2.7.3 The international dimension in technology development and deployment: technology transfer
Article 4.5 of the Convention states that developed country Parties ‘shall take all practicable steps to promote, facilitate, and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-how to other Parties, particularly developing country Parties, to enable them to implement the provisions of the Convention’, and to ‘support the development and enhancement of endogenous capacities and technologies of developing country Parties’.
Similarly Article 10(c) of the Kyoto Protocol reiterated that all Parties shall: ‘cooperate in the promotion of effective modalities for the development, application, and diffusion of, and take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies, know-how, practices and processes pertinent to climate change, in particular to developing countries, including the formulation of policies and programmes for the effective transfer of environmentally sound technologies that are publicly owned or in the public domain and the creation of an enabling environment for the private sector, to promote and enhance the transfer of, and access to, environmentally sound technologies’.
Technology transfer is particularly relevant because of the great interest by developing countries in this issue. This interest arises from the fact that many developing countries are in a phase of massive infrastructure build up. Delays in technology transfer could therefore lead to a lock-in in high-emissions systems for decades to come (e.g. Zou and Xuyan, 2005). Progress on this matter has usually been linked to progress on other matters of specific interest to developed countries. Thus Article 4.7 of the Convention is categorical that ‘the extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and the transfer of technology’.
The IPCC Special Report on Methodological and Techno-logical Issues on Technology Transfer (SRTT) (IPCC, 2000) defined the term ‘technology transfer’ as a broad set of processes covering the flows of know-how, experience and equipment for mitigating and adapting to climate change amongst different stakeholders. A recent survey of the literature is provided in Keller (2004) and reviews with special reference to developing countries are included in Philibert (2005) and Lefevre (2005). The definition of technology transfer in the SRTT and the relevant literature is wider than implied by any particular article of the Convention or the Protocol. The term ‘transfer’ was defined to ‘encompass diffusion of technologies and technology cooperation across and within countries’. It also ‘comprises the process of learning to understand, utilize and replicate the technology, including the capacity to choose and adapt to local conditions and integrate it with indigenous technologies’.
This IPCC report acknowledged that the ‘theme of techno-logy transfer is highly interdisciplinary and has been approached from a variety of perspectives, including business, law, finance, micro-economics, international trade, international political economy, environment, geography, anthropology, education, communication, and labour studies’.
Having defined technology transfer so broadly, the report (IPCC, 2000, p. 17) concluded that ‘although there are numerous frameworks and models put forth to cover different aspects of technology transfer, there are no corresponding overarching theories’ (emphasis added). Consequently there is no framework that encompasses such a broad definition of technology transfer.
The aforementioned report identified different stages of technology transfer and different pathways through which it is accomplished. These stages of technology transfer are: identification of needs, choice of technology, and assessment of conditions of transfer, agreement and implementation. Evaluation and adjustment or adaptation to local conditions, and replication are other important stages. Pathways for technology transfer vary depending on the sector, technology type and maturity and country circumstances. Given this variety and complexity, the report concluded that there is no pre-set answer to enhancing technology transfer.
There is no international database tracking the flow of ESTs (environmentally sound technologies). Little is known about how much climate-relevant equipment is transferred, and even less about the transfer of know-how, practices and processes, and most international analyses rely on proxy variables. It is well known that the nature of financial flows from OECD countries to developing countries has changed over the last 15 years. Overseas development assistance (ODA) has declined and been overtaken by private sources of foreign direct investments (WDI, 2005). International financial statistics only reflect the quantity and not the quality of FDI. They also say nothing about what fraction is a transfer of ESTs. Despite its decline, ODA is still critical for the poorest countries, particularly when it is aimed at developing basic capacities to acquire, adapt, and use foreign technologies.
IPCC (2000, p. 22) summarized the historical experience as a ‘failure of top-down, technology-focused development’. Some developing country policymakers believe that payments for technology are beyond their means and that international technology transfer contributes little to technological development in the recipient country (UNDP, 2000). Many failures of technology transfer have resulted from an absence of human and institutional capacity (IPCC, 2000, p. 118).
There are several modes to encourage technology transfer to developing countries, from technical assistance and technology grants, to capacity building and policy development cooperation. The priorities for these modes shift as host countries develop economically. Technology demonstration projects can play an important role early in the industrialization process. As the economy grows, policy development cooperation, such as assistance to develop energy-efficiency standards or to create an enabling environment for technology diffusion, becomes more important. Ohshita and Ortolano (2003) studied past experiences of demonstration projects using cleaner energy technologies in developing countries through assistance by international organizations as well as developed countries. They found that demonstration projects raised awareness of cleaner energy technologies in the technology transfer process, but were not very successful in diffusing the technologies more widely in the target developing countries. For China in particular, demonstration projects played an important role in the past, when the economy began shifting from a centrally planned system to a more open, market-based system. There is increasing recognition that other modes of technology diffusion may now be more suitable for China. Given the continued high growth of the Chinese economy, donors have been shifting their assistance programmes from technology demonstration to policy development assistance (Ohsita, 2006).
Figure 2.4: A general framework for factors affecting technology transfer and subsequent innovation.
Figure 2.4 shows one attempt to create a framework for all forms of technology transfer. In all forms technology transfer, especially across countries, at least seven characteristics are important. These are:
1. The characteristics of the technology.
2. The characteristics of the originator of the transfer.
3. The enabling (or disabling) environment in the country of origin.
4. The conditions of the transfer.
5. The characteristics of the recipient.
6. The enabling (or disabling) environment in the host country.
7. The ultimately valuable post-transfer steps, i.e. assimilation, replication and innovation.
Each of these characteristics are discussed below.
Characteristics of the originator of the transfer. Initially, there was a widespread tendency to think of technology transfer in supply-side terms – the initial choice and acquisition of technology (Brooks, 1995) and a lack of corresponding focus on the other factors that influence the successful outcome of technology transfer, such as enabling environment, institutions and finance.
The environment in the country of origin can be conducive or disabling for technology transfer. The public sector continues to be an important driver in the development of ESTs. Of the 22 barriers listed in the technical summary of the IPCC Report (2000) as barriers to technology transfer, 21 relate to the enabling environment of recipient countries. Many governments transfer or license the patents arising out of publicly funded efforts to the private sector as a part of their industrial policy, and then the transferred patents follow the rules of privately owned technologies (IPCC, 2000, p. 25).
One should also consider the ‘imperfect’ nature of technology markets:
(1) While some of the components of technology are of a public-good nature, others have an important tacit nature.
(2) Technology markets are normally very concentrated on the supply side, and bargaining power is unevenly distributed.
(3) The strategic nature of technologies normally includes limiting clauses and other restrictions in transfer contracts (for a discussion see Arora et al., 2001; Kumar, 1998).
Technology Denial Regimes in the country of origin also sometimes constitute a barrier to technology transfer, especially for multiple-use technologies. Thus supercomputers can be used for climate modelling and global circulation models and also to design missiles.
The conditions of the transfer. Most technologies are transferred in such a way that the originators also benefit from the transfer and this helps to establish strong incentives for proper management and maintenance of the technologies. The conditions of the transfer will primarily depend on the transfer pathway used, as mentioned above. Common pathways include government assistance programmes, direct purchases, trade, licensing, foreign direct investment, joint ventures, cooperative research agreements, co-production agreements, education and training and government direct investment. Developing countries have argued for the transfer of ESTs and corresponding know-how, on favourable, concessional and preferential terms (Agenda 21, 1992, Chapter 34). There have been instances in the pharmaceutical industry when certain drugs benefiting developing countries have been licensed either free or on concessionary terms.
The characteristics of the recipient. The recipient must understand local needs and demands; and must possess the ability to assess, select, import, adapt, and adopt or utilize appropriate technologies.
The enabling (or disabling) environment in the host country. Many of the barriers to technology transfer that are listed in the IPCC Report (IPCC, 2000, p. 19) relate to the lack of an enabling (or a disabling) environment in the recipient country for the transfer of ESTs. A shift in focus, from technology transfer per se to the framework represented in Figure 2.4, leads to an equal emphasis on the human and institutional capacity in the receiving country. A crucial dimension of the enabling environment is an adequate science and educational infrastructure. It must be recognized that capacity building to develop this infrastructure is a slow and complex process, to which long-term commitments are essential.
A recipient’s ability to absorb and use new technology effectively also improves its ability to develop innovations. Unfortunately, the capacity to innovate and replicate is poorly developed in developing countries (STAP, 1996). However, the engineering and management skills required in acquiring the capacity to optimize and innovate are non-trivial. The technology-importing firm needs to display what has been called ‘active technological behaviour’. Firms that do not do this are left in a vicious circle of technological dependence and stagnation (UNDP, 2000).