Innovation and Technology Transfer: Some Key Issues Prasada Reddy UNCTAD Division on Investment, Technology and Enterprise Development

What is technology? Basically the term technology means any information/knowledge that leads to either the creation of a product/service or the way a product is manufactured or a service is delivered. Technological change means any new information that leads to either improvement in the performance of a product or a reduction in the cost of its production. Technological change occurs through ‘innovation’ (Technology Atlas Team, 1987).

Cateories of innovations Incremental innovations Radical innovations Changes in technology systems – cumulative radical innovations and affect the industrial sector, e.g steam to electric locomotives Changes in techno-economic paradigms – cumulative changes in technology systems and affect the entire economy, e.g. electronics, biotechnology. Source: Freeman and Perez (1988)

Changes in the global business environment 1 Economic changes - Liberalization of economies worldwide Specialization in economic activities Privatization Source: Porter, 1986; Bartlett and Ghoshal, 1991)

Changes in the global business environment 2 Technological changes – Changes in techno-economic paradigm Impact of new technologies on firms and countries New technologies as enabling factors and driving forces Multi-disciplinary nature of innovations Divisibility of manufacturing & R&D Source: Reddy, 2000

Global competition Nature of competition (e.g. oligopolistic) New sources of technologies (e.g. SMEs) Reduced product life cycles Increasing importance of intellectual property protection Source: Reddy, 2000

Firm-level strategies Rationalization of global corporate structures Emergence of inter-firm alliances Outsourcing Intellectual property strategies (e.g. knowledge markets)

Implications for technology transfer FDI as a key source of TOT Inter-firm technology alliances New suppliers of technology New opportunities (e.g. divisibility of innovation facilitates participation in the innovation process)

Conducive conditions for TOT 1 Host country policies – Building up & strengthening national innovation system Development of science/technology parks and clusters Intellectual property rights regime Technology-related performance requirements

Conducive conditions for TOT 2 Home country measures – Financing of TOT TOT through FDI Match-making and provision of information Measures to improve host-country’s absorptive and technological capacity Source: UNCTAD (2005)