Methodological and Technological Issues in Technology Transfer

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4.8.1 Intellectual Property Rights

Weak legal institutions in host countries can be a serious barrier to technology transfer agreements. The relevance of the law of intellectual property rights (IPRs) is of obvious importance to the volume of technology transfer. If actors with IPRs or their licensees cannot protect income flows associated with ESTs in whose development they have invested substantial resources, they will either avoid transferring leading technologies into jurisdictions with weak IP laws or enforcement systems, or will export only second line, more exposed technologies which put at risk less of their capital stock. Although IPRs, discussed further in Chapter 3, merit great attention, many other types of laws and legal institutions, often less emphasised, should receive equivalent concern.

Especially when technology is transferred between private firms through ongoing relationships such as joint ventures, wholly owned subsidiaries with local supply and distribution networks in the host country, or royalty based technology licenses, the risks associated with the investments will be affected by the state of law and legal institutions in the receiving state. This will also be the case for foreign portfolio investors, banks and export-import agencies who finance investments that bring ESTs into an economy. At times, the capacities of these national legal institutions may be supplemented by international treaties like TRIPS or the WTO or partially substituted by transnational arbitration (Dezalay and Garth, 1996). But, even if the role of national institutions is no more than the enforcement of foreign legal judgements, the ability of local law to mitigate risks without extensive cost or delay will have an impact on investment patterns and profiles of technologies selected (Clarke, 1996).

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