There are two main sources and types of technology. Internal research and development is one source, but it is usually slower and more costly. External sources include mergers and acquisitions, joint ventures, franchise agreements, licensing agreements, and formal/informal contracts. These allow firms to gain new technologies through partnerships and sharing of innovations, but also come with disadvantages like culture clashes or high contracting costs. The types of technology discussed are agriculture/bio, energy/power, construction, manufacturing, transportation, medical, and information/communication.

1. Sources and Types of Technology
Mr. Roshan Bhattarai
Kathmandu, Nepal

2. Sources of Technology
1. Internal- Research and Development
• involves the seeking and developing of new technologies,
products, or processes through creative efforts within the
firm
• ownership of the technology/innovation can be provided
with legal protections (i.e. patents and trademarks)
• understanding and the knowledge gained from the process
of R&D can give the firm a head start on the next
generation of technology
• But it is usually slower and more costly and can be
disrupted by the departure of key personnel.
(The death of Steve Jobs has slowed the innovation of Apple
in the eyes of many consumers.)

3. 2. External
a) mergers/acquisitions (M&A) b) joint ventures,
c) franchise agreements, d) licensing agreements, and
e) formal and informal contracts
a) Merger/Acquisition
– Involves ownership changes within the firms
– For an acquisition, one firm buys another;
– For a merger, the two firms come together and form a
new firm
– The essence of both of these approaches is that a new,
larger organizational entity is formed
– The new firm should have more market power (be larger)
and should gain knowledge about a technology
– The blending of two cultures, two sets of processes, and
two structures are all potential disadvantages of M&A
activity.

4. b) Joint venture
– Long-term alliance that involves the creation of a new
entity to specifically carry out a product/process
innovation.
– Usually governed by a contractual relationship that
specifies the contributions and obligations of the partners
in the joint venture
– There are potential culture clashes as well as the potential
for strategic drift (losing strategic focus)

5. c) Franchise agreement
– usually long-term agreement that involves long payoffs for
the sharing of known technology
– Eg: McDonald’s use franchise agreements with store
owners
– McDonald’s provides R&D for new processes and new
products
– The store owners (franchisees) pay a fee for the use of the
name and the marketing of the product
– The contract and monitoring costs associated with
franchise agreements are the big disadvantage of this type
of alliance.

6. d) Licensing agreement
– involves technology acquisition without R&D
– Eg: Dolby contracts with producers of various type of
sound equipments to allow them to use their technology
to have better sound quality.
– Licensing agreements are quite common in high-tech
industries.
– The contract costs and constraints are the disadvantages of
licensing agreements.

7. e) Formal and Informal Contracts
– used to allow firms to share technology between them
– For formal contracts, contract is enforceable for the length
of the time
– Formal contract is usually longer and includes more details
– For the informal contract, the advantage is that if the
activity is no longer beneficial, it is much easier to disband
(break)

8. Types of Technology
1. Agriculture and Bio-Technology
– Developing and using devices and systems to plant, grow, and
harvest crops
– Learning about the science of life (crops, livestock and
pharmaceuticals)
2. Energy and Power Technology
– Developing and using devices and systems to convert,
transmit, or process energy.
3. Construction Technology
– Using systems and processes to put structures on the sites
where they will be used.
4. Manufacturing Technology
– Developing and using devices and systems and processes to
convert materials into products in a factory.

9. 5. Transportation Technology
– Developing and using devices and systems to move people
and cargo from an origin point to a destination
6. Medical Technology
– Developing and using devices and systems to promote
health and cure illnesses
7. Information and Communication Technology
– Developing and using devices and systems to gather,
process, share information, and to share ideas.