3.2.b-technological change

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TECHNOLOGICAL CHANGE*

by

Nawaz Sharif

1. Understanding Technological Change

Technological change largely shaped today's societies. In the previous chapter wediscussed how technological change has been recognized as a major driving force behind risingstandards of living. It has been the main weapon for development. In this chapter we will see howtechnology itself changes over time. The process of technological change will be discussed first,and then we will look into the rate of change of technologies.

1.1 The Process of Technological Change

Technological growth is the result of new inventions and innovations. Every invention(either hardware or software) is something new (in most of the cases, it is a new combination of already existing technological elements), and an invention becomes an innovation when appliedfor the first time. An innovation which has little disruptive impact on behaviour patterns is called acontinuous innovation (fluoride toothpaste is an example); in such cases alteration of an existingproduct, rather than creation of a new product is involved. There also are dynamically continuousinnovations which do not involve new consumption patterns but involve the creation of a newproduct or the alteration of an existing one (electric toothbrush is an example). In addition, thereare discontinuous innovations which involve the establishment of new behaviour patterns and thecreation of previously unknown products (examples: automobile, television, computer, etc.).

The process of technological change is very much linked to innovation.

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A lot of things areinvented, but it is only through innovation that technology effects social change. And the processthrough which technological change occurs--(i) substitution and (ii) diffusion. Substitution hasbeen an instrument of man's material progress since prehistoric days. Man has substitutedmachines for muscle, agriculture for hunting, automobiles for animal carts, aircraft for surfacevehicles, and preventive inoculations for disease treatment. The substitution phenomenon isbased on the fact that one product or technology is based on the fact that one product or technology which exhibits a relative improvement in performance or cost over the older (established or conventional product or technology) will eventually substitute for the product or technology of lesser performance or higher cost.14 Diffusion refers to the acceptance, over time, of some specific technology (product or know-how) by individuals, groups or organization.12 In thefollowing sections we will discuss these processes in details.

_______________________ *REPRINTED FROM: Nawaz Sharif, The Management of Technology Transfer and

Development (U.N. ESCAP Regional Centre for Technology Transfer: Bangalore,India, 1983), Chapters 4-5, pp. 25-44.

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1.2 Change Through Substitution

The simplest form of technological substitution occurs when a new technology (combinationof hardware and software from one extreme to the other) captures over a period of time asubstantial share of the market from an existing older technology.13 With the passage of time thetotal market changes both in terms of volume and constituents. Since the new technology is

better and economically more viable, after it has gained a small market share it is likely to becomemore competitive as time progresses, and therefore, once a substitution has begun it ishighly probable that it will eventually takeover the available market. This is a simple one-to-onetechnological substitution process, very good example of a simple one-to-one substitution is theintroduction of colour television in place of black and white television.

In many cases of rapid technological change, however, before the older technology issubstituted by the latter, a still newer technology enters the market and creates a situation of multilevel technological substitution.13 In this case, the oldest technology will lose its market shareto the two newer technologies, as they are superior. On the other hand, the newest technology willgain market share from both of its predecessors. The intermediate technology will, however,continue to gain market share from the oldest one and at he same time will be losing some of its

own market to the newest one. "Vacuum tube-transistor-integrated circuit" in the electronicsindustry and "wood-metal-plastic" for furniture are examples of multilevel substitution.

In general there can be series of innovations in rapid succession, giving rise to a largenumber of competitive technologies in the market, and resulting in a complex but orderly multilevelsubstitution phenomenon. This complex multilevel situation can, however, be successively reducedto a series of sample one-to-one substitution cases.

Some examples of technological substitution models will be given later. The substitutiontheory is valid for continuous type innovations. However, for discontinuous innovationstechnological growth occurs through diffusion.

1.3 Change Through Diffusion

Many ways have been used to measure the diffusion of an innovation at any particular time.Perhaps the commonest as well as the simplest situation arises when individuals are the adoptionunits and the innovation concerned is a consumer type. In this case, at any given time the number of individuals who have adopted the innovation gives a good measure of the diffusion process withtime. However, in the case of a process innovation, taking the number of companies that haveadopted the innovation as a measure of diffusion may not be very useful for two reasons. 3 Firstly,all the companies may not be of the same size and capacity. Secondly, there may be companieswhich might adopt a new process innovation but still use the old method to account for some of itsproduction. A further difficulty is that as diffusion progresses the innovation itself can undergo

major and major changes leading to an improvement in performance. (i.e., a continuousinnovation giving rise to the substitution process described earlier). Therefore, selecting asurrogate measure to study the temporal pattern of innovation diffusion requires carefulconsideration, in view of the multiplicity of the kinds of innovations and of adoption units.

Two important considerations in understanding the diffusion process are-(i) Neighbourhoodand Hierarchical Effects, and (ii) Information, Communication and Interaction.12 TheNeighbourhood effect states that, other things being equal, the closer a potential adoption

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unit to the source of innovation, or to another unit that had already adopted the innovation, thegreater the probability that it will adopt the innovation before potential adopters further away. On the other hand, the hierarchical effect says that if one defines a base for a hierarchy, beit size, social status or any other criterion, the higher the ranking of a potential adoption unit in thathierarchy, the greater the chance of adoption before units that are lower in the hierarchy. This infact implies that simple geographical distance need not always be the most dominant factor in a

diffusion process. For example, big cities of the world, linked with strong information flow, areactually closer to one another than they are in simple geographical space.

There is common agreement in the literature on innovation diffusion that information spreadprecedes, or coincides, with adoption. Interpersonal influence and mass media are both major causes of diffusion when individuals are the adoption units.15 However, when the adoption unitis an organization it is also important to look into other socio-economic factors. Some of thesefactors are discussed later in this chapter.

1.4 Factors Influencing Substitution and Diffusion

Researchers have investigated a broad spectrum of factors that can have an impact on theprocesses of substitution and diffusion.18 These factors can be conveniently classified into: (i)factors affecting the demand for a technology; and (ii) factors affecting the supply of atechnology. These are listed below:

1. DEMAND SIDE FACTORS

(a) Social, psychological, economic and locational characteristics of the potentialadopters;

(b) Size of the investment required to adopt the innovation;

(c) Profitability of the investment in an innovation;

(d) Compatibility of the innovation with other con-current technologies;

(e) Visibility or salience of the relative advantage of the innovation over its

predecessors;

(f) Complexity and efficiency of the innovation;

(g) Quality characteristics of the innovation;

(h) Utility-adjusted price ratio between the innovation and its competitors;

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(i) Age, condition and the rate of obsolescence of the existing capital equipment that

the innovation is seeking to displace;

(j) State of overall growth of the economy;

(k) The decision making environment and related organizational and political factors;

and

(l) The number who have already adopted the innovation, and the number whohave not yet adopted it.

2. SUPPLY SIDE FACTORS

(a) Diffusion agency actions pertaining to pricing and infrastructure;

(b) Actions of private and public entities such as infrastructure development andgovernmental regulation/promotion of the innovation;

(c) Diffusion agency actions pertaining to market selection, segmentation and

promotional communication; and

(d) Actions of other private and public entities pertaining to market selection,

segmentation and promotional communications.

The factors listed above are not exhaustive. They are identified on the basis of availablestudies, and not all of these factors may be relevant in every situation.

1.5 Technological Change Patterns

Over the years, we have noticed an accelerated growth in technology. 10 Alvin Toffler, theauthor of "Futureshock", has put the historical facts in a simple way.19 He has observed, for

example, that if the past 50,000 years of man's existence were divided into lifetimes of approximately 62 years each, there have been about 800 such lifetimes. Of these 800, fully 650were spent in caves. Only during the past 70 lifetimes has it been possible to communicateeffectively from one lifetime to another - as writing made it possible to do. Only during the past sixlifetimes have masses of our men ever seen a printed word. Only during the past four has it beenpossible to measure time with any precision. Only in the past two has become anywhere used anelectric motor. And the over-whelming majority of all the material goods we use in daily life todayhave been developed within the present, the 800th, lifetime.

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The same accelerative tendency is instantly apparent if we observe the sequence intravelling speed achieved by human beings. In 6000 B. C. a camel could move people at amaximum speed of 8 miles per hour (mph). The first animal driven cart, chariot in 3000 B.C.,increased our speed to 20 mph. With the introduction of steam locomotive in 1880 A.D. thetravelling speed became 40 mph. Since then the rate of increase itself is increased. Aircraft, in

1960, could move people at a speed of 500 mph. Supersonic planes have made it possible in1980 for people to travel at 1,500 mph speed. Today, the space-capsules travel at the enormousspeed of 25,000 mph.17

There are thousands of other examples which illustrate that technology is growingexponentially. One can cite various reasons for this.7 Some of these are: (i) inventions breedinventions; (ii) inventions of all the world are more and more pooled together as the barriers tocommunication are progressively reduced; (iii) the elements being combined are also becomingmore and more powerful; and (iv) methods of problem solving are being improved more andmore swiftly.

During the last one hundred years we have also witnessed acceleration in all the three

aspects of technological change that we have discussed previously--(i) the rate of invention; (ii)the time between invention and first application; and (iii) substitution of old technology anddiffusion of new innovations. Table 1-1 gives some evidence to indicate that there is a decreasingtrend in the speed of introducing technological developments into social use. The time of substitution has also decreased over the years. This stepped-up pace of invention, innovation andsubstitution/ diffusion, in turn, accelerates the whole process of technological change even more.6

For new machines and techniques are not merely products, but sources of fresh creative ideas.Each new hardware and software, in a sense, changes all existing technologies by permitting usto put them together into new combinations. The number of possible combinations risesexponentially. Thus, the basic patterns of technological change follows an exponential growth.Table 1-2 provides a "felling" regarding the dynamics of an exponential growth process. Witheven a very small increase in the annual rate of growth an exponential growth process reaches an

enormous size in a very much reduced time interval!

1.6 The S-Curve

We have mentioned earlier that the growth of a technology measured in terms of thecumulative pattern of adopters or the cumulative proportion of activity accounted for (whether it bea substitution or diffusion), usually conforms to an exponential curve. However, the exponentialgrowth pattern may be of three distinctive types - (i) simple exponential; (ii) modified exponential;and (iii) S-curve. Figure 1-1 gives a schematic presentation of all the three patterns. The historyof technology amply documents that when a given innovation is first established as discipline,scientific breakthroughs are frequent. But as the discipline matures, fewer breakthroughs occur

because the number of possibilities decline steadily. Hence, the simple exponential pattern withpossible infinite growth is not applicable after the technology matures. The modified exponentialpatterns with a finite upper limit is a more reasonable representation of matured technologies.However, this curve fails to match with the growth pattern in the early stage.

Usually the growth of any particular technology conforms to an S-shaped curve (called S-curve) which is a combination of simple (increasing increasingly) and modified (increasingdecreasingly) exponential curves.11 Various researchers have given many reasons for justifying theempirical regularity of the S-curve of technological growth.2 One explanation is that in the adoption

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of innovation there will always be some early innovators who adopt first. Once they set theexample they are quickly followed by a group called the early majority, who are in turn followed bythe later majority. Last to adopt are the laggards at the tail-end when nearly everyone else hasadopted the innovation. It can be seen that interaction of these postulates causes the S-curve'sslow increase; then rapid increase and then slow again; until saturation.

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Many economic reasons are also given for the S-curve patterns. Some of these are:

(a) Initially only very few firms will be willing to be the earliest to try out new techniqueswhich may in general considerable uncertainty and risk;

(b) If a few pioneer firms overcome the teething troubles of a new technique, they

substantially reduce the risk in the eyes of those who have yet to adopt it;

(c) Good reports of a new technique form those already using it may carry considerableweight to other potential adopters than reports in the press of publicity by thesupplier;

(d) Modifications to the new technique in the early stages of commercial application maysubstantially increase the potential range of its use, as well as its superiority over existing technologies.

(e) Firms whose existing capital equipment is old relative the average age of capitalequipment in the industry will be prompt to accept new processes; while other firms

with relatively new capital equipment will be slow in their innovative response;

(f) Some potential adopters may anticipate improvements in the cost/performancecharacteristics of the innovation and may postpone adoption;

(g) However, after some time, due to supply bottlenecks the innovation may not be thateasily available, and this can slow down the adoption rate;

(h) It may transpire that there are areas of production in which the new technique is after allnot very suitable; probably the most promising areas have already been exploited first;and

(i) The very success of the innovation in its early stages may stimulate some firms toimprove their existing methods of production for fear of competition.

This empirical regularity has thus been widely used to describe the trend in any particular technology.21 Although a particular technology may exhibit the S-curve growth pattern (whicheventually reaches a limiting condition), other related technologies are developed to achievefurther growth (also S-shaped) beyond the limit of the previous S-curve. This is shownschematically in Figure 1-2. In this figure, let us consider the speed of passenger air-travel, wheretechnology "A" is propeller aircraft, technology "B" is truboprop aircraft, and technology "C" is the

jet aircraft. Similarly, if we consider the intensity of electric lights (in lumens/watt) then "A" isincandescent lamp, "B" is fluorescent lamp, and "C" is the mercury-vapour lamp. In both

cases, each individual technology improves over time following the S-curve pattern. Theoverall growth of various technologies (representing a system of higher order, characterizedby a succession of discontinuous innovations) can be observed by drawing the "envelope" curve.1

Figures 1-3 and 1-4 are two examples of envelope-curve growth of two sets of technologies.The envelope curves also show an exponential growth trend. One would expect envelope curvesto take the form of a "Big-S" riding on the small S-curves for the individual technologies.9 Thecurrent technological level of the world is perhaps the initial phase of the Big-S curves! We

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hope to find sound technological solutions to the problems of the present world before weapproach the upper limit of the Big-S curves.

1.7 References

(1) Ayres, R. U.; "Envelope Curve Forecasting", in Technological Forecasting for Industry

and Government (Bright, J. R., Ed.), New Jersey: Prentice-Hall, 1968.

(2) Brown, L. A. and Cox, K.R., "Empirical Regularities in the Diffusion of Innovation",Annals of American Geography, Vol. - 61, 1971.

(3) Davies, S.; The Diffusion of Process Innovations, Cambridge University Press,Cambridge, 1979.

(4) Davis, W. J.; The Seventh Year: Industrial Civilization in Transition, New York: Norton,1979.

(5) Dobrov, G.: "A Strategy for Organized Technology", Technological Forecasting andSocial Change, Vol. - 19, 1979.

(6) Gray, E. et al; Growth and its Implications for the Future, Connectucut: Dinosaur,1975.

(7) Hornsby, J.; The Story of Inventions, Weidenfeld and Nicolson, 1977.

(8) Mansfield, E.; Technological Change, New York: Norton, 1971.

(9) Meadows, D H. et al; The Limits to Growth, New York Universe Books, 1972.

(10) Mishan, E. J.; Technology and Growth, New York: Praegar, 1969.

(11) Robinson, J. M.; "Technological Learning, Technological Substitution, and Technological

Change", Technological Forecasting and Social Change, Vol - 18, 1980.

(12) Rogers, E. M.; Diffusion of Innovations, New York: Free Press, 1962.

(13) Sharif, M. N. and Kabir, C.; "Basic Substitution Models", in TechnologicalSubstitution (Linstone and Sahal, Eds.), New York: Elsevier, 1976.

(14) Sharif, M. N.; "Technological Substitution Models", in Renewable Resources: ASystemic Approach (Campos Lopez, Ed.), New York: Academic Press, 1980.

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(15) Sharif, M. N. and Ramanathan, K.; "Binomial Innovation Diffusion Models with DynamicPotential Adopter Population", Technological Forecasting and Social Change, Vol.-20, 1981.

(16) Sharif, M. N. and Ramanathan, K.; "Polynomial Innovation Diffusion Models",Technological Forecasting and Social Change, Vol - 22, 1982.

(17) Shellard, P.; History at Source: Man and Machines, London: Evan Brothers, 1972.

(18) Starr, D. C. and Rudman, R.; "Parameters of Technological Growth", Professional

Engineer, March, 1973.

(19) Toffler, A.; Future Shock, New York: Random House Press, 1970.

(20) Van Duijin, J. "Fluctuations in Innovation Over Time", Futures, Vol - 13, 1981.

(21) Van Wyk, R. J.; "Technological Change: A Macro Perspective", TechnologicalForecasting and Social Change, Vol- 15, 1979.

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2. Technology is a Product

From the discussions so far, we have seen that technology has played the basic role of aninstrument for transforming the primitive and natural world into a technological and man-made

world. The primitive world is the so-called "not developed" world. We have observed the directrelationship between technology and development- at individual, social and national levels. Inaddition, we have noted that in the past technology has been growing at an exponential rate. Theenormous growth in technology has very significant implications for the future mankind. We haveseen that technology has--(i) enabled us to dominate nature; (ii) acted as a motor for materialprogress; and (iii) provided us with opportunities that did not exist before. However, technologyhas also--(i) caused alienation from nature; (ii) helped in the creation of destructive armamentsand (iii) generated many problems which did not exist before.

In this chapter we will take an in-depth look into--"What is technology?" It is proposed thatwe consider technology as a product. The discussions will lead us to see that technology is aman-made, knowledge-based, research and development factory-produced, marketable product.

It is a product in the economic sense. It has product life-cycle characteristics. And its price isdetermined by the law of supply and demand.

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2.1 Technology is Man-Made and Knowledge-Based

It is self-evident that technology is man-made. It has come into existence due to the humandesire to make life easier and to improve living conditions. As a matter of fact, man becamehuman when he began to use his brain to create options beyond those originally provided bynature.14 In his earliest days man's technology grew through luck, inspiration, and "trial and

error". In most cases probably he did not understand why his useful innovations worked; he onlyknew that they worked. It is only in the last few centuries that he has developed a systematicapproach to learning.8

Memory and ability to learn are the two most important functions of human brain. Memoryunderlies the highest functions of the brain, from multiplying two numbers to developing a sense of self. It lifts humans out of an eternity of unconnected moments to create a sense of continuity andunity, of connection with their past. The learning activities, on the other hand, add knowledge tohuman brain. Knowledge is the fact of condition of knowing something with familiarity gainedthrough experience or association. It is the sum total of what is known--the body of truth,information and principles acquired by mankind.

Technology is the application of knowledge to the solution of practical problems. Manypeople tend to think of technology as being embodied in the machines, tools, devices andimplements (the hardware). But no hardware can function itself. Human involvement is inherentin the productive capacity of any conceivable hardware. Technology is all the processes, methods,techniques, know-hows (the software), and also the hardware that have helped society survive andimprove its life. Technology is what people do with what they know. And technology isknowledge-based.

One of the big differences between developed and developing countries lies in the state of their knowledge base--advanced industrialized societies tend to be knowledge-intensive societies,while one of the characteristics of less developed societies is, by contrast, knowledge poverty.

The situation is identical with respect to technology, because technology is knowledge-based.

2.2 Knowledge, Science and Technology

Science is the pursuit of knowledge while technology is the application of knowledge.9 Thescientist may pursue knowledge for its own sake, but the technologist is utility-oriented.

The relationship between science and technology is by and large a recent phenomenon.2

Technology is not necessarily the application of science. In fact, the technology up to the middleof the nineteenth century grew up relatively independently of science. The technologies of thosedays (such as typewriter, sewing machine, cotton picker, building materials, machine tools, etc.)

were products of mechanical ingenuity, rather than application of science per se. In thosedays, people already knew the "how" before they learned the "why". With the growth of thechemical, communications, power and aeronautic industries in early twentieth century, one canobserve a greater interaction between science and technology. Increasingly, however, sciencehas overtaken technology.

A very important element in the growth of modern technology is the adoption of instrumentsinitially developed for scientific advance itself. Theories paved the way for better practice. In turn,

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technology provided the devices scientists needed in their pursuit of knowledge. Thus there ismultiplicity of relationships between science and technology.

While scientist are inventors, technologists reduce an invention to some practical form. Inearly days technology tended to run ahead of science. Scientific theory paves the way for practicetoday. Creation of new science is a necessary, though not sufficient, condition for the creation of

new technology. Science provides the environment in which technological ideas can be exploited.

2.3 Technology is Produced in R & D Factory

Today most of the new technologies are produced in research and development (R & D)organizations of the private sector in developed countries. The intentions of private organizationsare basically economic.4 The economic essence of technology is not its physical or chemicalconfiguration but its marketability. Thus, technology is a product produced in the R & D factories.

The input resources to the R & D factory are--(i) the traditional inputs to a factory, suchas: money, materials, facilities, energy and manpower; and (ii) the brain-based inputs, such as:

knowledge, science, technology, information and skills. The basic driving force for allocation of resources comes from the urge to satisfy various goals--(i) satisfaction of human needs; (ii)increasing productivity of human activities; (iii) gaining markets through competitive edge;(iv) reducing uncertainty by improving self-reliance; and (v) securing future growth by achievingtechnological independence.

New technologies are being developed continuously to substitute for older methods of satisfying human needs. Technologies embodied in new consumer products give higher profitsto organizations with R & D factories. New technologies which increase agricultural, industrial andeducational productivity lead eventually to economic and social prosperity. The world's populationhas gown tremendously causing an increasing demand on the resources of a finite earth.Therefore, new technologies which help substitution, recycling and conservation of scarce and

non-renewable resources lead to both self-reliance and independence. However, from theeconomic point of view, the most important objective of R & D investments is "to gain a competitiveedge".12

Throughout the world, we observe a highly competitive situation.4 A firm exists incompetition with other firms in its industry. A whole industry is in competition with other industries that offer alternative ways of satisfying some needs. A country exists in competitionwith other countries for its export market. In all of these situations technology is the key factor ingetting a competitive edge.6

Whatever technology comes out of the R & D factory is an output only when it is used, andany output modifies the surroundings (economical, socio-cultural, politico-legal, environmental

as well as technological). The effect of new technology on the surroundings act as a guidingforce for further allocation of resources to the R & D factories. Although the economic purpose of R & D resource allocation is obvious, the effects on the surroundings pose some seriousconstraints.13

In a technological society, everything becomes a component of the expanding social system.As the overall functions of a society become more complex, each individual function becomesmore refined, more limited and more dependent on every other function in the system for its

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survival.11 Hence, the management criteria for R & D organizations should be two-fold--(i)maximize the positive effects by producing technologies that satisfy goals; and at the sametime (ii) minimize the negative effects by not producing those technologies that causesdeterioration of the surroundings.

2.4 Technology Life Cycle

We have defined earlier that any technology is a combination of hardware and software invarious proportions. For our discussions here, let us call technologies with relatively higher hardware component as "hardware technologies" and those with relatively higher software as"software technologies". In simple words, hardware technologies are embodied in physicalproducts and software technologies are in the form of know-how. Hardware technology, beingphysical-based, exhibits life cycle characteristics similar to the well-known "product life cycles". 7

The stages and dynamics of the hardware technology life cycle are described in Figure 2-1 andTable 2-1. For the software technology the life cycle follows the pattern of "S" and "big-S"curves, as explained in the previous chapter. Software technology, being mind-based, exhibits

growth only.

As we can see from Figure 2-1, each technology passes through an incubation phase wheremany ideas are reduced to one successful idea for introduction into the market. In theintroduction phase the number of application of the new technology increase very slowly inthe beginning. Later, when it starts increasing rapidly, the technology is in its growth phase. After some time, its growth is reduced and some stability can be observed in the maturity phase.Finally, an improved substitute makes the technology obsolete in the decline phase.

The various changes that are normally associated with any technology as it passes throughthe introduction, growth and maturity phases are described in Table 2-1. In this table we haveconsidered the technology change process with respect to: socio-political, management,

economic, production as well as innovation aspects. It must be noted that investment ontechnology development does not refer to R & D alone. Although R & D is the most importantfactor, in terms of cost, it is only a small part of the total technology development process. Thecomplete commercial launching of any technology involves--(i) R & D investment; (ii) Marketresearch; (iii) Design work; (iv) Planning and installation of production plant; (v) Trialproduction; (vi) Testing and improvement; and (vii) Preparing the market to accept it (i.e.,promotion).

For a developing country, evolving industry or a new way of human need satisfaction, thecomplex of technologies seem to pass through three stages.7 During the first stage of technological

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development, the economic and political institutions are generally more flexible. In this earlyphase, knowledge is used to create new technologies for the new environment. In the secondstage, technology begins to multiply--itself as well as benefits and costs. Finally, the societyreaches the third stage, where its institutional complex is so enlarged that it takes more technologyto maintain it than the system can afford. At this point the system begins to disintegrate. And anew set of technologies is sought to fix the current technological mess. Thus the technology life-

cycle goes on.

2.5 Technology and International Trade

It is common knowledge that; in general, the export from developing to developed countriesis predominantly "non-technology intensive", whereas the export from developed todeveloping countries is mostly "technology intensive".4 This is generally true as long as weconsider the developing countries as a group versus developed countries as a group. Withinthese groups, however, the pattern of trade is somewhat mixed. But it is obvious that technologyplays an important role in international trade. As we have discussed earlier, technology

provides the competitive edge in international trade.15 We have also looked into "where" and"how" technology is produced. Therefore, international trade in technology means export of technology from its country of origin to other countries.

Let us first look at the trade situation with respect to those technologies which are morehardware intensive.16 Figure 2-2 gives the relationship of the technology life cycle to internationaltrade. Introduction of a new technology gives the country of its origin an absolute advantage over other countries for a time, but in relatively short time other countries which are not far behind inthat particular technological area start imitating and succeed in producing the technology as well.Therefore, in the introduction phase of the technology life cycle the country of origin producesmore than its own needs and earns good profit from exports. Somewhere in the growth phase,other developed countries start producing the same technology to meet their own demand. At this

time the country of origin starts exporting to less developed countries. But eventually after thetechnology has reached the maturity phase (when some other new technology produced bydeveloped country starts substituting this technology), the developing countries start to producethe technology marginally economically, and the trade situation is reversed (often with little profit).5

Next let us consider the trade situation with respect to those technologies which are moresoftware intensive. As most technologies are developed in the R & D factories of the privatesector of the developed countries, they sell their know-how to developing countries. 3 The sale of technology here means either the direct sale for a lump sum of the sale of a license for royalty.

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2.6 What, Why and How

In this chapter we have defined what is technology. Technology is a combination of hardware and software; it is man-made; it is produced in the R & D factories; it is a marketablecommodity; it is not free, but an economic goods sold to those who can pay for it; it has life-cyclecharacteristics, and its market value changes with the stages of life-cycle. However, quite unlike

other commodities, technology is not depleted nor its supply diminished when sold or used.

In the previous chapters we have explained that technology is a tool for nationaldevelopment. Therefore, it is obvious that developing countries would like to have technology.The important question now is: How? Part two of this book will explore this question of "how" onthe basis of the foundation provided in this part.

2.7 References

(1) Boston, J. R.; "Who Gets the Technology?", Asian Business and Industry, November,1976.

(2) Danzin, A.; Science and the Second Renaissance of Europe, London: PergamonPress, 1979.

(3) Ford, D. and Ryan, C.; "Taking Technology to Market", Harvard Business Review,

March, 1981.

(4) Hill, C. T. and Utterback, J. M. (eds.); Technological Innovation for a Dynamic Economy,

New York: Pergamon, 1979.

(5) Kolde, E. J.; "International Technology Market and Developing Countries", EKI, Vol -

25, No - 1977.

(6) Kotler, p.; Marketing Management, New Jersey: Prentice-Hall, 1980.

(7) Malecki, E. L.; "Product cycles, Innovation Cycles, and Regional Economic Change",Technological Forecasting and Social Change, Vol - 19, 1980.

(8) Marchetti, C.; "Society as a Learning System: Discovery, Invention and InnovationCycles Revisited", Technological Forecasting and Social Change, Vol- 18, 1980.

(9) OECD, Science and Technology in the New Socio-Economic Context, Paris, 1979.

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(10) Reddy, A. K. N.; Technology, Development and the Environment, UNEP, Nairobi,1979.

(11) Rickman, H. P.; Living with Technology, London: Hodder and Stoughton, 1967.

(12) Scherer, F. M.; Industrial Market Structure and Economic Performance, Chicago:Rand McNally, 1970.

(13) Schon, D. A.; Technology and Change, New York: Delta Publishers, 1970.

(14) Susskind, C.; Understanding Technology, London: John Hopkins Press, 1973.

(15) Vernon, R.; The Technology Factor in International Trade, New York: Columbia

University Press, 1970.

(16) Wella, L. T. (ed.); The Product Life Cycle and International Trade, Boston:Harvard Press, 1972.

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3.2.b-technological change

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