The effects of technology around the world are pervasive in business and in private lives. In fact in many parts of the world, whole generations of technological development are being skipped over; for example, many people will go straight to a digital phone without ever having their houses wired under the analog system. Even in a remote village such as Bano, Malaysia-still lacking traditional roads in 2001-an information highway is under way.71 Advances in information technology are bringing about increased productivity, for employees, for companies, and for countries.
Now that we are in a global information society, it is clear that corporations must incorporate into their strategic planning and their everyday operations the accelerating macro-environmental phenomenon of technoglobalism, in which the rapid developments in information and communication technologies (ICTs) are propelling globalization and vice-versa. Investment-led globalization is leading to global production networks, which result in global diffusion of technology to link parts of the value-added chain in different countries. That chain may comprise parts of the same firm, or it may comprise suppliers and customers, or it may comprise technology- partnering alliances among two or more firms. These technological developments are facilitating, indeed necessitating, the network firm structure which allows flexibility and rapid response to local needs. Clearly there is no ignoring the effects of technology on global trade and business transactions; in addition, the Internet is propelling electronic commerce around the world. In fact, the ease of use and pervasiveness of the Internet raises difficult questions about ownership of intellectual property, consumer protection, residence location, taxation, and other issues.
New technology specific to a firms products represents a key competitive advantage to firms and challenges international businesses to manage the transfer and diffusion of proprietary technology, with its attendant risks. Whether it is a product, a process, or a management technology, an MNCs major concern is the appropriability of technology: that is, the ability of the innovating firm to profit from its own technology by protecting it from competitors.
An MNC can enjoy many technological benefits from its global operations. Advances resulting from cooperative research and development (R&D) can be transferred among affiliates around the world, and specialized management knowledge can be integrated and shared. However, the risk of technology transfer and pirating is considerable and costly. Although firms face few restrictions on the creation and dissemination of technology in developed countries, less developed countries often impose restrictions on licnsing agreements, royalties, and so forth, and have other legal constraints on patent protection.
In Germany, for example, royalties on patents are limited to 10 percent of sales, but the patent and trademark durations are 20 years and 10 years, respectively, with 45 percent the highest tax bracket allowed on royalties. Less developed countries tend to be comparatively more restrictive on the patent and trademark durations and on the range of unpatentable items. Egypt has no limits on royalties, but will only patent production processes, and then only for 15 years.
In most countries, governments use their laws to some extent to control the flow of technology These controls may be in place for reasons of national security. Other countries, LDCs in particular, use their investment laws to acquire needed technology (usually labor-intensive technology to create jobs), to increase exports, to use local technology, and to train local people.
The most common methods of protecting proprietary technology are the use of patents, trademarks, trade names, copyrights, and trade secrets. Various international conventions do afford some protection in participating countries; over 80 countries adhere to the International Convention for the Protection of Industrial Property often referred to as the Paris Union, for the protection of patents. However, restrictions and differences in the rules in some countries not signatory to the Paris Union, as well as industrial espionage, pose continuing problems for firms trying to protect their technology. In 2001, western pharmaceutical companies were embroiled in the difficult battle to protect their patents for drugs while some less developed economies felt they had a right to override patents in order to provide low-cost drugs to fight AIDs epidemics -
One of the risks to a firms intellectual property is the inappropriate use of the technology by joint-venture partners, franchisees, licensees, and employees (especially those who move to other companies). Some countries rigorously enforce employee secrecy agreements.
As another major consideration, global managers will want to evaluate the appropriateness of technology for the local environment-especially in less developed countries. Managers must study the possible cultural consequences of the transfer of technology to assess whether the local people are ready and willing to change their values, expectations, and behaviors on the job to apply new technological methods to production, research, marketing, finance, or some other aspect of business. Often, the decision regarding the level of technology transfer is dominated by the host governments regulations or requirements. In some instances, the host country may require that foreign investors import only their most modem machinery and methods so that the local area may benefit from new technology. In other cases, the host country may insist that foreign companies only use labor-intensive processes to help reduce high unemployment in the area. When the choice is left to international managers, experts in economic development recommend that managers make an informed choice of appropriate technology; the choice of technology may be capital-intensive, labor-intensive, or intermediate, but the key is that it should suit the level of development in the area and the needs and expectations of the people who will use it.
As an example of the successful use of appropriate technology, we can point out a small manulacturer of detergent in India called Patel. Patel has taken over three-quarters of the detergent market from Lever, a multinatiqnal company whose Surf brand detergent had formerly dominated the market in India. Managers at Patel realized that, although Surf was a high-quality, high-priced product, it was dearly not suitable for a poor country. They set up a chain of stores in which people mixed their own detergent ingredients by hand. This primitive method has enabled Patel to tailor its technology to the conditions and expectations in India and to outsell Lever on the basis of price; its annual sales are now over $250 million.
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