Technology Transfer in China: Analysis and Policy Proposals

Elementary Stage (1978–1984)

As the reform and opening up started in China, the scientific and technological activities took a historic turn toward economic construction and the technology transfer system also began to face the market. In March 1978, the National Conference on Science approved the Outline of the Program for the State Science and Technology Development (Draft) and insisted to promote application and extension of technology achievements and focus on the intermediate links from scientific research to production. In October 1980, the State Council promulgated the Provisional Rules of Developing and Upholding Socialist Competition and affirmed that the important technology achievements such as invention needed to be transferred with compensation for the first time. In November 1984, the State Council produced Technology Transfer Ordinance and formally introduced the concept of the technology market.

Exploration Stage (1985–1991)

Led by the guideline that science and technology must face economic construction and that economic construction must depend on science and technology, the polices on technology transfer were actively explored and the technology transfer system began to take shape. The Decision on Reform of Science and Technology System promulgated by the Chinese Communist Party Central Committee in 1985 and the Decision on some Important Issues Concerning Deepening Reform of Science and Technology System promulgated by the State Council in 1988 became basic polices to promote application and production of technology achievements. The government opened research institutions and extended their decision-making powers; encouraged the institutions of research, education, and design to cooperate with production factories; encouraged the research institutions for technological development to enter into enterprises; strengthened the enterprises’ abilities on technology absorption and development; and built high and new-tech industrial zones to support private enterprises. Many laws and regulations, such as Interim Measures of Technology Transfer, the Patent Law, and the Law on Technology Contracts were promulgated to promote the opening of the technology market, technology achievement commoditization, and the flow of qualified people. In 1991, the technology contractual turnover was 9.48 billion Yuan, 4.6 times more than in 1986.

Market-Oriented Stage (1992–1998)

As deepening of the reform on the market economy continued, the technology transfer system also depended in a major way on market regulation and needed to energetically explore the technology markets. In 1992, the State Council promulgated the Ten-Year Plan for the Development of Science and Technology in the People’s Republic of China and the Outline of the Eighth Five-Year Plan, and pointed out that it would be necessary to reform the planning administration and build the market mechanism, including the technology market, as well as the market support factors such as funding, materials supply, human skills, and information. The government mobilized more technology staff to establish private technology enterprises, produced the plan on constructing technological centers within enterprises, supported high tech to form the equity as intangible assets and promoted innovation projects on the integration of production, teaching, and research. In April 1994, the State Science and Technology Commission and the State System Reform Commission issued Some Opinions on Further Cultivating and Developing the Technology Market and pointed out that more attention should be paid to develop technology exchange, establish many new types of organizations such as the engineering research center, the productivity promotion center, and the technology incubation center, while also creating intermediary institutions of technological trading and a fair, just, and open market order.

Deepening Stage (1999–2005)

As the research institutes were transformed toward enterprises and the market support factors developed, the modern technology market system and the technology transfer system were improved and, thus, the capacities on innovating technology and industrializing high-tech achievements were enhanced. The applied research institutes were transformed into enterprises and the public research institutes were reformed on the basis of being profitable or unprofitable, in order that the science and technology system and mechanism could be beneficial for the transfer and industrialization of the existing scientific and technological achievements into productive endeavors. The research institutes and the colleges and universities had to transform their service technology achievements toward the market. In December 1999, the Shanghai Technology Property Rights Exchange was established so that China would realize resource integration in the technology market, the financial market, and the property rights market. In addition, China began to encourage risk investment and set up venture funds for medium- and small-sized enterprises in order to promote technology driven industrialization.

Innovation-Oriented Stage (2006–Now)

The technology transfer system began to serve indigenous innovation and building an innovative country by strengthening the main firms and by integrating production, teaching, and research. At the end of 2005, the State Council promulgated the Outline of the Program for the State Long-term Science and Technology Development (2006–2020). It confirmed the guidelines “independent innovation, spanning on the key, supporting development, guiding future,” and raised the general objective of constructing an innovative country, thus, signaling a new stage of technology transfer system. The government put forward more than 60 measures that guaranteed and supported indigenous innovation and technology transfer in areas such as the fiscal system, taxation, banking, industries, government purchases, introduction and absorption, and intellectual property rights. The market support factors such as funding, materials, human skills, and information needed to be further improved, the technology market be actively developed, innovative elements be gathered toward the corporations, technology achievements transformation and technology transfer be promoted, and the system of identification and registration of state technology contracts on the internet be started in order to dynamically manage and analyze the state technology contracts. In 2008, the total value of technical contracts signed on the state technical markets reached 266.523 billion Yuan.

Initially Establishing a System of Policies, Laws, and Regulations on Technology Transfer

China has developed a legal system and a management system of technical contracts whose major frame includes the state laws and regulations on scientific and technological development, technology transfer, and contracts. There are 32 provinces, autonomous regions, municipalities, and cities that have specifically made administrative rules on the technical market. To promote the flow of the technical elements and technology transfer, on the basis of the previous polices covering business tax remission on technology development and transfer, the new tax incentives aiming to encourage home-ground innovation and promote technology transfer were issued (Gang et al. 2008).

Forming a Pattern of Diversified Technology Transfer Subjects

Before the reform and the opening up process, most Chinese technical resources were in research institutes, but now innovative subjects have been diversified to research academies and institutes, colleges and universities, and enterprises. In 2008, the expenditure on R&D was 461.60 billion Yuan and there were 1.97 million R&D employees. According to the percentages of every innovative subject in Figs. 8.1 and 8.2, enterprises, governmental research institutes, and colleges and universities are playing important roles. Meanwhile, the enterprises’ position on innovative subjects is enhanced.

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Technology users also comprise many types of enterprises, such as self-employed enterprises, enterprises in foreign countries, enterprises with foreign investment, and enterprises with investments from the mainland, Hong Kong, Macao, and Taiwan. Figure 8.3 indicates the percentages of transaction values of technology users in the technical market. Except enterprises with foreign investment, other types occupy important positions. Especially, the increase in the proportion of self-employed enterprises can to some extent reflect the effect of the state support for small businesses.

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Rapidly Building Technology Transfer Services Organizations

In China, technology transfer services organizations have fast grown from nothing. In the 1980s, the first batch of transfer services organizations was built. After a 30-year or so development, 189,800 services organizations have been established. By the end of 2008, there had been more than 200 standing technology markets and nearly 40 transaction agencies with technological property rights and financial capital (Gang et al. 2008). There had been 1,532 state productivity promotion centers which supplied services for small- and medium-sized enterprises, with an income of 3.04 billion Yuan, and 164 centers were at the national demonstrated level. There had been 674 technological business incubators, and 228 business incubators were at the national level. 32,370 enterprises had been incubated and 44,832 were in the process of being incubated. In 69 state science and technology parks in colleges and universities, there had been 1,055 public service organizations for business start-up and 247 industrialization service platforms. 2,979 enterprises had been graduated. The firms in the parks had undertaken 2,918 projects of various levels and sorts and had applied 4,454 patents.² The state promoted technology transfer by approving 134 demonstrated transfer institutions at the national level to take the lead, developing the regional alliances for technology transfer to promote technology cooperation in a certain region, and building the innovation relays to support multi-national technology transfer, international cooperation of production, teaching, research, and technology innovation for small- and medium-sized enterprises.

Significant Increase in the Scale of Technical Contracts

The contracted volume in the Chinese technical market was 700 million Yuan at the early period of the opening of the market, but by 2008 it reached 266.52 billion Yuan. It took 17 years to reach 100 billion Yuan of the technical contracted value, but from 100 to 200 billion Yuan, it took only 4 years. Figure 8.4 shows the number of registered technology contracts and their transaction values during 2000–2008. Although the number of registered technology contracts had a fluctuation, the transaction value indicated a favorable development, and its increasing speed had a growing trend. In addition, the average transaction value for each technology contract was 2.7 billion Yuan in 2000 and then reached 11.78 billion Yuan in 2008. The average annual growth rate was 20.21%, and it reflected the increase of the transaction volume of each contract. All the above reflect that Chinese technical market is in a period of fast development.

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Lack of Initiative in the Subject of Technology Transfer

Technology suppliers seem less energized in studying the technology that can be transferred and technology users also lack enthusiasm to employ independent R&D techniques. The major reasons are lack of incentives and limited funds for technology transfer.

The current incentive and evaluating methods cause the technology transfer subjects to lack enthusiasm. For technology suppliers, the evaluation system focuses more on advanced technology and pays little attention to the industrialization of the technology. Thus, the technical institutes suffer from the lack of motive power for technical industrialization (Guanghui and Wei 2009). In contrast, in western countries, when the project is established, the feasibility of the technology transfer has been demonstrated and the technology transfer effect has been made an important component of examination. The firms that are technology receivers have no special polices and tax preferences relating to indigenous innovative end-results. Meanwhile, since most of the technical achievements by the research institutes are realized at the laboratory stage, the companies need to undertake a lot of investment and establish technical ventures for the realization of the second or third development phases (Guanghui and Wei 2009). Thus, the companies prefer the matured technologies to the transferred ones.

The technology transfer necessitates high venture, high investment, and is spread over a long cycle, so that the shortage of the funds is decisive for technology transfer. This factor also results in the fact that the technology transfer subjects cannot actively participate in the transfer. Figure 8.6 shows that in China most technical funds come from the government and companies, with a share of over 80%. In the total, meanwhile, the research institutes have almost no funds for transformation and transfer, and the funds in monetary institutions and social funds in other forms make up just a small proportion. When the distribution of the corporate funds is further analyzed, it is seen that in the Chinese enterprises the R&D expenditure is 0.5% of the business income, a share that is greatly different from that in foreign countries, where it reaches 6%. Therefore, when the monetary and social funds do not effectively come into the technology transfer process, the technology transfer subjects end up with having no capacities to face the great ventures or raise funds to realize the transfer of technology in question.

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Technology Transfer Services Organizations’ Weak Service Capacities

In the recent years, the technology transfer services organizations have experienced a certain amount of development from nothing, although, the organizations’ and the employees’ service capacities are still weak.

On the one hand, there are various kinds of services organizations, but their service capacities cannot satisfy the market. Most services organizations, with their small scales, are in the preliminary stage, so they can hardly supply timely and correct information in their limited service range and they face difficulties in meeting the practical demands of large-scale technology transfer. Also, the service system for the small- and medium-sized enterprises needs to be improved. Although China has established many institutes and departments, such as the productivity promotion center which specially serves the small- and medium-sized enterprises, these still need more services organizations to help them obtain information and follow the developing trends.

On the other hand, China is short of the high-level professional employees needed in technology transfer. An outstanding technical broker is the versatile employee with the qualities and capacities of technical specialists, entrepreneurs, and sociologists. In the developed countries, such as the USA and Japan, most professional employees in technology transfer have master’s degrees and doctorates, but in China most are experienced qualified persons, but in limited numbers. As a result, according to the Chinese technical market association, in 50,000 services organizations with 1.3 million staff, only a few persons were able to pass authentication (Guanghui and Wei 2009).

Technical Market’s Deficiency in the Cooperation Mechanism

All the technology transfer institutes have a loose structure and lack a cooperation mechanism, so the ability of the networking combination is hard to form, which leads to the lack of an all-round, timely, and correct service. In China, most technology transfer institutes have built their information systems, such as the databases of technical achievements, technical demands, technical experts, and technical enterprises, just based on the needs and realities of their own districts, resources, and businesses. For example, colleges and universities establish the state and local technology transfer centers and in order mostly to transfer their own technology achievements, without any division of labor among them and a cooperation atmosphere. Thus, the individual institutes end up having only limited abilities for technology transfer and are able to complete only a small part of the work needed. Also the work is hard to divide up into parts and since the cooperation mechanism for technical integration, agent integration, information integration, and international communication integration has not also been formed, the same tasks are repeated again and again in the individual technology transfer institutes (Xuhong and Zheng 2008).

Incomplete Legal System of Technology Transfer

During the 30-year growth, China has passed many laws, rules, and regulations related to technology transfer and had a preliminary frame for a legal system of technology transfer. However, in the area of implementing the policies, the legal system is still incomplete. First, the current laws and regulations are dispersive, without a set of systematic laws in relation to technology transfer at the state level. Second, although the principal laws and regulations are in place, there are fewer detailed measures, so that the subjects are unclear in division of the work and the benefits, and the ownership of the intellectual property rights.

Cultivating Technology Transfer Subjects’ Enthusiasm

Governments at all levels can make an attempt to reform the system of evaluating and encouraging technology transfer subjects, in order to cultivate their enthusiasm and attract more financial institutions and other social institutions that would participate in the technology transfer process.

More technology transfer elements should be added to the evaluation of technology innovation subjects, but there should also be different evaluation methods according to specific research fields. Original research projects are sophisticated and they focus on the forward position. So they are hard to be judged in the short-run. Therefore, according to the experiences of Beijing Institute of Biological Sciences, one can invite experts in the same field to judge the original research projects over the long term.³ Applied research projects can be evaluated through the technology transfer effect, quantities and qualities of papers and patents over a period of 2–3 years. Particularly, there should be a high weight placed on technology transfer, and then the researchers will pay more attention to technology transfer, making use of the research achievements already at hand. The reform on the system of encouraging the researchers can be mainly on reforming the material rewards in this area. One can refer to the experiences of the German Fraunhofer-Gesellschaft Association for the Promotion of Applied Research in this regard. They hold that a large number of personnel expenses are an important condition for keeping high R&D abilities at high levels. Thus, more than half of the cooperation funds are allocated to the staff and the researchers, and they can claim 20% of the profit which comes from the later application of patents.⁴

In the case of the enterprises, the government should encourage them to actively participate in technology transfer, first, through ways like financial allocation, establishing special funds, and providing loan subsidies, government supports to technology transfer services organizations so that they can establish pilot plants for scientific and technological achievements independently or cooperatively, in order to hatch scientific and technological achievements (Guanghui and Wei 2009). Second, through ways like governmental tax incentives, free consultation provided by governmental intermediary services organizations, and the reduction of housing rental fees provided by management committee of science and technology parks, the government should encourage companies to use the technology achievements independently researched in China. Third, enterprises should be encouraged to actively participate in studying issues and projects, and should take achievements transfer as an important project-checking-and-accepting index.

The government should encourage financial institutions and venture funds companies to invest in technology transfer in order to reduce the technical companies’ risks in absorbing technology and to raise the initiatives of the technology transfer subjects. In view of the American experiences, the government can stimulate the development of venture capital and financial loans by confirming the system of tax incentives, financial subsidies, and credit guarantee for venture funds companies. In the late 1970s and early 1980s, in order to increase the personal venture investment, the American government reduced the capital gains tax rate from 49.5 to 20%. The result was that, in 1982, the net value of venture investment was seven times larger than that 12 years before. In addition, through policies and projects, the government can attract more social funds and foreign capital to join in the Chinese technology transfer drive.

Fostering and Cultivating Technology Transfer Services Organizations of High Standards

Since technology transfer services organizations should play a greater role in promoting technology transfer, the government needs to support and cultivate a number of high-quality services organizations and professionals.

The services supplied by the intermediary services organizations have to cover all aspects of technology transfer. Meanwhile, in order to meet the demands of the intermediary services, the technical market needs that the public institutions funded by the government and the profitable organizations funded by society must coexist and be complementary. In this connection, first, the services organizations should enrich and refine their services. These organizations not only simply connect technology transfer subjects to one another, but also offer them specific suggestions on important strategic decisions such as development directives, technology transfer forms, etc. So the Chinese services organizations must continue to refine their present services and provide more specific consulting services as well.

The services organizations can take the experiences of Fraunhofer-Gesellschaft as a reference in order to provide information about the development trends so that the technical enterprises can accurately gauge the market orientation, and realize better developments in the more important technology fields. Second, the qualities of the services organizations should include both public and profitable realms. For the small- and medium-sized enterprises, which have no profitability, there should be ways to provide them with cheaper technology consultation. Therefore, the government should establish a number of public technology transfer services organizations, like OSEO in France and service agencies funded by the German government,⁵ mostly directed to the needs of the small- and medium-sized enterprises. In addition, for some large-scale technology transfers that need a larger range of information and more strategic guidance, the government needs to cultivate a number of powerful technology transfer services organizations to provide comprehensive and high-level services.

High-level technology transfer professionals should be cultivated by both universities and the market, and their staff should be encouraged to learn with a spirit of initiative guiding them. First, an education system with high academic qualifications in the field of technology transfer should be established. According to the specialized demands of technology transfer, the postgraduate education with scientific courses and training schemes on technology transfer can be set, so as to cultivate high-quality, internationalized, and versatile technology transfer personnel with the spirit and capacity for technological innovation. Reportedly, Beijing Industrial University started to recruit in 2008 software engineering masters and graduates with an orientation in the direction of technology transfer, a good initiative for the high education system of China’s technology transfer process. Second, technology transfer seminars, a kind of nondegree education, can be organized to train technology transfer talents. Technology market management offices in all provinces and cities can learn from that in Shanghai in this regard. They can increase the training courses of technology brokers and offer certificates of practice. Third, a vocational qualification system related to technology transfer can be established and developed. The government can encourage the management of technology broker resources and promote vocational qualification in Bohai Rim region, Yangtze River Delta, and other areas, greatly improving the service levels and professional ethics of the technology brokers (Guanghui and Wei 2009).

Constructing the Cooperation Mechanism in the Technical Market

By constructing the technology transfer alliances among countries, areas, and industries, and establishing various ways of technology transfer, it would be possible to integrate the present resources and realize the cooperation needed in the technical market.

The technology transfer alliance is an effective way to integrate various intermediary services organizations in the technical market, especially the medium and small ones. For one project, it is possible to assemble the corresponding technology transfer organizations to complete the projects at higher levels of quality. The state technology transfer alliance works to coordinate and instruct all sorts of the state technology transfer organizations in order to realize the cooperation and integration of all the resources. The regional technology transfer alliance is the center of regional technology transfer. It will undertake the responsibility of transferring the technical achievements invested by the country, as well as by the region. The industry technology transfer alliance can comprise the leaders, organizers, and coordinators of technology transfer in some sectors.

In order to better promote the cooperation between the technology transfer subjects, besides traditional technology exchanges, new ways which would be beneficial for technology creation and transfer, can be developed. These would include cooperation in production-study-research, such as in the cases of the Joint Research Institute established by Shanghai Baogang Steel Group and Shanghai JiaoTong University; building a new firm or a branch institute, such as the National Heavy Machinery Research Institute – Yanshan University Branch built by the National Heavy Machinery Research Institute Co. Ltd. and Xi’an Jiaotong University, Northwestern Polytechnical University and many other universities, and Shanghai Modern Chinese Medicine Technology Co. Ltd., built by Shanghai University of TCM and Shanghai Xinhangning Group, which undertakes the development and industrialization of new medicinery⁶; enterprise technical transfer bases, such as the two pilot plants and some specific technology industrialization bases built by National Heavy Machinery Research Institute Co. Ltd.⁷; enterprises’ joint development, such as the research body of the integrated circuit with a very large scale in Japan (Xinxin 2008); the industrial cluster, such as the Suzhou IT industry cluster and Haidian Science and Technology Park.

Establishing and Improving the System of Policies and Legislation

In the process of establishing and improving the technology transfer system, the government should play an important role in providing guidance and service by establishing and improving the system of policies and legislation.

First, on the basis of the existing laws and regulations related to technology transfer and the objective requirements of the development of the Chinese technology transfer, the government should draw up and promulgate the state legal documents targeted toward technology transfer as soon as possible. Government, universities, research institutes, companies, and services organizations can confirm their rights, obligations, and interests in technology transfer and can divide the work rationally in order to increase efficiency. Second, after publishing guiding principles and policies, both the national and local governments should formulate specific measures based on specific conditions in order to insure having the foundations of implementation at hand. Third, besides continuing to encourage scientific research departments to develop indigenous innovation, the government should strengthen its support toward the technology receivers and technology transfer services organizations in the areas of finance and taxes. Also, local governments can establish special funds for technology transfer services, for supporting technology transfer services organizations in order to enhance the capacity of the professional services. Fourth, the intellectual property system must be promoted within a short period. Technology transfer has inseparable relations with management and operation of intellectual property and, thus, a perfect system can guarantee intellectual property transfer among different subjects.