TRAINING PROGRAMME ON TECHNOLOGY DIPLOMACY JAIPUR 16 November 2011
TECHNOLOGY SOURCING AND ASSESSMENT BY Dr. Vinay Kumar Former Advisor/Scientist G, Ministry of Science and Technology 16 November 2011
MAJOR ISSUES CONCERNING INDUSTRY n n n Shorter life cycles of technology Intense national and international competition Global markets Quality, cost, delivery, after-sales service, international standards Intellectual property rights High risks in investment
MAJOR ISSUES CONCERNING INDUSTRY (Contd. ) n n n n Shorter time between innovation and commercialization Research and development important Energy efficient technologies Environment friendly technologies Information and communication networks Socio-economic and socio-political factors Movement of capital across national boundaries
SCIENCE AND TECHNOLOGY DIPLOMACY It refers to provision of science and technology advice to multilateral negotiations and the implementation of the results of such negotiations at the national level. It thus covers activities both at the national and international levels pursuant to international commitments.
WHY SCIENCE AND TECHNOLOGY IMPORTANT IN INTERNATIONAL RELATIONS? n n n Emerging issues – infectious diseases, environmental concerns, ICT, Biotechnology, use of electronics in crimes. . International trade in commodity and technology International standard setting in the field of health, safety and environment
WHY SCIENCE AND TECHNOLOGY IMPORTANT IN INTERNATIONAL RELATIONS? – Contd. n n n International cooperation in manufacturing and Research and Development Foreign Direct Investments Intellectual Property Rights Issues
Receipts (R) and Payments (P) of Royalty and Licence Fee in US $ million (Source World Bank –World Development Indicators 2008 and various Issues) Coun try 2002 R 2002 P 2003 R 2003 P 2004 R 2004 P 2005 R 2005 P 2006 R 2006 P USA 44, 142 19, 258 48, 227 0, 049 52, 643 23, 901 57, 410 24, 501 62, 378 26, 433 JAPA N 10, 422 11, 021 12, 271 1, 003 15, 701 13, 644 17, 655 14, 653 20, 096 15, 500 UK 7, 701 5, 993 10, 245 7, 382 12, 019 8, 368 13, 303 9, 069 13, 588 9, 962 China 133 3, 114 107 548 236 4, 497 157 4, 398 205 6, 634 India 12 350 29 356 25 421 112 949
Receipts and Payments (Contd. ) 2008 Country R P USA 91, 600 26, 615 Japan 25, 701 18, 312 UK 13, 904 10, 615 China 571 10, 319 India 148 1, 578
Licensing Receipts and payments for Japan 1950 -1974 (in million US $) Source: 1950 -1970 - Lyn (1985)-Contractor 1981 Year Receipts Payments Balance Receipts/ Payments (%) 1950 0. 0 2. 6 - 1955 0. 2 20. 0 -18. 2 1 1960 2. 3 94. 9 -92. 6 2 1965 17. 0 166. 0 -149. 0 10 1970 59. 0 433. 0 -374. 0 14 1975 161. 0 712. 0 -551. 0 23
Number of technology licensing agreements in Japan (1981 -2001) Source: Japanese Statistics Bureau 2004 Year Out-Licensing In-Licensing Balance Outlicensing/Inlicensing (%) 1981 4103 7248 -3145 57 1983 4738 6936 -2198 68 1985 5426 7316 -1890 74 1987 5469 7494 -2025 73 1989 6532 8356 -2004 76 1991 7163 8249 -1086 87 1993 8201 8126 75 101 1995 9099 7618 1481 119 1997 13194 7659 5535 172 1999 9517 6687 2830 142 2001 15067 6445 8622 234
CHANGING PARADIGM IN R&D n n NOTHING IT IS SAID, IS CERTAIN EXCEPT DEATH AND TAXES – YET ANOTHER INESCABABLE CERTAINITY IS CHANGE Market and buyers driven – organizations can get more out of their research by linking it more closely to market need and customers requirements rather than increased spending elsewhere R&D on ‘business like’ footing
Changing paradigm in R&D (Contd. ) n n n Time and cost of R&D is important Expectations from R&D increased manifold R&D is getting increasingly more multidisciplinary in nature Team orientation Creativity and innovativeness of considerable significance
Changing paradigm in R&D (Contd. ) n n Managerial skills in R&D personnel increasingly required Borderless laboratories Intellectual property rights issues Changing from a strategy of ‘hope’ to a strategy of a more ‘systematic, disciplined and accountable’ R&D
Changing paradigm in R&D (contd. ) n n Impact of Information and Communication Technologies. These are impacting R&D management systems and practices in numerous ways, creating new threats and opportunities. Increased expectations of Head of the Institution
Changing paradigm in R&D (Contd. ) n n n Success now requires strong competitive advantage in the form of innovation, quality, agility, and or productivity – cost leadership alone is not sufficient Measurement of performance is being emphasized for every organizational activity. Individuals are required to add value at every level. Demographic shifts in customer and employee base has directly or indirectly influencing the way managers think and act.
INDIA AS GLOBAL R&D PLATFORM
WHY INDIA ? n n n Large number of R&D Laboratories and centers Wide technological institutional network Qualified and skilled manpower Proximity to a large Indian market Well established corporate infrastructure Strong expertise in information technology
WHY INDIA ? - Contd. n n Growth in health sector Heterogeneous population mix English is widely spoken Strong design and manufacturing base
BENEFITS TO HOST COUNTRY n n n Employment Arrest and reverse brain drain Encourages S&T as a career New R&D culture Encourages commercial culture amongst scientist and technologists Companies move up the value chain
BENEFITS TO HOST COUNTRY n n n Contract research to local bodies Collaborative research with Universities, R&D Institutions and industry New curricula development Positive impact on country's innovation system Global market for R&D capacity
A FEW EXAMPLES n n n Over 700 MNCs with R&D Centers in India Tier II locations emerging as growth centers. Offer up to 40 -50% savings on cost MNCs are changing their focus from cost to innovation, competency creation and leadership roles in R&D
A FEW EXAMPLES (contd. ) n n Over 2, 000 engineers employed in such centers Operating cost for MNC R&D Centers increased by 9% in FY 11 Samsung spends over 8% of its global spends in R&D every year, a significant part of which comes to India AMD has R&D team of 1, 100 people in India, nearly 10% of its global workforce. Has hired close to 300 people during 2011 and plans to recruit another 150 in 2012
A FEW EXAMPLES GE’s John Welch Technology Center Du Pont - RIL Medical equipment, aviation engines, consumer durables Ericsson - TCS Telecom Solutions HP – IIT Madras Research to help global Efforts of HP Motrola Introduced a Post Graduate course in advanced telecommunication engineering Chemical
SOME OUTPUTS (Source: IIFT AND DSIR Study 2006) Sectors Technologi Manpower es Employed Developed Training Programm es R&D Exp (Rs. in Lakhs) Patents Agriculture 23 118 14 1101 3 Automobile 8 NA 1 NA NA Biotech 69 2274 12 NA 216 Chemical 35 750 5 NA 380 Computer Software & H/W 11 1339 20 450 NA Others 33 26 NA 262 NA
OPTIONS FOR TECHNOLOGY n n Acquisition In-house development To get developed Joint development
Acquisition preferred where n n Too expensive/ too long to develop or get developed New technology on attractive terms Customers preferences Many technology gaps
In-house development preferred where n n In-house capability exists Time and cost effective Technology not available from outside sources High cost of technology acquisition
TECHNOLOGY SUPPLIERS AND TECHNOLOGY RECEIVERS -A FEW EXAMPLES A manufacturing or service Unit n An R&D Organisation n A Technical Institute/University n A Consultant TECHNOLOGY SUPPLIER n n n A manufacturing or service Unit An R&D Organisation A Technical Institute/University A Consultant TECHNOLOGY RECEIVER
TECHNOLOGY SOURCING n n n n Exhibitions and Conferences International Organizations Industry/Technical Journals Directories Industry Associations Government Sources Patent Literature
TECHNOLOGY SOURCING (Contd. ) n n n International Agreements Foreign Embassies/ High Commissions in India Data banks/ bases Experts and consultants Informal meets Indian Embassies/High Commissions
Assessment of technology supplier/partner n n n n Manufacturer/R&D organization/Technical institute Market share – National and international Financial health R&D set up Ownership of technology Authority to transfer Reputation amongst other technology acquirers
Assessment of Technology n n n Suitability to locally available raw materials Skill levels required Stage in Technology life cycle Input-output ratios Laboratory scale, pilot plant or commercially proven Safety considerations
Assessment of Technology (Contd. ) n n Environmental aspects Status of IPR, Trade Marks etc. National Policy Issues Quantitative Approach
Capacity building for identification of technology sources n n n Awareness of new technologies Identification of technology needs Evaluation of technology and technology supplier/ partner Net working International Agreements
Advantages of new technologies n n n n High financial returns Can stay longer in market Name recognition First mover advantage Enhanced value for customers Leveraging organization's capabilities ---
Disadvantages of new technologies n n n n May not be commercially proven Normally not market tested Risks of failure and commercial returns Safety risks in operation IPR related risks Competitors may bring better products after watching the performance of new technology ----
TECHNOLOGY ACQUISITION
TECHNOLOGY PACKAGE n n n Specifications of the product/output List of components/parts Details of each component/part Details of assemblies and subassemblies Operation process parameters Quality parameters
TECHNOLOGY PACKAGE – Contd. n n n List of purchased items Details of Plant and Machinery Plant Layout Plant Maintenance Guidelines Safety Precautions ---
Technology Acquisition Process – Complexities n n n Technology package has many components Not like buying equipment or raw materials or components Technology has cost and prices Generally no price list Long term relationship Technology absorption
Technology acquisition Process – Contd. n n n Technology Assessment and Evaluation Negotiations Agreement Implementation Technology is very dynamic Intellectual Property Rights Issues
MODES OF TECHNOLOGY ACQUISITION INFORMAL n General n Hiring of Engineers n Reverse Engineering FORMAL n Licensing n Outright purchase n Joint Ventures n Turnkey Projects n Acquisition of the company n Training and Experts n Consultants n Purchase of equipment with embodied technology
Price variance – technology life cycle STAGE PRICE Development Low RISK IN OPERATION High Ascent High Medium Maturity High Low Decline Low
Price variance – technology status STATUS PRICE RISK IN OPERATION Laboratory scale Low High Pilot plant Medium Commercial scale High Low
FACTORS FOR SUCCESSFUL ACQUISITION OF TECHNOLOGY n n n Good Agreement and Documentation Mutual Trust Competence of Technology Supplier Competence of Technology Acquirer Training Mutual Interest
FACTORS FOR SUCCESSFUL ACQUISITION OF TECHNOLOGY – Contd. n n Planning Appropriate channel -----
WHAT IS A GOOD AGREEMENT n n Should be comprehensive in point of substance and content Should be written in simple language with short sentences Ambiguity and multiple interpretations to be avoided Should be in conformity with law
WHAT IS A GOOD AGREEMENT (Contd. ) n n Should avoid disputes In case disputes arise, should provide for a satisfactory settlement mechanism
Important clauses in Technology Transfer Agreements n n n n Definitions Coverage Territory and Exclusivity Scope of documentation Language Training Terms of Payment Currency of Payment
Important clauses in technology transfer agreements (Contd. ) n n n n n Schedules Delay in payments Taxation Confidentiality Guarantees Language Third party IPR infringement Governing Law Dispute settlement mechanism
Important clauses in technology transfer agreements (Contd. ) n n n n Price escalation Improvements Environmental, Safety and other harmful effects Sub-contracting Mergers Expiry and renewal Status after expiry Force Majeure
ARBITRATION CLAUSE An example ICA Arbitration clause : “Any disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made therein shall be binding on the parties. ”
Arbitration Clause (Contd. ) n n Alternative Clause : Any dispute and differences whatsoever arising under or in connection with the contract will be settled by arbitration in accordance with the Rules of Arbitration of UNCITRAL/The Rules of Conciliation and arbitration of the International Chamber of Commerce (ICC) – (to be retained whichever is agreed to and delete the other) UNCITRAL – United Nations Commission on International Trade Law
Arbitration Clause (Contd. ) n n The venue of arbitration will be in India and arbitration proceedings will be administered by the Indian Council of Arbitration (ICA). The applicable law to the contract will be laws of India or such other as may be agreed to. ” Arbitration and Conciliation Act 1996 (Based on UNCITRAL Model Law of Arbitration)
OFFER FOR TECHNOLOGY AN EXAMPLE n n n Technology : Manufacture of Xylitol from bagasse Process: Bagasse hydrolysis – purification – hydrogenation – concentration – crystallization – drying – packaging Areas of application - Food industry as sweetener - Pharmaceutical industry -Light industry: as raw material
OFFER FOR TECHNOLOGY (Contd. ) n Advantages -Safe and flexible process line -Simple operation - Low investment -Clean production -Effluent can be easily treated - Waste can be utilized -Discharge as per international standards
Offer for Technology (Contd. ) n n n Payback period : 5 -6 years Stage of development: Commercialised Infrastructure required : Land…, Building…, Water…, Power… Manpower required : … Production Capacity …. Byproducts ….
Offer for technology (Contd. ) n n n n Main raw materials required …. Economic date : Project cost…, Working capital requirement…, ……, IRR… Content of technology package … Export possibilities …. Technical document language …. Technology supplier’ profile… Contact ….
Technology pricing- a case n n Zeolite ‘A’ – A by-product from Aluminum industry used in detergents industry Technology developed by a laboratory in 1990 Technology licensed to two small units in 1991 Price charged Rs. 0. 2 million per license
Technology pricing – a case (Contd. ) n n n After a year, one unit returned the technology, the other could not make any significant progress During 1993 -95, a consultancy firm, up scaled design and engineering from laboratory scale plant In 1996, technology licensed to a large aluminum manufacturing unit (10, 000 TPA Capacity) for a license fee of Rs. 13. 5 million
Causes of disputes in Technology transfer n n n n Different interpretations of a clause Any one party unable to operate any part of the agreement for any reason Bad drafting of the agreement Change of ownership Change in business interests Force majeure reasons Delay in project implementation/technology getting obsolete
Causes of disputes in Technology transfer (Contd. ) n n n n Lack of mutual trust Low technology capability of the receiver Non adherence to specified time schedules Non achievement of specified quality/outputs Delayed payments Unproven/untested technology Exclusivity/non exclusivity Incomplete documentation
SALIENT FEATURES OF POLICY FOR FDI/TECHNIOLOGY IMPORTS AUTOMATIC APPROVAL: - FDI up to 100% allowed in all activities/sectors except in the following: (a) Activities/items that require an Industrial License (b) Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same field (Press Notes 1 and 3 of 2005 Series refer) n
Technology Import - Contd. (c) Proposals relating to acquisition of shares in an existing Indian company in the financial services sector and where SEBI regulations are attracted (d) Proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted (e)Lump sum payments not exceeding US $ 2 million
Technology Import - Contd. Royalty not exceeding 5% for domestic sales and 8% for exports, there is no restriction on the duration of royalty payment Proposal does not attract compulsory licensing Item of manufacture is not reserved for the small sector
Technology Import - Contd, n n NON AUTOMATIC ROUTE- All cases which do not fall under Automatic Route For details refer ‘INVESTINGIN INDIA’ http: //www. dipp. nic. in
CASE STUDY Discussions in the Sessions
VISION Vision statements should be designed to be vivid, memorable, inspiring, meaningful, and brief…. It is the part that gives direction, helps focus effort and stays etched in one’s mind.
A FEW VISION STATEMENTS n n n ITC : A commitment beyond the market Dr. Reddy’s Lab : To transform themselves from change followers to change leaders DRDO : DRDO will get transformed into a technological leader of world class with corporate structure and with a mission of making the nation independent of foreign technology in critical spheres
A FEW VISION STATEMENTS – Contd. n CSIR - To provide scientific and industrial R&D that maximizes the economic, environmental and societal benefits for the people of India (Mission statement)
A FEW VISION STATEMENTS (Contd. ) n n NTPC VISION: A world class integrated power major, powering India’s growth, with increasing global presence MISSION: Develop and provide reliable power, related products and services, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society
A FEW VISION STATEMENTS (Contd. ) n n n n NTPC CORE VALUES Business Ethics Customer Focus Organizational & Professional Pride Mutual respect and Trust Innovation and speed Total quality for excellence
A FEW VISION STATEMENTS(Contd. ) n IIT Delhi : To contribute to India and the world through excellence in scientific and technical education and research; to serve as a valuable resource for industrial and social; and to remain a source of pride for all Indians
A FEW VISION STATEMENTS(Contd. ) n n Merck : To preserve and improve human life Walt Disney : To make people happy Walmart : To give ordinary folk the chance to buy same things as rich people Stanford (1940 s) : Become the Harvard of the West
THANK YOU
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