Technology Transfer and MNCs Courtney Davis Matthew Elias Michael Tang Lalita Urasuk MET AD 655 – International Business, Economics and Cultures Professor Jung Wan Lee December 8, 2014

Technology Transfer and MNCs  Technology is a driving force for economic development and competitiveness  Developing nations such as China have attempted to close the technology gap by encouraging technology transfer from multinational corporations (MNCs)  China is an attractive market for MNCs but technology transfer comes with risks Research Questions  What are the benefits of technology transfers for MNCs and China?  What are the MNC’s concerns regarding technology transfer to joint ventures in China?  How can MNC’s safeguard intellectual property rights of their technology transfers in China?

 Ranked #55, in Fortune 500 Companies  Revenue of $47 billion  Over 75,049 employees worldwide What are the benefits of technology transfer for Cisco and China?  New Market  Access to established business partners  Strong local cultural partner  Access to more scientists and engineers  Foreign Direct Investment  Job creation  Increase in knowledge – technological, processes and management  Access to newer technologies Cisco China

 Intellectual property theft  Chinese government does not strongly enforce IP rights  Creation of competitor through government subsidies  IE Huawei electronics What are Cisco’s concerns regarding technology transfer to joint ventures in China? How can Cisco safeguard intellectual property rights of their technology transfer in China?  Smarter partner choices  Look for companies with integrity and strong reputations  Don’t transfer the newest technology  Ensure proper IP protection in the US

 Rank #13, in Fortune 500 Companies  Revenue of $206 Billion  Assembly plants and sales networks in 80 countries  Employ 370,000 people What are the benefits of technology transfer for Samsung and China?  Increased Market Penetration  Increased Production efficiency & Capacity  Increased Product Lines  Tax incentives & R&D support  Narrowed Technology Gap  Increased Productivity and Product Quality in local market  Increased in Global Competitiveness Samsung China

 High Bargaining Power of Chinese Government  Government Restriction in Selected Sectors  Imbalance of Technology Expertise What are Samsung’s concerns regarding technology transfer to joint ventures in China? How can Samsung safeguard intellectual property rights of their technology transfer in China?  Sign Cross-Patent Contract With Chinese Partners  Limited Chinese professionals to participate in R&D Center  Provide Short Training On Core Technology

 Ranked #9, in Fortune 500 Companies  Revenue of $146 billion  Over 305,000 employees  GE Aviation – leader in avionics What are the benefits of technology transfer for GE and China?  Market Entry  Complimentary Partner/Sharing of Intellectual Properties  Access to Established Customers  Increased Jobs/Profits  Decreased Technology Gap  Increased Productivity/Jobs  Increase in Reputation GE China

 Intellectual Property (IP) Theft by Military  Government Restriction/Ban  Reputational Risk  Lack of Legal Recourse What are GE’s concerns regarding technology transfer to joint ventures in China? How can GE safeguard intellectual property rights (IPR) of their technology transfer in China?  Vetting of Partner/Employees  Establish Protocols With Input from Governments and Industrial Experts  Use of Third Party Auditors  Tiered Technology Transfer

 Ranked #7, in Fortune 500 Companies  Revenue of $155 billion  Over 212,000 employees worldwide What are the benefits of technology transfer for GM and China?  Low-wage manufacturing  Access to thriving market  Partner with top domestic automaker  Auto manufacturing knowledge  Proprietary knowledge/business practices  Jobs GM China

 IP theft resulting in competing domestic vehicles  Pressure from Chinese government to share trade secrets  Theft of hybrid vehicle technology What are GM’s concerns regarding technology transfer to joint ventures in China? How can GM safeguard intellectual property rights of their technology transfer in China?  Seek protection such as design patents  Be strategic in determining which technology to transfer  Use bargaining power with Chinese government

Results and Findings What are the benefits of technology transfer for MNCs and China?  Market Entry/Jobs  Local Knowledge  Lowered Labor Costs  Access to Established Customers  Mutual Transfer of IP  Decreased Government Bureaucracy Similarities Differences What are the MNCs’ concerns regarding technology transfer to joint ventures in China?  IP Theft by Indigenous Firms  Government Subsidized Competitor  Lack of Legal Recourse  Government Theft of IP  Changing Government Policies (Local and Foreign)  Reputational Risk (Local and Foreign) Similarities Differences

Results and Findings How can MNCs safeguard intellectual property rights of their technology transfer in China?  Choose Reputable Partner That Contributes To Innovation  Use of Tiered Technology Transfer  Detailed Enforceable Contracts  Establish Protocols with Input from Experts and Government Representatives  Use of Third Party Auditors  Withdrawal from Market SimilaritiesDifferences

Conclusion  MNCs need to enter Chinese market to further company growth  MNCs need to vet indigenous firms for their joint venture  MNCs need to establish protocols to protect their IP  Communication, cultural understanding & business flexibility