A RESEARCH PROJECT ON TECHNOLOGY PARTNERSHIP BETWEEN
JAPANESE AND LATIN AMERICAN ENTERPRISES
AND POSSIBLE AREAS FOR FUTURE WORK ON TP
by
Masafumi Nagao
Tomoatsu Shibata
Sasakawa Peace Foundation, Tokyo
- ALTERNATIVE VIEWS OF TECHNOLOGY PARTNERSHIP
A) Approaches to technology partnership
UNCTAD's 1996 study presents a review of emerging trends in technological cooperation and an analysis of selected technology partnerships (TPs). One definition of TP is that it is a strategic instrument employed by firms in those industries and markets where innovation is a key competitive factor, and involves pooling of technological resources for a monopoly gain. This pattern of TP, however, has so far been mostly observed among developed country enterprises. In the case of TPs involving developing country firms (with developed country partners), the scope of the instrument could be extended to include long-term, mutually beneficial learning.
Even with this modified view, participation by developing country firms in TP is quite limited according to the above-mentioned study. This may generally be explained by a basic asymmetry between developed and developing country enterprises in respect of technological capability. This makes it difficult to appreciate the mutual nature of technological gains. In exploring the relevance of TP for capacity-building in developing countries, it is therefore useful to investigate the factors that act upon technological asymmetry, including in particular its perception by the firms concerned.
a) Policy environment
Although a developing country firm may have a considerable disadvantage in terms of accumulated technological capability, if it adopts a deliberate strategy for technology acquisition and research and development capacity development with a noticeable impact on its market performance, the developed country firms operating in the relevant industries may sense a progressive narrowing of the technological gap. Depending on the speed and direction of developing country firms' capacity-building, and on the particular configuration of the market (i.e. the competitive situation of the leading firms), TP may emerge as a viable proposition for both the developing country firm and its developed country counterparts. The few cases of technology partnerships concluded by newly industrializing countries' firms probably fit this description. Although these cases may be regarded as a "market" phenomenon taking place on an enterprise-to-enterprise basis, it is important to point out that the dynamic orientation of the developing country firm concerned has, more often than not, sprung from a favourable policy environment, be it for domestic industrial capacity-building or export promotion in technology-intensive fields, and as such the policy impact is clearly marked. In this connection, it may be useful to examine how developed country firms that engage in TP with developing country firms look at the policy environment in the developing countries concerned.
b)Information gap
The perception of policy environment by developed country firms is not only shaped by the actual policies of the developing country concerned but also influenced by their experience and the confidence built (or destroyed) through it. For example, as some of the major Latin American countries begin to explore new ways of integrating themselves into the global economy, including through the development of new relationships with foreign firms, their approaches are not always received very positively by the latter, which are reminded by their banks of the "bad" experience they suffered during Latin America's lost decade of the 1980s. There seems to be a persistent lack of confidence about the economic environment in Latin America on the part of Japanese firms, for example. This confidence gap is accentuated by an even more fundamental knowledge gap, which is caused by lack of information in developed countries about firms in developing countries. Under such circumstances, even the few Latin American firms with adequate technological capabilities for entering international markets would have difficulty in finding a willing technological partner. The information gap caused by lack of knowledge and confidence on the part of developed country firms may be acting as a decisive factor in developing country firms' limited participation in TP.
c) Publicly sponsored TP schemes
No doubt publicly financed support schemes for TP arrangements through both bilateral and multilateral channels would help to narrow the information gap. They would also reduce the risks to be borne by the developed country firms, especially the small and medium-sized enterprises, in entering such arrangements. Public support measures, however, are usually for initiation of the partnership, whose long-term evolution would depend on the relationship between the enterprises concerned. It is perhaps useful to explore a mechanism that combines risk-reduction for initiation and confidence-building for long-term TP commitment C a mechanism principally constituted by enterprises from both developing and developed countries that are interested in pursuing strategic technological alliances, which is supported by the governments of the countries concerned. Such a mechanism may be relatively easily conceived within the framework of bilateral economic relations between a developing country and a developed country.
B) From technology transfer to technology partnership
In the UNCTAD study mentioned above it is suggested that TP involving developing country firms should be seen as an agreement for long-term, two-way technological learning. However, it is conceivable that a conventional, one-way technology transfer agreement with a five- to ten-year term may give rise to a technological partnership of sorts between the developed country supplier and the developing country purchasing the technology during the period of the agreement. The specification of treatment of related technological improvements, including the grant-back arrangement, presupposes the possibility of interchanges between the two parties. Some of the actual cases observed of ongoing technological exchanges in which a developing country firm concludes a series of technology transfer agreements, characterized by increasing technological complexity, with a single developed country firm may represent de facto TP. Whereas UNCTAD tries to catch TP at the beginning of the partnership process, what is suggested here is a focus on the evolving process of more numerous technology transfer arrangements in order to trace the possible development of TP over time. It may then be useful to complement the study of TP agreements with case studies of actual TP processes. From the point of view of a developing country firm, TP may be regarded as an alternative instrument in building desirable relations with developed country firms to aid in capacity-building.
C) TP between developing country enterprises
UNCTAD's concept of TP involving developing country enterprises for long-term, mutually beneficial technological learning could actually explain very well some cases of horizontal technological cooperation between developing country enterprises. The growing phenomenon of foreign direct investment and technology transfer between developing countries in Asia and Latin America may reflect the emergence of such cases, especially when they involve relatively advanced technologies for the production of goods subject to international competition. Just like TP between developed country enterprises, this cooperation may take place on the basis of a greater technological symmetry.
A case could also be made for publicly supported schemes for TP between developing country enterprises, especially involving enterprises from the least developed countries, which are engaged in industries such as food and food-processing, housing, clothing, footwear and other sundry-type consumer goods. These goods are locally produced and distributed to meet the daily living requirements of consumers. Most of them are non-traded. As such, their producers are not direct competitors. However, both the products and the production processes are more or less standardized across national boundaries. The producers may therefore gain in their respective markets from mutual technological learning. Since there may not be any market-derived motivation for seeking such a partnership, it may be necessary to foster it through, for example, the publicly supported exchange of relevant information.
Much of this, however, is still speculation. Whether or not such a conceptual approach has practical merit for capacity-building in developing countries would require further investigation.
- INTERNATIONAL RESEARCH PROJECT ON TECHNOLOGICAL PARTNERSHIP BETWEEN LATIN AMERICA AND ASIA, SPONSORED BY THE SASAKAWA PEACE FOUNDATION
The Sasakawa Peace Foundation is a private, non-profit foundation based in Tokyo, whose purpose is to promote international understanding and cooperation. As part of its programme to support international research networking activities, it is sponsoring a multi-year research project on technological partnership between Asian and Latin American enterprises based on tripartite cooperation among the University of Chile (Chile), the University of Buenos Aires (Argentina) and Tsukuba University (Japan).
Given the dynamic economic performance of some of the Asian countries during the last few decades and the more recent resurgence of Latin American economies, there appears to be a significant potential for the development of economic and technological links between these two regions. Asia's economic development has witnessed the rise of numerous enterprises geared to international markets and committed to strengthening their technological capabilities. In Latin America also, there are quite a few firms with much technological experience, which are becoming increasingly outward-oriented. However, the development of market-based exchanges involving enterprises from the two regions is still quite limited. The research project mentioned above was initiated in recognition of this problem as well as of the inherent opportunity. It is considered timely, since Latin American countries such as Chile and Argentina are actively engaged in government-led efforts to expand their enteprises' market relations and technological cooperation with their Japanese counterparts, and to explore ways of tapping into the rapidly expanding Asian markets.
A) Hypothesis underlying the project
The hypothesis underlying this research project is that there is an information gap between the two regions which prevents spontaneous market development and TP development linking their enterprises. This information gap is due to the following two factors:
- Knowledge gap. There is a lack of shared information regarding the opportunity for technological partnership. A proper recognition of Latin America's potential technological capability is lacking, for example, in Japanese enterprises and presumably also in other Asian enterprises, and vice versa.
- Confidence gap. The Latin American financial crisis of the 1980s continues to have a negative impact on the minds of Japanese businessmen.
The project believes that the solution to the information gap consists in narrowing the knowledge and confidence gaps. Academics and researchers could play a useful role by providing the necessary information through academic and empirical research. However, even if the information gap is narrowed by means of an information input, and as a result developed country enterprises (Japan, for example) recognize the potential of Latin America's economic and technological capabilities, TP may still not evolve if developed country enterprises act on the basis of short-term profit incentives. As mentioned above, TP requires a long-term commitment on the part of developed country enterprises. This issue is essentially about identifying long-term incentives and profit-earning mechanisms for developed country enterprises to engage in TP.
B) Project methodology characteristics
a) MacroBmicro feedback cycle perspective
In order to see what is happening in the world in a balanced manner, both macro and micro perspectives are necessary. For example, seeing only national economic statistics cannot reveal the dynamism of specific enterprises, even when they are internationally competitive. In the contemporary world, macro and micro phenomena are closely related. The project has therefore focused research for year 1 on the "national innovation system" in Chile, Argentina and Japan, the initial set of countries to be studied, and on "the state of economic and technological relationships among the three countries" so as to obtain a macro perspective regarding TP possibilities. The focus of subsequent research will be on case studies of individual enterprises in each country in order to shed light on TP problems and potentials in a more detailed fashion.
b) Researcher-business-government feedback cycle mechanism
To narrow the information gap, academics and researchers may play a critical role if they can provide enough objective information to practitioners such as businessmen and policy-makers. For this reason, the project puts emphasis on stimulating the information flow between and among these groups. In year 2, for example, it plans to hold a seminar for the researchers to report the results of their initial studies to a selected group of businessmen and government policy-makers from the three countries. The latter's views will be reflected in planning the subsequent research.
The project will also take advantage of existing business associations and forums, especially with regard to consideration of the vision and business perspective of enterprises, including their short- and long-term strategies. To pursue such issues in a general manner, the Sasakwa Peace Foundation has instituted the "Business Forum Toward the 21st Century", where around 30 to 40 upper-middle-level managers of leading Japanese corporations meet to discuss their visions for the future of business corporations, including approaches to global development issues. This forum will provide a useful sounding board for information dissemination and practical consideration of measures to promote TP.
c) Use of information technology
The distance between Japan and the Latin American countries is great, and poses some difficulty for implementing the research project; this is in fact another detrimental factor for TP promotion. To overcome this obstacle and to pursue international collaboration, the project uses information technology (i.e. the Internet) as much as possible. The project itself may serve as a demonstration of a model for narrowing the information gap.
d) Network extension
Although the project has started as tripartite research cooperation linking Chile, Argentina and Japan, the network is expected to widen so as to include other Latin American and Asian countries, Brazil and the Republic of Korea being the candidates for inclusion. In addition, the project seeks to cooperate with other initiatives for research and information-sharing designed to promote TP involving developing country enterprises.
- POSSIBLE AREAS FOR FURTHER WORK ON TP
First, the knowledge base for the actual process of TP between developing country firms and developed country firms needs to be improved. This will require compilation of case studies of the impact of TP agreements on the capacity-building of the developing country firms concerned and, to contrast with such studies, examination of the experience of those developing country firms which have succeeded in building up technological capabilities mainly through technology transfer agreements.
Secondly, a programme needs to be established to monitor and evaluate the working of various publicly supported schemes for the promotion of TP agreements. This may take the form of tripartite consultation among the administrators of these schemes, representatives of the developed country firms which participated in them and representatives of the developing country firms concerned, with representatives of the developing countries' relevant authorities participating as observers. Such a programme should be organized in an informal setting with the objective of assisting the schemes' administrators and ultimately benefiting the capacity-building efforts of the developing country firms.
Thirdly, UNCTAD should consider the feasibility of a publicly supported scheme for promoting TP among enterprises from different least developed countries, especially those engaged in the production of basic consumer goods. The objective of such a scheme should be to encourage innovative behaviour by these enterprises in their respective domestic markets on the basis of mutually shared learning. This, of course, should not prevent developed country firms or enterprises from participating in such a scheme. Finally, pursuant to the recommendation made by the Ad Hoc Working Group on the Interrelationship between Investment and Technology Transfer (namely, that UNCTAD in coordination with the appropriate international organizations "organize a world dialogue among governments, enterprises and the academic sector for the purpose of exchanging views and formulating proposals for technological cooperation"), UNCTAD should consider the topic of "technology partnership for capacity-building in developing countries" with the participation of enterprise and academic representatives. Discussions should address all possible approaches to technology partnership.