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Published: 12:04 AM, 23 February 2020

Spillover of technology and competitiveness

https://dailyasianage.com/news/219846/spillover-of-technology-and-competitiveness

M S Siddiqui

Enterprises continuously working on quality and competitiveness thought Research &

Development (R&D) for new technology. Competitiveness used to be based mostly on static
comparative advantage.

Bangladesh is lacking policy on technology and competitiveness. Most of the enterprises have no
R&D and there lack enthusiasm in acquiring technology through various ways and means from
MNEs. It has no capacity to finance research and skill manpower to attain desired technology.

Our researchers hardly have innovation and the poor number of application for IP protection at
Intellectual Property Rights (IPR) office is the example of state of research in Bangladesh.

The production, marketing and distribution etc has become extremely complex and knowledge-
intensive as investments in intangibles such as R&D, software, design, engineering, training,
marketing and management come to play a greater role in this competitive and globalized
market.

Competitiveness does not just depend on the cost of factors of production, or on a specific
technological advantage. It depends on continuous innovation, high level skills and learning, an
efficient communications and transport infrastructure, and a supportive enabling environment.
This may be a completion of R&D to achieve quality at competitive price through innovation of
technology.

In order to get governments to focus on both macro and micro policies, particularly for SMEs, the
case must be made for supporting SMEs. While it is generally accepted that SMEs are important
contributors to the domestic economy, not many governments have framed policies to enhance
their contribution or increase their competitiveness and technological advancement.

The outcome of technology investments, especially in research and development projects,

establishing technology start-ups, launching new products or adapting new products, is highly
uncertain, with the possible returns to the investment materializing only after lengthy period of
time. The price of technology is very high. Small and Medium Enterprises (SMEs) are unable to
acquire, diffuse and master technology from the market.

The SMEs in developing countries have hardly any option to acquire technology. The foreign
direct investment (FDI) technology spill over is transfer of technology into any country from
overseas companies.

The potential benefits of FDIs are viewed as important, particular emphasis is placed on
technological gains in the productivity and competitiveness of the domestic industry. In many
studies, two determinants have been generally recognized as conditioning gains from FDI.
Multinational Enterprises (MNEs) use to involve themselves with indigenous enterprises in
upstream and/or downstream industries, it is very likely that the indigenous enterprises and local
employees will gain technological benefit from the overseas investors.

The presence of foreign firms can have a demonstration effect that allows local firms to become
familiar with superior technologies, marketing and managerial practices used in foreign affiliates.
By technological spill overs local partner or employees can acquire information created by others
without paying for that information in a market transaction, and the overseas technology owner
have no effective recourse, under prevailing laws, if other firms utilize information so acquired
with a small modification under Reverse technology.

Spill over can take place in the form of imitating the foreign subsidiaries' technology. The primary
technologies acquired by Asian countries such as Japan, Taiwan, Korea, China and other gained
technology through imitation and subsequently through Reverse Engineering.

Spill overs may occur through movement of labor, whereby workers trained by or working in
multinationals may decide to leave and join an existing or open up a new domestic firm, taking
with them some or all of the firm specific knowledge of the multinational.

MNE usually transfer limited technology to local staffs and workers and sometime local suppliers
to gain from low cost production service and efficient services. Again MNEs would have policy to
prevent information leakage to their competitors, including local enterprises, thereby reducing the
possibility of horizontal spill over taking place.

The process of hide and seek is resulted in spill over some technology to local entrepreneurs. As
globalization increases, spill overs become more international and domestic companies can reap
the advantages everywhere.

MNEs usually have some R&D activities in overseas locations in order to get appropriated
technologies for local markets. R&D spill overs refer to the involuntary leakage, as well as, the
voluntary exchange of useful technological information during the exercise in any host countries.

Acquiring of technology also depends upon ability to acquire, diffuse and master technologies as
well as innovate can be achieved in many ways. The state policy support can accelerate the
transfer of technologies in to own market with clustering and inter-firm cooperation or business
linkages.

Clusters have been variously defined as sets of economic actors concentrated along a value
chain or agglomerations of sectorally specialized agents within a geographically delimited space.
Clusters of industries are designated geographic area for similar range of products or related and
complimentary products /services those share common markets, technologies, worker skill
needs.

Clusters may be set up trough market mechanism or organized by government policy decision.
The Government sponsored Savar tannery Industrial area, Jamdanee Pally at Sonargaon and
Knit garments Industrial area at Fatulla, Narangonj are example of cluster of industries.

The development of clusters is accelerated by policy and action of government. The government
measures to set up technical schools, research centers, export promotion support activities,
support to attain desired quality and standard of local and overseas buyers are preconditions for
developing of clusters.

Government may also offer incentive of export, promotion of brands and new products or location
image and promote strategic alliances among public and private actors to stimulate and support
clusters.
The experience from both the developed and the developing world shows that with suitable help
in the form of technological assistance, financial support and a stimulating environment, clusters
can produce goods with a high technological content and become competitive on a global scale.

Bangladesh Small & Cottage Industries Corporation (BSCIC) has been given responsibility of
developing infrastructure facilities for such clusters. There are efforts to set up Plastic, Garments
and Pharmaceutical clusters around Dhaka city. Bangladesh Bank (BB) has lending policy to
promote cluster of SMEs. PP's policy is that 'Area Approach method' shall be applied for SME
sector like agricultural credit.

Territorial industrial production, type of industrial products i.e. areas famous for industrial
production or important due to geographical location will be taken into consideration while
disbursing SME loan.

Financial institutions (FI)have been given instruction to report to BB after adopting cluster
development policy to flourish SME sector. Cluster development policy can be formulated in co-
operation with banks, financial institutions and NGOs.

The objectives of this policy are to strengthen the existing cluster, development of new clusters
for special sector, development & expansion of sustainable and competitive technology, skill
development of entrepreneurs, development of marketing channels, reduce credit risk and
enhance overall product development.

Historically SMEs are not competitive in overseas market for export competitiveness in the SME
sector can be increased by cluster formation, especially in traditional and mature industries. The
competitive advantage of clustered enterprises derives from two main sources.

Firstly from the establishment of linkages to a wider set of technology inputs and actors and spill
over of technology for design, quality control and information related to markets and marketing
etc.

The industry -academia co-operation is very excellent partnership to develop new technology or
improvement of technology and reverse engineering of product from spill over of technology from
MNEs.

The strategically located cluster of industries and Universities or research institutes, often benefit
from the technological advice and help of faculty members as well as from the more practical
administrative support services of the incubator and, in many cases, the interchange with other
scientifically or technically minded entrepreneurs.

Clusters are generally more likely to create the conditions that increase efficiency and
productivity on a long-term basis and therefore to become attractive to FDI.

Inter-enterprise linkages of MNEs and local enterprises can be a remarkable source of

technology for local enterprises. There are many types of linkages: backward, forward, R&D and
horizontal. According to UNIDO (2002), Ireland, Malaysia, Mexico, the Philippines, South Africa
and Singapore upgraded their local productive capacities and enhanced their industrial
performance by integrating into the MNEs supply chain.

Experience shows that it does not happen automatically. It requires a partnership among all
stakeholders: government, MNEs, local SMEs and their support agencies.

MNE- local enterprise linkages build up competitive supply chains can help local SMEs access
new and diversified markets, and broader market information and to acquire and master new
technologies and skills etc. There may be spill over of technology in each situation. In other
cases, vertical linkages local lager enterprises and SMEs spill over technologies for better
efficient outsourcing of products and services.
In some cases horizontal linkages are established through networking activities, out sourcing,
and formal and informal cooperation among local SMEs.

The writer is a legal economist

Email: mssiddiqui2035@gmail.com