INTRODUCTION
Preface
In 1848 Marx and Engles wrote "Modern industry has established the world market ... All
old established industries have been destroyed or are daily being destroyed ... In place of
the old local and national seclusion and self-sufficiency, we have universal inter-
dependence of nations. As in material, so also in intellectual production. The intellectual
creations of individual nations become common property." (Kobrin, 1991). This was true
in the middle of the 19th century and it is even truer today. At the dawn of a new
millennium we enter the four dimensional invisible continent described by Kenichi Ohmae.
The dimensions of this world are old economy commerce; a borderless world in which
capital moves around, chasing the best products and the highest investment returns
regardless of national origin; the cyber-world; and the high multiples awarded to new
economy stocks which underpin the pensions of many people (Ohmae, 2000). In this
chaotic New World, it is especially important that the knowledge transfer be as fast and
accurate as possible.
In this chapter, the background to the research issue, technology transfer to
multinational medical device and pharmaceutical companies manufacturing in Ireland is
introduced. The reason that this area was chosen as a subject for study is elucidated. The
specific research questions are outlined. The expected benefits of the research are
presented. And finally an outline of the thesis is presented.
Background to the Research
The author is employed in Ireland by a multinational medical device manufacturer. He is a
knowledge worker with higher degrees in technology. At the beginning of his period of
employment he was sent as part of a team for over 6 months to the firm's American
headquarters. The team members' objective was to assist with the completion of the
development of a new manufacturing process and learn as much about it as necessary to
transfer the technology back to Ireland.
The first objective was achieved very successfully and the talented Irish knowledge
workers made a major contribution to the completion of the development work and its
introduction into operation in the USA. However, when the technology was transferred
to Ireland a short time later, a number of difficulties were encountered with the transfer
process. And while all these difficulties were overcome, the question was asked about
why they occurred and how the process could have been managed better.
Technology Transfer
A detailed account of research on technology transfer is presented in Chapter 2. In
general, Technology Transfer is the transfer of a process, product manufacturing
knowledge, or other technical equipment or know-how from one organisation or
individual to another. The term has different meaning depending on the context. Within
one nation Technology Transfer often refers to the transfer of a new idea or invention
from a University or Government research institution to a private firm for
commercialisation. Technology Transfer may refer an inter-firm licence transfer of
intellectual property such as know-how, patents, trademarks, copyrights, blueprints, trade
secrets, methods, formulas, customer lists, manuals, etc.
This study is concerned with International Technology Transfer, which refers to the
transfer of technology across national boundaries. There are five generic categories
(Simon, 1991): (1) international technology market; (2) intra-firm transfer; (3)
government-directed agreement or exchanges; (4) education, training, conferences; (5)
pirating or reverse engineering. The first two are generally of most interest to business,
although business is also concerned to limit its losses as a result of the last.
Three classes of Technology Transfer can be distinguished. Material-transfer is the
transfer of finished goods, which some do not consider to be technology transfer since
"know-how" is not transferred. Design-transfer involves the transfer of designs,
blueprints, and the know-how to manufacture previously designed products and
equipment. Capacity-transfer is the transfer, not just of the capability to manufacture
existing products, but of the capability to adapt existing products and develop new ones.
How technology is transferred depends on the resources needed. The possible modes
of International Technology Transfer considered by Tsang (1997) in order of increasing
resource need were (a) exporting, (b) licensing, (c) joint ventures, and (d) wholly owned
subsidiaries. This study is primarily concerned with transfer to wholly owned subsidiaries.
There are a number of reasons why companies pursue a globalisation strategy.
International firms can exploit differences in prices and resource availability between
countries. This may mean producing labour intensive goods in countries with cheap
labour rates or where raw materials are abundant and cheap, or producing technologically
advanced products or conducting advanced research in countries with high levels of
education (Kogut, 1985). Firms may want to be multinational to benefit from the transfer
of knowledge between subsidiaries in different countries, to increase the return on R&D
by being in as many markets as possible, to exploit ambiguous national jurisdictions, to
subsidise across markets, to diversify markets so as not to be too dependent on the
fortunes of one market, and to scan for new technologies and market opportunities world
wide. Firms gain operational advantages from being in all major world-wide markets.
There can be significant transnational economies of scale.
The major reasons for locating manufacturing sites have been changing. For many
manufactured goods the labour component of manufacturing costs has been decreasing
(Aharoni, 1991). Reductions in transport costs have lessened the importance of proximity
to markets. The effect of international trade agreements and organisations has lowered
regulatory barriers to the free movement of goods and services.
Ireland is benefiting from these trends. The rising labour rates are not of major
concern to high-technology industries such as computers, electronics and pharmaceutical
industries, although more labour intensive industries such as textiles are closing and
moving to lower cost locations. The shortage of highly skilled labour is a greater problem.
The reduction in transport costs, and indeed to high value to weight ratio of high
technology products, lessens the disadvantage of Ireland's location as the outer island of
an archipelago on the periphery of Europe. Ireland's membership of the European Union
and Euro-zone complement the advantages accruing from its well-educated workforce and
favourable corporate taxation rates.
Multinational Healthcare Industry Companies in Ireland
Many overseas multinational manufacturing companies have been attracted to Ireland.
The firms have been lured with financial incentives such as grants for employing people,
by a favourable tax regime (10% taxation on corporate profits), the availability of an
educated relatively cheap workforce, and a manufacturing location within the EU. Since
the 1970's a number of large multinational pharmaceutical companies established
manufacturing operations in Ireland. Originally, these firms were also attracted by
availability of suitable green-field sites for locating chemical plants and (at the time) more
relaxed environmental laws. Many of these firms continue to expand (e.g. Merck in
Clonmel, Pfizer and Novartis in Ringaskiddy). Typically bulk pharmaceuticals and
pharmaceutical intermediates have been produced from imported raw materials and
intermediates. Bulk pharmaceuticals are often exported for further processing and
tableting. Many of the companies adjust their transfer prices to benefit from Ireland's
favourable corporate tax regime. The pharmaceutical industry has been a success for the
IDA. The cost of construction, permanent nature of chemical plant installation, and cost
and regulatory difficulties with building plants elsewhere, have enticed nearly all bulk
pharmaceutical operations attracted to remain in operation. With so many companies
continuing to expand, the industry should remain large for many years to come.
Many other Healthcare companies including medial device manufacturers have located
in Ireland in recent years. Many of these companies produce medical devices or tablets.
With the ageing of the post-war baby boom generation in America and Europe and
advances in technology, these industries are expanding considerably at present. Ireland is
popular with American companies locating European manufacturing sites. The
advantages of Ireland are the availability of an educated English-speaking workforce, entry
into the Euro zone (compared with UK), an extra hour of business overlap time
(compared to continental Europe), and low corporate tax rates.
Technology Transfer within Healthcare Industries
Regulation of the pharmaceutical and medical device industries by organisations such as
the Food and Drug Administration in the USA is strict. The medical profession is
concerned about patient welfare and malpractice suits, and therefore conservative about
choices of drugs and medical devices. Both factors restrict entry to the marketplace and
lengthen product cycles by comparison with the electronics industry. The length of time
from initial development to market is long, allowing enough time for transfer of
technology from R&D to manufacturing. But patent expiry and advances in technology
do limit product life and compress the traditional 6-stage international product life cycle
somewhat (Aggarwal, 1991, p. 64).
The Research Issue and Objectives
This research will focus on the issue of technology transfer to Irish subsidiaries of medical
device and pharmaceutical companies from their international parent. Every time another
multinational sets up in Ireland it must transfer technology for start-up. As products and
manufacturing processes change more technology must be transferred to implement the
changes. Technology flow back is also possible if the Irish subsidiaries improve the
original methods.
Research Approach
The primary focus of research can either be quantitative or qualitative depending mainly
on how well defined the objectives of the study are. A quantitative study would be used
for causal and predictive studies when the dimensions of the problem are well defined. A
qualitative study would be used for exploratory studies when the dimensions are less well
defined.
There has already been much study of technology transfer between affiliates of
multinational companies. For this reason the methods of conducting technology transfer
and the various approaches taken are well known. The literature review was sufficient to
reveal useful questions to ask. Also it was preferred that questions related to the benefit
of various strategies could be answered with certainty. For these reasons, a primarily
quantitative approach was preferred.
Typical quantitative studies require larger samples than qualitative studies. Questions
are usually pre-set. In quantitative studies questions may be open-ended. In quantitative
studies the researcher is usually not involved. Therefore, a mail survey was chosen for the
research. It is well suited for gathering a lot of data using pre-set questions. The author
chose not to include his own company's experiences in the final study to maintain
uninvolvement.
Research Questions
The objective of this research is to ascertain how successfully multinational pharmaceutical
and medical device companies have managed the process of technology transfer into
Ireland. After reviewing the literature the key issues were determined. The effects of
nationality of parent, size of the subsidiaries, the duration of their establishment in Ireland
and their degree of autonomy, on the smoothness of technology transfer, as measured by
adherence to the schedule and budget is assessed. The benefits or otherwise of
techniques, such as travel by Irish based employees to the head office or other company
sites and travel by other employees to Ireland is assessed. The effect of quality of training
and documentation is measured. The effect of the 'newness' of the technology and the
application of various business improvement initiatives on the success of technology
transfer is assessed. The knowledge gained by those involved in the transfer process that
could help them transfer technology more efficiently in future is also gauged. The extent
of Research and Development by the Irish subsidiaries is measured and compared with
technology transfer capabilities.
Methodology
After reviewing previous published work on the issue of technology transfer, the key
issues that may affect the technology transfer process were identified. It was decided that
the main method of collection of primary sources of data to be used was a postal survey of
managers involved in managing technology transfer to multinational pharmaceutical and
healthcare companies operating in Ireland.
A case study of a transfer process with which the author was familiar was considered
as the methodology. It would have answered a number of questions about why this
particular process was not perfect. However, the sources of knowledge would be limited
to those within the company and as such would fail to benefit from the broader
experiences of other.
A questionnaire was written to ask questions highlighted in the review of the
literature and was fine-tuned by testing on personal acquaintances of the author. The
questionnaire was kept as brief as possible and multiple-choice answers were preferred for
most questions. Two open-ended questions were included to seek new ideas. These
questions were a small part of the survey and are used for supplementary analysis. Once
revised the questionnaire was sent to managers of Irish subsidiaries of multinational
pharmaceutical and medical device manufacturers firms who transferred technology into
Ireland. The returned questionnaires were analysed.
Analysis was conducted using Excel. The first part of the analysis was to edit the
responses and get a feel for the data (Sekaran, 1992). After examination of the data it was
decided that a composite variable called TTE (Technology Transfer Effectiveness) be the
major 'effect' against which the various causal and predictive variables be examined. TTE
is a combination of variables relating to adherence to technology transfer schedule and
budget.
Additional results were obtained from the open-ended questions. These are based on
the recommendations of the participants concerning their technology transfer experience.
Discussion and Strategy Recommendation
The results from the analysis are discussed and compared with previous research
unearthed in the literature survey. Technology transfer to healthcare and pharmaceutical
companies in Ireland is compared with similar studies of other industries in other
countries. The actions that are most and least beneficial are highlighted.
Finally, recommendations on the effectiveness of some processes and methods on
technology transfer processes of multinational pharmaceutical and healthcare companies
operating in Ireland are formulated.
Significance of the Study
The study is significant because the area has not been examined in detail in any published
work. There have been some studies of more general aspects of technology transfer and
of technology transfer in other industries in other countries. Multinational industries are
one the most important parts of the Irish economy providing well-paid employment and
significant balance of payment advantages. The strategic actions by the government have
encouraged this influx and Ireland is now the world leader for exporting software.
The healthcare and pharmaceutical industries are increasingly important as the
American and European post-war baby boom generation ages. The number of firms
setting up or expanding operations continues to grow. With each of these growth phases,
technology transfer is required. This study attempts to improve the knowledge of this
increasingly important subject matter.
This study presents results relating the effects of company characteristics and
technology transfer practices to technology transfer effectiveness. It present an important
new measure TTE (Technology Transfer Effectiveness), a composite of adherence to
schedules and budgets, as a measure of technology transfer performance to compare the
effect of characteristics and practices. Results of the relationship of R&D in Ireland to
technology transfer effectiveness are presented. It was found that the number of
companies conducting R&D in Ireland has increased significantly in recent years.
The results of this study will be promulgated to those respondents who requested it.
This will allow the learning in the work to be applied to the benefit of those transferring
technology into Ireland.
Structure of the Thesis
There are a total of seven chapters and three appendices in this thesis. In
Chapter 2
literature pertaining to the background areas of globalisation strategy and knowledge
diffusion are presented. More specific studies of International Technology Transfer are
then outlined. In Chapter 3 the methodology of the research is
described which include reasons for the choice of methodology and the details about its
execution. In Chapter 4
the research finding are presented. The results of the detailed quantitative analysis and
brief qualitative studies are included. In Chapter 5 the findings
are discussed with respect to 24 hypotheses derived from the literatures. In
Chapter 6 conclusions and
recommendations are derived. In Chapter 7 the bibliography of the
study is presented. In the Appendix the verbatim comments are
presented.