Final Research1

Chapter 1
Introduction
Technology has been, for a long time, recognized as the key factors in accelerating
effectiveness and efficiency to bring back companies competitiveness. In high and increasing
competition of the world market, technology gradually confirms itself as main source for
sustainable competitive advantages and plays a crucial strategic role for the future success.
For the Less Developed Countries, Technology development is really considered the most
important part for the national strategy to strengthen the health of its national economy to
catch up with developed ones.
Michael Porter [1985] stated that technology change is one of the principle drivers of
competition. Therefore, it is important at national level as well as firm level to consider
technology as the most significant weapon to compete and secure the development in long
term. There are two sources for technology development: Indigenous or local technologies or
and imported or transferred technologies. In developed countries, technology development is
basically based on indigenous research or R & D within these countries but in developing
ones, technology transfer plays the most crucial role. Past experience indicated that without
careful management of an imported technology, the technology transfer does not lead to
enhance the technological capabilities. However, the advantages of technology transfer are
those: it is possible to get tested, standardized and proven technologies and with scarce
resources, developing countries do not find it appropriate to invest their resources in R&D for
available technologies in market. It is often more efficient to import and assimilate
technologies which lay the foundation upon which the future technological capabilities could
be built.
For most of the Less Developed Countries, importing new technology for a leapfrogging in
technology development to shorten the distance or to catch up with the advanced countries
has been considered as the only one and effective strategy. But how to select the technology
and adapt it to a specific condition is even more important. Depending on the circumstance of
a specific country, the way of acquiring and assimilating technology may be modified.
Post harvest technology is considered a major area of Vietnamese economy, which need be
developed to enhance both agriculture and post harvest industries. The Vietnamese
Government has recently paid a lot of attention to this area such as importing new machines

and equipment as well as reducing taxation and financial supports to related companies.
Under pressure from the market for higher quality of product, many Vietnamese companies
have been seeking new technology and adapt them to their circumstances to improve their
product quality to satisfy its hard-tempered customers. Coffee industry of Vietnam is an
example for the effort of upgrading technology in post-harvest processing sector. In recent
years, with the supports from the German Government, most coffee Vietnamese companies
have spent a large amount of money on purchasing new machines and facility to upgrade
their processing plants or set up a joint venture with foreign companies. But mere import of
machines and equipment and poor management are not sufficient for enhancing company’s
capabilities because of the lack of software technological components. With the aim at
studying the acquiring and assimilating new technology in two companies in Vietnam- one
joint venture and one state owned, we intended to learn the actual processes that the
company adapts a newly imported technology into the company’s circumstance.
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1.1Problem Statement
Coffee industry highly contains characteristics of agricultural business but the post harvest
technology itself actually plays an important role in creating customer-attractiveness to
improve competitiveness. At present, the world market requires an increase of coffee quality
because of the changes in consumer's taste and habit of drinking coffee and the existence of
variety of substitute drinks. The need of quality improvement forces coffee producers to seek
for new technology in processing coffee to match their customer’s requirements.
Transfer of technology is a main way for all Vietnamese Coffee Companies to upgrade their
technological capability. The way transferee companies acquire and digest newly imported
technology to improve their technological capabilities is very significant especially in post
harvest processing sectors. There is an interest of studying specific processes of technology
transfer and the way to assimilate new technology effectively to draw out some lessons that
can help Vietnamese companies to acquire and assimilate new technology effectively through
a right mechanism. Studying two typical mechanisms of technology acquisition and
assimilation in Vietnamese coffee industry is an active instance to analyze, compare and
draw out problems and suggestions to improve the possibility of success of technology

transfer in this sector.
1.2 Organization of the Research Study
This study will consist of five parts. In the first part, the rationale and objectives will be
explained. The second part will cover the literature review explaining in detail the concept of
technology, technology components and related aspects. The following part will be the
evolution of Vietnamese Coffee Industry and the company background and overview of
coffee processing technology. In the forth part, the actual process of technology transfer of
VIETDUC Coffee Company through a pure purchase of processing plant and evaluated and
the process of technology transfers through joint venture mechanism of DAKMAN Company
is analyzed, compared to withdraw findings. Conclusion and recommendations are given in
the last part of this study.
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Figure 1.1 Organization of the Research Study.
1.3Objectives of the Research
Mere Purchase of technology can not lead to a proper transfer of technology. Good results of
technology transfer are only achieved through careful selection of technology and a suitable
way to upgrade company’s capabilities to adapt the newly imported one into new
environment. The way in which new technology being identified and digested determines the
success of technology transfer. Therefore, the main objective of this research is to study the
ways the two companies selected and assimilated technologies in specific circumstances.
Based on that process, recommendations and suggestions for improvements will be given.
The specific objectives of the research are as follows:
1. Studying the actual processes of technology transfer through two mechanisms –
purchase of plant and joint venture and how to manage them in Vietnamese Coffee
Companies
2. Comparison of technological and economic performances between the local firm
( purchase of plant and equipment) and the joint venture.
3. Determining whether and how the technological capabilities of the firms have been
upgraded through transfer of technology.
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Introduction
Literature Review
Analytical Framework Overview of Industry and
Companies Background
(Chapter II)
(Chapter IV)
Analysis of Technology
Transfers in the Two Companies
(Chapter V)
Conclusions &
Recommendations
(Chapter VI)
(Chapter I)
(Chapter III)
4. The difficulties that the transferees faced in managing the acquisition and assimilation of
technology and steps taken to overcome them.
5. Proposing a mechanism for Vietnamese State Owned company to engage in technology
transfer and recommendations to improve the effectiveness of technology transfer
1.4Methodology
In order to carry out the research, we used some methods to collect data, analyze and offer
some suggestions.
Collecting data:
The data and information were mainly based on face to face interview and other official
documents such as financial statements and reports VINACAFE
 A face to face interview with Vice director of VIETDUC coffee company and DAKMAN
 A face to face interview with the heads of the coffee processing plants in the two
companies
 Questionnaires were used as guidelines for interviews
Secondary data was carefully selected from newspapers, magazines and other international
and domestic publications.

Research analysis
Qualitative and comparative methods was used to examine technology transfers in VIETDUC
and DAKMAN companies to identify critical issues that these companies faced and their
corrective actions.
1.5Scope and limitation of the study
As mentioned above, the coffee processing plants in Vietnam are basically using imported
technology and mostly through purchasing machines and equipment and forming joint
venture. New technology is, now, transferred and applied into coffee processing. This study
mainly focused on aspects related to processes of technology acquisition and assimilation in
coffee industry of Vietnam from a strategic point of view.
Figure 1.2: Aspects Focused in the Research
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Corporate
Governance
structure
Internal resources/
Capability
CEO
Technological
Strategy:
Structure
Performance
External Environment
The scope of the study is as follows:
 The study will focus on the technological strategies and transfer processes of VIETDUC
Coffee Company- a state owned and DAKMAN Company- a joint venture by which they
upgraded their technology capability.
 It will concentrate on technological aspects of technology transfer in a resource
perspective.
One of the major limitations of the study was time limitation. So we just focus on two

companies to conduct the research. Among Vietnamese coffee companies, VIETDUC and
DAKMAN are chosen to carry out the research. They are two typical companies for most of
Vietnamese coffee industry.
There are a lot of factors which affect the success of a technology transfer such as the
Government's policies and diplomatic relations, maturity of technology and degree of
sophistication of the transferred technology but these are not focused in this study.
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Chapter 2
Literature Review
2.1 Concepts of technology transfer
It is not easy to clearly define “ technology transfer”. Different philosophers often employ
different concepts for their literature and, sometimes, they seem to have contrast conclusions.
In some points of view, technology transfer is just the transfer of machines and equipment to
a new environment but others take into accounts both hardware and software of technology.
These points of view basically stem from different perspectives such as " technology as a
transformer", " technology as a tool", technology as Knowledge" or " technology as
embodiment form". Mingsarn [1981] used four concepts of technology transfer, which can be
often found in the literature:
 Technology is transferred only when the local work force has ability to use and
responsible for the imported technology and do it efficiently.
 Technology is regarded transferred when it is used effectively in a new environment
regardless of the origin of inputs of production. For this concept, technology is only
considered transferred to other constitution when it is assimilated and adapted in new
condition even if every thing is done by outside people. As long as the technology is
employed efficiently, technology is considered transferred.
 Technology transfer occurs when technology spreads to other local productive units in the
recipient economy.
 When imported technology is fully understood by local workers, and when these workers
begin to adapt the technology to a local environment for particular needs or modify it for
other purposes.

Therefore, technology transfer can be understood according to one of all the four concepts.
For example, when local workers acquire all skills needed to operate the machines properly
or they can solve all problems probably happening, technology is actually transferred.
Depending on the requirements of transferees, technology transfer is recognized when some
technological capabilities demanded are gained and improved.
Robinson [1988] firstly used the term of “technology transfer package”. It is shown in the
following diagram:
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Finance
Marketing
Processes
product
Social OrganizationManagement
Know-how transferred
Manuals
Engineering & skilled workers
Machine
tools
Blue prints
Figure 2.1: The technology transfer package
(Source: Michael Z. Brooke, selling Management Service Contracts in International Business.
The technology transfer package concept is widely used and covers many areas of
technology transfer. Marketing may not be included in technology transfer even though it
seem not to be a part of technology, unless in very special cases. In manufacture of industrial
goods like machinery and equipment, marketing may be viewed as a part in technology
package. In this case, marketing is also included because the marketing staff needs to have
certain technical and engineering skills to introduce how to install and offer after sale service
for such goods.
 Technology transfer consists of one or more indivisible technology modules, which may
be core technology or peripheral one. " Core technology" is indispensable to a process or

the use of a product or performance of a service. The modules may also contain
peripheral technology, which may not be necessary for a process. These modules may be
transferred via technical documents and blue prints and/ or personal explanation,
demonstration, or training or “ know how” assistance.
 Permission to use various rights, knowledge, or assets (that is, under license, franchise,
or lease).
 Hard goods- "embodies” technology which may take the form of Capital Equipment
 Intermediate goods
 Final goods
 Soft goods- “disembodies" technology, which may take the form of written documents,
computerized package, and photographs, or oral transmission whether telephonic,
recorded or face to face.
The embodiment forms of technology -UNCTAD, Geneva, [1990] are described as follows:
 The embodied form Includes capital goods and intermediate goods as presented in plant,
machinery and equipment. It also includes human labor… skilled and specialized
manpower to use equipment and technique accurately and to resolve problems that may
occur in production process or in the implementation of a plan, design or activity.
 Disembodied technology consists of information recorded in tangible form, whether in
words such as the written description of a production process, or in a diagrams or some
other forms of graphic presentation, such as production drawing, specifications or plan,
figures symbols and so on. Technology can be said to encompass the thousands of
detailed steps that are necessary for the development and manufacture of a product
including the design and development of manufacturing processes and equipment.
As Baranson [1976] defined it, knowledge transmission enables the recipient enterprise to
manufacture a particular product or provide a specific service.
Other researcher e.g. Teece [1977] defined technology transfer like the transfers of know
how. As distinct from the sale of machinery and equipment which embodies technology, they
argue that the transfer of technology, in most cases, calls for a sustained relationship
between two enterprises over a period of time. So the receiving enterprise can reproduce the
product with the desired level of quality standards and cost efficiency. This relationship model

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of international technology transfer is consistent with the work of Contractor [1980] Robinson
[1988].
Chesnais [1986] argued that the transfer of technology implies the transfer to the recipient not
only of the technical knowledge needed to produce the products but also of the capacity to
master, develop, and later produce autonomously the technology underlying these products.
The transfer of “ know how” and “know why” component of technology is rarely defined in
detail in philosophies. Ramanathan [1994], has considered technology as the “ hardware” and
“software” components in detail through the definition of Polytrophic components of
manufacturing technology, which can be used for mapping the technology transfer
successfully.
2.2. The Polytrophic components of manufacturing technology
Traditionally, technology can be viewed as basic forms of tool or “technology as a tool”
perspective. In this perspective, there is an emphasis on the importance of machines and
human-machine interactions. Technology is also defined as knowledge or “technology as
knowledge “ perspective. This perspective highlights the importance of “ know why” and
“know how” and implicitly gives out the role of human skill in gathering, using and upgrading
knowledge. Finally, “technology as transformer” perspective is used to stress on the
importance of organizing activities in order to achieve desired transformations. In general,
they are viewed as comprising two major parts: “ hardware” and “software”.
Hardware: The physical items related to the task of technical production.
Software: The work roles and division of labor, which surrounds it.
The definitions given by the Technology Atlas Team [1986], Asian and Pacific Center for
Transfer of Technology [1987] and Sharif [1989] made a further step and break down these
two major parts into four components:
 Object-embodied form or “ Technoware”
 Human embodied form or “ Humanware”
 Documents/ record embodied form or “Inforware” and
 Institution Embodied form or “orgaware”
Ramanathan [1994] defined these four elementary and interacting components in detail and

the importance of them at the firm level. In fact, he confines these comprehensive forms of
technology in a comprehensive definition of manufacturing technology.
Technology embodies the four components, which are hardly transferred well especially the
software because the software of technology is often associated with human being such as
skill of employees, skill of manager and the communication and information system as well.
2.3 Concept of appropriate Technology
Bourrieres [1979] from a micro-system perspective, suggested that appropriate technology
should be defined in the context of complex system and five levels have to be considered:
The objective of the decision making unit, resource available, the action intended, the actors
and the results.
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From an economic perspective, suggested that appropriate technology should be defined as
one that makes possible the production of a given good at a price not exceeding the current
world price, taking into account the scarcities and opportunity cost of production, exchange
rate, and the rate of interest or discount.
From the financial perspective, the World Bank defined appropriate technology as one that
provided the highest net present value relative with capital investment.
Although there are various definitions of appropriate technology, there is general agreement
that such technology must be efficient, not be obsolete, and that it must vary according to the
particular situation of each country under that consideration. There is not an appropriate
technology for all countries but the appropriateness of a technology with one circumstance.
2.4 Concepts of Technological Capability
Many researchers give typologies of technological capabilities. From a social perspective,
Dunning [1981] identified five elements of technological capability: people, operation
experience, an effective organization, a problem sensing and solving mechanism, and
necessary values and attitudes.
Westphal, L. E. Kim and Dahlman [1985] made a functional classification of capabilities
(production, investment, and innovation).
Baranson and Trends [1985] distinguished four types of technological capabilities: capability
in purchasing technology, plant operation, duplication and expansion, and innovation.

Ramanathan [1994] based on an extensive literature review has pointed out six types of
technological capability that will be needed by a transferee: Acquisitive capability, operative
capability, adaptive capability, innovative capability, marketing capability, and supportive
capability. These conceptual distinctions, although not always easy to make in practice, are
helpful in interpreting inter-industry and cross-country differences.
Technology transfer is not as simple as purchasing a capital good or the acquisition of its
blueprints. The transferees have to devote substantial resources to assimilate, adapt, and
improve upon the original technology. The successful trends of transferred technology use
are to be dependent upon transferor firms and countries to develop their own technological
capabilities.
2.5 Acquisition of technological Capability
Many studies proved that acquisition of a technology does not automatically lead to
acquisition of technological capability.
Katz [1985], based on his studies of six Latin American Countries, concluded that the kind of
technological capability that emerges and develops in any given social setting depends on
the type of economic agents in such a setting, the resource endowments. They are affected
over time. He further pointed out that the size of the firm, its field of activities, type of
production organization, the degree of product standardization, and type of ownership are all
important determine the factors in the development of indigenous technological capability.
Dunning [1981] said that, after more than two generations of control of the local Trinidad-
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Tobago oil industry by foreign MNCs, a local technological capability still does not exist over
the whole range of activities necessary for running the industry. Mytelka [1985], in his study of
the textile industry in Africa, concluded that substantial technological effort is essential to the
acquisition of technological capability. Lasserre[1983] emphasized the importance of training.
They correctly pointed out that the geographical transfer of technology might be of little use
unless the appropriate human resources are simultaneously available.
The transferee countries pay a lot of effort towards the continuous adaptation of imported
technology to local conditions and to the firm’s operational characteristics and productive
constraints. Empirical studies have showed that adaptation takes place through changes that

stretch the capacity of existing plants, break bottlenecks in particular processes and product
designs. However, such positive actions do not take place easily or cheaply in any
environment.
2.6 Problems of international technological transfer encountered by LDCs
Balasubramanyam [1987] has pointed out lack of efficient sources of components as a major
problem in adapting and using imported technology. Poor quality of components supplied,
lack of adherence to delivery schedules and lack of continuity in supply were cited.
Thomas [1973] pointed out that the transfer of technology to the African countries is usually in
the “embodied” form in imported technology. Lack of appropriate manpower to exploit these
technologies to meet local conditions and needs and the obstacles by the mechanism of
transfer have fostered complete dependence on foreign technology and limited indigenous
technological initiative. For example, agricultural technology (for food production and
processing) “embodied” in imported tractors, irrigation systems, fertilization processes, new
cropping, canning, and refrigeration have not been advantageously used due to improper
adaptation to tropical agriculture, lack of effective organizational know how, and requisite
marketing techniques.
Imported technology needs to be restructured to suite indigenous labor needs, the climate
and the culture. The imported design and equipment may have to be restructured to fit the
local needs and conditions.
2.7 Main elements of technology transfer process
The main elements of technology transfer process are Transferor, transferee, Technology,
linking mechanism, Transferor environment, transferee environment and the greater
environment (see figure 3)
Transferor: Supplier of technology
Transferee: The receiver of technology
Technology: Includes tangible parts as well as intangible part such as “know how”, “know
why” suitable to the technology.
Linking mechanism: the means by which technology is transferred from the transferor to
transferee. The linking mechanism may be as indirect or direct one. Direct mechanism refers
to a case when transferee is in direct contact with the transferor of the technology. Indirect

mechanism is the one when an intermediary partner engaging for acquiring the technology.
Market oriented mechanism: these are initiated with profit motive as a major consideration in
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technology transfer. It includes: purchase of plants, equipment and product, direct foreign
investment (FDI), joint venture, turnkey contract, subcontract, licensing, and technology
information service
Figure 2.2: Schematic Presentation of the Technology Transfer Process
Gougeon & Gupta(ed.), [1997]
Transferor environment: the immediate set of conditions under which the transferor is
operating: at the individual, organizational and national level.
Transferee Environment: this is mainly determined by the absorptive capacity of the
transferee (physical and organizational infrastructures, skill availability, commitment to
change, etc.).
Greater environment: The factors that can influence beyond transferee and transferor
environment. For instance, transfer of technology between two nations may depend on some
factors such as political relationship, exchange rate, trade negotiations, technological level of
each nation and the competition in the international market.
Market oriented mechanism: These are initiated with profit motive as a major consideration in
technology transfer. It includes: purchase of plants, equipment and product, direct foreign
investment (FDI), joint venture, turnkey contract, subcontract, licensing, and technology
information service
2.7.1 Comparison of major Technology Acquisition Methods
Depending on specific condition, a technology transfer mechanism will be selected and
applied. The comparison of five main mechanisms of technology transfer is presented in the
following table:
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Transferor’s environment
Transferor
Transferee’s environment
Transferor

Technology
GREATER
ENVIRONMENT
Link Mechanism
Table 2.1: Comparison of Major Technology Acquisition Methods
Major Characteristics Dependent Independent
JV P L I R
Cost - Cost of technology acquisition
- Cost of R&D
- Royalty Payment
H
VL
-
VH
VL
VH
M
L
H
L
L
-
VH
VH
-
Manpower – Need for local R&D manpower
- Possibility of training specialist before
start- up
L
L

L
L
M
M
H
H
VH
VH
Time - Advantage in shortening development
Time (early start-up time)
VH VH M * H
Technological Considerations
- Technological self-reliance
- Availability of key technology
- Automation/ Adaptability of technology
Utilization
VL
VL
VL
L
VL
L
M
L
M
H
M
VH
VH
VH

VH
Market - Expected return on success * * * * VH
Risk - Technological risk
- Commercial risk
VL
*
VL
*
L
*
M
*
VH
VH
Where JV: Joint venture, P: Purchase of technology, L Licensing in, I: Imitation, R: indigenous
R&D, VH: very high, H: high, M: medium, L: low, VL: very low.
Source: Hand outs, Professor Young-suk Huyn [1999].
Based on the needs of transferee and characteristics of technology, a suitable mechanism
will be selected in order to satisfy the needs.
According to Ford [1988], factors affecting technology acquisition decision are company’s
relative standing, urgency of acquisition, commitment/ investment involved in, technology life
cycle position and categories of technology. They are illustrated in table 3.
Depending on specific condition of company and characteristics of technology acquired, a
suitable method is selected. It is very important to select a right method because it can affect
your competitiveness in the market.
Table 2.2: Factor Affecting Technology Acquisition Decisions.
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Acquisition
Methods
Company’s

relative
standing
Urgency of
Acquisition
Commitment/
Investment
Involved in
Technology
Life Cycle
Categories of
technology
Internal R&D High Lowest Highest Earliest
Most
distinctive or
“Critical”
Joint Venture Lower Early
Distinctive or
basic
Contract-out
R&D Low Early
Distinctive or
basic
License in High Lowest Later
Distinctive or
basic
Non-
acquisition Low High
No
commitment All stages external
Highest

High
Source: Ford [1988]
2.8 Joint venture and purchase of Technology in developing countries
According to the report of the International Development Research Center (web:
most technology transfer mechanisms used
were Joint Venture, BOT, FDI and purchase of technology. In post harvest industry, Purchase
of technology and joint venture are normally used. Each mechanism has their own
advantages and disadvantages but both of them need a careful selection of technology or
partner and good management of technology transfer. For State owned companies, purchase
of technology is mostly preferred because it is easy to handle the transfer and the transferees
have autonomy in running their business. Joint venture is also considered as an effective way
to acquire technology in case of shortage of resource or facing difficulties in finding market for
output.
Purchase of technology seems a simplest form of technology transfer but sometimes it is
difficult to handle successfully especially in the adapting process of the new technology. It
seems the only transfer of physical machines and equipment but actually other components
such as humanware, and inforware much be embodied when the machines and equipment
are transferred.
In short, managing a transfer of technology through purchase of machine and equipment or a
joint venture is not easy. Software of the technology transferred must be an indivisible part to
ensure a proper transfer of technology.
2.8.1 Purchase of technology
2.8.1.1 Reasons to engage in buying and selling technology
Motives of technology seller
There are many reasons for a company to sell its technology to the other. According to Hyun,
J.H. and J.K.Oh [1996], the reason for the seller engaging in selling its technology are
financial, market entry, selling obsolete technology or avoiding imitative competition.
Some possible reasons for selling technology may be:
 The first reason is that the seller can obtain immediate financial benefits from the buyer
for the technology sold.

 The second reason may be the seller wants to exploit good sources of raw material.
 Technology sold is not valuable or competitive advantage creating but it is still new and
competitive in other market.
 Gain access to a new market
 Testing or improving its existing technology
Among these reasons, financial gain and market entries are the most frequent reasons for the
sale of technology. One other important reason is the obsoleteness of technology in the
primary market. The seller wants to change its technology and sell the existing one to other.
Motives of technology buyer
Some possible reasons for buying technology:
• The buyer lacks capability to produce technology locally due to both skill and resource
constraints
• Reducing time needed for upgrading company’s technology and improving its capability
• Having autonomy in doing business
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There are many main factors affecting the buyer’s decisions. Ford [1988] noted that
companies choosing purchase of technology as mechanism of technology often has full
autonomy in control on the technology. This is a strong point over other mechanisms and it is
also the main reason why transferee wants to choose purchase of technology than other.
2.8.1.2 Problems and difficulties with purchase of technology
Purchase of technology is the simplest method of acquiring technology but it has to face a lot
of problems and difficulties. First, there may be no real need for the plant or equipment
purchased because the existing technology is not out of date in the company environment.
The second is the inadequate infrastructure facilities for the new technology such as water,
power, transportation and so on. Sometimes obsolete technology is bought because of the
lack of experience. This problem mostly occurs in transfer of technology from Developed
Countries to the third ones where the transferees often lack experience, knowledge and
information of technological market. Problems may come from the lack of intangible
technological components because the buyer just focuses on the physical components of
technology.

Because the commitment of transferor is not obliged in long term with buyers so the problem
may arise after the sale such as in repairing or maintenance.
In order to avoid these problems or reduce their impacts, the buyer of the technology must
carefully manage the technology transfer and the adaptation to the company’s environment.
2.8.2 Transfer of technology through joint venture methods
2.8.2.1 Definition of joint venture
There are some definitions of a joint venture. They are somehow different but a joint venture
usually has three elements: a separate legal entity, joint ownership of the legal by the joint
venture partners and joint management of the joint venture partner.
Tomlinson [1970] defined Joint venture as one where there is the commitment, for a more
than very short duration, of fund, facilities, and services by two or more legally separate
interests, to an enterprise for the mutual benefit.
UNIDO [1971] defined joint venture as follows: “ joint ventures are enterprises in which there
is significant, and typically an initial sharing of equity between the principal parties to the
ventures or some substantive and continuing contractual arrangement of a technological
and / or trading nature”
Both definitions of joint venture emphasize the three elements above of joint venture. For a
joint venture between foreign and local parties, there are some characteristics as follows:
 The establishment of a new enterprise in the legal form of a separate entity
 Participation of local partner(s) and foreign partner(s)
2.8.2.2 Reasons to engage in joint venture
Joint venture is particularly appropriate when complementary needs exist between firms and
when the partners’ strategies are compatible. This ensures the participating companies have
a reasonable and effective degree of cooperation and commitment throughout the life of the
agreement.
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The motive to form a joint venture can be viewed from foreign and local partners’
perspectives. Some motives of foreign partner and local one are presented as follows:
Motives of foreign partner
The motives of foreign partner can be classified into six groups:

 Developing and penetrating oversea or new markets
 Securing, maintaining and developing raw material supplies
 Financial reasons ( using low labor cost, transferring old technology, spreading the fixed
cost and so on)
E. Hallet [1971] indicated that joint industrial or commercial operation usually derive their
reasons from economies or sharing risks, financial resources, management, and personnel,
corporate know-how, and other intellectual property.
Webster [1989], in his study, showed that the underlined reasons for joint ventures go beyond
survival in the international market place or even an interest in pursuing growth opportunities.
The joint venture may be the only means of gaining market access to countries whose non-
tariff barriers and import restrictions make direct exporting difficult, if not impossible.
Because the risk associated with new market entry is often high. The risk is even higher in
markets about which the company has not had any experience before such as new open-
door economies like Vietnam or China.
Motives of local Partner
According to Shenkar [1990] many developing countries seek foreign investment in order to
obtain capital, technology, managerial know-how and other benefits to further their economic
development. Joint venture is one of the ways, which are mostly used to obtain these
benefits. Some reasons for local partners to be eager to engage in joint venture are:
• Technology transfer and technological training. This is the main motive for all local
partners.
• The upgrading of technology investments already in place
• Increasing company’s earnings
• Increasing exports
• An increase in the local productive capacity
• Industrial identification
• Increasing the local value added
• The training and advancement of host citizens
Doo-Soon Ahn [1981] identified three categories of motives to explain why developing
countries enter joint ventures. These are as follows:

• Training and mobilization motives. (Including capital, training for work force and
management skill).
• Economics and political motives.
• National political strategic motives:
From the point of view of local companies, joint venture can help them to increase their
positions in the local market, by upgrading its technology capability by learning from their
20
partners. However, economic motives and market entry are always the most important factors
leading to decision of coming into a joint venture with foreign companies.
2.8.3 Problems and Difficulties of Joint Ventures in developing countries
Through formation and operation of joint ventures, so many difficulties and problems may
arise. Problem may be a general one, which normally occur in most of Joint Ventures. Others
may be associated closely with one specific stage or through out the whole process from
forming to management of joint venture.
Geringer [1991] made a survey to note that the ratio of unsatisfied joint ventures in
international business ranging from 37% to 70%. Lasserre [1983], in his study of ASEAN
nations pointed that there are some sources of problems faced by foreign partners and local
partners. The sources are showed in the following table:
Table 2.3: Perceived Sources of Problems in Foreign Operations in ASEAN
Perceived by European Partner (%) Perceived by local Partner(%)
General condition: 30%
-Change in economic conditions
-Devaluation
- Imitative competition
General condition: 35%
-Competition
-Government regulations
-Bad debts
Government Policies 23%
-Local content push

-Bureaucracy
-Remittance
Behavior of 47%
Local partner & employees
-Lack of management skills
-Absenteeism
-Poor motivation
-Lack of dynamism of local partner
- lack of trust from local partner
Behavior of 65%
European Manager
-Lack of trust
-Lack of experience
-Too many expatriates
-Too high technical expectations
-Too high sales quota
-Lack of communication
Source: Lassere [1983]
Selection of partner
In stage of selecting partner, there are some common problems to which local partners may
face. Lassere [1983] noted that the search process was typical of “ limited information”
theory. Few or non-searchings are done to compare alternatives, nor is there an in-depth
investigation of the motives and capabilities of the candidate.
Selections of proper partner are problematic processes because developing countries have
not sufficient information and experience. Thus, some problems in this stage are:
 Less time and attention for this process
 Limited information of partners
 Less effort for comparing alternatives and assessing their capabilities
Negotiations
Bobinson and Richard [1964] pointed out main problems occurring in this process concerning

financial aspect of the agreement but in some countries. Negotiation is more complicated by
21
culture, legal and bureaucracy which sometimes bring prospective parents to a point of
despair.
In short, good joint ventures require a systematic selection, negotiation and management as
well as capability for problem solving. From the first stage of forming joint ventures to trial
operation and management of operation, a lot of problems may occur which must be dealt in
order to keep the joint ventures existing.
2.9. Review of previous research
Most of the previous comparative studies on performance have dealt with economic
performance. The results of these studies show that joint ventures with MNCs have been
more efficient and profitable than indigenous firms, due to the fact that MNCs have been
superior skill and knowledge in R&D, Marketing and management than indigenous firms
(Asheghian, 1982; Dunning, 1970; Mason 1970).
In a research titled “ small and medium-sized Japanese joint venture in Korea” of Jinjoo Lee
and Young-suk Hyun (1986), the two authors compared the behaviors, performance between
indigenous firms and Japanese joint ventures in Korea. The authors/ pointed out that there
were distinctive differences in behavior and performance between small and medium sized
indigenous firms and Japanese joint ventures in Korea. Indigenous firms exhibit higher
technology assimilation, higher interests of top management in innovation and higher
technological performance (innovation) but lower economic performance (sale per employee).
The conflict between technological and economic performances of indigenous and joint
venture firms can be explained by the better skill and knowledge of Japanese joint ventures
over indigenous ones’.
Table 2.4 Some Results of the research in Korea
Variables Indigenous firms/ Japanese Joint
Venture
R&D Intensity higher*
Technology assimilation efforts higher
Top management interest in innovation higher

Export oriented lower
Technological performance (innovation) higher*
Economic performance (sale/ employee) lower
• Not significant at 0.01 level
Source: International Small business journal, Jinjoo Lee and Young-suk Hyun (1986).

22
Chapter 3
Analytical framework
The literature review, in chapter II, presented various concepts and studies of technology and
technology transfer, impacts of technology transfer on the company’s technological capability
and mechanisms of technology transfer. In this chapter, the framework to analyze the transfer
of technology at firm’s level will be presented.
3.1 Analytical framework
For technology transfer through purchase of plant and equipment will be assessed mainly
based on cost of technology, time and four components of the transferred technology. It is
also important to evaluate the transferred technology according to its performances or its
impacts on the output. The company’s technological capability improvement is also an
important element of a successful technology transfer.
For technology transfer through joint venture mechanism, beside the above criteria, the
effectiveness of the joint venture’s operation, the effectiveness of management and economic
results are also regarded as major factors to determine the success of the joint venture.
There is a close correlation between the management of the joint venture and the success of
the technology transfer.

In this study, the process and impacts of technology transfer through the mechanisms of plant
and equipment purchase and joint venture are mainly focused. From a specific condition of
each company and objectives and goals of its technological strategy in relation with its
cooperate and business strategies, the technology transfer will be assessed and compared.
The study will examine some aspects as follows:

3.1.1 Corporate governance structure
Major of stakeholders in each company as well as their roles in building the company’s
strategy including corporate, business and technological strategies will be analyzed.
Stakeholders are recipients of good performance of a company and also the persons who
suffered the loss. The stakeholders influence on CEO of the company and the CEO will
based on the benefit of the stakeholders and a specific condition of the company to select for
the choice of its strategy to meet the future demand. This strategy will determine the way they
organize production as well as other activities such as marketing, finance o achieved good
performance.
23
Figure 3.1: Analytical Framework of the Research Study
3.1.2 Environment and internal resources/ capability
A sound strategy can be made only if the company assesses its capability and resources and
based on its current and future capability prepares a scenario to meet the change of
environment. Environment scan is considerably important for a company to select its
competitive strategy. External environment provides the company opportunities to exploit in
the future but it may bring back threats, which threaten the development or even survival of
the company. In high competition environment, a wise company will position itself in the
weakest level of forces. At the weakest level of forces, the company will find it easier to
maintain its position or prepare a competitive strategy for development. Analysis of
environment and internal resources and capability is the examining of the firm’s strengths,
weakness, opportunities and threats to exploit its strengths, overcome is weakness to catch
the coming opportunities as well as coping with threats
3.1.3 Chief executive officer
A CEO is a person who build cooperates, business and technological strategies for the
company. He is the most important personnel in a company because he eventually
24
Company A)
(Purchase of Technology)
Evaluation and comparison

Sophistication of technology transferred
Technological Components transferred
Technological economic performances( quality,
sale, profit, cost)
Corporate
Governan
ce
structure
Environment
CEO
Internal resources/ capability
Technological Strategy:
Purchase of plant
Structure
Performance
Company B:
(Joint venture)
Corporate
Governan
ce
structure
Environment
CEO
Internal resources/ capability
Structure
Performance
Technological Strategy:
Forming a Joint
Venture
determines the choice of company’s competitive strategy. He determines way for a company

to meet its future demands and he is also the final one to prepare a competitive strategy to
deal with its rivals. For technological strategy, CEO will determine what mechanism used to
upgrade and acquire company’s technological capability based on his environment scan and
current capability of the company.
3.1.4 Strategy
Technological strategy of acquiring new technology and its integration with business strategy
will be analyzed to determine the fitness. It is very important to view the firm as an economic
value chain and the technology can create a firm’s competitiveness. Technology development
is a supportive activity for the value chain so technology can affect any value added primary
activities in the value chain. Business strategy integrates with technological strategy to exploit
the market value.
3.1.5 Structure
It is organization of all operational activities such as acquisition and assimilation of
technology, production and marketing.

3.1.6 Performance
The companies regard technology as major component in a proactive strategic planning and
utilization of new technology to establish the strategies of the corporation on the basis of a
unique competitive advantage. Technology can be also regarded as the most important
resources so it is needed to evaluate the results of new technology on the company. The
quality of product improvement, volume of sale and profit gained are major criteria for
evaluate the performance of new technology. The evaluation and analysis will be based on
the major stakeholder benefit.
25
Chapter 4
Vietnamese coffee industry and company background
4.1Development of Vietnamese Coffee Industry
Coffee was introduced into Vietnam by French missionaries in 1857. Coffee plantations were
established in the North Midlands in the late 1800s and in the North Central Coast in the early
20

th
century. In the 1920s, suitable coffee growing areas were discovered in the Central
Highland region. By 1945, Vietnam had about 10 thousand hectares of coffee, most of which
was in the central region. Because of the low yields (around 0.5 tons/ha), production was just
4500 tons, most of which was exported to France (DSI, 1998).
During the period when Vietnam was divided (1954-1975), the north took over French
plantations and formed 24 state cooperatives. Production reached close to 5000 tons in 1968,
but declined subsequently. In the South, coffee production reached a similar level in 1973.
Following reunification and peace, coffee production more than doubled to reach 12 thousand
tons in 1980 (DSI, 1998).
Between 1980 and 1985, coffee area and production were stagnant and yields were low
(around 1 tons/ha). For reasons discussed below, coffee production has expanded
dramatically since 1986. Coffee exports, now, account for 6-12 percent of the total value of
exports, making it the second most important export crop after rice.
In the decade of 1980s, coffee production was much improved in terms of planting area but
post harvest processing technology was regarded as an inferior factor because the central
planned mechanism for the whole economy was just focusing on volume of coffee produced.
With support of the Former Democratic Republic Germany, some Vietnamese coffee
companies used machines made in this country for coffee processing. This kind of machines
used old machines for husking, classifying and polishing coffee bean. So the rate of broken
coffee was very high and quality was low. At that time, all companies did not care about the
quality of coffee just because most of the coffee was consumed in the former socialist
countries where the demand was usually extremely higher than the supply.
Since the collapse of the Socialist Country System, Vietnamese coffee industry lost all of its
traditional markets. Thus, these companies have to seek new markets for their product. To
enter the world market, Vietnamese companies must deal with high competition but step by
step they have created their own images. To succeed in the new markets, the quality of
coffee has been actually considered by these companies a very important factor to be
achieved. Vietnam became the forth-largest country producing and exporting coffee bean
(green coffee) in 1996 and the first largest country of robusta coffee exportation in 1999 puts

a remarkable step for the development of Vietnamese coffee industry.
In 1998, going a long with the agreement signed between the Government of Vietnam and
the Government of the former Eastern Germany, the German Government has supported four
coffee companies in Daklak province amount of 4 million DM to upgrade their processing
plants. Perceiving the impacts of processing technology on quality of coffee, many coffee
companies now are seeking new technology to improve their processing capability.
26
4.2 Marketing channels and exporting markets
In the past, almost all coffee in Vietnam was robusta and most of it was grown on state farms.
The harvested cherries were dried and delivered to the state farm processing plant. State
farms processing plants generally have capacities of around 3000 tons, making them
appropriate for farms of around 1000 to 1500 hectares. The green beans would then be
delivered to the port for export under a government-to-government contract.
Since the national reform, the marketing channels have become much more complex.
Farmers associated with a state farm generally sell their output to the state-farm processing
plant, though they have the option of selling some outside. This option has created problems
for some state farms, because farmers can more easily avoid repaying debts to the farm
management.
Every year, over 4 million tons of green coffee is traded. The largest coffee importers are the
United States, Germany, and Japan, followed by other European countries. The largest
markets for Vietnamese coffee are the United States (24percent) and Germany (17 percent).
Until 1992, the embargo of the US Government on Vietnamese exports meant that most
Vietnamese coffee was exported to Singapore where it was reprocessed and exported.
The main competitors of Vietnamese coffee are Brazil and Colombia and Indonesia. Brazil
produces medium to low-quality coffee in a production system that includes much large-scale
coffee plantations. In contrast, Colombia produces high-quality arabica coffee because coffee
is grown by small farmers within selective harvesting and other quality-control measures.
4.3 Overview of coffee processing
Coffee beans are the seeds of fruits, which resemble cherries, with a red skin (the exocarp)
when ripe. Beneath the pulp (mesocarp), each is surrounded by a parchment-like covering

(the endocarp), lie two beans, flat sides together. When the fruit is ripe a thin, slimy layer of
mucilage surrounds the parchment. Underneath the parchment the beans are covered in
another thinner membrane, the silver skin (the seed coat). Each cherry generally contains two
coffee beans. If there is only one it assumes a rounder shape and is known as a pea-berry.
Coffee beans must be removed from the fruit and dried before they can be roasted; this can
be done in two ways, known as the dry and the wet methods. When the process is complete
the unroasted coffee beans are known as green coffee.
DRY METHOD
The dry method (also called the natural method) is the oldest, simplest and requires little
machinery.
The method involves drying the whole cherry. There are variations on how the process may
be carried out, depending on the size of the plantation, the facilities available and the final
quality desired. The three basic steps, cleaning, drying and hulling, are described below.
Firstly, the harvested cherries are usually sorted and cleaned, to separate the unripe,
overripe and damaged cherries and to remove dirt, soil, twigs and leaves. Winnowing can do
this, which is commonly done by hand, using a large sieve. Any unwanted cherries or other
material not winnowed away can be picked out from the top of the sieve. The ripe cherries
can also be separated by flotation in washing channels close to the drying areas.
27
The coffee cherries are spread out in the sun, either on large concrete or brick patios or on
matting raised to waist height on trestles. As the cherries dry, they are raked or turned by
hand to ensure even drying. It may take up to 4 weeks before the cherries are dried to the
optimum 12% moisture content, depending on the weather conditions. On larger plantations,
machine drying is sometimes used to speed up the process after the coffee has been pre-
dried in the sun for a few days.
The drying operation is the most important stage of the process, since it affects the final
quality of the green coffee. A coffee that has been over dried will become brittle and produce
too many broken beans during hulling (broken beans are considered defective beans). Coffee
that has not been dried sufficiently will be too moist and prone to rapid deterioration caused
by the attack of fungi and bacteria.

The dried cherries are stored in bulk in special silos until they are sent to the mill where
hulling, sorting, grading and bagging take place. All the outer layers of the dried cherry are
removed in one step by the hulling machine.
The dry method is used for about 40% of the Arabica coffee produced in Brazil, most of the
coffees produced in Ethiopia, Haiti and Paraguay, as well as for some Arabicas produced in
India and Ecuador. Almost all Robustas are processed by this method. It is not practical in
very rainy regions, where the humidity of the atmosphere is too high or where it rains
frequently during harvesting.
WET METHOD
The wet method requires the use of specific equipment and substantial quantities of water.
When properly done, it ensures that the intrinsic qualities of the coffee beans are better
preserved, producing a green coffee, which is homogeneous and has few defective beans.
Hence, the coffee produced by this method is usually regarded as being of better quality and
commands higher prices.
Even after careful harvesting, a certain number of partially dried and unripe cherries, as well
as some stones and dirt, will be present among the ripe cherries. As in the dry method,
preliminary sorting and cleaning of the cherries is usually necessary and should be done as
soon as possible after harvesting. This operation can be done by washing the cherries in
tanks filled with flowing water. Screens may also be used to improve the separation between
the ripe and unripe, large and small cherries.
After sorting and cleaning, the pulp is removed from the cherry. This operation is the key
difference between the dry and the wet methods, since in the wet method the pulp of the fruit
is separated from the beans before the drying stage. The pulping is done by a machine,
which squeezes the cherries between fixed and moving surfaces. The flesh and the skin of
the fruit are left on one side and the beans, enclosed in their mucilaginous parchment
covering, on the other. The clearance between the surfaces is adjusted to avoid damage to
the beans. The pulping operation should also be done as soon as possible after harvesting to
avoid any deterioration of the fruit, which might affect the quality of the beans.
The pulped beans go on to vibrating screens, which separate them from any un-pulped or
imperfectly pulped cherries, as well as from any large pieces of pulp that might have passed

through with them. From the screens, the separated pulped beans then pass through water-
washing channels where a further flotation separation takes place before they are sent to the
next stage.
28
Because the pulping is done by mechanical means it normally leaves some residual flesh as
well as the sticky mucilage adhering to the parchment surrounding the beans. This has to be
completely removed to avoid contamination of the coffee beans by products resulting from the
degradation of the mucilage. The newly pulped beans are placed in large fermentation tanks
in which the mucilage is broken down by natural enzymes until it is dispersible, when it can
be washed away. Unless the fermentation is carefully monitored, the coffee can acquire
undesirable, sour flavors. For most coffees mucilage removal takes between 24 and 36
hours, depending on the temperature, thickness of the mucilage layer and concentration of
the enzymes. The end of the fermentation is assessed by feel, as the parchment surrounding
the beans loses its slimy texture and acquires a rougher "pebbly" feel.
When the fermentation is complete, the coffee is thoroughly washed with clean water in tanks
or in special washing machines. The wet parchment coffee at this stage consists of
approximately 57% moisture. To reduce the moisture to an optimum 12% the parchment
coffee is dried either in the sun, in a mechanical dryer, or by a combination of the two. The
sun-drying is done on extensive flat concrete or brick areas, known as patios, or on tables
made of fine-mesh wire netting. The beans are laid out in a layer of 2 to 10 cm, and turned
frequently to ensure even drying. Sun-drying should take from 8 to 10 days, depending upon
ambient temperature and humidity. Coffee dries more quickly if raised on tables because of
the upward draught of warm air. The use of hot-air drying machines becomes necessary to
speed up the process in large plantations where, at the peak of the harvesting period, there
might be much more coffee than can be effectively dried on the terraces. However, the
process must be carefully controlled to achieve satisfactory and economical drying without
any damage to quality.
29
Figure 4.1: Diagram of Primary Coffee Processing
30

Coffee Cherries
Harvested
Dry process
method
Dry process
Method
Drying
Material preparation
Washing, foreign material
separation
Floating
coffee bean
Foreign
Material
Separating Cherry Exocarp
(Red skin)
Red-skin
Separating mesocarp &
endocarp
Coffee Seed drying
Pulp of the
fruit
Dried coffee seedDried coffee cherries
Foreign Material separation
Hulling coffee
Silver skin
Coffee cherry coat
Size classification of coffee
Polishing coffee
Weigh classification of coffee

Color selection
Dark and Molded
coffee
Packaging