Tuesday 2 December 2008

Maximising the speed and breadth of a technology’s spread

The discussion of multinational enterprises in the last post suggests their role in another often analysed phenomenon, the global spread of technology. Often the focus in the literature is on maximising knowledge spillovers from a company to local producers, so that the latter can produce as efficiently as the former. This mechanism is probably important in catch-up of incomes between countries. The underlying motivation is thus usually on increasing economic growth, but there are others. For example, international bodies may want to spread a technology as widely and quickly as possible if it is found to reduce the degree of global warming without lowering economic productivity.

If the spread of a technology is of interest in itself, then two major questions arise: whether the underlying technology is successful as a marketplace proposition, and how to maximise the spread of a technology given its viability. Evidently, if a technology is a commercial disaster, it is not going to get very far. Many papers on technology spread assume that a technology is already commercially viable, or use measures of local viability such as prices in the market. However, the available price data is not always reliable, so the default position is the first. It is reasonable to assume that a technology which has already been successful in one market, particularly an OECD technology leader where most formal R&D innovation occurs, is potentially commercially viable in other countries now or in their futures.

The second question has many aspects: would posting the design of the technology free of charge on the internet be most effective? Most companies could see it, but how would the innovation be encouraged in the first place? Perhaps innovators could be financially supported by their subsequent provision of the tacit knowledge required for the technology’s successful operation. But then, if the tacit knowledge is very large, the technology spread will be slow.

Alternatively the technology could be the property of a single multinational, and it could spread easily and efficiently through its subsidiaries. But then how would it get beyond the company? Other companies would have to innovate to copy the company, or the knowledge would have to leak from it. Both processes could be slow.

The most rapid spread may be from a large intergovernmental or philanthropic funded organisation creating a low-tacit knowledge technology, and presenting the technology free though publicly available or trade-based sources. Such efforts are probably infrequent in high-tech fields, although some parts of Internet and Web innovation may be partial examples. A possible commercial alternative might go something like this: a small high tech company establishes a niche in its domestic market, and licenses to foreign companies. Leakage of its ideas is very likely, as it will lack the financial resources to protect its intellectual property, but given its small size, licensing and export income may be sufficient to support domestic expansion or branding efforts. The business plan is risky, but in common with other start-ups, could lead to commensurate high returns.

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