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Technology transfer and Chinese government policy: Opportunities and implications for business

Authors:
David Bennett at Aston University
David Bennett
Kirit Vaidya at Aston University
Kirit Vaidya
X M Wang
X M Wang
X M Wang
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F D Zhu
F D Zhu
F D Zhu
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Abstract

State-owned enterprises in China have been given greater autonomy and responsibility, have freer access to foreign technology, and are being encouraged to form groups to gain from rationalization and integration. This article uses case studies to identify the key strategic issues that affect the commercial viability of foreign technology acquisition by state-owned enterprises within the context of enterprise reforms. All the case study enterprises used technology transfer to develop new or improved products. Technologies acquired as parts of subcontracting arrangements and well-established technologies to produce end-use products are easier to manage and operate profitably. However, the latter type of technology has been imported by numerous enterprises and has led to fierce competition and industry restructuring. Importing capital-intensive and complex technology to produce major components for products, such as cars, is more difficult and requires closer coordination with customers and suppliers.
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Technology Management: Strategies
&
Applications,
Vol.
3,
pp. 95- 108
Reprints available directly
from
the publisher
Photocopying
permitted
by license only
Case
Study
@
1997
OPA
(Overseas Publishers Association)
Amsterdam
B.V.
Published in The Netherlands under
license by Gordon and
Breach
Science Publishers
Printed in India
Technology Transfer and Chinese Government Policy:
Opportunities and Implications for Business
I
aAston Business School, Birmingham, UK; b~he Business School of
the
People's University of China, Beijing, China
I
(Received injnal form
9
October
1996)
State-owned enterprises in China have been given greater autonomy and responsibility,
have freer access to foreign technology, and are being encouraged to form groups to
gain from rationalization and integration. This article uses case studies to identify the
key strategic issues that affect the commercial viability of foreign technology acquisition
by state-owned enterprises within the context of enterprise reforms. All the case study
enterprises used technology transfer to develop new or improved products. Technologies
acquired as parts of subcontracting arrangements and well-established technologies to
produce end-use products are easier to manage and operate profitably. However, the
latter type of technology has been imported by numerous enterprises and has led to
fierce competition and industry restructuring. Importing capital-intensive and complex
technology to produce major components for products, such as cars, is more difficult and
requires closer coordination with customers and suppliers.
Keywords:
Technology transfer, China, Economic policy, Industrial policy, Economic reform,
Value
chain
INTRODUCTION
include outmoded technology and products. Liberal-
ization of policies on foreign direct investment and
A
succession of policy changes in China since
1978
technology imports were intended to enable state-
has led to rapid growth of industrial production and owned enterprises to upgrade their capabilities, but
foreign investment. However, the development has this process has been slower than expected.
been uneven geographically and between the state Within the context outlined above, this article
and non-state sectors. The fastest growth has been uses evidence from case studies to examine the role
in the coastal areas in the South, which were the first of international technology transfer in the strate-
to be granted Special Economic Zone status. State- gies of state-owned enterprises. While the focus is
owned enterprises have performed less well overall, on technology transfer at the level of the enter-
but they vary significantly in their capabilities and prise, the effects of the policy environment on the
performance. Major problems facing many of them technology transfer strategies of enterprises have
95
... Increased international technology transfer through FDI, especially in joint ventures, and other forms of collaborations between foreign and Chinese firms was expected to play an important role in bringing about this shift. FDI was encouraged by tax incentives which were especially favourable for foreign-invested firms operating in China's SEZs and other areas designated for special treatment (Sit, 1985;Bennett et al., 1997). To support industrial capability development, science and technology (henceforth S&T) policy required state-owned scientific research institutions to: . ...
Is China's manufacturing sector becoming more high‐tech? Evidence on shifts in comparative advantage, 1987-2005
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Purpose The paper assesses the extent to which China's comparative advantage in manufacturing has shifted towards higher‐tech sectors between 1987 and 2005 and proposes possible explanations for the shift. Design/methodology/approach Revealed comparative advantage (RCA) indices for 27 product groups, representing high‐, medium and low‐tech sectors have been calculated. Examination of international market attractiveness complements the RCA analysis. Findings for selected sectors are evaluated in the context of other evidence. Findings While China maintains its competitiveness in low‐tech labour intensive products, it has gained RCA in selected medium‐tech sectors (e.g. office machines and electric machinery) and the high‐tech telecommunications and automatic data processing equipment sectors. Evidence from firm and sector specific studies suggests that improved comparative advantage in medium and high‐tech sectors is based on capabilities developing through combining international technology transfer and learning. Research limitations/implications The quantitative analysis does not explain the shifts in comparative advantage, though the paper suggests possible explanations. Further research at firm and sector levels is required to understand the underlying capability development of Chinese enterprises and the relative competitiveness of Chinese and foreign invested enterprises. Practical implications Western companies should take account of capability development in China in forming their international manufacturing strategies. The rapid shifts in China's comparative advantage have lessons for other industrialising countries. Originality/value While RCA is a well‐known methodology, its application at the disaggregated product group level combined with market attractiveness assessment is distinctive. The paper provides a broad assessment of changes in Chinese manufacturing as a basis for further research on capability development at firm and sector levels.
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... Following the end of the Cultural Revolution the decision was taken to begin some limited market reforms and to open up parts of the economy to more foreign trade and investment. A government review of technology transfer policy soon afterwards found previous approaches, which relied on turnkey projects and purchase of equipment, deficient in a number of respects (Bennett, Vaidya, Wang and Zhu, 1997). The turnkey projects were expensive and provided limited scope for developing local technological capability. ...
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  • May 2001
This paper addresses the question of how enterprises can improve their competitiveness through the acquisition and development of technology, and hence how countries are able to raise the level of industrial development and grow their GDP. It takes the example of East Asia to demonstrate how fast economic growth can be achieved through the "stages" approach to technology acquisition and development. It also provides some case studies of technology transfer to China as a means of illustrating how successful transfer can be achieved and the problems that can be encountered. Finally, some comparisons are made with, and among, the Arab countries and an attempt is made to draw some lessons for the development of the Arab world from experiences gained elsewhere.
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... For the next phase of its development, China has ambitious aspirations to develop its science and technology capabilities or what China's former leader Deng Xiaoping called the 'knowledge economy'. To achieve this end, China encourages FDI that provides for technology transfer (Bennett et al, 1997). In 1998 alone the contracted value of technology imports into China was US$ 16 bn, the majority of which was associated with equipping foreign funded enterprises (Ma, 1999). ...
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To best use their proprietary resources companies can extend the application of their know-how through technology collaborations. International technology transfer provides a means whereby they can globalise their production operations to take advantage of cost or market factors. This paper examines the question of partnership arrangements for international technology transfer. Using research carried out in China it considers the forms of ownership arrangement used to transfer technology for production between industrialised and newly developing countries. It also addresses the question of how companies try to retain their competitive advantage by protecting the technology from leakage.
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... Following the end of the Cultural Revolution the decision was taken to begin some limited market reforms and to open up parts of the economy to more foreign trade and investment. A government review of technology transfer policy soon afterwards found previous approaches, which relied on turnkey projects and purchase of equipment, deficient in a number of respects (Bennett, Vaidya, Wang and Zhu, 1997). The turnkey projects were expensive and provided limited scope for developing local technological capability. ...
Meeting technology needs of enterprises for national competitiveness
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  • Jan 2005
  • INT J TECHNOL MANAGE
This paper addresses the question of how enterprises can improve their competitiveness through the acquisition and development of technology, and hence how countries are able to raise the level of industrial development and grow their GDP. It takes the example of East Asia to demonstrate how fast economic growth can be achieved through the ''stages'' approach to technology acquisition and development. It also provides some case studies of technology transfer to China as a means of illustrating how successful transfer can be achieved and the problems that can be encountered. Finally, some comparisons are made with, and among, the Arab countries and an attempt is made to draw some lessons for the development of the Arab world from experiences gained elsewhere.
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Evidence from a survey shows that British engineering companies with a business interest in China recognise the potential benefits from technology transfer to China. The major strategic objective in transferring technology to China is to gain access to the Chinese market. British firms have a high opinion of the capability of Chinese enterprises to learn to use new technologies but they give a low rating to their managerial and technological capabilities and quality of existing equipment. Foreign companies appear to have a cautiously favourable view of the economic and political environment but the legal framework for doing business, time consuming negotiations, inconvenience of communications, bureaucracy, and unclear organizational authority are identified as the most difficult problems.
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Technology transfer under China's economic reforms: Business environment and success factors
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  • Jan 1995
The opening up of the Chinese economy and the associated transfer of technology from abroad have been taking place at an accelerating pace. Technology is crucial to China's industrial development. It is a productive resource and has a vital role in the process of economic and social development. This article provides an overview of technology transfer into China, focusing on recent developments, and examines the macroenvironmental and microenvironmental influences which foreign enterprises must consider when making investments or technology transfer decisions. Cases of companies engaged in international technology transfer are used to illustrate the discussion on the microenvironment. To be successful, foreign investors and suppliers of technology must respond to China's industrial priorities and pursue projects that are compatible with the country's broad policy goals as well as the corporate objectives of Chinese partners. The article concludes by listing a number of points to which attention should be paid before a decision is made to transfer technology to China.
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Transferring technology to China: supplier ' perceptions and acquirer expectations Manufacturing Strategy: Operations Strategy in a Global Context Business School/European Operations Management Asso-ciation
  • 73-78
  • D J Bennett
  • H Y Zhao
  • K G Vaidya
  • X M Wang
Bennett, D. J ., Zhao, H. Y., Vaidya, K. G. and Wang, X. M. (1996). Transferring technology to China: supplier ' perceptions and acquirer expectations. In: Voss, C. (ed) Manufacturing Strategy: Operations Strategy in a Global Context, Proceedings of the European Operations Man-agement Association 3rd Intemational Conference, London Business School/European Operations Management Asso-ciation, London, pp. 73-78