If that’s the case, why doesn’t technology move more freely from places where it was invented to places where it is needed? What are the impediments even to potentially profitable technology deployment transactions?
A recent G-77 declaration argues that the root cause of the problem is the failure of developed country governments to honor their “commitments to transfer technology to developing countries and provide access to technology on favourable terms, including concessional and preferential terms.” As I noted in a previous blog, this begs a wide range of critically important questions. Two sets of questions stand out as particularly relevant. First, who is going to be acquiring this technology – governments or private entities -- and what obstacles are impeding them from using it to produce such services as clean drinking water and renewable energy? Second, who owns the technology that would be transferred – governments or private individuals -- and what obstacles are impeding them from “transferring” this technology to emerging markets?
I would argue that there are structural impediments on both the acquiring and technology providing sides of the technology transfer process. In the Summary of the December 2012 Club de Madrid-P80 Group Foundation meeting in Little Rock, Arkansas and the ensuing Little Rock Accord, my P80 Group Foundation colleagues and I described these structural impediments as “broken circuits” or structural obstacles that make it difficult for entrepreneurs in developing countries to identify, adapt and adopt proven technologies and for entrepreneurs (in developed and emerging markets) who own these proven technologies to identify potential customers or users in emerging markets. Until we address these structural problems and repair these broken circuits, subsidies alone stand little chance of generating a more effective global technology deployment process.
In terms of the emerging market side of the equation, I have written previously (here on Page 7) that for many developing countries, innovation entails “building the capacity to use technologies that are in widespread use elsewhere but that are new to the country, new to the firm, or used in new ways. To facilitate this type of innovation, countries must build the capacity to find, absorb and use these technologies.” More recently, in a Discussion Paper prepared for the 11th Annual Brookings Blum Roundtable on Global Poverty, Professor Diego Comin of the Harvard Business School writes, “Technological knowledge is a key ingredient for the adoption and use of new technologies. Often, companies need to know how to use a new technology before they can decide whether the technology will solve its needs.”
In other words, developing countries need to build the expertise required to learn what technologies are currently available, what new ones are coming online, how to get these technologies into the hands of local entrepreneurs who can combine them with other technologies and integrate the entire package into viable businesses or service delivery organizations, and how to evaluate the strengths and weaknesses of different technological solutions. How can developing countries develop this expertise?
Several years ago, some World Bank colleagues and I recommended that as part of their national innovation strategies, developing countries establish a series of Innovation and Technology Entrepreneurship Centers (ITECs). These ITECs, which could be jointly administered by local university schools of engineering and business, would serve as local centers of expertise for technologies in a particular sector (e.g., water filtration, off-grid renewable energy, etc.), scouting organizations monitoring the latest technological developments in that sector, and technology deployment centers helping local entrepreneurs learn what technologies are available and how to use them. More specifically, working in collaboration with the local private sector, including students as well as expatriates, and returning members of the Diaspora with special sectoral expertise , government agencies, universities, research institutes, private foundations, and NGOs, ITECs would (i) identify, evaluate, and locate relevant technology that exists outside the home country; (ii) where necessary, license it or find other ways to acquire it and bring it into the country; (iii) pass it along to scientists in universities, research institutes, engineers, designers, and private businesses who can perform any “translational” or “developmental” research and design modifications required to adapt this technology for local use and to suit local customs; and (iv) transfer or diffuse this technology to local entrepreneurs from inside and outside the country who can start new businesses on the basis of this “new-to-the-country” technology.
In addition to these technical functions, ITECs could help play a matchmaking function by introducing local entrepreneurs who want to start a business on the basis of this new technology to entrepreneurs with interesting technology who are looking for emerging market partners. ITECs could also sponsor “start-up weekends” and boot camps where would-be local entrepreneurs with interesting ideas for starting a rural micro-grid or a rural clean water distribution business can join with other like-minded individuals, get mentoring and advice from experienced entrepreneurs, and learn about new ways to finance their business and the newest ways to generate revenue from customers, etc.
Developing ITECs will go a long way towards helping to repair the first broken circuit. Repairing the second broken circuit will require helping entrepreneurs with useful technology do business in emerging markets.
In the course of organizing the Global Solutions Summit, my colleagues and I encountered numerous entrepreneurs who had developed innovative technologies for generating off grid electricity, energy saving devices for pumping irrigation water and cooling/heating buildings, and drinking water filtration and purification systems. (We will soon feature some of these companies on the GSS website. Further announcements about this will be available in the coming weeks.) In almost every case, the technology was not developed with emerging market customers in mind. But when we explained to the entrepreneurs or the venture capitalists who backed them that there was an enormous potential market for this technology in emerging markets, we were frequently met with this common refrain: “I simply don’t have the bandwidth, contacts, or know-how to find customers in Africa, Latin America and Asia.” This illustrates the second technology transfer broken circuit. Not only don’t countries have the capacity to identify and adopt the technology they need but technology suppliers do not have the capacity to identify and develop commercial relationships with potential customers in emerging markets.
As my colleagues in the P80 Group Foundation and I pointed out in Little Rock, there are at least five barriers inhibiting technology deployment:
1. The Technology Company (TC) does not have a comprehensive strategy and specialized support to enter multiple markets simultaneously.
2. The TC lacks sufficient capital for additional staff and other resources necessary to service the international markets.
3. The TC lacks a qualified and well capitalized local in-country "franchisee" to act as a local project developer, develop a locally acceptable billing and payment system, organize and operate repair and maintenance services, and combine the entrepreneur's core technology with all the other technologies that are required for operating, for example, a well functioning off-grid power generation and distribution business or water purification drinking water production and distribution system.
4. The TCs and local "franchisees" lack the complete know-how to access all of the governmental, NGO and public/private related assistance that is available for both project preparation, feasibility studies, and project financing and often do not have the time and resources to develop such assistance on a case by case basis.
Repairing this broken circuit requires innovative business organization models and technology deployment mechanisms which, in turn, can attract financing directly and indirectly from institutional investors, the Diaspora, and the “crowd.” Future blogs will discuss these issues in greater detail.