6. Technology Transfer and the Creation of Absorptive Capacity

78. In the context of a developing country such as Pakistan, technology transfer takes place at two broad levels; international and national. International technology transfer en-tails the acquisition and transfer of technology from a more scientifically and technologically advanced country to a developing country. International technology transfer takes place through different channels. Capital goods im-ports and technological inputs serve to enhance the productivity when they are used in the pro-duction process. Another channel is Foreign Direct Investment (FDI) as multinational en-terprises transfer technological information to their local subsidiaries. The third channel by which transfer of technology takes place is di-rect trade in knowledge licensing.

79. National technology transfer entails the further diffusion of technology from the early leading adopters to the whole sector of produc-tion and the identification and exploitation of promising indigenous research with a com-mercial potential. Seen from these two levels, technology transfer encompasses not only the process of innovation but also the diffusion of innovation represented as technology.

6.1 Absorptive Capacity for Technology Transfer

80. In order for both types of transfer of tech-nology to take place successfully in Pakistan, there is a need to create absorptive capac-ity at the individual, firm and national lev-els. There is a need to develop the capacity of people, businesses and institutions to assimi-late process and create new information. The process of acquiring, imitating, absorbing and diffusing technology is known as Absorptive Capacity. Enterprises in Pakistan can only be made innovative if funding is made available to building the absorptive capacity of business enterprises operating in the public and private sectors. Absorptive capacity is based on the accumulation of contextual knowledge and is path dependent. An organization’s and firm’s

absorptive capacity depends on how well it is exposed to using internal and external knowl-edge, its learning culture and capabilities and its organizational ability to exploit it within its subunits. Further, there is a need to ensure that maximum advantage is secured from the above three types of international technology transfer by incorporating the transfer and de-velopment of human and technological capa-bilities in technology transfer agreements. It should also be noted that technology transfer negotiation skills be imparted to personnel and institutions in public and private sectors who are involved in the process of negotiating the transfer of technology. Moreover, it should be remembered that technology transfer should not be limited to the transfer of physical stock of a particular technology but efforts should be made to acquire the set of disembodied skills and capabilities associated with a particular technology which prove vital in the process of further development of technology in the do-mestic setting.

6.2 Absorptive Capacity of the Firms

81. The domestic firms should be encouraged to become integrated into Global Production Networks (GPN) of the transnational corpora-tions (TNCs). Special tax incentives should be reserved for those firms which become part of these GPNs. These incentives should not be cut and dried but need to change with the level of experience accumulated by firms as they progress from lower end of the value chain to the higher end. These incentives should be geared towards reducing the costs of doing business.

82. Moreover, local firms in chosen indus-tries like software products, automotive parts etc. should become Original Equipment Manu-facturers (OEMs) of the big transnational cor-porations to achieve economies of scale and facilitate the transfer of knowledge and infor-mation from the flagship corporation of the GPNs. Inter-firm collaboration should then be encouraged between local firms which operate as a part of GPNs and those firms which are yet

32 National ST&I Policy 2012

Technology Transfer and the Creation of Absorptive Capacity

to become integrated into GPNs to promote the fl ow of knowledge, skills and technology from the higher to the lower end of the industrial spectrum.

6.3 University-Firm Collaboration and Scientific Mobility for Technology Transfer

83. Universities should be encouraged to col-laborate with those industries in which the number of fi rms participating in the GPNs of multinational enterprises is the highest. This collaboration can become a very vital channel of international transfer of technology through these networks. The attraction of highly skilled Diaspora happens to be a crucial source of technology-related skills for institutional de-velopment, businesses and capital infl ow. This mobility should be promoted so that the fl ow of highly skilled Pakistanis abroad is reversed. This mechanism contributed to the develop-ment of computer industry and software in-dustry in Taiwan and India respectively. The highly skilled Pakistanis should be attracted

back to the country and then placed in key public sector research organizations collabo-rating with fi rms which have become a part of the GPNs.

84. The following actions will be taken to im-prove technology transfer mechanism in the country:

Policy Actions:

A44. Provision of funding for increasing ab-sorptive capacity of public and private production sector.

A45. Tax incentives for fi rms that are able to integrate into Global Production Net-works.

A46. Directives for negotiating international trade agreements to ensure technology transfer.

A47. Offering of incentives to achieve reverse brain drain.