Going to the moon, talking to a person who is on the other side of the earth, slowing the rate of aging – all these things have recently stopped existing only in fairy-tales. Technology has improved the quality of our lives and has been helping us in reaching our dreams. People might wonder how those technologies were designed and produced, which is also important. But in fact, there are much more behind it.
The production, research, and development of technology and electronic products also represent something other than the Technical level. The system of the industry has great impacts on the global economy as well. The U.S. is without any doubt the pioneer of high tech and electronic industry. But statistics show that the U.S. is no longer taking the lead in the high tech production and innovation. According to the report of Computer Professionals for Social Responsibility, …the offshoring of high wage jobs from the United States to lower cost overseas locations is currently contributing to unprecedented levels of unemployment among American electrical, electronics and computer engineers. American high-tech firms shed 560,000 jobs between 2001 and 2003, and expect to lose another 234,000 in 2004. (Brigham 2005)
New York Times affirms, “The report by the Information Technology and Innovation Foundation found that the United States ranked sixth among 40 countries and regions, based on 16 indicators of innovation and competitiveness.” Due to the transfer of knowledge, shift of production of high tech and electronic products, it is possible for the industries of developing countries to become independent manufacturers and to boost their economies.
First of all, Knowledge here refers to the technologies, human capitals, tools, tasks, know-how, and networks that an organization uses to stay in business. In accordance with the definition proposed by Dayasindhu “Knowledge management is creating, acquiring, interpreting, retaining and transferring knowledge to improve performance by purposefully modifying behavior based on new knowledge.” (Dayasindhu, 2002)
Transfer of knowledge is especially important and beneficial for organizations which function in a developing industry or country. With the investment, research result, and human capitals brought by the developed industry or country, the developing industry gets an ability to transplant their experience and use the resources.
During the past few decades, it has become a trend to move factories and outsource from places with higher output cost to places with lower output cost, such as South and East Asia (except Japan). Western countries invested a lot in those areas. At the beginning, foundry somehow brought up the economy. Later, they turned their attention from only manufacturing and outsourcing to design and creativity, while a significant decline could be observed in the West. Some cases of how the transfer of knowledge has affected the high tech and electronics industry will be examined and explained below.
Taiwan has been famed for its computer industry which has a large share in the world. In 2008, Acer alone had an 11 % share of laptop market. Acer and Asus occupied 70% of the share of global netbook market. These big brands have been active only recently.
In 1980, Taiwan set up the Hsinchu high tech park. The company initially aimed to be contractors to produce semiconductor and some other electronic products. Among them, TSMC is the biggest one; it has been sharing half of the global IC market. The high tech park contributes a lot not only to the Taiwan economy, but also to the competitiveness of Taiwan high tech industry. Thus, in 2007, the annual output of Taiwan high tech reached more than 21 billion USD.
How has Taiwan achieved this? Taiwan was originally an agricultural and traditional industry oriented country aimed at the transfer of knowledge. According to New York Times report in 1986 “The [Taiwanese] Government’s goal was to attract a number of high-technology industries with inducements…and lure home its students after they complete their courses for advanced degrees in American universities…85 percent of those with doctoral degrees.”(Burns 1986) As of this year, the U.S. and Japan sent a large portion of their semiconductor orders to Taiwan. The news informs that 45% of the order was from the U.S. with the total value of the order equaling 0.5 billion USD.
Later, Taiwan high tech industry transformed from foundry contractors to self-develop oriented. Then, several big brands emerged and started sharing the global market. It can be stated for sure that without the demand, investment, and knowledge brought by the developed countries, Taiwan would not be able to develop so fast or even in the right direction.
On the other hand, India is also a country which benefits from the transfer of knowledge. The population of India is 1.2 billion people; 30% of them are illiterate and consist of farmers, or the so-called traditional industrial workers. However, the structure of the India industry has changed. It has recently emerged as one of the high tech industry countries.
In 1984, the Prime Minister Rajiv Gandhi set out to do some reforms. One of such reforms was to develop the IT industry. Several policies were made to subsidize the baby industry. For instance, the Computer Policy of 1984, …eased the availability of microcomputers and facilitated software exports by encouraging on-site service provision. The 1986 Software Policy encouraged foreign investment in the industry and access to technological developments overseas, by allowing easy imports of the latest software and software tools. While the 1984 and 1986 policies mainly removed hurdles before the industry, positive promotion came in 1990 when the DoE initiated the Software Technology Park. (Parthasarathy 2004)
As a result, India has become the biggest software foundry and exporting country sharing 65% of the global market.
Nevertheless, India software industry did not stop at the achieved. In order to compete with the software giant like Microsoft in the western world, many companies were set up not only to do foundry, but also to conduct R&D and manufacture products of their own. They were able to do this since they have acquired a lot of knowledge and techniques when they were doing foundry for others. Now there are a number of software companies in India seeking more brand-oriented development and investment.
According to a study of outsourcing in India, more contractors are seeking independence from their parent companies or investors and are trying to develop their own brands and products. They emphasize that
…a company (one that from a developed country) might need to transfer its knowledge regarding the application domain to the remote site … Such transfer usually causes no problems for distributed development organized according to Models 2(Separate teams in legally related companies) or 3(One team distributed across multiple sites of legally related companies) because the sites belong to the same company. However, such transfer becomes crucial for Models 1(Separate teams in basically independent companies) and 4(One team distributed across multiple sites of several basically independent companies) where the independent partner company might also be developing software for competitors…or development knowledge for themselves. (Kobitzsch, W. Rombach, D. Feldmann, R.L. 2001)
Due to the knowledge transfer, India software industry has been successful in increasing its independence and competitiveness. For example, the RBIN–Tenovis cooperation was to create a team of software developers of equal competence but at much lower engineering cost than the western countries.
The study conducted in 2001 concluded that, India provided software services to about 185 of the Fortune 500 organizations…About 90% of India’s software exports are to the demanding markets in USA, Europe and Japan. …These organizations have shown consistently increasing trends in productivity (growth in revenue per employee), innovation (largely in software development processes and human resources management) and growth for the last 5 years. ( Dayasindhu 2001)
In sum, there are, of course, more examples that show how the transfer of knowledge has helped the developing countries or industries, such as China, to develop. China is also turning its attention to just outsourcing to R&D and brands of its own. Lenovo would be a great example. This is certainly something desired by the developing industries. Yet, the ones who provide the knowledge are actually declining due to the loss of competitiveness and cheaper output cost. However, this might be beneficial for the global economy. The transfer of knowledge gives rise to the economy of the developing countries enabling them to put more efforts into R&D and allowing using resources in a more efficient way.
Brigham, Nancy. “Outsourcing High-Tech Jobs: Why benign neglect isn’t working.” Outsourcing High-Tech Jobs. 2005: 2.
Burns, John F. “Taiwan is seeking high-tech growth.” New York Times 1986.
Dayasindhu, N. Embeddedness, knowledge transfer, industry clusters and global competitiveness: a case study of the Indian software industry. India: Elsevier Science Ltd., 2002.
Dayasindhu, N. Embeddedness, knowledge transfer, industry clusters and global competitiveness: a case study of the Indian software industry. India: Elsevier Science Ltd., 2001.
Kobitzsch, W., Rombach, D., and Feldmann, R.L. “Outsourcing in India [software development]”, 2001.
Lohr, Steve. “In Innovation, U.S. Said to Be Losing Competitive Edge.” New York Times. 2009.
Parthasarathy, Balaji. “Globalizing Information Technology: The Domestic Policy Context for India’s Software Production and Exports.” Iterations: An interdisciplinary Journal of Software History (2004).