“Forced technology transfer” policies: Workings in China and strategic implications

• Published in: Technological forecasting & social change 2018-09, Vol.134, p.150-168
• Main Authors: Prud'homme, Dan, von Zedtwitz, Max, Thraen, Joachim Jan, Bader, Martin
• Format: Article
• Language: English
• Subjects: Case studies; China; Companies; Forced technology transfer policy; Foreign-domestic technology transfer; Impact analysis; Innovations; Law; Leverage; Policies; Policy making; Reforms; Risk assessment; Risk forecasting; Strategy; Studies; Technology policy; Technology transfer; Thematic analysis
• ISSN: 0040-1625; 1873-5509
• DOI: 10.1016/j.techfore.2018.05.022

This paper evaluates the ability of “forced technology transfer” (FTT) policies – i.e., policies meant to increase foreign-domestic technology transfer that simultaneously weaken appropriability of foreign innovations – to contribute to technology transfer. We focus on transfer of frontier technology in China's newly designated “strategic emerging industries” (SEIs). Drawing on a survey of foreign firms, extensive interviews with foreign firms, and case studies of Chinese firms, we identify three categories of FTT policies in SEIs: “lose the market”, “no choice”, and “violate the law” policies. Our thematic analysis finds that FTT policies likely exert the most leverage over (i.e., force) frontier technology transfer when accompanied by seven conditions: (1) strong state support for industrial growth, (2) oligopoly competition, (3) other policies closely complementing FTT policies, (4) high technological uncertainty, (5) policy mode of operation offering basic appropriability and tailored to industrial structure, (6) reform avoidance by the state, and (7) stringent policy compliance mechanisms. We develop a Strategy & Risk Matrix to forecast the overall leverage of individual FTT policies. We conclude that Chinese FTT policies may enable domestic acquisition of frontier foreign technology if all seven conditions determining policy leverage are fully exploited by the state. However, if this is not the case, the policies have weaker leverage and may even discourage technology transfer. •Three categories of “forced technology transfer” (FTT) policies are identified.•Forecasting matrix allows states and firms to predict leverage of FTT policies.•Seven conditions determine leverage of policies over foreign-Sino technology transfer.•If all seven conditions are fully exploited, the policies may spur transfer of frontier technology.•However, absent all seven conditions, policies have limited leverage and may even discourage technology transfer.