Knowledge Wars: Technology Transfer, IP Theft, and the Business Battles of the Future

What is Technology Transfer and why is it so Important for Corporates?

Technology transfer. This is a term that bedevils companies in various sectors when they place large orders and enter into joint ventures with other firms.

To explain, technology transfer refers to the practice of the foreign firm transferring the technological knowhow and the expertise to make the products by the buyer or the indigenous firms that are entering into the joint ventures.

This is especially the case when Western firms are the sellers or the foreign firms entering into partnerships with the emerging and developing country firms.

The reason why the latter insist on technology transfer is due to the fact that with the knowhow and the expertise, the indigenous firms would be in a position to make the products themselves and hence, become competitive and self sufficient in the global marketplace.

Indeed, throughout the 1990s and the earlier decades of globalization, many large ticket sales of defence equipment, mega joint ventures between Western firms and Asian companies were stymied because the former were not willing to share the knowhow and the expertise to the latter.

The East - West Battles over Technology Transfer: The Position of Each Stakeholder

The reasons ranged from loss of competitive advantage to the very real threat of the Western governments refusing permission to their firms to transfer the technology due to National Security and other considerations.

Indeed, these reasons led to many Asian leader and business leaders hinting that Westerners were paranoid about losing their edge and hence, were refusing to share the knowhow.

Further, there were also appeals made to the Western governments by Asian statesmen reminding them of their responsibility towards Asian countries as part of the shared success that globalization promised and was premised on.

In other words, the argument that if globalization had to succeed, Western nations and their firms had an obligation to share their technological knowledge and the knowhow with their counterparts worldwide so that everyone benefited in the end.

Moreover, frequently, Asian and Latin American firms were willing to pay more for the technological expertise so that the “Carrot” of more money would incentivize and persuade the Westerners to give up or at least reveal some knowledge.

The Asian Response: Reverse Engineering, IP Theft, and Big Ticket Defence Deals

On the other hand, the reluctance of Westerners to share their knowledge led to Japanese and South Korean as well as Taiwanese ones to some extent, to perfect the art of what was known as Reverse Engineering which is basically breaking down the product and then figuring out how it was made by micro analysis of the various components and the parts.

In recent months, the issue of technology transfer has taken on a more urgent form as the United States and China battle it out over the allegations of IP or Intellectual Property Theft or in other words, the Chinese firms allegedly stealing the knowledge and the technological knowhow from their American counterparts.

Indeed, this issue has become so serious that President Trump used it as one of the reasons to justify the imposition of high tariffs and the blocking of some Chinese firms on accusations that they were obtaining the IP through unfair and illegal means.

Moreover, even other Asian countries have been chafing at what they perceive is the reluctance of Western firms to share knowledge.

This is one of the reasons why the Indian government when negotiating big ticket defence deals often insists on the seller entity to share the knowledge and transfer to the Indian firms identified by it.

For those of you who have been following the controversial Rafale Defence deal, one of the sticking points was how much the French firm, Dassault was willing to help the Local Offset firm, in this case Reliance Defence, to become capable of manufacturing Rafale jets on its own. This shows how much the stakes are as far as the issue of Technology Transfer is concerned.

Why Sharing Knowhow Means Commercial Suicide and Solutions

Having said that, it is also not the case that this is a form of Neo Colonialism where the Superior West does not want the Rest to develop. Indeed, no large or small firm once it acquires a significant source of competitive advantage would like to give it up and help the competition. Indeed, as any businessperson would attest, this means commercial suicide as not only would the firm lose out, it would also be effectively handing the market share it gained to others.

Moreover, businesses invest substantial monies in acquiring technological knowhow which is gained after extensive Research and Development and after years or even decades of painstaking hard work.

Indeed, the most common argument against Technology Transfer is that after spending Billions, why would anyone want to give away the Golden Goose that lays the Eggs to someone else.

However, it is also the case that unless the thorny issue of Technology Transfer is not addressed, the world would continue to witness more of the Trade Wars currently ongoing between the US and its numerous trading partners.

Conclusion

Lastly, with Information Technology sectors progressing, this issue would take on more urgency as the entire business models of Digital Economy firms are built on Knowledge.

Therefore, it is our contention that the Business Battles of the Future would be fought over Knowledge, IP, and Data and hence, we can expect to see more fireworks as far as the issue of Technology Transfer is concerned.

To conclude, we are entering into a New Era of Knowledge as the source of Competitive Advantage and hence, more conflict over it.