TECHNOLOGY EXPORTS AND JOINT VENTURES

TECHNOLOGY EXPORT It is an export of technology which is normally implemented by

concluding various types of technology transfer agreements. Technology export can be - technological disclosure, technical guidance, technical assistance, technology assignment, and licensing.

Although there is no fixed interpretation or definition of a technology transfer agreement, Article 30 of the Foreign Transactions and Foreign Trade Act ,which sets out the provisions regarding technology introduction contracts -a type of technical assistance agreement ,which pertains to the transfer of patent rights and other industrial property rights related to technology, the establishment of the license and the right to exploit and use these rights or guidance on technology related to business management.

TECHNOLOGY LICENSING• Technology licensing is a contractual arrangement

in which the licenser's patents, trademarks, service marks, copyrights, or know-how may be sold or otherwise made available to a licensee for compensation negotiated in advance between the parties.

• Such compensation, known as royalties, may consist of a lump sum royalty, a running royalty (royalty based on volume of production), or a combination of both.

TECHNOLOGY LICENSING• Companies frequently license their patents,

trademarks, copyrights, and know-how to a foreign company that then manufactures and sells products based on the technology in a country or group of countries authorized by the licensing agreement.

TECHNOLOGY LICENSING• Technology licensing agreement usually enables y

firm to enter a foreign market quickly, and to poses fewer financial and legal risks than owning and operating a foreign manufacturing facility or participating in an overseas joint venture.

• Licensing can be a particularly attractive method of “exporting” for small companies or companies with little international trade experience, even though small and large firms profitably use this technique.

TECHNOLOGY LICENSING• Technology licensing may also be used to acquire

foreign technology through cross-licensing agreements or grant-back clauses that award rights to improved technology developed by a licensee.

Technology export includes:1) Transfer of industrial property rights and other

rights related to technology (know-how)2) Granting of licenses pertaining to industrial

property rights and technology (know-how)3) Guidance on technology related to business

management.4) Granting of licenses pertaining to patent rights

and utility model rights5) Granting of licenses pertaining to currently

claimed inventions and devices6) Granting of the right to use know-how

Objectives of Technology Export

1) Avoid infringement of another’s patent rights and

other intellectual property rights.

2) Enable access to know-how, which is normally

information kept secret by the other party.

3) Earn royalties, make business safer, and raise

cost performance (buy time).

4) Opportunities for licensing agreements… When,

where, and how.

Need of Technology Export

1.Offer Technical Assistance (licensing-out)

2.Receive Technical Assistance (licensing-in).

Offering technical assistance (licensing-out)

1) Technology transfer offers another useful means

of earning besides the production and sales of

products (= open innovation).

2) Companies can receive a higher reputation for

their technological power that they can offer to

other companies as technical assistance.

Offering technical assistance (licensing-out)

3) Surplus or idle technologies can be commercialized

to reimburse technological development expenses

and maintenance fees incurred for those

technologies.

4) Companies can receive a grant-back for improved

technology developed by their licensees.

5) Technology transfer plays an important role in

international strategies.

Receiving technical assistance (licensing-in)

1) Cost performance increases because there is no need

for technological development.

2) Time required for technological development can be

reduced, and the company’s position as the head

starter can be secured.

3) Infringement of other companies’ rights can be

avoided by obtaining a license.

4

Receiving technical assistance (licensing-in)

4) Companies’ weak points can be made up for.

5) Access to and the right to use other companies’

secrets and useful information can be obtained.

ADVANTAGES OF TECHNOLOGY EXPORT

• Can create fortunes worth billions of dollars for the exporters as well as the early adopters .

• Technology can be adopted by developing countries to improve living standards and security .

• Turn key projects can enable to exploit the expertise without investing much in R&D and enable them to save on time.

• Exports of technology by developing countries can serve as an indicator of their technological development

• It encourages local technological capabilities of the importer .

DISADVANTAGES OF TECHNOLOGY EXPORT• One negative aspect of licensing is that control over the

technology is weakened because it has been transferred to an unaffiliated entity .

• In certain developing countries, there also may be problems in adequately protecting the licensed technology export from unauthorized use by third parties .

• It is not feasible to export all the technologies..eg developed countries are cautious while exporting nuclear power related technologies and products to developing countries .

• Adopters may innovate and surpass the actual technology exporting entity

CONTINUED• European Union & other western nations have strict

protectionist laws that affect technology licensing .

• Restricts the copying of patents , technology know-how and other intellectual property rights .

• Because of the potential complexity of international technology licensing & exporting agreements, firms should seek qualified legal advice.

• do not reveal the whole range of technical progress under way in the exporting countries, but do provide examples of technical learning where the technology has been assimilated, reproduced,

CASE STUDY : EXPORT OF AWACS TO INDIA BY ISRAEL

• ISRAEL exported 3 AWACS ( Airborne Warning & Control Systems) for $ 1.1 bn

• India joined the global ranks of the AWACS operators .

• To provide broad spectrum crystal clear scan of air threats and illegal Indian airspace entry even in worst climatic conditions .

• The system can receive transmissions from other air and ground stations to round out its surveillance picture, and uses sensor fusion to provide a complete picture of the battlespace out to 500 kilometers.

Joint Venture is a win /win collaboration between two or

more people, sharing resources to solve common

problems and achieve goals.    

No limits, no catch, no selling, no manipulation, no risk.

   

It can be called a Strategic Alliance or Partnering as well.

Joint Venture

Joint Venture Company

Inputs

MNE LOCAL FIRM

HOME COUNTRY

HOST COUNTRY

Inputs

Share of Profit

Share of Profit

DEVELOPING JV

Finding ideas or partners

• In the era of the Internet, finding opportunities for exploiting an idea is sizeable together with remote, or advertised, communicating.

• There are also the blogging networks as well the social networking sites and search engines.

• There are also other venues to find a JV partner such as seminars, exhibitions, directories and the plain newspaper advertising of opportunities.

• One should not forget websites which have become prosperous like eBay and Amazon.com, Wikipedia, YouTube to name the most obvious. Forming JVs with distributor and marketing agencies is possible in this flat world to market a product. But finding an entrepreneur for a JV is another task.

• Nonetheless, there are risk-takers- venture capitalists, angel investors and venture managers (see: Carried interest) – especially in the high-tech industries like IC chips or biotechnology.

Preparation

• One can here only underline the steps or information that will be needed by the JV candidate. They are:– the objectives, structure and projected form of the joint

venture, including the amount of investment and financing arrangements and debt

– the JV's products, their technical description and usage– alternate production technologies– estimated cost of equipment– estimated technology transfer costs– foreign exchange projections (where applicable)– staff requirements and trainingfinancial projections– environmental impact

SELECTING PARTNERS• The ideal process of selecting a JV partner

emerges from:– screening of prospective partners– short listing a set of prospective partners and some

sort of ranking– due diligence – checking the credentials of the other

party– availability of appreciated or depreciated property

contributed to the joint venture– the most appropriate structure and invitation/bid– foreign investor buying an interest in a local company

INCORPORATION

• A JV can be brought about in the following major ways:– Foreign investor buying an interest in a local

company– Local firm acquiring an interest in an existing

foreign firm– Both the foreign and local entrepreneurs jointly

forming a new enterprise– Together with public capital and/or bank debt

SHAREHOLDERS AGREEMENT• This is a legal area and is fraught with difficulty as the laws of countries

differ, particularly on the enforceability of 'heads of' or shareholder agreements.

• For some legal reasons it may be called a Memorandum of Understanding. It is done in parallel with other activities in forming a JV.

• Some of the issues in a shareholders' agreement are:– Valuation of intellectual rights, say, the valuations of the IPR of one partner

and,say, the real estate of the other– the control of the Company either by the number of Directors or its "funding"– The number of directors and the rights of the founders to their appoint

Directors which shows as to whether a shareholder dominates or shares equality.

– management decisions - whether the board manages or a founder– transferability of shares - assignment rights of the founders to other members

of the company– dividend policy - percentage of profits to be declared when there is profit

EXECUTE AND REAP THE REWARDS!

CASE STUDY

Shanghai BOC (SBOC)

• Established in 1988• Between Wusong Chemical and British

Oxygen Company (BOC)• Production of industrial gases• In 1995

– net profit 5%– turnover growth 8.4%

• SBOC (continued)• Organization structure

– a board with 8 rep (half-half), one foreign and one local general manager.

• Skills– seek good employees with good training

• Successful factors

• Planning for future growth– not able to meet 8 year payback but patience– one half of the revenue used for R & D– Raise additional capital of $30 million bank

loan to build gas processors at the customer’s cites as marketing strategy

• Learning from the foreign partner– able to learn new technology and practices– focus on quality of product– decisions are based on consensus and

consultation

Problems

• Increasing need for capital -thread for wholly-owned subsidiary from BOC

• FX imbalance low foreign earnings due to low volume of exports

• Sourcing and retaining staff– below market salary

• Cultural differences– - expatriate cannot speak Chinese

Partner selection• Additional financing flexibility• Modern management practices• Technology transfer• Location

- labor, materials, transportation

Successful factors for Joint Venture

• Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones.

• Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Branson's Service Group. Currently, the company uses Tata's CDMA network to offer its services under the brand name Virgin Mobile, and it has also started GSM services in some states.

Not so successful cross border ventures.

• Mahindra-Renault joint venture• In a joint venture between the two

companies, 51 per cent of the stake is held by Mahindra and Mahindra while the rest of 49 per cent is being held by French car maker Renault. But their first car Logan was a failure because of technical reasons as well as stiff competition from other makers. So this is the example of a not so successful joint venture