technology at good prices so that it can either continuously improve the sophistication of its technology or make money from what it owns; Adapt, improve and eventually develop its own technology

5 Thus, having the technology component is only one side of the “technological competency coin” Having the abilities mentioned above- which we may call “technological capabilities” is the other side. Technological capability gives power to firm. While a firm A may sell technology to another firm B, it will not upgrade the technological capabilities of B because no entity likes to distribute power to others. Technological capability must be accumulated by firms on their own.

6 III-A Possible Classification of technological capacities Technological capabilities can be divide into four categories. There are: Operative Capabilities Transaction Capabilities Innovative Capabilities Support Capabilities

7 a. Operative Capabilities Operative Capabilities refers to the continuing ability of a firm to effectively transform inputs into outputs in accordance with the business strategy of the firm. It consists of the: Capability to effectively utilizes available plant and equipment Capability to plan and control production operations

8 Capability to carry out troubleshooting and good predictive preventive maintenance. Capability to quickly change over to new models Capability to use computerized information and control systems to provide information support for production operations.

9 b. Transaction Capability Transaction Capability refers to the ability of a firm to effectively plan and implement technology transactions. It consists of the: Capability to justify and specify clearly the technologies to be bought/sold, based on detailed engineering studies. Capability to identify suitable sellers/buyers of technology Capability to identify the most suitable mechanism(s) for buying/selling technology.

10 c. Innovative Capability Innovative capability refers to the capability of a firm to come out with technological innovations and take them through to economic practices with a view towards strengthening current business, providing new business ventures, and exploring new technology bases. It consists of the: Capability of a firm to reverse engineer acquired new technology

11 Capability of a firm to carry out product innovations Capacity of a firm to carry out process innovations and Capability of a firm to introduce system innovations

12 d. Supportive Capability Supportive capability refers to the capability of a firm to develop, integrate and improve operative, transaction, and innovative capability. This includes: Capability to formulate a technology based development into strategic vision. Capability to identify funding sources and obtains fund for expansion and growth. Capability to sustainable development of an organization.

13 Capability to effectively access necessary material inputs for production Capability for planning and implementing programs for sustained HR development.

14 IV-Interrelationships Between Technology Components and Technological Capability A firm may not need all the technological capabilities from the beginning. Depending on its vision and competitive environment a firm may gradually accumulate the desired technological capability. However, for a particular transformation operation a firm must have the necessary four components of technology. With the gradual development of an enterprise the sophistication of both the components and capabilities must increase.

15 Depending upon the type of technology of capability, the relative importance of the four components may change. For example: For innovative capabilities H and I will, in general, be more important than T and O.

16 V-Improving Technological Capabilities Accumulation of technological capabilities is a process of institutional learning. It must reside in an enterprise and must not be diminished if an individual leaves the firm. Thus, we need necessary mechanisms for fostering collective learning for technological capability development is very critical. Technological capability development is a dynamic process. In today’s competitive environment there can be non stopping of the “component enhancement” and “capability development” processes.