[IEEE Engineering Management Society Conference on Managing Projects in a Borderless World - New Delhi, India (17-18 Dec. 1993)] Proceedings of Engineering Management Society Conference on Managing Projects in a Borderless World - Managing innovation projects in the global system

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    Sag& Process Analysts, 303, Elite House 36, Community Centre, Zaauudpur

    New Delhi 110048 (India) .

    Absrrucr The scheme of global integration currently coming into place reduces tariff barriers while building other forms of resaictians. It is also not an equal one, with different coun- tries integrating themselves at different levels. To improve these terms, the third world countries will have to develop innovatian management. For a number of third world coun- tries, this would consist of locating windows of opportunities and concentfating their resources in a narrow domain. It is argued tbat flexible production systems and procesk descaling provides such windows of opportunity today.

    Globalisation and global integration in a borderless world are being discussed about today with slightly mystical overtones tovexlooking the rather ugly reality beneath. The Globaliition that people are talking about is not the free flow of people or ideas but of free flow of commodities and capital. For people, the borders are real and the immigration laws are getting in- creasingly tougher. Ideas ofcourse come under Intellectual Property Rights and there is a restriction on the free flow of knowledge and information under this garb. And there are other restrictions in tenns of technology flows in the shape of COCOM, Nuclear Non Roliferation Treaty 0 etc., which are certainIy quite different from the pretty picture of a borderless world.

    While the GAIT negotiating Draft - the famous Dunkel Draft - argues for a relaxation of trade and tariff barriers, it is im- portant to note that non-tariff baniers are actually growing in todays world. The non-tariff barriers directed, specifically against third world countries, are of various kinds. At the sim- plest level they consist of Standards like IS0 90o0 which the EEC insists the Third World possess in order to enter the EEC market. Then we have the US, which under the Intellectual property Rights Regime, seeks to force other countries to con- form to its domestic patent laws, without which US will im- pose restrictions under 301 and Super 301. We have further restrictions of other kinds l i i COCOM, Nuclear Non-prolif- eration Treaty (NPT), Missile Technology Control Regime (Fa) etc., all of which seek to create effective barriers against certain countries. Then there are anti-dumping provi- sions which can be invoked if the Third World goods are found cheap. And finally, all else failing there is ofcourse of the con- science of the West which can be roused in the name of Hu- man Rights, Environment etc., to create further physical bar- r i a particularly if third world goods are found competitive.

    It is not being suggested that the alternative to global integra- tion is a retreat into a neo-autarchic regime of trade and tariff controls. It is only king pointed out that the global world is by no means a buderless or an equal one. Each country is integrating itself in the global order at different levels. In this integration, control of technology is the key to det-g the level at which countries integrate themselves. At the low- est rung, are the countries who are bartering their natural re- sources for the manufamd countries. At the middle level are countries U e South Korea Taiwan, China etc., which are able to win some space for themselves and are able to sell manutkturedgoods; at the top oftheheap are a d v d c o u n - tries who not only sell knowledge intensive goods but also knowledge itself as a commodity. It is in this context that we have to look at the development of technology and therefore knowledge intensive industries, if the terms of integration are to be improved.

    Technical innovation is the key to the development of knowl- edge intensive industries [I]. The global system which is now coming into place will see increasing restrictions on global flows of knowledge for the development of technology. There- fore, if the third world has to develop technologically,it is im- perative that it is also able to innovate in order to improve its position in the global schema. However, the innovation man- agement for the advanced countries and the third world may not be an identical phenomena. In fact, it will be argued here that innovation management in the Third World consists of locating windows of oppomnity and the ability to concen- trate its resources m a namw domain to achieve certain break- throughs. Only then will it be in a position to bargab on bet- ter tenns on the trade of technological knowledge.

    Self Reliance in a World

    Self Reliance has been theslogan of a number of newly inde- pendent countries. Generally, it has consisted of creation of highly protective trade barriers within which techoological base was sought to be create& The key was indigemisation - the indigenous content of products was to be in- till the product was wholly indigenised. In a certain sense it was au- tarchic. It was felt that the entire economy needed to be pro- tected while self reliance was also expected to be achieved across the board. This resulted in growth of rather inefficient monopolies which were quite comfortable with the system of protection f2.31 and had little desire for developing techaol-


  • ogy. Apart from the creation of monopolies, the scheme also assumed that technology changes were not rapid, and there- fore indigenisation really meant self reliance.

    Technologies of the '50s and '60s were relatively different compared to today's technologies. They were relatively ma- ture i.e. had been developed some time back and were not subject to rapid changes. Thus a scheme of indigenisation of such a technology is different from a technological scenario where continuous change is the order of the day. Where change is not so rapid, indigenisation means the ability to increase progressively the indigenous content and over a period of time to bring it to a very high level. The prevailing technological paradigm in such a scheme is import substitution - once a technology is borrowed, it only needs to have its inputs from the country in order for self reliance to be achieved.

    While '50s and early '60s were to see generally stable tech- nology regimes and extension of production as the major thrust, this was to radically change in the succeeding decades. The development of micro-electronics and cheap computing power was to introduce a new dynamism in almost all pro- duction technologies and the capital goods sector [4]. Apart from the relative speed of change of technologies in the '70s and '80s. there was another major development that was tak- ing place globally in the system of production. The post 60's period was to see an increasing degree of complexity of the system of production. The ability to incorporate 'intelligence' in the products was also to see the development of a whole range of new industrial and consumer products. Earlier, it was relatively simple to estimate a country's development - it was strongly correlated to the amount of steel and energy being used by a given economy. However, with the growth of the information sector in advanced countries which today is of the order of 25 %I, such co-relations do not work anymore. Further, a study of a cross-section of industrial and consumer products will show that the complexity of today's products are far more than a similar range of products of the earlier period. Apart Erom the dynamic nature of technology today, it is also the complexity of both the products and the produc- tion systems that has a vital bearing on the policies for engen- dering self reliance.

    The earlier attempts for self r e l i c e was, as already stated, characterised by a highly regulated system consisting of im- port controls and production controls. These controls were physical and required the administrative machinery to be fully knowledgeable both about the nature of the regulations and the entire range of production systems. Obviously, the speed with which technology was changing and the complexity of the system were responsible for the crisis of this system. With increasing complexity of the production system, maintaining physical controls become increasingly difficult. It is easy to show that if the number of products to be controlled increases



    physically, the regime of controls will be faced with an expo- nential increase of work. Physical controls would then s*- ply slow down the processing of information and the flow of goods, finally clogging the system.

    If indigenisation was not leading to self- reliance, what then can be a new definition of self-reliance? In a system of pro- duction which is dynamic and part of a an increasingly global order, the key to self reliance consists of the ability to de- velop new technologies and knowledge [5 ] . This can no longer be across the board but must be of an order that it can be used to to trade with other such possessors on more equal terms. The key to self reliance today is the ability to develop future technologies rather than producing second rate goods with borrowed knowledge in aprotected home market. We are not discussing the policy implications of this approach here. Suf- fice it to say that the issue of selective protection and planned development is still central to this appmach rather than a laissez faire approach to trade and capital liberalisation.

    R . 1 R - lations

    Globally, the development of information technologies has led to the increasing importance of knowledge-intensive in- dustries. We are using the term 'knowledge-intensive' rather than 'science-based since the latter denotes a m m determin- istic scheme than that existing in practice. Hitherto, R&D- intensive industries were largely chemicals, pharmaceuticals, aerospace and materials. With micro-electronics and infor- mation technologies, a much larger domain of R&D-inten- sive or knowledge-intensive industries have been established. The chemical and pharmaceutical sectors are R&D intensive but not necessarily knowledge-intensive in the same way as information technologies are. Once a product is found to have certain properties, duplicating it is not difficult. The impor- tance of patent protection for this sector stems &om this speci- ficity of the industry.

    Micro-electronics has generally been identified as the first knowledge-based industry. Bbtechnology is the next. In the OS, and now in the '9Os, biotechnology is poised to enter into a variety of sectors including agriculture and animal hus- bandry 161.

    The micro-electronics revolution brought to the fore that knowledge as a commodity could be the mjor cost of a prod- uct. Apart from labour and capital, the two traditional factors of plioduction, knowledge or human capital was increasingly becoming important in the production process [71.

    While information technology and biotechnology have been identified as the major knowledge intensive industries today,

  • however, these are not the only R&D-intensive industries. In fact, traditional engineering industries are also becoming in- creasingly R&D intensive. For instance, the Airbus Industries consortium in Europe was formed specifically to meet the soaring R&D costs which no single company was able to meet individually. Knowledge intensive industries differ from such industries in only one aspect: the cost of knowledge as an mnwgible is a large part of the cost of the commodity itself. The clearest example of this is software, where the cost of the tangibles, namely software media and manuals, are very small compared to the total Cost of the software as such. However the distinction between knowledge intensive industries and other R8tD intensive industries would require a mote detailed analysis tban is possible here and may, indeed, not be as sharp as made out above.

    The development of manufacturing industries in commies like Egypt, India, ASEAN countries, China, Korea, Tawan etc. have created a condition where the West can no longer look for a permanent monopoly in all manufactured goods. Whiie they continue to fight vigorously to open up other economies while closing theirs, there is littl~ doubt that this cannot be done indefinitely. The West is therefore looking to retain its economic dominance by concenmting on the more knowl- edge-intensive industries. Today the structuring of interna- tional technological relations means that technologies for a variety of manufactured goods are available for transfer to third world countries while knowledge-intensive industries are coming under various restrictions.

    George Keyworth, then Resident Reagans scieace advisor described US leadership in science to be an economic im- perative. He also emphasiied that if the newly industrialized countries move towards taking a bigger share of the manu- factured goods market, we, along with other advanced na- tions, will increasingly have to shift to even higher technolo- gies and services.[8]

    It is important to note that R&D intensive industries tradi- tionallyhavehighermarginsthanconventionalindustriessince there is a monopoly in newly created knowledge which per- mits higher margins in the nature of a monopoly rent. -The US for instance depends on high-tech products for its most valuable exports. Between 1969 and 1979, for example, US trade surplus in R&D intensive goods rose from $10.5 bil- lion to $39.3 billion; during the same period, its deficit in non-R&D intensive goods went from $6.7 billion to $34.8 billion [8]. And a large proportion of this increase was in sales to the Wid world.

    The knowledge intensive industries, particularly in informa- tion technology and materials are often tenned strategic in- dushiis. They determine the development of a whole rabge

    of technologies and provide a competitive edge far beyond their nonnal domain. That is why these technologies are gen- erallyregardedas dualpurpose andcomeunderresrrictions either under COCOM, IWT, MTCR etc.

    Recesses for such strategic technologies are also well guarded by MNCs who generally do not license out such technolo- gi~.For~~severalsoudiesbaveshowathatwhileMNcS readily part with some new technologies developed as a prod- uct, they are loth to do so when processes are involved. One survey [8] showed that when the new technology was devel- @as a product, m 72% of the casesit was tnmsferredabroad through a foreign subsidiary, 24% by unaiiibted licensing andonly495 bydirectexports.However, whenpnxessswere involved, 17% was transferred through foreign subsidiaries andm 83% of the cases, the innovation was dtbrough

    never used in such technologies. export of the resultant products, - licensing was


    It has been argued that control over the results of scientific research bas clear c o m m a as well as military implica- tions. The military argument can be used to legitimize restric- tions on a whole host of technologies so that the wmmercial interests of advanced countries ca...


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