International Manufacturing and Technology Transfer: Considerations of Transfer Value

Abstract

In recent years technology transfer has been used increasingly within international manufacturing as a means of reaching new markets and is playing a critical role in establishing collaborative ventures between companies in developed and developing countries. This paper considers the concept of transfer value within the context of a technology valuation model which is being developed using empirical data gathered from the machine tool industry in the UK and China. The paper presents the preliminary results from surveys in China and describes some case studies of technology transfer collaborations. Some of the main issues arising from the cases and the surveys are discussed.

Full text

Research Symposium on International Manufacturing
Cambridge University, 28 – 30 September 1997
INTERNATIONAL MANUFACTURING AND TECHNOLOGY TRANSFER:
CONSIDERATIONS OF TRANSFER VALUE
David Bennett, Zhao Hongyu and Kirit Vaidya
Technology and Innovation Research Centre, Aston Business School
Abstract
In recent years technology transfer has been used increasingly within international
manufacturing as a means of reaching new markets and is playing a critical role in
establishing collaborative ventures between companies in developed and developing
countries. This paper considers the concept of transfer value within the context of a
technology valuation model which is being developed using empirical data gathered from the
machine tool industry in the UK and China. The paper presents the preliminary results from
surveys in China and describes some case studies of technology transfer collaborations. Some
of the main issues arising from the cases and the surveys are discussed.
Introduction
Establishing the value of technology is a crucial question in technology transfer arrangements
[1]. Elsewhere we have described the main factors which make it difficult to determine a value
for technology that is acceptable both to suppliers and acquirers. We have also discussed the
framework for a ‘technology valuation’ model being developed using empirical data gathered
from various points along the UK-China value chain for machine tool technology [2]. In the
development of the model four components have been identified. They are “owner’s value”,
“transfer value”, “substitute value” and “traded value”. The concept of owner’s value and its
development have been previously reported [3, 4]. Transfer value, defined as the net benefit
to the technology acquirer, is probably of greatest immediate relevance for establishing the
joint value for suppliers and acquirers. The purpose of this paper is to focus on transfer value
and its influence on the views of both suppliers and acquirers within the context of
technology transfers to China’s machine tool sector. The evidence is drawn from the
provisional results of questionnaire surveys of machine tool manufacturers and users in China
and case studies in the Chinese and UK machine tool industries.
Methodology
Development of the technology valuation model is based on empirical data gathered from
three groups: machine tool manufacturers in the UK; machine tool manufacturers in China;
machine tool users in China. Snapshot and longitudinal approaches have been employed in
the case study investigations. Case data have been gathered through plant visits and semi-
structured interviews with staff. A total of twenty four machine tool companies in the UK
and China, with varying technology transfer experiences, have been investigated. These
include four UK companies involved in transfer agreements with four of the Chinese
companies. These ‘pairs’ of companies have been the focus of longitudinal case studies in
which the transfer experience has been observed from both sides.

Apart from the case studies three questionnaire surveys are being carried out, i.e.:
i) A survey of UK (and UK based) machine tool companies who have transferred, or are
going to transfer, technology to China or sell machines in China.
ii) A survey of Chinese machine tool manufacturers covering most of the key enterprises who
have imported, or plan to import, technology through various forms of collaboration.
iii) A survey in China of companies in the automotive and machinery sectors where both
Chinese and foreign machine tools are used.
Since the surveys were still in progress at the time of preparation of this paper the results
reported here are preliminary, based on returns from seven Chinese machine tool companies
and eighteen machine tool users. Altogether details of twelve cases of technology transfer
from foreign companies were detailed in the responses from the Chinese machine tool
companies. The questionnaire focus is on attributes influencing transfer value and, for these
attributes, the perceived differences between foreign technology based and Chinese
technology based machine tools. The degree of ‘importance’ of attributes has been scaled,
with a score of 6 meaning imperative and 1 meaning not important or irrelevant. Scores in
between refer to varying degrees of importance. The rating of the attributes of foreign
technology based and Chinese machines has been scaled with a score of 10 meaning
completely satisfied and a score of 1 meaning not at all satisfied, with scores in between
referring to varying degrees of satisfaction.
Technology transfer motivations
Figure 1 indicates that foreign machine tools have made large inroads into the Chinese
market. This is in spite of their prices being much higher.
Figure 1
Domestic market share of Chinese machine tools
between 1990-1996
70% 67% 59%
49% 42% 39% 36%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1991 1992 1993 1994 1995 1996
(source: CMTBA
1
)
Figure 2 shows the large price differences between CNC machine tools imported into and
exported by China. An exceptional example is the average price of imported CNC boring
1
China Machine Tool and Tool Builders Association’s statistical figures.

machines which is 18 times higher than equivalent exported Chinese machines. However, it
should be noted that while the categories in Figure 2 classify the machines according to their
functions imported and exported machines are not strictly comparable in specifications and
technological levels. Nevertheless the above evidence supports our case findings that machine
tool manufacturers and users expect the price of domestically produced machines to be less
than half that of imported machines. Therefore, in judging the value of foreign technology,
acquirers take account of its superior technical level and better performance and the related
advantages it offers in the market.
Table 1 summarises the opinions of Chinese machine tool manufacturers and users
concerning the importance of major quality elements for product competitiveness as well as
the differences in the perceptions of these elements between foreign and Chinese machines.
Figure 2
Price ratio of CNC machine tool: Imports/Exports
to/from China (1996)
3.21 4.26 4.52 4.94
7.46
18.73
0
2
4
6
8
10
12
14
16
18
20
Imp price/Exp price
(source: CMTBA
1
)
Table 1. Product features: Relative importance and comparison between imported
and Chinese machine tools (Note: In column (1) 6 is the maximum possible score while
in columns (2) and (3) 10 is the maximum. The meaning of the scores is described in the
methodology section)
Product feature (1)
importance for
product
competitiveness
(2)
performance of
foreign
machines
(3)
performance of
Chinese machines
reliability 5.65 9.02 5.76
processing consistency 5.38 8.89 5.65
accuracy 5.01 9.17 6.22
processing productivity 4.91 8.50 6.12
ease of use &
maintenance 4.83 7.70 7.35
functionality 4.55 8.82 6.13
appearance 3.75 8.04 5.24

It can be seen that foreign machines provide greater satisfaction in meeting customers’
requirements in all quality elements. The only element which has a small difference is ease of
use and maintenance. The surveyed companies mentioned that this is due to the shortage of
operational expertise and spare parts for imported machines. Otherwise the large differences
result from the gap between foreign and Chinese machine tool manufacturing technology.
From the acquirer’s point of view the technology provides the capability to produce higher
performance and better quality products with improved efficiency which could compete with
imported machine tools. The value of technology acquired would then be based on how much
importance that capability is assigned by the acquirer.
Acquirer’s objectives for technology transfer
A judgement about the importance of the ‘capability’ of technology requires consideration of
the objectives for acquisition which have been identified as financial gain, technical
improvement and strategic development. In order to value technology the attributes in
relation to each objective should be assessed based on its importance. Table 2 shows the
survey respondents’ assessment of importance of attributes for each objective.
Table 2. Importance assessments for financial gain, technical improvement
and strategic development (Note: 6 is the maximum score. The meaning of the scores is
described in the methodology section)
Score
Main contributors to achieving financial gain
improving product quality 5.71
quick response to customers’ requirements 5.43
upgrading technological level of products 5.14
after sales service 5.14
Major criteria for technological improvement
advanced product design 5.86
customised design 5.71
response time to customers’ requirements 5.71
product quality 5.57
Major attributes contributing to strategic development
company’s reputation among customers 5.43
technological competitiveness in local market 5.29
high market share in domestic market 5.00
Transfer gains regarded as important for strategic development
improving product quality 5.14
upgrading technological level of products 5.00
improvement of technical development capability 4.86
development of new domestic market niche 4.86
improvement of company/product image 4.71

Financial gain, technical improvement and strategic development
Currently the majority of the Chinese machine tool companies surveyed regard increase in
financial return as the most important objective for importing foreign technology. This is
probably influenced by their serious financial difficulties caused by the shrinking market
share for Chinese made machines in recent years. Chinese machine tool companies perceive
an immediate financial benefit from technology transfer through increased domestic sales
revenues so technology attributes which promote these are therefore highly valued.
Table 2 shows the main contributors to achieving financial gain through increased sales and
their scaled importance. The question that needs to be asked by acquirers is whether, and the
extent to which, technology can provide them with the capability to gain those attributes. In
answering these questions the key elements (in Table 1) which determine the attributes which
influence sales first need to be identified, and then the contribution from technology towards
improving those elements can be evaluated.
In the long term, financial achievement cannot be isolated from technological improvement.
The fundamental reason for the non-competitiveness of products is technological
disadvantage so the task for acquirers is to narrow the gap between them and their
competitors. Given that technology transfer is regarded as a way of achieving technological
improvement [5] the questions that need to be asked by the acquirer are (a) what are the
objectives regarding technological improvement? and (b) what attributes can be provided by
the technology for realising the objectives?
Figure 3
Importance and current situation of know-how and skills: disadvantage of
Chinese machine tool companies
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Design Key Comp Customise Program CNC Assembly
Averaged score
Import ance rating Current situation
Key to Figure 3
Design = product design know-how; Key comp = processing skills for key components;
Customise = customising design know-how; Program = process planning and tooling
know-how; CNC = knowledge of CNC applications; Assembly = assembly skills
Scores above ‘zero’ refer to the degree of importance of know-how and skills.
Scores below ‘zero’ refer to degree of disadvantage. A score of ‘-1’ refers to a slight
disadvantage and ‘-2’ refers to a fairly large disadvantage

Table 2 also shows the major criteria for technological improvement and their scaled
importance. On the basis of this assessment acquirers are more concerned about gaining
attributes such as design know-how from the imported technology. The importance can then
be evaluated accordingly.
Figure 3 shows the comparison between the importance and the current situation regarding
know-how and skills of Chinese machine tool companies. This figure demonstrates that
design know-how is most important and also would be attributed greater importance
according to the above mentioned criteria. On the other hand, there is greater disparity
between foreign and Chinese machine tool companies in process planning, tooling know-how
and knowledge of CNC applications. These “know-how” factors would therefore be given
more value than others by acquirers.
Acquirers could also consider what benefits they can capture from technology imports for
their long term strategic development. Being aware that such benefits may not occur
immediately but through a phased incremental improvement, acquirers would give special
attention to technology attributes which contribute to their strategic development when
technology is valued. Table 2 shows the major attributes contributing to the strategic
development of Chinese machine tool companies and their scaled importance. It also shows
which perceived transfer gains were regarded as important transfer benefits.
Acquisition costs and risks
The contribution of technology attributes to meeting the objectives of technology acquisition
provide the criteria with which to ‘weigh’ the value of technology. However these by
themselves do not provide sufficient information to determine the transfer value. Acquisition
of technology not only provides benefits but is also associated with costs and risks. The costs
and risks vary substantially depending on the sophistication of the technology, technological
gaps between suppliers and acquirers and different forms of transaction. If the costs and risks
are so high that they outweigh the benefits then acquirers may doubt the worth of acquiring
the technology or may be uncertain about capturing the benefits from the transfer. In these
cases the acquirer may not agree the owner’s valuation, considering that the price based on
such a valuation makes attaining value from the technology beyond their reach or too risky.
To establish the value of technology, benefits, costs and risks therefore need to be
comprehensively assessed. From the acquirer’s point of view the value of technology can only
be judged by comparing its benefits that can be captured with the associated costs and risks.
There are three types of costs:
i) Transfer costs. These comprise a substantial part of the total acquisition cost for technology
acquirers. In the twelve transfer cases detailed in the manufacturers’ survey responses they
accounted on average for 80% of the total acquisition cost. Their breakdown included
purchase of sample machines, design specifications and drawings, CKD kits, key
components, CNC controls, and training. The cost of each element varies substantially
depending on the transfer arrangement in each case.
ii) Consequential and transaction costs. These are unavoidable in most transfer processes.
This is because an acquirer is often required to incur additional costs to more effectively
absorb and make best use of transferred technology. These costs are mainly associated with
purchase of other relevant equipment or spare parts and fittings, or additional staff training.

Some collaborations may even involve costs for organisational changes such as establishing a
joint venture or restructuring a state enterprise.
ii) Intangible costs. These cannot be neglected despite the problems of measurement. Some of
the major intangible costs for transferring technology are time-related. Due to the
sophistication of machine tool manufacturing technology and the long production cycle to
build a machine tool the time taken for a transfer is longer than with many other products.
The opportunity costs in the form of management, workers and other resources tied up in the
transfer are significant and typically go unrecorded.
As well as the three costs described above there are three kinds of risks to be considered by
acquirers. Table 3 shows the survey respondents’ assessments of these.
Table 3. Assessments of technical, market and collaborative risk based on
actual transfer experiences (Note: Assessments are percentage differences between
actual experience and complete satisfaction)
Assessment
Technical risks
- main technical uncertainties associated with transfer
quality of end products 44%
solution to technical problems 43%
effective use of technology 43%
absorption of technology 41%
Market risks
-main uncertainties affecting future market sales
competitiveness of end-products 59%
product performance in meeting customers’ needs 50%
customers’ confidence in quality and reliability of domestically
made machines (even when based on foreign technology) 39%
Collaboration risks
- main uncertainties affecting collaboration between partners
goodness of working relationship 51%
understanding and trust between partners 44%
financial stability of foreign partner 40%
i) Acquirers may not be certain that they are able to absorb advanced technology and that the
quality of end-products can meet the design specifications. Table 3 shows the main technical
uncertainties which emerged from the twelve transfer cases reported by survey respondents.
ii) Market risks are probably of greatest concern to acquirers. They cannot be certain that the
imported technology will bring in sufficient gain until it is realised through the sale of end-
products in the market. There are a number of reasons that cause uncertainty about future
market sales. Table 3 shows the most important of these.
iii) Collaboration risks are important because the majority of technology transfers are
undertaken through partnership arrangements. From an acquirer’s point of view considerable
risks are associated with the workings of the relationship with the partner. Table 3 shows the

main collaboration related uncertainties that have emerged in the twelve transfer cases. The
risk of a poor working relationship appeared higher because acquirers are uncertain about
whether suppliers would conform to agreements and how they might react when problems
emerge
Transfer value within the context of strategic collaborations
Transfer value is based on the balance between the benefits derived from technology and the
costs and risks associated with the transfer transaction. As noted above, transfer cost has a
significant effect on transfer value and the supplier’s return from the transaction is subject to
risks. This raises the question of how the benefits, costs and risks should be shared between
the two parties, which in turn could substantially influence the value of technology.
Furthermore, a specific form of collaboration and transfer arrangement would allow different
means of sharing benefits, costs and risks so the value of technology cannot be isolated from
a transfer arrangement [4]. There are two broad aspects to be considered within the context of
strategic collaboration:
i) Terms of payment. From the technology acquirer’s point of view different types of payment
will have different means of sharing benefits, costs and risks. A ‘no sharing’ arrangement
(one-off payment) means an acquirer gains all the future benefits but also bears all the costs
and risks. A ‘part sharing’ arrangement (initial payment plus royalties or instalment at each
phase) means suppliers bear some of the costs and risks although this is generally only a
small part. A ‘closer sharing’ arrangement (payment only made for the supply of key
components or share of returns from future sale) implies a closer partnership for technology
collaboration and allows more sharing of benefits, costs and risks between the two parties.
Table 4 shows the priority given to different terms of payment by the survey respondents and
the suitability of the various forms of collaboration for effective technology absorption. Due
to the large time gap between acquirers investing in technology imports and realising their
transfer benefits in the market the above result indicates that they have an unwillingness to
pay for the technology ‘up-front’ [6], instead they often wish to share more costs and risks
with suppliers in return for only a share of longer term benefits [7].
ii) Forms of collaboration. The terms of payment can only determine how financial benefits,
costs and risks are shared between suppliers and acquirers. Technical and strategic factors
also need to be considered by acquirers. There are two straightforward questions: (a) is an
acquirer technically able to capture those shared benefits? (b) what are the strategic benefits
which may be derived from a transfer arrangement?
The time required for transfer and the effort necessary for learning and absorption depend on
the degree of sophistication of the technology and the technological gaps, including the
quality and capacity of equipment and the “stages of knowledge”, between suppliers and
acquirers [8]. Compared with many other types, machine tool manufacturing technology
requires more systematic know-how and skills to ensure the accuracy and reliability of the
whole machine. Moreover, some key know-how cannot be transferred in the form of drawings
and routine instructions, but only through an experience-based learning process [9, 10].
Therefore acquirers would normally prefer closer collaboration with more provision of
training and technical support in order to absorb the technology most effectively and take full

advantage of it. Table 4 shows that the survey results are consistent with these technical
concerns.
Table 4. Assessments of priority given to different terms of payment and suitability of
collaboration form for effective technology absorption (Note: 6 is the maximum score.
The meaning of the scores is described in the methodology section)
Score
Priority given to different terms of payment
one-off payment 2.37
initial payment plus royalties 3.25
instalments 3.55
share of returns from sales 3.40
payment only for supply of key components 3.75
Suitability of collaboration form for effective technology absorption
subcontracting 2.75
licensing 3.20
co-production 3.80
equity joint venture 4.00
Acquirers also consider the potential contribution of the acquired technology for their future
competitiveness and further development. In addition, they need to be aware that different
forms of collaboration may link with different strategic benefits or have an influence on
strategic development. The attributes which influence acquirers’ exports, such as supplier’s
world-wide reputation, joint brand name of product and use of supplier’s distribution
channel, cannot be obtained by acquirers through one-off transactions but may possibly be
gained through a closer collaboration such as a co-production arrangement or joint venture.
More importantly, as contributions to the acquirer’s strategic development, technological
competitiveness in domestic market and customers’ confidence in product quality and
reliability may be more effectively acquired through closer forms of collaboration which also
reduce acquirers’ risks as indicated above.
Case Studies
The following five case examples from our research have been chosen to demonstrate the
complexity of valuing technology within the context of a strategic collaboration and to
highlight some key issues which will be discussed in the next section. Three of the five cases
have been investigated as ‘pairs’ (i.e. from both sides); these are cases (a), (c), and (d). The
names of all the companies have been changed. Table 5 summarises the main aspects of the
technology transfer arrangements described.
Case a) China Great Wall Machines (CGWM) is a small technologically based company. In
1993 it established a co-production partnership with Matoco who supplied technology for the
best selling machining centre from its latest product range. CGWM paid Matoco for the
transferred technology in instalments at each of four phases of the contract. By 1997 one
hundred and ten machines had been made and sold.
Case b) Capital Machine Tool Works (CMTW) is one of the largest state owned machine tool
enterprises with over 7,000 employees. It makes a comprehensive range of products. In 1984
it signed a technology transfer agreement with Comech for co-producing to order large CNC

gantry milling machines. Nothing was paid by CMTW for the technology but Comech
receives a share of the profits from sales according to the percentage of the product supplied
by them (about 60%). Eight machines were made by 1996.
Case c) East China Machinery Co. (ECMC) makes gear cutting and special purpose
machines. In 1996 it signed a licensing agreement with a foreign company that was
subsequently acquired by Autoco in 1991. Autoco provided drawings and training for an
automated transfer line for customers in the automotive industry. An initial payment was
paid for the technology by ECMC and Autoco would receive royalties on sales. However, by
1997 ECMC had built and sold just two lines.
Case d) Red Banner Machine Works (RBMW) was originally state owned but became a listed
shareholding company in 1995 (There are only four listed machine tool companies in China).
Its products are mainly milling machines of all types. Also in 1995 it signed a collaborative
joint venture agreement with Protools. RBMW holds 52% of the equity and Protools holds
48%. Profits are shared correspondingly and Protools additionally receives a royalty on each
machine sold. Initial progress in establishing the new company at a separate location was
slow and only two machines had been sold by 1997.
Case e) New Friendship Machinery Co. (NFMC) is medium sized but one of the best
renowned machine tool companies in terms of its technological capability. In 1987 it
established a technology transfer agreement with Beetech for manufacturing a CNC
horizontal machining centre and a CNC turning centre. Around 5 machining centres and 4
turning centres were made and sold but in 1992 Beetech went into liquidation. NFMC was a
creditor since it had a contract with Beetech and had paid for parts, but it received no
compensation. By 1993 no more machines were being made with the transferred technology.
Table 5. Summary of main aspects of case studies
Chinese
company
Foreign
supplier Type of technology Form of
collaboration Terms of
payment
(a) China Great
Wall Machines Matoco CNC vertical
machining centre Co-production Instalments
according to
contract phases
(b) Capital
Machine Tool
Works
Comech CNC gantry
milling machine
Co-production Share of return
from sale
(c) East China
Machinery Co. Autoco Automatic transfer
line Licence
agreement Initial payment
plus royalties
(d) Red Banner
Machine Works Protools CNC vertical
machining centre Joint venture Share of profits
plus royalties
(e) New
Friendship
Machinery Co.
Beetech CNC machining &
turning centre Licence
agreement Initial payment
plus royalties

Key issues arising from the cases
Normally one of the purposes of technology transfer collaborations is to enhance the
opportunities for both parties to generate greater total benefit. However, to enable the
achievement of this purpose their respective objectives should ideally be clarified in the
agreement and, more importantly, each targeted return needs to be related to its contribution
towards the generation of the total benefit. Therefore, an assessment of their respective
capabilities to achieve the collaborative objectives as well as to meet customers' requirements
is an essential prerequisite to determining each partners’ contribution. Case (b) and case (c)
clearly demonstrate the importance of this aspect. CMTW and Comech each identified their
respective contribution based on their capabilities, resulting in success for both sides. On the
other hand ECMC and Autoco did not consider this aspect of the collaboration, with their
agreement being based more on ‘opportunism’ and very limited commitment, consequently it
ended in failure.
Most tacit knowledge cannot simply be transferred through the sale of drawings and a short
period of training but requires a build-up of experience supported by a close commitment to
the collaboration by both partners. This is particularly the case when technology is for
making special purpose products. In case (c) the technology is for making transfer lines
which require a high level of customisation and reliability. Also each application, and
consequently each machine, is different and specialised skills, such as how to sequence
machine operations, are crucial. The technology acquirer therefore needs to possess
considerable ‘know-how’ about the whole design and manufacturing process. In case (c)
without support from a close collaboration and being unable to win orders from customers
CMTW could not accumulate the necessary experience. Therefore Autoco could not make
any gains from royalties and as a result the collaboration has ended with little benefit for
either partner. A unique example where tacit knowledge was successfully acquired was in
case (e) where, despite the liquidation of Beetech, NFMC’s existing technological capability
enabled it to use some of the knowledge gained in developing a new range of machines.
The value of technology is only realised in the market and transfer value should reflect the
returns which both suppliers and acquires intend to capture but these benefits cannot be
gained unless the technology adds value further downstream. In case (a) there was a period
when CGWM only managed to sell very few machines, despite its success in absorbing the
technology, so the added value realised by the seller and the acquirer was small. As a result
CGWM was incurring significant financial losses and Matoco doubted the strategic benefits
from continuing with the collaboration. CGWM later changed its marketing strategy from
selling single machines to focusing on designing production lines and started winning orders
for sets of machines to be integrated into these lines. Consequently its sales of the machining
centre that year were greater than those of any other CNC machine tool manufacturer in
China. In comparison, case (d) illustrates a situation where collaboration between the
partners is much closer. However, the benefits for each party have so far been very small
since only two machines have been sold, due mainly to difficulties in establishing effective
marketing function and distribution channels.
A good working relationship between partners is regarded as being an important attribute for
achieving the best results from a technology transfer collaboration. Contributing factors may
include mutual understanding, trust and working efficiency, but from the beginning each

partner’s objective has to be understood by the other. In case (b) a mutual understanding
between CMTW and Comech provided the basis to determine the appropriate form of
collaboration as well as transfer arrangements. Trust between partners needs to be built-up
gradually. Case (a) demonstrates that in certain circumstances this may become a key factor
in determining the continuation of a collaboration. Matoco needed to exercise patience with
CGWM and trust was only established after some years of the collaboration. However, trust
alone cannot enable the partners to work effectively. Case (d) is the only one where
technology transfer is under a joint venture, requiring a high level of mutual trust. Protool’s
intention was to improve the efficiency of transfer by directly participating in operation and
management but the results so far have been disappointing and the joint benefit is smaller
than expected. The worst case of a relationship being inhibited is where one party goes
bankrupt during the transfer process. Case (e) is an example of this and consequently NFMC
suffered considerable losses including payments made for sample machines and key
components as well as consequential costs such as providing after sales service that would
otherwise have been the responsibility of Beetech.
Concluding discussion
Transfer value is of importance both to suppliers and acquirers. To acquirers, it includes
transfer costs and returns generated through their downstream activities. These are not only
tangible financial returns, but also intangible returns such as technological enhancement and
strategic development on which a judgement has to be formed in determining transfer value.
To suppliers, transfer value is influenced by their share of returns which may also include
various benefits, depending on the forms of collaboration and transfer arrangements. Where
technology is more effectively transferred and used, greater benefits will be generated.
Technology must also be valued within the context of collaboration with consideration taken
of the potential value to be generated by joint efforts and arrangements for sharing benefits,
costs and risks.
To determine transfer value, technology attributes which contribute to acquirer’s financial,
technical and strategic returns need to be assessed and the costs and risks compared. Forms of
collaboration have a substantial influence on the capacity to absorb technology and the ability
to capture transfer benefits. Transfer value depends on the contribution of technology and its
use in enhancing competitive strength, improving performance and generating increased
benefits.
Acknowledgements
This paper is based on a project funded by the UK Engineering and Physical Science
Research Council (EPSRC). The authors wish to acknowledge this financial support and the
assistance provided by many companies and organisations in the UK and China.
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