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Technology Transfer to the China Machine Tool Industry: The Need for a Technology Valuation Model

Authors:
David Bennett at Aston University
David Bennett
Kirit Vaidya at Aston University
Kirit Vaidya
Zhao Hongyu
Zhao Hongyu
Zhao Hongyu
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Wang Xing Ming
Wang Xing Ming
Wang Xing Ming
  • This person is not on ResearchGate, or hasn't claimed this research yet.
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Abstract

Due to its fast growth China is rapidly becoming a focus for globalized manufacturing strategies and is now one of the world's largest markets for technology. The international transfer of manufacturing technology has also contributed significantly to the recent sharp increase in the rate of China 's industrial development. The Chinese machine tool industry, for example, has exhibited an annual growth of more than 12% between 1980 and 1995 and is now one of the largest markets for machine tool technology. Technology transfer agreements are not motivated only by the willingness of foreign suppliers but also by the desire of Chinese enterprises to acquire technology. One of the major problems in technology transfer is how to establish the value of the technology. ' In many cases partnerships between foreign companies and Chinese enterprises fail to become established because the value of technology cannot be agreed by both sides. It is therefore important to establish a method for valuing transferred technology. This paper outlines the concept of a technology valuation model which is being developed using empirical data from the machine tool industry. It is based on research carried out in the UK and China, and draws on selected case studies of technology transfer in the machine tool sector supplemented by information obtained from questionnaire surveys carried out in both countries.
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Technology transfer to the
China machine tool
industry
The need for a technology valuation
model
David Bennett, Kirit Vaidya, Zhao Hongyu and
Wang Xing Ming
Due to its fast growth China is rapidly becoming a focus for globalized
manufacturing strategies and is now one of the world's largest markets for
technology. The international transfer of manufacturing technology has
also contributed significantly to the recent sharp increase in the rate of
China
's industrial development. The Chinese machine tool industry, for
example, has exhibited an annual growth of more than 12% between 1980
and 1995 and is now one of the largest markets for machine tool
technology. Technology transfer agreements are not motivated only by the
willingness of foreign suppliers but also by the desire of Chinese
enterprises to acquire technology. One of the major problems in technology
transfer is how to establish the value of the technology.
'
In many cases
partnerships between foreign companies and Chinese enterprises fail to
become established because the value of technology cannot be agreed by
both sides. It is therefore important to establish a method for valuing
transferred technology. This paper outlines the concept of a technology
valuation model which is being developed using empirical data from the
machine tool industry. It is based on research carried out in the
UK
and
China, and draws on selected case studies of technology transfer in the
,
machine tool sector supplemented by information obtained from
1
questionnaire surveys carried out in both countries.
David Bennett is with the Technology and Innovation Research Centre of the Aston
Business School, Aston University, Aston Triangle, Birmingham 64 7ET, UK. Tel: +44 121
359
361 1. Fax:
+
44 121 359 5271. E-mail: d.j.bennett@aston.ac.uk. Kirit Vaidya andZhao
Hongyu are also with Aston University. Wang Xing Ming is with the People's University of
China, PR China.
China is among the world's top five machine tool
industries in terms of output value. However, its
production capacity still cannot meet the rapidly
increasing domestic demand which in recent years
has grown annually at a double-digit rate, making it
currently the world's third largest market for
machine tools. The major users of machine tools in
China are the automotive and general machinery
industries which are two of that country's 'pillar
industries' and are designated as priority sectors for
the government's promotion policies. The shortage
of domestically produced machine tools of sufficient
quality has resulted in large numbers of imports
from the major industrialized countries. As a result,
INDUSTRY
&
HIGHER EDUCATION
February
1997
35
... From our case studies and interviews with various organisations in China, and surveys conducted in earlier research, we have identified 5 basic reasons why suppliers and acquirers often do not agree on the value of the technology being transferred (Bennett et al, 1997). ...
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... 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. ...
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... Suppliers often felt that the acquirers tried to drive down prices without appreciating the full benefits of the technology and by contrast acquirers felt that suppliers always wanted to charge higher prices and did not appreciate the availability of alternatives or local development capabilities. From research carried out to date the following are the main factors which make it difficult to determine a value for technology which is acceptable both to the supplier and acquirer (Bennett et al, 1997). ...
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As manufacturing becomes increasingly globalized the value of technology has become a crucial question when being transferred from suppliers to acquirers. Under many forms of transfer arrangement the value of technology cannot be considered in isolation from the nature of the arrangement itself which could range from one-off transactions to an equity joint venture or other forms of close partnership. The distribution of costs, risks and benefits varies substantially between types of arrangement as well as the specifics of the agreement. Previous research by the authors into the transfer of technology between the UK and China has revealed that the issue of reaching mutual agreement on the value of technology was a major handicap to many transfer negotiations. This paper describes the framework and progress with development of a technology valuation model. The main focus of the research is on machine tool technology being transferred from the UK to China. The results will assist companies in developing their technology transfer and global manufacturing strategies. The overall aim of the research is to develop a model using empirical data gathered from both countries to identify the factors that both technology suppliers and acquirers consider when valuing transferred technology. The model will provide a framework for assessing the components of value, their relative weights, the balance between them and how they are related to the form of collaboration between the supplier and acquirer.
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... Suppliers often feel that acquirers try to undervalue the technology without appreciating its full benefits, while by contrast acquirers consider that suppliers always place a high value on their technologies and did not appreciate the availability of alternatives or local development capabilities. The following are the main factors making it difficult to determine a value for technology that is acceptable both to the supplier and acquirer (Bennett et al, 1997b). ...
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View
... Valuing the technology is a crucial question in most technology transfer negotiations and collaboration arrangements (de Bruijn and Jia, 1993). Bennett et al. (1997a) have identified the main factors which make it difficult to determine a value of technology and form of transfer acceptable both to technology suppliers and acquirers. A ``technology valuation'' framework has been developed based on the influences of four components, owner's value, transfer value, substitute value and traded value. ...
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The value of technology and the appropriate form of transfer arrangement are important questions to be resolved when transferring technology between Western manufacturing firms and partners in industrialising and developing countries. This article reports on surveys carried out in the machine tool industries in the UK and China to establish the differences and similarities between owners and acquirers of technology regarding the relative importance of the factors they evaluate, and the assessments they make, when considering a technology transfer. It also outlines the development of a framework for technology valuation. The survey results indicate that the value of product technology is related to superior technical performance, especially on reliability and functionality, and the prospects of premium prices and increased sales of the technology transfer based machine tools. Access to markets is the main objective of UK companies, while Chinese companies are concerned about improving their technological capability. There are significant risks, especially related to performance in the market, and while owners and acquirers have benefited in the short term, the long term collaboration required for strategic benefits has been difficult to achieve because of the different priorities of the owners and the acquirers.
View
... The technology also adds value downstream (for example, by enabling more efficient manufacture of better quality products). Based on these considerations, four components have been identified for incorporation into the Technology Valuation model (Bennett, et al., 1997). " Owner's value " . ...
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