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Definition and Concept of Technology

Aditiawan Chandra and Zulkiflimansyah 

There is no universally accepted definition of the term that might serve as a natural point of departure. In a very narrow sense, technology is only technical information contained in patents or technical knowledge communicable in written form  [31]. Very often, technology refers to a class of knowledge about specific product or production technique and sometimes includes the technical skills necessary to use a product or a production technique  [16,68].

Technology thus is largely identified with the hardware of production or technical artifacts. Frances Stewart [101] provided probably the broadest definition of technology by including all skills, knowledge and procedures required for making, using and doing useful things. Technology in her definition therefore includes the software of production – managerial and marketing skills, and extended to services – administration, health, education and finance. Smillie  [95] describes this broader definition of technology as ” the science and art of getting things done through the application of skills and knowledge “.

In general,  the concept of technology implies a subtle mix of know-how, techniques and tools. Technology in this sense is vested in people – their knowledge, skills and routines – just as much as in the machine they use. Machines and tools are only the physical manifestation of a particular technology or technologies. Indeed, mere access to the physical elements of technology – even if accompanied by instructions for their use, and time to build up experience in using them – does not automatically lead to ‘mastery’ of that technology  [2] .

For mastering technology as stated by Clark [18], should not consist just of the establishment of new production facilities along with ancillary manuals, charts, schedules, diagrams and people – embodied know – how. It requires also the knowledge and expertise for implementing technical change. This in turn involves both the underlying ‘know – why’ of the technological system itself as well as the various technomanagerial capabilities needed to evaluate and transform existing plant to meet new and innovative operating conditions. Thus, technological mastery here implies the capability to use knowledge about physical processes underlying that technology in order to assimilate, adapt and / or create novel elements, in response to changing needs [22,70,83].

Technology in Economic Literature 

In the economic literature, the importance of technology has been known since the beginning of the discipline. Economists writing about economic growth for example have recognised technological advance as its key driving force  [72,93,96,]. The conclusion was that productivity growth depends very heavily on the introduction and efficient diffusion of new and improved processes and products in the economic system.

Although the contribution of technology is well recognised in the economic literature, for long it was treated as a ‘black box’ [86]. As a result, it is still common to find technology being equated simply with machines and devices, in isolation from the human resources and social contexts of their use, which give these tools their technological value. In this light, technology is defined in a static way.

Technology is a product, a package, that is produced by one set of firms or other institutions and consumed or used by another[2]. Using the neo-classical framework, technical change in industry has  conventionally been seen as involving two main activities. First, the development and initial commercialisation of significant innovations. Second, the progressively wider application of these innovations in a process that economists and others have described as ‘diffusion’.

The first of these activities is assumed to be heavily concentrated in the developed countries, becoming significant in developing economies only as they approach the international technology frontier – a pattern which is becoming evident in the recent data on international patenting by firms in the more industrialised developing countries such as  Korea and Taiwan.

Before this stage, developing countries are assumed to be involved in the international diffusion of technology, and since this is seen simply as involving the choice and adoption / acquisition of established technologies, creative innovation is assumed to be irrelevant.

From this perspective, “technological accumulation” in industrialising countries is seen as involving technology that is embodied in the stock of capital goods, together with the associated operating know-how and product specifications required to produce given products with given techniques at the relevant production efficiency frontier[9] .In the real world however, the evidence shows that the technology market does not function like a product market, and its ‘goods’ could not be transferred like physical products.

The reality indicates that most developing countries are rather inept in using industrial technologies. They are in other words, technically inefficient in using the imported technologies. As a result, many industrial technologies are used at lower levels of productivity in developing than in developed countries.

According to Lall [66,67] the technical inefficiency in developing countries can take several forms:

  1. The inability to find, choose and negotiate for the best imported technologies at the best prices, leading to high capital costs and low productive efficiency.
  2. The inability to master properly, in a static sense, the technologies that have been imported, i.e. technologies may be used below ‘best practice’ level of efficiency, needing too many inputs to produce a given level of output or producing output of inferior quality.
  3. Wide variations in efficiency levels among enterprises in the same industry. This implies that resources are being wasted by the enterprises that fall below the technological levels of the best firms.
  4. Lack of technological dynamism, of the ability to adapt or upgrade technologies to cope with changing circumstances at home or technological progress outside. T

Thus, because of this technical inefficiency, developing countries then may stay at the low value added end of the industrial spectrum, falling behind world technological frontiers as others forge ahead[67].

The neo-classical approach to technological development was challenged in the second half of the 1970s. The new approach has been rapidly developing, particularly since the early 1980s[1]Bell and Pavitt, for example, give a more realistic view of the nature of technology. According to them, understanding of technological change requires the distinction between innovators and adopters to be rejected[8,9]. The successful adoption of technology involves more than merely the purchase of machinery and the learning of operating procedures [22]. In part, this is because of the tacit nature of much technological knowledge: making it difficult or very costly to effectively communicate the full range of skills and knowledge required in executing complex tasks. This means that firms can not shift effortlessly along the production function [66], nor operate any particular technique immediately at optimal efficiency.

For firms in developing countries therefore, while technology ‘transfer’ may be necessary, it is not sufficient. The effective adoption and mastery of technology requires the acquisition of knowledge about a set of procedures, understanding of why procedures work and skill in putting them to use [2]. According to Bell and Pavitt[9] it also involves firm-level processes in which:

1.      The basic features of a technology are adapted to meet the idiosyncratic needs of a specific situationa

2.      A stream of further incremental modifications improve the technology and / or adapt it to changes in the inputs or products demanded by a competitive market.

Evidence from studies of large-scale industrial plants in many countries, indicates both phases of adaptation require complex and creative activities, and have the potential to generate significant improvements in production and economic gains [23,48]. This suggests that innovation should be understood not as a distinct precursor to technical change in production, but rather as part of an integral process which takes place within the environment of the innovating firm. It is among other things, the process which involves matching technological possibilities to market opportunities[37]. Furthermore, the incremental innovations – adaptations, modifications and enhancements to products and processes – which occur within firms may be just as economically important as major investments in new machines or changes in products that originate outside the firm [2,12]. 

The Technological Effort of Learning

The kind of improvements in industrial performance mentioned above, are often interpreted in most economic analysis as a natural consequence of doing production; the result of an automatic learning by doing process[5] .  This doing – based learning according to Bell[10] has three remarkable properties;

1.   It arises quite passively. Little or no explicit action is required to capture the increased knowledge / skill and whatever benefits flow from that acquisition.

2.      The learning process is virtually automatic. Given a period of ‘doing’ some quantum of learning will take place.

3.      It is costless. Learning is acquired simply as a free by – product from carrying on with production. No expenditure beyond that needed for production is required to generate the increased knowledge and skill.

This ‘something for nothing’ model of the learning process leads inevitably towards certain kinds of policy prescription. Increased ‘learning’ requires increased ‘doing’, and hence various forms of protection for doing are seen as appropriate means for enhancing learning – the benefits of the learning gained will offset the inevitable cost of protection. Beyond that, the role of policy intervention is limited.

Since experience accumulation is simply a function of time or of cumulated total output, questions about policy intervention designed to raise the rate of learning derived from a given stream of production activity are largely irrelevant[10].However, studies of infant industries in developing countries[7] demonstrate that learning does not occur spontaneously, and that performance can easily stagnate or decline over the long-run. Firms which do manage to master technology and initiate a process of incremental innovation, do so as a result of learning which is neither automatic nor effortless. Even minor innovation requires a spectrum of skills, knowledge and capacities for searching, selecting, assimilating and adapting techniques.

Developing and maintaining these capabilities requires both a conscious effort by firms and the investment of significant resources [2].  Thus, we can say that the acquisition of technological capability does not come merely from experience, though experience is important. It comes from conscious efforts – to monitor what is being done, to try new things, to keep track of developments throughout the world, to accumulate added skills, and to increase the ability to respond to new pressures and opportunities [24].

The need for such effort has been emphasised in virtually every article on the subject of capability building. The term has a certain intuitive appeal because it affirms that capability building is not a trivial activity; however, effort is a very broad term and does not tell us a great deal about what the learning process involves concretely [85].

An attempt to overcome this problem was made by Bell, who designed a useful classification of learning mechanisms based on the existing empirical evidence [10]. In addition to identifying experience – based learning by operating, he distinguished five mechanisms :

  • Learning by Doing / Operating
  • Learning by Changing
  • Learning by Evaluating (Learning from Performance Feedback)
  • Learning through Training
  • Learning by Hiring
  • Learning by Searching. 

Technological Capability

Technological capability was defined in the early 1980s as ‘ the ability to make effective use of technological knowledge.  It inheres not in the knowledge that is possessed but in the use of that knowledge and in the proficiency of its use in production, investment and innovation ‘ (Westphal, Kim and Dahlman, 1985:171).

This concept was interchangeable with other concepts that referred to the same idea, such as technological effort [22,65] or technological capacity [10,59]. Later on the concept of technological capabilities became more widely used.Although technological capability is a key issue for the firms in developing.

Capability acquisition is not easy, in part because the resources firms accumulate are diverse and difficult to categorise. They comprise both human capabilities: skills, experience and knowledge vested in people, along with institutional resources: the internal procedures, routines and organisational structures of the firm, and the external linkages cemented with other firms and institutions.

 An easy trap to fall into, is to associate ‘technology’ only with production activities, for example product design, manufacturing processes and the organisation of production. However, this ignores the importance of capital goods; in raw materials supply, and in distribution of products[2,66].

One common approach is to distinguish three general types of capabilities: production capabilities, investment capabilities and innovative capabilities [2,66,85].

Production capabilities involve those skills, knowledge and resources needed to use existing plant and processes efficiently to make established products. These capabilities enable firms to monitor raw materials inputs, schedule production, control output quality, maintain and replace machinery, and generally deal with day to day problems.

Investment capabilities involve those skills, knowledge and resources which enable firms to expand workshop facilities, procure and install standard equipment; as well as to search for, evaluate and select technology and its sources for new production projects. Finally and crucially,

Innovative and Adaptive capabilities consist of the skills, knowledge and resources which enable firms to assimilate, change and create technology via such activities as capital stretching, adapting processes and modifying products[2].However, to give these three categories equal status is to miss an important distinguishing dimension. Lall for example points out that the process of developing capabilities occurs gradually and cumulatively. In general, it leads from simple routine activities in which learning is based on experience, through more complex adaptive and duplicative activities requiring searching functions, to the most innovative activities based on more formalised research [66].
Bell and Pavitt [9] introduce a general distinction between basic production capacities and dynamic technological capabilities. This distinction applies across the full range of firm activities and adds a new dimension to the taxonomy of capabilities.

Production capacities are static attributes. Knowing a firm’s production capacities gives a ‘snapshot’ of the firm’s ability to use existing production facilities, make standard investment decisions, expand established processes.

Technological capabilities on the other hand are dynamic resources, which encompasses the skills, knowledge and routines involved in generating and managing technical change, whether they concern production activities, investment activities or relations with other firms.


Bell and Pavitt call the learning process involved in building the underlying dynamic resources as ‘technological accumulation’ or ‘technological learning’ [9]. By using Bell and Pavitt conceptual model, it is easy to see how a firm with a fixed set of technological capabilities might generate a stream of improvements in production capacity over time. Such improvements may be important in enabling the firm to modify or scale-up production.

A firm with no technological capabilities at all, would be rigidly unable to adapt to any changes in its environment, and would not survive long. However, the fact that a firm has a limited set of technological capabilities, and uses these to gradually improve production capacity, may not always be adequate either. In the long run, such a firm may not be able to change radically enough to bridge the discontinuities that occasionally arise in technical change, and may be out-competed by those that can. If this conceptual model reflects reality, then a most important task facing firms in the long run is technological learning; the acquisition and strengthening of their technological capabilities [2]. 

Lessons of Technological Accumulation in PT Texmaco Perkasa Engineering

Technological accumulation at the microeconomic level is incremental and dynamic. It is not the result of an automatic learning by doing process. The technological learning tends to move along trajectories in which past learning contributes to particular directions of technical change and experience reinforces the existing stock of knowledge and expertise.

It is also shown that the accumulation of technological capability at the firm did not come merely from experience, though experience is important. It came from conscious efforts – to monitor what was being done, to try new things, to keep track of developments throughout the world, to accumulate added skills, and to increase the ability to respond to new pressures and opportunities. 

This article is a summary version of the author’s articles on “The Dynamic of Technological Accumulation at the Microeconomic Level : Lessons from Indonesia -A Case Study”  in  Asia Pasific Management Review, 2003 9 (6), pp 367-408



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