DEVELOPMENT OF A MEASURE FOR TECHNOLOGICAL

CAPABILITY IN THE INFORMATION AND COMMUNICATIONS

TECHNOLOGY INDUSTRY IN NIGERIA

BY

ADEREMI, H.O, OYEBISI, T. O. & ADENIYI, A. A.

Corresponding Author: Aderemi, H. O., National Centre for Technology Management and Ph. D.
student, Technology Planning and Development Unit, Faculty of Technology, Obafemi Awolowo
University, Ile-Ife, Nigeria (This paper is the preliminary outcome of her Ph.D. work)

Submitted to Globelics 2009, Dakar, Senegal and for the Ph. D. Student Paper Competition

1.1 Introduction

Information and Communications Technology (ICT) has proved to be a catalyst

to fundamental changes in the world’s economies and societies. It creates more avenues

to earn income, allows access to useful information, enhances the world of work and

makes the world a global village (Aderemi, 2006). The ICT industry spans broadcast,

electronics and print media, computers, telecommunications and e-commerce activities.

As put forward by Oyelaran-Oyeyinka, Adelaja & Abiola (2007), ICT infrastructure is

made up of all physical facilities and technologies engaged in delivering and

disseminating information and communication services in telecommunications,

broadcasting, cable television service, postal service, publishing, printing, computer

networks, and a wide range of terminal equipment. The minimum composition of an

ICT infrastructure that would bring about social and industrial development include: a

functional telecommunications network with voice, data and video transmission to

enable an information base that is adequately networked; local production of ICT

equipment and materials; a pool of human resources with capacity in

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telecommunications and other related aspects of the rapidly growing ICT industry; and

software development and production of information technology (IT) applications

(Oyelaran-oyeyinka, Adelaja & Abiola, 2007).

In Nigeria today, telecommunication activities continues to play a lead role as a

central component of the ICT sector. The industry is competitive with a mix of service

providers in the private and public sectors in their respective domains. This is

consequent upon the deregulation in the industry.

The recognition of the pivotal role of Information Technology (IT) for

development became eminent in Nigeria with the formulation and approval of the

National Information Technology (IT) Policy in March, 2001. The formulation of the

IT policy was a consultative process that brought together major IT stakeholders such as

Computer Association of Nigeria (COAN) now known as Computer Society of Nigeria,

National Information Technology Professional Associations (NITPAs) now known as

Computer Professionals of Nigeria (CPN), Association of Licensed Telecommunication

Companies in Nigeria (ALTCON) as well as the Nigerians in the Diaspora. The IT

policy has very clear-cut policy goals on the development of the national information

backbone. This was to engender seamless interconnectivity in ICT infrastructure

development in Nigeria. The policy document stipulated that the government, through

the National Information Technology Development Agency (NITDA), shall establish

and develop a National Information Infrastructure (NII) backbone as the gateway to the

Global Information Infrastructure (GII) interconnecting it with State Information

Infrastructure (SII) and the Local Information Infrastructure (LII). The policy also has

the objective to promote technological capability in local production of ICT equipment

and materials such as computer and telephones. NITDA is expected to work with the

private sector in actualising these goals.

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Thus, given the importance of ICT, the passing of the policy document in 2001

with one of the objective on the promotion of technological capability; a study on

technological capability eight years after the passing of the policy document could be

considered as well overdue. Technological capability is one of the crucial determinants

of competitiveness as well as economic performance of any industry. From the very

early times, the concept technological capability has been referred to as a stock of

technological knowledge that an organisation accumulates over time (Raghavendra &

Subrahmanya, 2006). It reflects the ability to not only respond speedily through changes

in products and processes, but also the ability for innovation which is a flow variable

that could provide the cutting edge in competing with other products and even bring

about comparative advantage in other sectors aside the original sector of use. The

concept of technological capability is linked with theories and models of knowledge,

organisational and technological learning, technological change, diffusion, production

capacity and innovation. A distinction is drawn in literature (Bell & Pavitt, 1993)

between production capacity and technological capability. Both are regarded as stocks

of resources however, the former incorporates the resources used to produce industrial

goods at given levels of efficiency and given input combinations: equipment (capital-

embodied technology), labour skills (operating and managerial know-how and

experience), product and input specifications, and organisational systems.

Technological capability incorporates the additional and distinct resources needed to

generate and manage technical change, including skills, knowledge and experience, and

institutional structures and linkages. This distinction is important because of our

interest in the dynamics of industrialization, and hence in the resources necessary to

generate and manage that dynamism. Altogether, a robust body of studies exist on firm-

level technological learning strategies and innovative capability building in developing

countries. One of the current challenge for researchers is to refine their research design
 4

and strategies to capture and analyse the intricacies of the dynamics of the process of

innovative technological capability accumulation not only at the level of firms, but also

at the levels of industrial sectors, clusters, regions, and countries in the context of

developing nations under increasingly open and inter-connected market place. The

purpose of this study is therefore to capture, analyse and develop a system of

technological capability measurement and evaluation in ICT firms in Nigeria that could

monitor the trajectory of technological capability accumulation and tract parameters that

could lead to competitiveness and growth of the sector. The empirical analyses

generated by this research and the practical recommendations that emerge from it would

serve as key sources of base data for corporate managers, government policy makers,

officials of development agencies, and investors to design and implement strategies to

speed up innovative technological capability in developing countries (especially

Nigeria) ICT sector.

1.2 Statement of the Problem

Technological capability has been recognised as an important input in industrial

development. Technological capability incorporates the additional and distinct resources

needed to generate and manage technical change, including skills, knowledge and

experience, and institutional structures and linkages (Bell and Pavitt, 2003). The level of

economic growth and development of a country depend on its ability to accumulate

these technological capabilities. For instance the differences among the industrial

countries in growth and trade on the one hand and the gap between the developed and

the developing countries on the other, can be traced largely to the differences in the

extent of investment in activities that could generate technical change (Krugman 1986;

Grossman and Helpman 1990; Romer 1990, Bell and Pavitt, 1992).
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A growing body of evidence that is emerging from the developing countries

shows first, that there are considerable international variation in the static efficiency

with which “given” technologies are used (Pack, 1987) and second but more

importantly, there are considerable differences in two types of dynamic efficiency: the

intensity with which industrial technologies already used by firms are changed by

continuing adaptation, improvement, and development (Bell et al. 1984; Enos and Park,

1988), and the efficiency with which new bases of comparative advantage are created in

increasingly technology-intensive industries (Bell and Pavitt 1992). Hence, much

emphasis is being placed on analyzing technical change and exploring the policies and

institutions most likely to promote such change and improve dynamic efficiency.

Studies have shown that the performance of South-East Asian countries notably

described as the Newly Industrializing Countries (NICs) such as Singapore, Taiwan,

Hong-Kong, and China have been brought about by building up relatively good

technological capabilities in a spectrum of industries compared to international

standards and that this was a major factor in their rapid export growth and technological

upgrading (Pack and Westphal, 1986; Aw and Batra, 1998; Wignaraja, 2001). In these

economies, foreign technology is first adapted for incorporation in new production

facilities, at which time the original technology may be improved on or adapted for the

specific situation (Amsalem and Michael, 1983), and later modified to conform to

changes in input and product markets.

In a rapidly globalising world, the ability of countries, particularly Nigeria to be

in the league of the NICs, and possibly catch up with the developed countries lies in the

extent to which technology capabilities can be accumulated. While many studies have

been carried out on the importance and process of accumulating technological

capabilities in developed countries and developing countries generally (Bell and Pavitt,

2003; Enos and Park, 1988), the empirical examination of this area has thus far been
 6

somewhat scarce, particular at firm level in Nigeria. Existing studies for instance,

Akerele (2003) and Oyelaran-Oyeyinka et al., (2007) have limited focus. First, the

studies failed to examine the factors that drive technological capability available in

firms. Second, the studies did not decompose technological capability available in firms.

Also, the studies failed to examine whether the knowledge and skills in the selected

industry has led to any incremental, adaptive or modified new products and processes

that can be termed as innovation.

The present study, therefore, intends to bridge these knowledge gaps identified

above by focusing on the ICT, a sector often recognised as a ‘strategic’ one on the basis

that it exhibits positive externalities with other industries, thus contributing to social and

economic welfare. More importantly, existing studies in developing countries including

Nigeria do not examine the critical issue of the development of appropriate software to

evaluate and review existing technological capability particularly, in the ICT. This is a

critical gap in the existing literature, and the present study also intends to bridge this

gap.

1.3 Research Questions

The following questions were considered in order to find solutions to the

highlighted problems in the ICT industry in Nigeria:

(i) What are the capabilities (potentials and competence) available in the

industry?

(ii) What are the factors that determine and influence technological

capabilities and technologies in the industry?

(iii) Have the firms been able to master the ICTs enough as to generate

innovations?
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(iv) How does the technological capability of the firms impact on their

performance?

(v) What strategies can be employed to develop technological capability in

the industry?

1.4 Objectives of the Study

The general objective is to carry out a study on technological capabilities and

innovations in the ICT industry in Nigeria with a view to providing information that

would enhance growth and competitiveness in the industry.

The specific objectives of the study are to

(i) examine the existing technological capabilities in selected ICT firms;

(ii) assess the types and degree of novelty of technological innovations that have

emanated from the ICT firms in Nigeria;

(iii) investigate the factors influencing technological capability in the industry;

(iv) appraise the impact of technological capabilities on the firms’ performance; and

(v) develop a computer software for technological capabilities evaluation and

review in the firms.

1.5 Delimitation

The study covered mainly computer firms involved in

development/manufacturing and assemblage of computer hardware, accessories and

software. The focus is on firm because there is emphasis in literature on manufacturing

enterprises as the main actors in the process of accumulating technological capability

(Bell and Pavitt, 1993; Wignaraja, 2001). Furthermore, the study focused on

technological capability building in the Small and Medium ICT Enterprises because
 8

majority of the ICT firms in Nigeria falls into this category – that is having a capital

base and investment of more than N1.5 Million and employing between 11 and 300

personnel. Finally, time series was introduced into the study to enable the study

determine the variation in performance following improvements in the accumulation of

the stock of technological capability over time in the industry. Thus, a span of five

years (2003-2007) was considered appropriate for the study due to the dynamism of the

technologies in the industry with the rate of technical obsolescence much faster than in

other technologies such as steel and textiles

2.0 Literature review

ICTs are systemic and pervasive set of technologies. They are associated with

fundamental institutional, social and economic restructuring. In developed countries,

the diffusion rate of ICTs is very rapid, facilitates human development and produces

material benefits. In such countries, ICT contribute to an innovative climate and

institutions, adequate supply of skills and finance, disposable income and investment

capital, policy intervention among others. However, in many more countries, where the

learning, skill and needs of ICT are not adequately explored and given attention, there

exist a vicious cycle of absence of innovation, participating in ICTs as consumers only,

ICTs being poorly integrated with the rest of the economy and society, lack of skilled

people and finance, low levels of income and insufficient policy capability (IBM

Corporation, 2007).

The positive benefits of diffusion of ICTs, which include productivity gains, job

creation, improvements in wealth, enhancement of well being, are for the most part,

limited to wealthy countries. In those countries, the rapid diffusion of ICTs has been

facilitated by technological capabilities, economic restructuring in OECD countries,

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reorganization of firm-level production processes, changes in functioning of markets

and social and political change, and through a series of feedback effects, has produced

material and social gains (IBM Corporation, 2007).

The need to transform Nigeria into a knowledge-based economy should be

motivated by the necessity to develop national capability in ICT. For a knowledge

economy, national plans and strategies must relate to improving human resource and

skill capability, others include institutional development, incentives, information

structure, science and technology capacity, public and private sector reforms and

bridging the digital divide (Mohammed, 2005; Ramirez, 2006).

Malaysia in her quest to become a knowledge-based economy undertook the

Eighth Malaysia Plan, 2001-2005 and introduced a host of measures, taken from the

Knowledge Economy Master Plan. These included the areas of human resource

development, research and development, science and technology, venture capital

financing, ICT infrastructure, content development, promoting electronic based

activities as well as creating a supportive regulatory framework (Mohammed, 2005).

Chinese information and communication technology (ICT) firms have developed

in the past 20 years into internationally competitive players and major contributors to

their country's industrial development (Ramirez, 2006). To reach this position they have

innovated new products that are competitive on the world market. This achievement is

particularly significant since China remains a poor country in terms of per-capita

income, and other developing countries have failed to make similar breakthroughs.

Hence, there is a need to research into how this has been accomplished. Thus, it

becomes imperative that a study of this nature would in no doubt contribute to building

a knowledge-driven society and address need issues that would position Nigeria into

emerging as one of the leaders in ICT development.

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This review focus on ICTs around the world; technological capability and

industrial development; technological learning; technological change; technological

capability in developing countries and enterprises; ICTs industry in Nigeria and

innovation; conceptual framework and the underlying theory for the study.

2.1 Information and Communications Technologies (ICTs)

The United Nation Development Programme (UNDP) defines ICTs as basically

information-handling tools - a varied set of goods, application and services that are used

to produce, store, process, distribute and exchange information. They include the “Old”

ICTs of radios, television and telephone and the “new” ICTs of computers, satellite and

wireless technology and the Internet. These different tools are now able to work

together and combine to form our networked world – a massive infrastructure of

interconnected telephone services, standardized computer hardware, internet, radio and

television which reaches into every corner of the globe”. Hamelink, 1997 also defines

ICTs as those technologies that enable the handling of information and facilitate

different forms of communication. These include capturing technologies (e.g.

camcorders), storage technologies (e.g. CD-ROMS), processing technologies (e.g

application software), communication technologies (e.g. wide area networks), and

display technologies (e.g. computer monitor). ICTs include old and new technologies

that facilitate storage and transfer of information. However the distinction between old

and new technologies is no more important as convergence of technologies and media

has now made traditional distinctions and classification less useful since radio,

television, satellite technologies and the Internet are now being combined in innovative

ways to reach a wide range of target audiences. For instance, you can browse the web

on your television or from your cell phone, make phone call from your computer, etc.
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2.2 Information and Communications Technologies (ICTs) around the World

All sectors of Europe’s economy depend on ICTs and they believe in continued

heavy investment in ICT research and in bringing innovations to market. The

contribution of ICT to the economy of both Europe and America is well established

based on empirical evidence from growth accounting models that link the production

and use of ICT to productivity (Table 1). From the table, the aggregate productivity in

the EU grew by 1.8% per year from 1995 to 2000 with at least 55% of that increase due

to ICT. Between 2000 and 2004, productivity growth fell to 1.1% but the contribution

of ICT remained high at around 45%. The impact of ICT on productivity in the EU has

consistently been only half of the impact in the US over the last ten years. From 2000 to

2004 the relative figures were 0.5% and 0.9%. The US continues to outstrip the EU both

in terms of efficiency gains in the ICT sector and in terms of investment in ICT.

Furthermore, there is a significant difference in the contribution of ICT to productivity

before and after 2000.

Table 1: The ICT Sector and its impact within Europe and the USA

S/no Indicators EU USA

1 Size (% of the economy)
2000-2003 5.6% 7.2%
2 Growth (real terms)
2000 -2003 5.3% 4.6%
3. Market Revenue growth (nominal terms)
2004 3.8% 3.9%
Total ICT Sector 3.6% 3.9%
4 ICT Research and Development
% all research expenditure 25% 35%
% GDP 0.31% 0.63%
5. Investment in ICT
As % of GDP 2.4% 4.2%
6. Labour Productivity
2000 – 2004 Total 1.1% 2.8%
ICT 0.5% 0.9%
Non-ICT 0.5% 1.9%
7 Innovation by businesses EU
ICT-enabled product/services 17%
Non-ICT-enabled product/services 29%
ICT-enabled processes 12%
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Notes: (1) Size is % value-added at current prices in the EU15 – source: Groningen Growth & Development Center (GGDC) – 60
Industry Database; (2) average annual growth of value added at constant prices in the EU15 – source: GGDC-60 Industry database;
(3) annual growth of market value in % - source: EITO 2006; (4) R&D in 2002-2003-source: Commission services; (5) Annual
average 2000-2004 - EU15 - source: GGDC- Total Economy Growth Accounting database; (6) average annual growth rates in % -
EU15 - source: B. van Ark and R. Inklaar (2005); (7) % of companies having introduced innovations in previous 12 months – EU 15
– source: European Commission -2004 eBusiness W@tch.

Table 2 shows the distribution of ICT specialist businesses by states in the

United Kingdom in 1999. New South Wales was the base for 39% of all specialist ICT

producing businesses in Australia. Western Australia was the base for 8.5%, with a total

of 1,535 specialist ICT businesses - 112 communications services businesses, 1,024

information services businesses, 356 ICT equipment wholesalers, and 43 ICT

equipment-manufacturing businesses.

Table 2: 1999 ICT specialist businesses by State in UK

Comms Information Equipment Equipment Total

Services Services Manufacture Wholesale
New South Wales 402 6,362 128 842 7,734
Victoria 249 4,589 116 850 5,804
Queensland 170 1,760 53 415 2,398
Western Australia 112 1,024 43 356 1,535
South Australia 65 682 35 232 1,014
Australian Capital Territory 32 729 22 104 887
Tasmania 25 111 5 63 205
Northern Territory 18 53 5 34 110
Australia (Total) 869 14,731 294 2,177 18,072
Note: Multi-State businesses are counted in each State in which they operate, hence State totals do not
sum to national total.
Source: Houghton, J.W. (2001) Information Industries Update 2001, CSES, p. 32, see www.cfses.com.
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Figure 1: Fixed line penetration rates worldwide and for developed and developing
regions, between 1994 and 2006

Source: ITU ICT Statistics 2007

Figure 2: Mobile cellular penetration rates worldwide and for developed and developing
regions, between 1994 and 2006

Source: ITU ICT Statistics 2007

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Figure 3: Internet user penetration rates worldwide and for developed and developing
regions, between 1994 and 2006

Source: ITU ICT Statistics 2007

In general, the telecommunication/ICT sector has undergone major changes in

recent years with higher growth in the mobile sector. ITU data suggest that the number

of mobile cellular subscribers surpassed the 3 billion mark in August 2007. In 2006,

less than 5 out of every 100 Africans use the Internet, compared with an average of 1

out of every 2 inhabitants of the G8 countries (Canada, France, Germany, Italy, Japan,

Russia, the UK and the US). There are roughly around the same total number of Internet

users in the G8 countries as in the rest of the world combined: 474 million Internet users

in G8 countries and 657 million Internet users in non-G8 countries. The G8 country

which is just 13% of the world’s population has more than 40% of the world’s total

Internet users and 28% of the world’s total mobile users.

In Africa, the use of ICTs has grown relatively rapidly in most urban areas.

Some years back, only a handful of countries had local Internet access, now it is

available in every capital city. In the same period more mobile cell phones were
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deployed on the continent than the number of fixed lines laid in the last century.

Hundreds of new local and community radio stations have been licensed, and satellite

TV is now also widely available. However, the Digital Divide is still at its most extreme

in Africa, where the use of ICTs is still at a very early stage of development compared

to other regions of the world. According to the report by ITU and UNESCO statistics,

of the approximately 816 million people in Africa in 2001, it is estimated that only 1 in

4 have a radio (205m), 1 in 13 have a TV (62m), 1 in 35 have a mobile phone (24m), 1

in 40 have a fixed line (20m), 1 in 130 have a PC (5.9m), 1 in 160 use the Internet (5m),

and 1 in 400 have pay-TV (2m). As shown in Table 3 below, sub-Saharan Africa, along

with South Asia, remain at the bottom of the list of developing regions in Internet usage

surveys around the world, while South Asian Internet use is growing more rapidly.

Table 3: Internet users as percentage of total population

Region 1998 2000

United States 26.3 54.3

High-income OECD (excl.US) 6.9 28.2

Latin America and the Caribbean 0.8 3.2

East Asia and the Pacific 0.5 2.3

Eastern Europe and CIS 0.8 3.9

Arab States 0.2 0.6

Sub-Saharan Africa 0.1 0.4

South Asia 0.04 0.4

World 2.4 6.7

Source: UNDP World Development Report 2001

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As far as specific ICTs are concerned in Africa, most literatures would talk on

adoption and permeations rather than technology innovations and development in the

sector. For instance in broadcasting, Jensen 2002, talked on the massive adoption and

usage of radio and satellite-based broadcasting popularly known as the DSTV in Africa.

He stated that radio ownership in Africa was estimated by UNESCO at close to 170

million with a 4% per annum growth rate in 1997 and estimates for 2002 was put at

about over 200 million radio sets, compared with only 62 million TVs. For

telecommunications, the number of fixed lines was said to have increased from 12.5

million to 21million across Africa between 1995 and 2001. North Africa had 11.4

million of the lines; South Africa had another 5 million lines, leaving only 4.6 million

for the rest of the continent. For computer hardware and software development, up until

2001, there had been a prevailing high cost of computer hardware, which constitutes the

largest component of many startup budgets in the continent. Although, cost are

becoming lower due to the emergence of local hardware producers and low-cost

bandwidth is becoming increasingly available, such as through Ku-Band VSAT and

spread spectrum wireless (WiFi) links. Nonetheless, local producers are still very few

and as a result increasing attention is being directed toward the use of recycled PCs, thin

clients, set-top boxes, or other low-cost Internet 'appliances', and Open Source (free)

software.

Table 4 below shows Africa ICT indicators in 2007. Obviously, the numbers of

main telephone lines have increased from 21 million in 2001 to almost 35.5 million in

2007. North Africa had 18.6 million of the lines; South Africa had another 4.6 million

lines, leaving 12.3 million for the rest of the continent. Mobile subscribers as a

percentage of total population in Africa as at 2007 are 27.5% while internet users are

5.3%.
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Table 4: Africa ICT Indicators for 2007

Population Main telephone lines Mobile subscribers Internet users

000s 000s p. 100 000s p. 100 000s p. 100
Algeria 33'860 2'922.7 8.63 21'446.0 63.34 3'500.0 10.34
Egypt 75'500 11'228.8 14.87 30'047.0 39.80 8'620.0 11.42
Libya 6'160 852.3 14.56 4'500.0 73.05 260.0 4.36
Morocco 31'220 2'393.8 7.67 20'029.0 64.15 7'300.0 23.38
Tunisia 10'330 1'273.3 12.33 7'842.0 75.94 1'722.2 16.68
North Africa 157'070 18'670.9 11.91 83'865.0 53.39 21'402.2 13.64
South Africa 48'580 4'642.0 9.56 42'300.0 87.08 5'100.0 10.75
South Africa 48'580 4'642.0 9.56 42'300.0 87.08 5'100.0 10.75
Angola 17'020 98.2 0.62 3'307.0 19.43 95.0 0.60
Benin 9'030 110.3 1.22 1'895.0 20.98 150.0 1.66
Botswana 1'880 136.9 7.78 1'427.0 75.84 80.0 4.55
Burkina Faso 14'780 94.8 0.70 1' 611.0 10.90 80.0 0.59
Burundi 8'510 35.0 0.45 250.0 2.94 60.0 0.77
Cameroon 18'550 130.7 0.79 4'536.0 24.45 370.0 2.23
Cape Verde 530 71.6 13.80 148.0 27.9 33.0 6.36
Central African Rep. 4'340 12.0 0.29 130.0 2.99 13.0 0.32
Chad 10'780 13.0 0.13 918.0 8.52 60.0 0.60
Comoros 840 19.1 2.33 40.0 4.77 21.0 2.56
Congo 3'770 15.9 0.40 1'334.0 35.40 70.0 1.70
Côte d'Ivoire 19'260 260.9 1.41 7'050.0 36.6 300.0 1.63
D.R. Congo 62'640 9.7 0.02 6'592.0 10.52 230.4 0.37
Djibouti 830 10.8 1.56 45.0 5.40 11.0 1.36
Equatorial Guinea 510 10.0 1.99 220.0 43.35 8.0 1.55
Eritrea 4'850 37.5 0.82 70.0 1.44 100.0 2.19
Ethiopia 83'100 880.1 1.06 1'208.0 1.45 291.0 0.35
Gabon 1'330 36.5 2.59 1'169.0 87.86 81.0 5.76
Gambia 1'710 76.4 4.47 796.0 46.58 100.2 5.87
Ghana 23'480 376.5 1.60 7'604.0 32.39 650.0 2.77
Guinea 9'370 26.3 0.33 189.0 2.36 50.0 0.52
Guinea-Bissau 1'700 4.6 0.27 296.0 17.48 37.0 2.26
Kenya 37'540 264.8 0.71 11'440.0 30.48 2'770.3 7.89
Lesotho 2'010 53.1 2.97 456.0 22.71 51.5 2.87
Liberia 3'750 ... ... 563.0 15.01 ... ...
Madagascar 19'680 133.9 0.68 2'218.0 11.27 110.0 0.58
Malawi 13'930 175.2 1.26 1'051.0 7.55 139.5 1.00
Mali 12'340 85.0 0.69 2'483.0 20.13 100.0 0.81
Mauritania 3'120 34.9 1.10 1'300.0 41.62 30.0 0.95
Mauritius 1'260 357.3 28.45 936.0 74.19 320.0 25.48
Mozambique 21'400 67.0 0.33 3'300.0 15.42 178.0 0.90
Namibia 2'070 138.1 6.66 800.0 38.58 101.0 4.87
Niger 14'230 24.0 0.17 900.0 6.33 40.0 0.28
Nigeria 148'090 6'578.3 4.44 40'396.0 27.28 10'000.0 6.75
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Rwanda 9'720 16.5 0.18 679.0 6.98 100.0 1.08

S. Tomé & Principe 160 7.7 4.86 30.0 19.09 23.0 14.59
Senegal 12'380 269.1 2.17 4'123.0 33.31 820.0 6.62
Seychelles 90 20.6 23.79 77.0 89.23 29.0 35.67
Sierra Leone 5'870 ... ... 776.0 13.23 10.0 0.19
Somalia 8'700 100.0 1.15 600.0 6.90 94.0 1.11
Sudan 38'560 345.2 0.90 7'464.0 19.36 1'500.0 3.89
Swaziland 1'140 44.0 4.27 380.0 33.29 42.0 4.08
Tanzania 40'450 236.5 0.58 8'252.0 20.40 384.3 1.00
Togo 6'590 82.1 1.30 1'190.0 18.08 320.0 5.07
Uganda 30'880.0 162.3 0.53 4'195.0 13.58 2'000.0 6.48
Zambia 11'920 91.8 0.77 2'639.0 22.14 500.0 4.19
Zimbabwe 13'350 344.5 2.58 1'226.0 9.18 1'351.0 10.12
Sub-Saharan 757'880 12'098.3 1.65 138'310.0 18.28 23'904.2 3.23
AFRICA 963'530 35'411.2 3.77 264'475.0 27.48 50'406.4 5.34

Source: ITU World Telecommunication/ICT Indicators Database (2008)

2.3 Technological Capability and Industrial Development

Technological capability has been diversely defined in three broad ways: as

input to economic activities; as an output of economic activities; and as both an input

and output. The definitions of technological capability as an input to economic

activities dwell on contributions of technological capability to economic activities at

various levels of economic organisation. In this train of thought, the International

Labour Office (1986) defined technological capability as ‘the ability of a country to

choose, acquire, generate and apply technologies which contribute to meeting its

development objective’. With a particular focus on developing countries as importers

of technologies, Aw and Batra (1998) as cited in Olamade (2002) described

technological capability as the ability to adapt or assimilate technology imported from

abroad and to incorporate the additional and distinct resources needed to manage and

put to productive use the newly acquired technology. Furthermore, as an input,

technological capability is the resources (or knowledge assets) needed to generate and

manage production-based and innovative activities such as improvements in processes

 19

and production organisation, products, equipment, and engineering projects (Figueiredo,

2007). These are accumulated and embodied in individuals (skills, expertise, and

experience) and organisational routines and systems.

As an output, technological capability was defined in terms of its constituents.

Girvan (1981) and Enos (1992) following this approach defined technological capability

in terms of a complex mix of three components. These components are: (i) The

existence of people with a scientific foundation/training in the basic concept of

knowledge relevant to a particular area of concern; (ii) The possession by these people

of a certain amount of operational experience, and; (iii) The existence of an organisation

in which the skills are resident and which can harness and deploy them in pursuit of

given goals.

As both an input and output, Lall (1994) defined technological capability as

critical assets – human and organisational capitals that are employed by productive

enterprises for the efficient use of machinery, equipment and technologies. Similarly,

Bell and Pavitt (1993) defined technological capability as the resources needed to

generate and mange technical change. These resources include skills, knowledge,

experience as well as particular kinds of institutional structure and linkages necessary to

produce inputs for technical change.

Thus, technological capability goes beyond the trilogy of science, engineering

and technology. It includes organisational know-how, knowledge of behavioural

patterns of workers, suppliers and customers (Bamiro, 1997). This knowledge and

skills are evolutionary; it includes iterative serendipity known as trial and error,

cumulative learning-by-doing and by-using and by-interactions within a firm; between a

firm and its suppliers and between a firm and its customers.

Technological capabilities are in general tacit, firm and sector specific. Its

accumulation is one of the factors that help to explain the success or failure of countries
 20

technologically and economically throughout history. The industrial development of

nations depends on the ability of individual enterprises who are key players to develop

and sustain technological capabilities and remain competitive in doing so – Industrial

Development Report (IDR) 2002. In economic development debates, a need assessment

of domestic technological capability building and private sector development usually

ensue. Technological capabilities are at the centre of the new theories of economic

growth which focus on technology and human capital as engines of growth (Romer

1986; Stokey 1988; Young 1991). Recent developments in this literature suggest that

long-run economic growth, as seen in East Asia most recently, reflects sustained

increases in firm productivity stemming from continuous accumulation of technological

capabilities (Biggs et al., 2001). Building technological capabilities requires conscious

technological and innovative effort.

The accumulation of technological and innovative capabilities is a key factor for

developing countries to achieve world leading positions in different industrial sectors

either by catching up with the international technological frontier (e.g. South Korea in

steel, automobiles, and semi-conductors) or by engaging in brand new technological

trajectories (e.g. Brazil in oil exploration in ultra-deep waters, forest biotechnology for

pulp and paper, and bio fuels) Bell and Pavitt, 1993.

For decades, many nations have achieved industrial development not only by

developing technology but also by utilising their capability in technology transfer and

reengineering. Industrial development is a process of acquiring technological

capabilities and translating them into product and process innovations in the course of

continuous technological change (Kim and Nelson, 2000). Technological capability

building enables core competency to be developed in industry. It can be regarded as an

indispensable mechanism for strengthening competitiveness in old and thriving firms

and for developing competitiveness in latecomer firms. Technological capability

 21

building is regarded as a tool for developing and strengthening the competitiveness of a

nation (Sikka, 1999). A major objective of technological capability building is to

accumulate technical knowledge that would enable firms to develop commercially

exploitable product and processes, to win new markets or to hold existing ones against

competition, and to reduce costs of production (Central Advisory Council for Science &

Technology, 1968). In recent years, technological capability building has been a well

researched area and has been increasingly recognized as a driver for economic growth

(Yeh and Chang, 2003).

The UNIDO (2004) industrial development report considered technological

capabilities as crucial to national economic performance – all the more so due to the

introduction of stronger Intellectual Property Rights (IPRs), regulatory harmonisation

and standardisation and the worldwide spread of emerging science-based industrial

technologies. Developing countries’ prospects for catching-up with more advanced

countries in productivity and income hinge increasingly on their ability to rapidly build

up competences. This places domestic knowledge systems at the core of industrial

development strategies. This is not new, but has acquired far greater importance in

recent times.

Among firms, small enterprises are better suited to develop their technological

innovations due to their specific advantages of flexibility, concentration and internal

communications (Rothwell and Zegveld, 1982). Thus, as good and dynamic as ICTs

are, it is not just its presence in a country that matters but the ability of the firms in the

sector to build technological capabilities and competences that can catapult the industry

and serve as motor for industrial growth and development.

The Nigerian industrial sector is made up of both private and public firms as

well as the multinationals. Sometimes it is being described as the formal sector. It

probably contributes about 3 percent to Nigeria’s Gross Domestic Product (GDP),

 22

Ogbimi (2000). It is highly import dependent with each market made up of few firms

having little or no basis for competition. The catalytic role that this sector would have

played in the development of the country’s economy are being hampered by unstable

power supply, high interest rates, dumping of imported cheap products, multiple

taxation and uncompetitive prices (Aderemi et al., 2008)

Technological capability would mostly be adaptive and incremental in nature

within the Nigerian industrial sector. This is because of the presence of constraints

which are peculiar to developing countries such as poor infrastructure and weak

innovation systems. Nigeria’s industrial sector like most of other developing countries

especially in the sub-Saharan Africa has gone through a lot of challenge. Current issues

of globalization, trade liberation and competitiveness has helped to boost the challenges.

Prior to the 1970’s, researchers were of the opinion that large enterprises were the

cornerstone of a modern economy. However, this view has changed, as the importance

of small-scale manufacturing industries in promoting industrialization and economic

growth has been recognised globally. Thus, industrialisation, through not only small

scale industries but also cottage/micro industries remains a catalyst for technological,

financial and other socio-economic transformation.

2.4 Technological Learning

Technological learning is a process that permits companies, industrial sectors

and countries to accumulate their own capabilities to carry out production-related and

diverse types and levels of innovative activities over time. Industrialised economies

attain industrialization through the process of technological learning. Technological

learning is not necessarily a conscious or intentional process (Hubber, 1991). Dodgson

(1993) described technological learning as the way firms build, supplement and

organise knowledge and routines around their activities and within their culture, and
 23

adapt and develop organisational efficiency by improving the use of the broad skills of

their workforce. Ernst et al (1994) distinguished three types of learning. Formal

learning leading to certificates, degrees and diplomas. Non-formal learning such as on-

the-job training, collaboration, or learning externalities, and informal training which is a

life long process by which employees in foreign affiliates or in domestic companies

interact with Trans-National Corporations (TNCs) and acquire values, attitudes and

beliefs embedded in the organisational culture of the TNCs through daily experience,

observation and exposure to indoctrination. According to Biggs et al (1995)

technological learning is facilitated by firms’ involvement in information-rich

environment created by a dense network of relations with other firms engaged in similar

activities, with training opportunities and information sources that address specific

business problems, and with an available network of specialised consultants.

Technological learning and the strategy for approaching it therefore becomes crucial for

firms that have to operate imported technology. Since industrial dynamism and

competitiveness depend largely on the accumulation of technological capabilities, Bell

and Pavitt (1993) refer to any process that strengthens those capabilities as

technological learning. Albu (1997) described technological learning as a process

involving conscious effort. This was because studies of infant industries in the South

(e.g. Bell et al. 1982) demonstrated that learning does not occur spontaneously, and that

performance can easily stagnate or decline over the long-run. Akerele 2003 defined

technological learning as any process that strengthens the technological capabilities for

generating and managing technical change. Firms that manage to master technology

and initiate a process of incremental innovation, do so as a result of learning. Lall

(1987) accrue the industrialisation of older industrial firms to their investments in

technological knowledge and innovations.

 24

There are two categories of learning as identified by Bell and Pavitt (1993). The

first refers to the methods by which an individual firm or economy accumulates a set of

skills through education, training and experience which can be by hiring of skills and

the well-known ‘learning by doing’. The second category is technical change which

sometimes is used interchangeably with learning in literature. However, technical

change does not occur in isolation of learning alone but with other inputs. Lall (1989)

as cited in Akerele (2003) suggests three sub-categories of learning namely: (i)

elementary learning which involves ‘learning-by-doing’ and learning by adapting’; (ii)

intermediate learning consisting of ‘learning-by-design’ and learning-by-improved

design’ and; (iii) advanced learning also referred to as ‘learning-by-setting up a

complete production system’.

The role of technological learning cannot be overemphasized as it is the way by

which firms acquire and build up technological knowledge and core competences.

Also, learning represents the dynamic component of the process of acquisition of

capabilities (Oyeyinka 1994) and is brought about through the following broad

channels: (i) the apprenticeship system of training; (ii) on-site training at supplier’s

factory; (iii) on-the-job training within the country; (iv) expert contracting; (v) support

mechanism provided by public institutions; (vi) learning-by-doing production and

maintenance and; (vii) learning through transactions with local and external agents.

Furthermore, Biggs et al (1995) underscores the elements of the process of skill

acquisition in firms to include (i) learning by doing – this refers to on-the-job skill

acquisition by carrying out tasks in the production process; (ii) learning through training

– this has to do with transmission of skills and further improvement during periods

explicitly set aside for these purposes; (iii) learning from changing – this is involved

with the introduction of innovative technical change-attempts to adapt, diversify,

improve quality and bring out new products or variants of production processes; (iv)
 25

learning by evaluation – here, there is regular monitoring of changes and performances

in production; (v) learning by hiring- where consulting services and taking of specialist

advice outside the enterprise exists and; (vi) learning by searching scientific research

applied to production.

Technological learning has been linked to the industrialization of countries by a

host of authors (Kim, 1997; Oyeyinka, 1997; Biggs et al, 1995; Akerele, 2003; Bell and

Pavitt, 1993, Lall, 1987; Akinbinu, 2001). For instance, Kim, (1997) cited in

Akinbinu (2001) described a stage model of how South Korea acquired, absorbed and

assimilated imported technology (Table 5). He purported that with some modifications,

the model may be used to explain the industrialization process in most of the successful

New Industrialized Countries (NICs). At the level of the firm, Table 6 shows the

typology of learning and capabilities that successful nations acquired in a roughly

sequential order. The search starts with the mastery of production and maintenance

techniques. Higher levels of technological capabilities follow with experience and

explicit investment in training and learning. Many firms try to acquire only those that

contribute to their commercial objectives.

Table 5: Pattern of Technological Capability Building in Developing Countries

Learning First Stage Second Stage Third Stage Fourth Stage

Phases
Preparation Poaching experienced Literature review, Literature Poaching
personnel, literature observation tour, review, scientists,
review, observation foreign personnel observation literature review
tour tour
Acquisition Packaged technology Unpackaged Unpackaged Acquisition by
transfer, foreign technology technology research, overseas
personnel transfer transfer R&D, foreign
personnel
Assimilation Learning-by-doing Learning-by- Learning- Learning-by-
doing by-doing doing
Improvements/ Learning-by-doing Learning-by- Learning- Learning-by-
Application doing by-doing doing
Source: Linsu Kim (1997) cited in Ajibayo Akinbinu (2001)
 26

Table 6: A Typology of Technological Learning and Capability Acquisition

Technological Capability Required Technological Learning

Production and Leaning –by-doing Process, production, management,

maintenance capabilities engineering repair and maintenance
Investment capability Learning by: bargaining and project identification, doing
detailed design, setting up and commissioning plants,
modernizing existing plants
Minor change capability Learning the: ability to adapt and improve continuously,
incremental upgrading of product design and process
technology
Strategic marketing Learning by accumulating: knowledge and skills for
capability collecting market intelligence, for development of new
markets and for establishing distribution channels and
customer services
Linkage capability Learning by accumulating: knowledge and skill and
organisational competence to transfer technology within
firms, between firms and within a firm and the domestic
science technology and engineering infrastructure
Major change capability Learning by accumulating: knowledge and skills for
creating major changes in the design and core features of
products and products and production process. It is the
llearning that culminates in the creation of new
technologies.
Source: Oyelaran-Oyeyinka, B. Technological learning in African Industry: A Study of

Engineering Firms in Nigeria. Science and Public Policy, 1997, UK cited in Akinbinu

A. 2001

The learning process therefore covers a much wider range of knowledge and

operations than innovation does. Sethuraman and Maldonado (1992) opined that

learning mechanisms are made up of dynamic elements of technological capabilities

which enable the firms to change over time the levels of investment and production

capabilities. These involve acquisition of new investment and production capabilities or

improving those already existing in the firms which are crucial for the firm’s future

competitive success and survival. These learning mechanisms can ultimately determine
 27

parameters and aggregate manufacturing productivity growth and development

(Akerele, 2003).

In the views of Biggs et al (1995), while the incidence of training appears lower

in Africa in comparison with other regions of the world, the inter-firm and inter sectoral

patterns are similar. Enterprise size is an evident determinant of firm-based training in

Africa as it is obtained in the rest of the world. Empirically in semi-industrialised

countries like Taiwan, 38% of large firms formally train workers in-house while the

corresponding figures for small firms is only 4%. In Zimbabwe, the corresponding

figures are 52% for large firms and 17% for small firms. In Kenya, 34% for large and

12% for small. Also in Japan large firms have about 18% of their employees engaged

in in-house, on-the-job training programmes and 30% engaged in in-house, off-the-job

training programmes. The small firms have about 8% of their employees involved in

in-house, on-the-job training and 24% in in-house, off-the job training (Biggs et al

1995).

In terms of who actually receives the training, Bartel (1991), states that in the

U.S., workers who receive enterprise training are primarily technical and managerial

workers and that non-technical workers receive more training in Europe and Japan than

the U.S. This study intends to show whether the formal education received on ICT in

Nigerian tertiary institutions is adequate to meet the technological capability

requirements in the ICT industry. Furthermore, the study would show the informal

learning process of workers; and what categories of workers undergo such informal

training in the ICT industry in Nigeria whether they compare with what obtains in

newly industrialising nations of the world. This we hope would enhance enterprise

level studies on technological capability in Nigeria ICT industry.

 28

2.5 Concept of Technological Change

Technological change is an improvement in process or product occurrence that

brings about modernization in the way things are done. It has impact both on

individuals and the society. According to Girifalco (1991), technological change

generally focuses on the techniques, their attendant devices, products and processes, and

the effects of these on individuals and society. It is a dynamic process that encompasses

an enormous array of events, influences, motivations, individuals, and institutions. It is

regarded as a process because it takes place in time as a series of linked events.

Technological change is easier to observe and recognize than to define. For instance if

a device, a product or process, which did not exist at some given time is found to exist

at a later time, then technological change has taken place. Also, if a device, product, or

process is found to be different at two different times, then technological change has

occurred over the intervening time period. For this definition to apply, the device,

product or process must be a recognizable entity with a sufficient number of constant

characteristics so that it preserves its identity over time in spite of the changes it

exhibits.

2.5.1 The Three Eras of Technological Change

Girifalco (1991) divided the time sequence of technological change into three

broad era namely; invention, innovation and diffusion. Invention is the process of

arriving at an idea for a device, product or process and demonstrating its feasibility.

While the process of invention would necessarily involve tapping from a reservoir of

experience, imagination and knowledge, the outcome satisfies some human or physical

need and desire. Innovation is the process by which the invention is first brought into

use. It involves the improvement or refinement of the invention, the initial design and

production of prototypes, pilot plant testing and construction of production facilities.

 29

The third era, which is diffusion, is the process of the spread of the innovation into

general use whereby it is adopted by more and more users.

The three eras of technological change usually overlap and may extend over

considerable periods of time. Nonetheless, they are distinct in nature and dates can be

attached to the differing eras. Thus, the date of an invention is defined as the time of

first publication through an accessible medium such as a technical journal, patent

disclosure, and conference of professional bodies or press news. The date of an

innovation is said to be the first time it is available for use. For product innovation, this

would be the first time it was sold or when production commenced. For process

innovation, this would be the first time it is used in regular production runs and for a

device; it would be the first time of its development. The era of diffusion commenced

at innovation till afterwards. These eras are not static as improvements are continuous.

Every improvement upon existing invention, innovation or diffused product, process or

device with distinctive features and characteristics could also be regarded as a

technological change. Thus, because of the complexity of the matter, there could be no

simple precise definition of the process of technological change that applies universally.

However, this complexities gives birth to two major types of technological change

namely; incremental and radical technological change.

Much literature and available statistics are based more on diffusion of ICT than

on invention or innovations – be it radical or incremental. This study shall research

mainly into innovations in ICT firms.

2.6 Technological Capabilities in Developing Countries

As discussed in Wignaraja, 2001, a common perception in the literature is that

the successful accumulation of technology in a given developing country can be

encouraged by a smooth inflow of new information, ensuring conducive macro-

 30

economic conditions and increasing expenditures on education. Though these factors

have a role to play, they are insufficient on their own to ensure a continuous process of

domestic technological development in developing countries. A comparatively recent

development in the literature is the emphasis on manufacturing firms as the main actors

in the process of accumulating technological capabilities. Technological Capability

literature (Pack and Westphal, 1986; Katz, 1987; Lall, 1992; Bell and Pavitt, 1993;

Ernst, Ganiatsos and Mytelka 1998 and Metcalfe) emphasises the notion that enterprises

have to undertake conscious investments to convert imported technologies into

productive use. New technologies have a large person embodied information otherwise

known as tacit element which is difficult to articulate and can only be acquired through

experience and deliberate investments in various inputs such as training, information

search, engineering activities and research and development (R&D).

The neoclassical approach on technological capability rests on a particular

conceptualization of technology at the enterprise level. It assumes that technology is

freely available from a known ‘shelf’ on which there is full information. Firms optimize

by choosing from this shelf according to their factor and product prices. Any

intervention is necessarily distorting resource allocation. The selected technology is

absorbed costlessly and risklessly by the enterprise and used at efficient (‘best practice’)

levels. As a necessary consequence, no learning is required and the underlying

assumption is that any observed industrial inefficiency is due to government

interventions. In contrast, the evolutionary approach of Nelson and Winter (1982) on

technological capabilities draws upon and locates learning in markets as prone to

imperfections, satisfying behaviour and widespread failures. It is an approach that

intentionally looks at developing countries and formulates a theory of innovation and

learning. Among the main contributions to this approach, see Bell and Pavitt, 1993 and

1995, Dahlman et al., 1987, Enos, 1991, Fransman and King, 1984, Figuereido, 2001,
 31

Katz, 1987, Lall, 1992, 1993 and 2001, Pack and Westphal, 1986, Pietrobelli, 1994,

1997 and 1998, Wignaraja, 1998.

Technological capabilities are the skills - technical, managerial or organizational

- firms need to utilize efficiently the hardware (equipment) and software (information)

of technology, and accomplish any process of technological change. Capabilities are

firm-specific, institutional knowledge made up of individual skills and experience

accumulated over time. Technological change is the result of purposeful activities

undertaken by firms (“Technological Efforts”). It is neither exogenous nor automatic.

Individual effort is required to make the many tacit elements of technology explicit, and

most technological effort does not take place at the frontier of technology at all. It

covers a much broader range of effort that every enterprise must undertake to access,

implement, absorb and build upon the knowledge required in production. Technology

cannot simply be transferred to a developing country or to a firm like a physical

product: its effective implantation has to include important elements of capability

building. Simply providing equipment and operating instructions, patents, designs or

blueprints does not ensure that the technology will be effectively utilized. Substantial

efforts to improve technical skills, acquire the necessary equipment and relevant

knowledge are continuously needed. Learning plays a central role in this approach, and

its success depends on the efficacy with which markets and institutions function,

uncertainty is coped with, externalities tapped, and coordination achieved. If the

learning period, costs, uncertainties and leakages are very high, coordination with other

firms in the supply chain exceptionally difficult, or information, labour and capital

markets particularly unresponsive, ‘difficult’ knowledge may not be absorbed – even

where it would be efficient to do so.

Following Lall (1990, 1992 and 2001) a useful categorisation of TC considers

the functions they perform and the degree of complexity as the two classificatory
 32

principles (The complexity and the variety of TCs does not pretend to be portrayed

exhaustively here. Other categorisations have been proposed by Bell and Pavitt, 1995,

Dahlman et al., 1987, Enos and Park, 1988, Figueredo, 2002, Katz, 1987). Thus, it is

possible to single out "investment", "production" and "linkage" capabilities. When

industries are started, many of the TCs necessary at the firm-level are absent. These

missing TCs may be temporarily obtained at home or imported in an "unbundled" form,

but some "core" capabilities have to be developed by firms and expanded over time.

Moreover, many of these TCs are inter-related and partly over-lapping, and there is

often strong inter-dependence among them

Investment capabilities refer to all the skills required before the investment is

undertaken and needed to carry it out. They include the capabilities to assess the

feasibility and profitability. of a project, to define its detailed specification, the

technology required and the selection of its best sourcing, the negotiations of the

purchase (cost and terms), the skills to erect the civil constructions and the equipment,

to draw its detailed engineering, to recruit and train the skilled personnel required, and

eventually to design the basic process and supply the equipment.

Production capabilities include the skills necessary for the efficient operation of

a plant with a given technology, and its improvement over time. Process, product and

industrial engineering capabilities are part of this subset. Among the infinite number of

operations that require adequate skills are: the assimilation of process and of product

technology, their adaptation and improvement, trouble-shooting, quality control,

equipment stretching, workflow scheduling, inventory control, monitoring productivity

and co-ordination of different production stages and departments, finally process and

product innovations following basic research activity.

Linkage capabilities are required because of high transaction costs; in narrow

and inefficient markets, the setting up of extra-market linkages often corresponds to an

 33

efficient and rational strategy. Therefore special skills are needed to establish

technology linkages among enterprises, between them and service suppliers, and with

the science and technology infrastructures.

In each group there are TCs with different degrees of technological complexity.

These are used for "routine", "adaptive and replicative", or "innovative and risky"

activities. Different levels and depth of technological capabilities indeed explain

different levels of industrial performance across countries (Lall, 1990, Pietrobelli,

1998). However, the approach does not presume that all firms will necessarily build up

capabilities in a linear sequenced process, neither does it imply that firms will start and

end at the same stages (Figueiredo, 2006).

The policy implications of this approach are straightforward: policies need to

adopt a firm level focus, and must target the building and strengthening of technological

capabilities. Clusters, (global) value chains, production networks or other forms of

industrial organization may contribute to a different extent in different circumstances,

but firm-level efforts to build and improve TCs are the sine qua non of industrial

development (Lall, 2001).

2.6.1 Features of Technological Capability in Developing Countries

The need for technological capability, learning and innovation exists in

developing countries even when the technology is imported and the seller of the

technology provides guidance and assistance on usage. However, the extent and costs

of learning vary by technology, enterprise and country. Building technological

capability that could lead to technological innovation and competitiveness calls for

conscious, purposive and incremental efforts to collect new information, try things out,

create new skills and operational routines and forge new external relationships. This

process is distinctively different from textbook depictions of how technology is

 34

transferred and used in developing countries. The nine most important features of

technological capability development as discussed by Figueiredo, 2007 are:

1. Conscious and purposive: Learning is a real and significant process. Vital to

industrial development, innovation and learning are primarily conscious and purposive

rather than automatic and passive.

2. Risky and costly: Enterprises do not have full information on technical

alternatives. Instead, they function with imperfect, varying and rather hazy knowledge

of technologies they are using. As a result, there is no uniform, predictable learning

curve. Each enterprise has a different innovation and learning experience, depending on

its initial situation and subsequent efforts. Each faces an element of risk, uncertainty and

additional cost in innovation and learning.

3. Not obvious: Enterprises may not know how to build up the necessary

capabilities. In a developing country, knowledge of traditional, stable and simple

technologies may not be a good base for knowing how to master modern technologies.

So, enterprises may not be able to predict if, when, how and at what cost they would

learn enough to become fully competitive, even if the technology is well known and

mature elsewhere. This adds to the uncertainty and risk of the learning process.

4. Path-dependent: Firms cope with these conditions by developing

organizational and managerial routines, which they adapt over time as they collect new

information, learn from experience and imitate other firms. So, technological

trajectories tend to be path-dependent and cumulative. Once embarked on, they are

difficult to change suddenly (for countries and for enterprises), and patterns of

specialization tend to persist over long periods.

5. Highly specific: The innovation and learning process is technology specific,

since technologies differ in their learning requirements. For instance, some technologies

are more embodied in equipment while others have more tacit elements. Process
 35

technologies (like chemicals or paper) are more embodied than engineering

technologies (machinery, automobiles or electronics), and demand different (often less)

effort. Capabilities built in one manufacturing activity may not be easily transferable to

another and policies to promote innovation and learning in one may not be very useful

in another. Similarly, different technologies can involve different breadth of skills and

knowledge, with some needing a relatively narrow range of specialization and others a

very wide range.

6. Many complex inter-linkages: Technological innovation and learning in a

firm do not take place in isolation: the process is prevalent with externalities and inter-

linkages. The most important direct interactions are with suppliers of inputs or capital

goods, competitors, customers, consultants and technology suppliers. Technological

linkages also occur with firms in unrelated industries, technology institutes, extension

services and universities, industry associations and training institutions. Many such

linkages take place informally and are not mediated by markets. Not all are deliberate or

cooperative: some learning involves imitating and stealing knowledge. Where

information and skills flow around a set of related activities, clusters of enterprises and

industries come together. Tapping these cluster effects can be very effective in

accelerating technological competence. Different technologies have different degrees of

interaction with outside sources of knowledge (enterprises, consultants, equipment

suppliers or technology institutions). These differences in turn lead to different learning

costs, risks and duration. A set of policies conducive to the development of one set of

capabilities may therefore not be suited to another.

7. Many levels of effort: Capability building involves effort at all levels:

procurement, production, process or product engineering, quality management,

maintenance, inventory control, outbound logistics, marketing and other outside links.

What appear to be routine and easy technical functions, like quality management or
 36

maintenance, can be very difficult to master in a developing country. Most learning in

developing countries arises in such mundane technical activities. But formal R&D

becomes important in complex technologies, where even efficient absorption requires

search and experimentation.

8. Many depths of development: Technological development can take place to

different depths. The attainment of a minimum level of operational capability (know-

how) is essential to all industrial activity. This may not lead automatically to deeper

capabilities, the ability to understand the principles of the technology (know-why). The

deeper the levels of technological capabilities, the higher the cost, risk and duration

involved. It is possible for an enterprise to use imported technologies without

developing the ability to decode the processes to significantly adapt, improve or

reproduce them or to create new products or processes. But this is not optimal for long-

term capability development. Without technological deepening the enterprise or country

remains dependent on external sources for major expansion or improvement to its

technologies which is a costly and possibly inefficient outcome. The development of

know-why is an important part of overall innovation and learning. It allows a firm to

select the new technologies that it needs, lower the costs of buying them, adapt and

improve on them more effectively, add more value by using its own knowledge in

production and develop autonomous innovative capabilities. The lack of these deeper

capabilities may also restrict an enterprise’s ability to move up the technology scale

even in using higher levels of know-how in its given activity, diversifying into other

activities or coping with unexpected demands of technological change. Note that even

good follower strategies, in which enterprises efficiently imitate and adapt technologies

developed by others (common for efficient enterprises in developing countries), require

good know-why capabilities.

 37

9. Foreign plus domestic: Technological interactions occur within and across

countries. Imported technology provides the most important initial input into

technological innovation and learning in developing countries. Since technologies

change constantly, access to foreign sources of innovation remains vital to continuing

technological progress. But technology imports do not substitute for the development of

indigenous capability. That is the efficacy with which imported technologies are used

depends on local efforts. Domestic technological effort and technology imports are

largely complementary. But not all modes of importing technology are equally

conducive to indigenous learning. Much depends on how the technology is packaged

with complementary factors: whether it is available from other sources, how fast it is

changing, how developed local capabilities are and the policies adopted to stimulate

transfer and deepening. Transfers internal to a firm, as from a trans-national corporation

parent to its affiliate, are efficient means of providing the latest know-how, but they

tend to be slow in building know-why in the affiliate.

In summation, considerable technological effort is involved in industrial

development. This effort can be called technological capability accumulation to the

point of innovation, since it differs only in intensity and emphasis from the effort to

create new products and processes. Such innovation arises at any point in the value

chain—from design and procurement to production, R&D and marketing.

2.7 Imperative of Technological Capability Accumulation in Enterprises

A discussion on the imperative of technological capability accumulation in

enterprises is considered to be obvious in this study owing to the fact that technological

capability development is the bedrock of industrial development. However the

imperative becomes more obvious examining the historical antecedent.

 38

In the early 1960s, developing countries came to terms on the critical need to

formulate policies for the advancement of technology. With UNESCO at the forefront,

most developing countries proceeded to create institutions whose responsibility was to

oversee science and technology (S&T). S&T policy as conceived by UNESCO was

delimited to R&D. Thus, the boundary for policy was then primarily concerned with

funding R&D and planning the allocation of funds between various R&D agencies.

UNESCO’s conceptualization of S&T policy at the time was greatly influenced by the

‘pipeline model’ of innovation (Bell 1985). This model separated technological actors

into two components- (i) the technologically active scientists and technologists engaged

in R&D in government owned research institutions; and (ii) the enterprises

appropriating the results of R&D. The implication of this model and the S&T policies

based on it according to Oyeyinka (1997) was that all R&D were practically expected to

be funded by government and conducted in government owned institutions. Potential

users of the scientific results are expected to perform comparatively little or no research.

Unfortunately, the pipeline model and the S&T policy it fostered was not too concerned

with how to forge close linkages between the S&T institutions and the users of the R&D

outputs.

Following the failure of the pipeline model to advance industrial technology in

developing countries, attention then shifted to the firms or enterprises as the main agent

in the accumulation of technological capabilities. UNCTAD (1993) conceptualized the

firm as a collection of core competences or capabilities. Every firm is a collection of

activities performed to design, produce, market, develop, and support its products

(Narayanan, 2001) thereby advancing the productivity of nations (Oyeyinka, 1999).

Furthermore, it is imperative for firm to accumulate technological capabilities

given the specific, cumulative and partly tacit nature of technology and that most

technological learning takes place in firms (Bell and Pavitt, 1993). The very nature of
 39

firms’ activities and their objectives includes a process of technological learning, to be

creative, to be successful, to be relevant and competitive and hence the need to develop

technological capability.

2.8 Factors Influencing Firm’s Technological Capability Development

From literature, the main influence on firm’s technological capability in

developing countries can be categorized into two; demand and supply factors. On the

demand for efforts to build firm’s technological capability, the most important factors

are threefold. First there is an inherent need for the development of new skills and

information simply to get a new technology into production. This operates regardless of

policy regime and provides the elemental drive for firms to invest in capability building;

the form that capability building takes depends on the nature of the technology (process

or batch, simple or complex, large to small scale). The second is an external factor or

the macroeconomic environment which impacts on technology capability investment

decision. A stable, high growth environment affects positively the perceived returns to

higher investment in firm’s technological capability. In addition, competition with

international market is probably the most potent inducement to skill and technology

upgrading. However, competition is a double-edged sword, and, given the necessary

costs of learning, can stifle capability building in newcomers when certain market

failures exist. Trade orientation also affects the content and pace of firm’s technological

capability development. The evidence from a study of technological development in

some industries in India and Korea (Amsden, 1989; Kim, 1988; Lall, 1987) suggest that

inward-oriented regimes foster learning to "make do" with local materials, "stretch"

available equipment for down-scale plants, while export-oriented regimes foster efforts

to reduce production costs, raise quality, introduce new products for world markets, and

often reduce dependence on (expensive) imported technology.

 40

Third, technological change itself, which proceeds continuously in almost all

industries in the developed world, stimulates developing country firms to try to keep up.

Exposure to competition mediates this incentive, and highly protected firms can delay

their upgrading for long periods. Nevertheless, the existence and potential availability of

more efficient technologies can create their own incentives for firms to invest in

technological capability.

On the supply factor, the ability of firms to produce new capabilities depends on:

the size of firm; access to skills from the market; organizational and managerial skills in

the firm and its ability to change structures to absorb new methods and technologies

(Katz, 1987; Hoffman, 1989) access to external technical information and support (from

foreign technology sources, local firms and consultants, and the technology

infrastructure of laboratories, testing facilities, standards institutions, and so on); and

access to appropriate "embodied" technology, in the form of capital goods, from the best

available sources, domestic or foreign.

In summary, firm technological capability development is the outcome of

investments undertaken by the firm in response to external and internal stimuli and in

interaction with other economic agents, both private and public and local and foreign.

Thus, there are factors that are firm-specific (leading to micro-level differences in FTC

development and to "idiosyncratic" results) and those that are common to given

countries (depending on their policy regimes, skill endowments, and institutional

structures). In more general term, technological capabilities of a firm will be influenced

by: (i) broad factors, such as government policies toward education, particularly

education in science and engineering, which affect the available supply of technical

personnel; (ii) efforts inside the firm to promote learning, such as on-the-job training

and R&D activity; and (iii) the availability of micro-level learning support mechanisms,

external to the firm, which can be drawn on as the firm seeks to build capabilities.
 41

These external support mechanisms can be private, in that learning occurs as a by

product of the firm’s normal business transactions, or collective, in that the channels for

learning are fostered by a collective effort of government, NGO or donor programs to

aid firm-level technical efforts.

2.9 Technological capability building and strategies

The general notion is that technological capability building are usually promoted

or brought about through investment in training and R&D or if a firm in an industry

desires to be a market leader in the midst of competitors. In which case, technology

strategies such as value analysis may be employed. Thus, as commonly known,

‘necessity’ in many cases is the author of invention or in this case ‘technological

capability accumulation’. The ICT sector in Nigeria is dynamic and peculiar in the

sense that many technological capabilities are developed through serendipity.

Furthermore, the technological capabilities in the sector are incrementally developed.

The road to technological capability building is technological learning. Some of the

strategies that can be employed to develop technological capabilities are: (i) Active

involvement of the enterprise staff in the process of technical change; (ii) carrying out

of R&D, training and education to upgrade skills; (iii) the hiring of foreign experts

(technical assistance) or purchasing technical knowledge and assimilating that

knowledge and; (iv) carrying out ‘searches’ for new techniques and by introducing

systemized measurement and instrumentation of these production processes. These

strategies are what Akinbinu 2001 referred to as learning efforts that can enhance

technological capacity of an enterprise.

 42

3.0 Measurement Priorities

Empirical investigations on the issues pertaining to the acquisition of

technological capability have been mainly hindered by the lack of proper measurement

methodologies and researchers have made attempts in resolving the problem in

literature. Most studies in developed and developing economies would employ

conventional proxies such as technical manpower available for technical tasks, patents,

publications, innovations and R&D expenditure for measuring technological

capabilities. These are usually used to determine the relative technological strengths

and efforts of firms. However, these metrics are not assessing true technological

strength (Acha, 2000). Raghavendra and Subrahmanya, 2006 in their study used a

proxy called ‘technology level’ to measure the technological capability of a foundry

firm. This proxy ascribed a rating to the technological expertise of the employees to

perform some functions and process in manufacturing. However, most studies in

developing country context (Lall, 1992; Biggs, Shah and Srivastava, 1995, and Aires

2005) saw technological capabilities as covering a wide spectrum of technical efforts

undertaken by firms and therefore categorize these capabilities into three functional

groups: investment capabilities, production capabilities, and learning mechanisms. Aires

2005 further divided learning mechanisms into adaptive innovation capability and

networking capability. The first set of capabilities refers to the skills and information

needed to identify feasible projects, locate and purchase suitable technologies, design

and engineer the plant, and manage the construction, commission and start-up. The

skills and knowledge needed for the subsequent operation and improvement of the plant

are defined as production capabilities. Lastly, the learning mechanisms available to

firms determine the extent to which they can augment their endowments of production

and investment capabilities over time. Together, the three types of capabilities

determine how efficiently firms organize and manage their activities, which are
 43

regarded as their total factor productivity. Some authors (Lall, S., G.B. Navareti, S.

Teitel and G. Wignaraja, 1994) view technological capabilities in terms of investment

and production capabilities.

Investment capabilities are the skills and information needed to identify feasible

investment projects, locate and purchase suitable (embodied and disembodied)

technologies, design and engineer the plant, and manage the construction,

commissioning and start-up. It is believed from the experience of Japan and the Asian

Newly-Industrialized Countries that growth in the domestic ability to select

technologies, negotiate favourable terms for its transfer and participate in the design and

setting up of the plant can greatly reduce project costs and increase the subsequent

capabilities for technology adaptation and improvement.

Production capabilities are the skills and knowledge needed for the operation

and improvement of a plant. As the table shows, these capabilities range from routine

functions to intensive and innovative efforts; adaptation and improvement in

technology. Production capabilities include both process technological capabilities as

well as product capabilities, such as product redesign, product quality improvement and

introduction of new products. In addition, production capabilities also cover monitoring

and control functions included under industrial engineering. Industrial engineering skills

are required to improve productivity by changing the time and spatial sequencing of

manufacturing and auxiliary operations.

4.0 Roles of Government in Technological Capability Building

There has been increasing interest in the role of government in technology

capability development and also in R&D. This is because for most nations that can be

termed ‘developed’ today, government had played a pivotal role in setting priorities and

devoting resources to bring about sustainable development. Here, though the interest
 44

lies in technology capability building, we include R&D because expenditures on R&D

are considered as a key determinant for the acquisition and accumulation of

technological capabilities. For instance in Finland, Europe, government R&D funding

on Science and Technology (S&T) alone is 1798 million euro in 2007. This amount

was tapped by both public and private S&T based organizations and firms. Moreover,

their Science and Technology Policy Council has key government officials such as the

prime minister; minister of education and science; minister of economic affairs; minister

of finance; four other ministers aside other key stakeholders as members. Thus,

government has the roles of setting priorities, participating and funding research and

development activities that could enhance technological capability development and

accumulation. Furthermore, productive, technological, organization and institutional

changes are important outcomes of the process and accumulation of technological

capabilities which in turn serve as instrument for long-term development. Government

has the principal role to drive these kinds of changes by virtue of their legislative

functions.

5.0 The ICT Industry in Nigeria

The ICT industry in Nigeria consists of players involved in hardware and

peripheral assembly and manufacturing; sales and services of hardware, peripherals and

consumables; information technology consultancy and solutions providers; printers and

photocopiers re-manufacturers and recyclers ; educational and training services;

software development and marketing; system engineering and systems support services;

network service providers among others. From the Goldstar Directories of the major

5,000 companies in Nigeria (2007/08) the categories shown in Table 7 were made.
 45

Thus, about 21% of the top 5000 companies in Nigeria are ICT firms. The

number of employees of individual firm within a group range between 10 and 300.

Some of these companies are situated in the popular Otigba cluster described by

Oyeyinka et al. (2007) which consist of highly skilled entrepreneurs basically involved

in computer hardware assembly technology, sales and services. The cluster had boosted

the growth of the industry and the duplication of such clusters is recommended in other

states of the country and even in other industry because it enhances technology-learning

process and industrial growth.

5.1 Innovation and the ICT Industry

The highly innovative ICT sector invests heavily in R&D. In 2004, ICT

manufacturing industries accounted for more than a quarter of total manufacturing

business R&D expenditure in most OECD countries. They accounted for more than half

in Finland and Korea (63 and 57%, respectively), and more than 30% in the United

States (39%), Canada (38%) and Ireland (34%).

In countries with data for both manufacturing and services industries,

expenditure on R&D generally expanded in ICT-related service industries but

contracted in ICT-related manufacturing industries. However, investment in R&D still

accounted for a small share of GDP in both sectors (less than 1.3% in the former and

less than 0.2% in the latter). Only Norway and Sweden reported a decrease in R&D

investment as a share of GDP in ICT-related service industries in 2004.

The ratio of R&D expenditure to GDP or to total business enterprise R&D can

be a sign of R&D specialisation. Finland is clearly more specialised than large countries

in both ICT manufacturing and services. In 2004, it allocated 1.3% of GDP to ICT-

related manufacturing R&D, compared to 0.79% in 1997.

 46

Table 7: Categories of ICT companies among the major 5,000 in Nigeria.

S/No ICT Firm’s Nature of Activity No in Group Employees

1. Hardware and peripheral assembly and manufacturing 2 252

2. Sales & services of hardware, peripherals and consumables 289 5732

3. Information technology consultancy & solutions providers 87 3108

4. Printers toners & photocopiers re-manufacturers and recyclers 2 61

5. Educational and training services 63 1961

6. Software development and marketing 75 3368

7. System engineering and systems support services 109 4349

8 Internet service providers 51 2038

9. Internet Designers and Engineering Services 32 800

10 Telecommunication Engineers and Consultants 43 1300

11 Telecommunications Equipment & Systems sales & services 80 2800

12 Telephone (fixed wireless/mobile) service providers 14 560

13 Telephone (GSM) and accessories sales and repairs 42 1890

14 Telephone (pre-paid cards) operators 18 630

15 Telephone (wired/fibre-optic) service providers 2 129

16 Telephone (cable) re-broadcasting services 3 53

17 Office automation, business machine & equipment sales & services 72 2872

18 Satellite (VSAT) Communication engineering services 44 1760

19 Satellite (VSAT) Communication Equipment 30 1200

20 Telecommunication (non-telephony) service providers 5 192

21 Telecommunication consultancy services 3 40

Total 1066 35095

6.0 Technological Capabilities, Innovation and the Challenge of Policy

Technological capabilities are key assets that enable a country and its enterprises

to compete internationally and attain reasonable level of economic progress.

Meanwhile, continuous innovation is one of the drivers of international competitiveness

 47

and economic progress. Thus, Olamade 2002 described technological capabilities as the

resources that are organised to generate innovations, which may be incremental, radical,

adaptive or modified. In recognition of the relationship between technological

capabilities and innovation therefore, Science and Technology (S&T) policies are no

longer sufficient to address issues of technological development but a more robust

agenda of innovation policy is needed to support existing S&T policy. S&T policy

consists of principles and methods, together with the legislative and executive

provisions required to stimulate, mobilise and organise a country’s scientific and

technological potential for the implementation of the national development plan

(UNESCO cited in Olamade 2002). An innovation policy, on the other hand, goes

further to integrate S&T policy with conventional industrial policy.

As early as in the 1980s, OECD countries were making efforts to harmonise

their economic, technological and social policies to optimize the contributions of

technological development to economic and social development (OECD 1980 cited in

IDRC 1999). In this regard, important efforts that sought to delineate the policy

significance of the concept of National System of Innovation (NIS) were held in high

consideration. Probably the most influential early publication on the subject was that

edited by the Danish scholar, Lundvall 1992. Today, the industrialized countries have

reached the conclusion that technical change is the principal driving force behind

economic growth within their economies. Further, it is also understood that technical

change has two primary sources - technological innovation and technology diffusion.

This latter concept - technology diffusion - is crucially important and has embedded

within it the need for technology recipients to participate in a continuing process of

incremental innovation to adjust the acquired technology to the needs of the markets

and supply systems of the technology user. In simplicity, the 1960s and early 1970s are
 48

considered as the era of science policy, the late 1970s and 1980s as the era of S&T

policies; and the 1990s as the era of science, technology and innovation policies (IDRC,

1999). During these years there has been a global process of cumulative learning about

the range of issues that need to be encompassed in the attempt to harness the forces of

technological change to national economic and social development.

Rothwell (1984) drawing from the experiences of industrialized countries

identified the following as problems associated with innovation policy:

• Too easily obtainable government funds devoted to projects of high

technical sophistication but low market potential and profitability and

projects involving higher technical and financial risk than those funded

wholly by private companies;

• Lack of capacity on the part of public policy-makers to identify high

technical risk projects that also have high market potential;

• Concentration of government fund in assisting large firms that might be

expected to be able to support major projects to the neglect of small

firms. Whereas convincing evidence supports that in many sectors, small

firms can make significant contributions to national rates of innovation

(Rothwell and Zegveld 1982 cited in Olamade 2002).

• Passive stance towards information dissemination so that small firms are

largely unaware of many governmental measures that are available to

assist them. In some cases where small firms are well informed, many of

them do not possess the technical expertise to enable them exploit the

available measures;
 49

• Lack of practical knowledge of or imaginative conceptualization of the

process of industrial innovation by policymakers, resulting in them

adopting a narrow heavily R&D oriented view of innovation to the

detriment of other important aspects such as innovation-oriented public

purchasing;

• Lack of inter-departmental co-ordination in the formulation and

implementation of a coherent innovation policy resulting in

contradictions in policies

• Policies are often subject to major changes in accordance with political

situation rather than with changing industrial or economic needs or

conditions;

• Most policies fail to make explicit distinction between existing small

firms in the traditional areas of industry and new technology-based small

firms with a view to harnessing the latter’s potential for both innovation

and employment generation.

However, more specifically, most developing countries undertake industrialization

without an explicit S&T policy. In this respect, developing countries assume that

substituting imports with direct foreign investment was an appropriate industrialization

policy that would eventually lead to an automatic transfer of capital, management skills,

and technical knowledge. Such transfers eventually never take place. It is now widely

accepted that effective transfer of technology requires a deliberate S&T policy in the

recipient country to ensure that various technologies are compared; the appropriate one

is selected for transfer; and the effectiveness of the transfer, assimilation, and adaptation

of the selected technology is monitored (Smith, 2005). The major gap in S&T policies

in developing countries is the lack of coordination of S&T institutions and activities

 50

which result in lack of synergetic efforts that could bring about industrial development.

At present, in most of these countries including Nigeria, various ministers regulate

different aspects of industry, which is inefficient because there is little consultation

among them. The need for African economies to undergo deep technological

revolutions that would bring about rapid structural shifts to deepen their industry, and

build up their endogenous technological capability have been emphasised in the

literature (IDRC, 1995), Furthermore, there is a general problem of non conducive

enabling macroeconomic environment and the ways that environment interacts with an

effective technology policy. Science, Technology and Innovation policy in developing

economies are yet to be fully integrated with the environment to bring about

technological learning, the right technical choices, the setting up of appropriate

institutions, and effective technological management for both the industrial and

agricultural sectors, including those small and medium-sized enterprises that are now so

vital for income and employment.

The Nigerian National Policy on Science and Technology was first published in 1986

and revised in 1999 for a 25-year time frame with a provision for revision at 5-year

intervals and current revision (2003). Its basic philosophy emphasizes Nigeria’s

commitment to the creation of an independent, integrated and self-sustaining economy,

with the National Policy itself being the framework for effort towards the fulfilment of

the commitment. However, the problem with the policy document has always been that

of implementation. A study by Abdullahi (2004) confirmed the fact that S&T policy

has not played a critical role in national development and that Nigerian society is not

aware of and hardly contribute to formulation of S&T policy. Furthermore, the study

revealed that development process in Nigeria failed to recognize the critical role of

scientific and technological activities. The country lacked science culture and the
 51

existing institutional capacity for S&T development is very weak in terms of requisite

personnel and facilities. The study concluded that a new policy shift is desirable which

emphasizes the promotion of S&T culture, its integration into the production system and

the strengthening of institutional framework for policy formulation, implementation,

monitoring and evaluation in addition to promotion of S&T literacy. Thus, myriad of

inadequacies exist in the S&T system in Nigeria which is also common in most

developing countries. Others are:

• Due to inability to tract the direct relationship between benefits, and expenditure

and the time- lag involved on Research and Development, it is often not easy to

convince the government to invest on Science and Technology.

• Science, Technology and Innovation concepts are not well understood by the

society and thus the implementation of its policy guidance has not been able to

produce any noticeable results.

• The management of science and technology system is not well developed yet.

This often leads to duplication of efforts by the stakeholders.

• The interest in "indigenous technologies and knowledge," is hampered by,

deeper interest for foreign goods, western science culture and systems and

counter policies promoting the importation of such. This weakens and kills

existing small enterprises venturing on indigenous technologies and knowledge.

It also discourages the emergence of science-based industries arising from

domestic-scientific efforts. Many are ignorant of Intellectual Property Rights

Systems and the bibliometrics used as one method of measuring R & D output is

foreign.

• Poor facilities and strategies to undertake R & D, auditing and technological

assessment at national level.

 52

• Inadequate human resource base and lack of capacity to implement and facilitate

the smooth running of the system.

7.0 Development of the Conceptual Framework

In order to derive the basis for which information can be collected for the study

of technological capability building, concepts and activities that constitute technological

capability development in product and process technology were considered. Various

theoretical perspectives were drawn on in literature and this study propose a direct

relationship between technological capability and performance (including adaptive and

incremental product development and annual turnover), the mediating role of customer

value, the possible moderating effects of business environment and other important

contingent factors such as learning orientation. A conceptual framework that examines

these relationships in general and in various contexts, which is believed more important

and useful for firms to manage their technological capability more effectively, is

devised.

Scholars of technological capabilities development have made efforts to explain

the dynamic nature of the process of technological capability building as having

diversified activity with many interacting components. Thus, this study concentrates on

the process of technological capability building and accumulation at the level of the

firm. Figure 4 shows the schematic of the conceptual framework for the study.

From Figure 4, either external or internal factors to the firms determine and

influence the technological capabilities available in firms. The external factors include

competition, technological change, skills from the labour market, technical

information/support, government policy and licensing. The internal factors include on-

the-job training, R&D, ownership structure, funds, working experience and linkages.

These factors interact to determine the functional capabilities available in firms such as
 53

investment, production and networking capabilities. The performance and mastery of

these functions generate technological innovations in terms of adaptive and improved

product and process that can be found in the industry and invariably determines the

performance of the firms. The performance here referred to is the annual turnover as

well as the number of technological innovations, patents and license acquired by the

firms for the period under consideration. The framework suggests a process whereby

the performance of the industry is evaluated and reviewed, and this forms the basis on

which appropriate interventions are proposed. Such interventions would either emanate

from the firm or external environment (for instance government policies) and will serve

as input to the system to bring about the desired technological capability, technological

innovations and improved overall performance.

 54

TECHNOLOGICAL
TECHNOLO-
ENVIRON- INNOVATIONS
GICAL
MENTAL (INCREMENTAL
CAPABILITIES
FACTORS ADAPTATIONS,
(TC) IN ICT
MODIFICATIONS &
FIRMS
IMPROVEMENTS TO ICT
TECHNOLOGY)

Competition, technological
change, skills from labour
market, technical INVESTM

E
information/support, government INVEST-
ENT

C
policy and licensing MENT
PRO-

N
EXTER DUCT
-NAL

A
M
PRODUC
PRODUC-

R
TIVE
TION

O
F
PRO-

R
CESS
INTER-

E
NAL

P
NETWOR
NETWOR-
KING
KING
On-the-job training,
R&D, ownership
structure, funds,
working experience
and linkages

INTERVENTION
(TC STRATEGIES BY ICT FIRMS &
GOVERNMENT POLICIES)

Figure 4: Conceptual Framework for the Study of Technological Capability

in ICT Industry
 55

7.1 Link between the theoretical underpinnings for the study and the

conceptual framework

In this work, the Jacobs et al (1999) theory describing development as a function

of society’s capacity to organize human energies and productive resources to respond to

opportunities and challenges is visited. Jacobs et al theory identifies the human

resource as the driving force and primary determinant of development; other resource-

money, materials, and mansion though important, are secondary. This study expanded

upon this theory with explicit reference to intra-firm technological learning processes

(Kim, 1997; Oyeyinka, 1997; Biggs et al, 1995; Akerele, 2003; Bell and Pavitt, 1993,

Lall, 1987; Akinbinu, 2001) and interacting environmental factors which broadly

speaking include policy, market and institutional frameworks as theorized by Ergas,

1984,1986; Fagerberg, 1987; Dosi et al, 1988; and OECD, 1987. All of these culminate

to technological capability development in firms as well established in development

studies literature (Bell and Pavitt 1993; Dutrenit 2000; Ernst et al. 1998a; Figueiredo

2001; Hobday 1995c; Kim 1997b; Kim and Nelson 2000; Lall 1992; Marcelle 2004).

This work goes further to link the generation of technological innovations, profit and

growth as resulting from the accumulation of technological capability. This position is

theorised and summarised somewhat as the evolutionary or institutional model of the

firm which in modern economic theory is a shift from the neoclassical to the

evolutionary economic approaches.

In summary, modern, evolutionary economics sees the firm as a searching,

learning mechanism. It survives and improves by continually reinventing itself. The

firm consists of two elements (Arnold, E. and Thuriaux, B. (1997): i) A pool of assets,

including both physical assets and intangible ones such as capabilities; 2) Intelligence,

which learns from the environment and modifies the resources. Each of these elements

can be broken down much further. An important attribute of the firm’s ‘memory’ is that
 56

it comprises a mixture of knowledge (tacit as well as codified) and of the configuration

of assets: namely, organisation, characteristics of the capital stock, relationships, and so

on. One of the primary concerns in this work is to identify the essential technological

capabilities needed for technological innovation.

7.2 Area of Study

The study areas include Lagos, the Federal Capital Territory – Abuja,

Portharcourt and Kaduna. These cities were selected based on their predominant

commercial activities, their age-long existence and the presence of most ICT firms.

Furthermore, the popular Otigba cluster which is believed to be representative of ICT

developments rapidly taking place in other cities of Nigeria and even in Africa is

situated in Lagos.

In addition, ICT firms involved in development/manufacturing, assemblage,

repairs and maintenance of ICT hardware and software were examined in the study.

This is because these firms have interrelated developmental activities which provide

details on the nature of technological effort undertaken in the industry.

7.3 Research Instruments

The study employed the use of structured questionnaires and personal interviews

to obtain primary data from mainly ICT firms involved in production, engineering,

maintenance of ICT hardware and software. Secondary data from reports, journals,

internet, government publications and newspapers were also used.

7.4 Sample Population and Sampling Technique

Primary data on existing technological capabilities, types and degree of novelty

of technological innovations, factors influencing technological capability were obtained

 57

through questionnaire administration from all the 185 small and medium ICT firms

(Lagos 140; Abuja 30; Port Harcourt 13; and Kaduna 2) involved in assemblage and

manufacturing of computer hardware, software development, toner and other

peripherals remanufacturing as published in the Goldstar directories of 2007/2008.

8.0 Technological Capabilities in ICT Firms and Measurement

Functional technological capabilities are divided into three major categories:

investment capability; production capability; networking and linkage capability The

variables to be considered under the three categories and the method of measurement

are as follows:

A. Investment capability

This is the ability and skill needed before a new facility is commissioned or

existing plant is expanded. The tasks involved include identifying needs, preparing and

obtaining the necessary technology. This is followed by design, construction,

equipping, and staffing the facility. They determine the capital costs of the project, the

appropriateness of the scale, product mix, technology, and equipment selected. The

performance of this function brings about an understanding of the basic technologies

involved and in turn, affects the efficiency with which the firm later operates the

facility.

Parameters for determining investment capability function include:

i. Feasibility studies (IC1)

This is an important aid in project formulation and implementation. It is usually

prepared for new or existing businesses to help generate, crystallise and focus ideas, to

set objectives and monitor performance. Usually, feasibility studies are a pre-requisite

for any successful venture/project because of its detailed, functional and technical
 58

nature. In the process of engaging in feasibility studies, firms develop in-depth

knowledge of their product and the learning process is enhanced.

It is one of the functional technological capabilities to be investigated in the ICT firms.

The firms would be asked to indicate the number of successful feasibility studies they

have engaged in since inception as well as the amount spent. Furthermore, they were

asked to rate the ability and skill of their firm to perform the capability function in-

house under a rating of 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill

between 2003 – 2007.

ii. Search for technology source (IC2)

This refers to the skill and information needed to search for, identify and locate

sources of technologies. In the case of ICTs source in Nigeria, most of the firms rely on

importation of components, small parts and heavy machineries. In the process of

performing such function, the firms develop technological capability in knowing

different sources of their product and the different peculiar environment and

circumstances that actualize the production of such technologies from the country of

importation. The function was measured under a five scale rating of the ability and skill

of the firm to perform the capability function in-house under a rating of 5 – Excellent; 4

– Very good; 3 – Good; 2 – Fair; 1 – No skill between 2003 – 2007.

iii. Assessment of technologies (IC3)

Plant and machinery constitute more than 60% of total capital outlay of an

industrial outlay. Thus firms should carefully consider selection process, production

factors and appropriateness of technology selected based on environmental, political

and technical factors. Thus the ability to assess the ICTs as being capable of performing

the required functions is entailed in assessment of technology. The function was

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measured under a five scale rating of the ability and skill of the firm to perform the

capability function in-house under a rating of 5 – Excellent; 4 – Very good; 3 – Good; 2

– Fair; 1 – No skill between 2003 – 2007.

iv. Equipment procurement (IC4)

The act of procurement requires some level of knowledge about the item to be

procured. Performance of this function develops the skill of the entrepreneur to be able

to identify and differentiate between various technologies, machineries and facilities.

The function was measured under a five scale rating of the ability and skill of the firm

to perform the capability function in-house under a rating of 5 – Excellent; 4 – Very

good; 3 – Good; 2 – Fair; 1 – No skill between 2003 – 2007.

v. Recruitment of skilled personnel (IC5)

Recruitment of skilled personnel is a key function in fostering the dissemination

of technological knowledge. While some countries have relied extensively on

Multinationals Corporation as far as recruitment of skilled personnel is concerned,

others have relied on protecting domestic infant industries though securing access to

technology through licensing. However, there are imbalances in the national supply and

demand of skilled personnel in the economy. The prevailing situation is that the

industry is finding graduates unemployable. Thus recruited personnel are groomed

through in-house training to meet the need in industry. The firms were asked to state

the number of skilled personnel recruited between 2003 and 2007. The function was

also measured under a five scale rating of the ability and skill of the firm to perform the

capability function in-house under a rating of 5 – Excellent; 4 – Very good; 3 – Good; 2

– Fair; 1 – No skill between 2003 – 2007.

vi. Involvement of the firm in detailed engineering (IC6)

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New and imported technologies such as ICTs have large tacit element that has to

do with embodied information that is difficult to articulate and can only be acquired

through training, information search, experience and deliberate involvement in

engineering activities or technology unpackaging. Involvement in detailed engineering

would enable the firm to comprehend the components that makes up the ICT and how it

operates. They would also be able to carry out repairs, replacement and maintenance

functions on the ICTs. The function was measured under a five scale rating of the

ability and skill of the firm to perform the capability function in-house under a rating of

5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill between 2003 – 2007.

B. Production capability

Production capability includes process and product engineering and involves the

following functions:

i. Quality management (TC1)

Quality control function is a means of reinforcing technological capabilities of

domestic knowledge system. Particularly, for ICT industry there should be constant

upgrade of testing and measurement strategies to ensure quality control. Firms are to

frequently ensure that imported and improved processes and products are being tested to

comply with established standards such as ISO 9000. Firms were asked to indicate the

actual number of skilled personnel in their firm that can carry out the production

function between 2003 and 2007. The function was also measured using a rating of: 5 –

Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill; for the ability or skill of the

firm to carry out the production function in-house between 2003 and 2007.

ii. Debugging (TC2)

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Debugging is a term commonly used in software development. It means the

‘perfection’ of a software program by tracing and correcting error messages.

Debugging can apply to both software and hardware product or process development

function. In the process of debugging, firms develop their technological capability as

they gain mastery of the process or product under development. Firms were asked to

indicate the actual number of skilled personnel in their firm that can carry out the

production function between 2003 and 2007. The function was also measured using a

rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill; for the ability

or skill of the firm to carry out the production function in-house between 2003 and

2007.

iii. Maintenance management (TC3)

Capability building involves effort at all levels including routine and preventive

maintenance. What appears to be routine and easy technical functions, like quality

management or maintenance, can be very difficult to master in a developing country.

Most learning in developing countries arises in such mundane technical activities. It

would be desirable to know how often ICT firms practise routine and preventive

maintenance. Thus firms were asked to indicate the actual number of skilled personnel

in their firm that can carry out the production function between 2003 and 2007. The

function was also measured using a rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2

– Fair; 1 – No skill; for the ability or skill of the firm to carry out the production

function in-house between 2003 and 2007.

iv. Plant layout for cost saving (TC4)

This is the arrangement of plant and machineries, facilities and other services in

the factory or business premises for easy access and efficiency of operation. Bad layout

could result in congestion of materials, components and assemblies, excessive amount

of work-in process, poor utilization of space, production bottlenecks at certain machines

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while some facilities or machine are lying idle, delay in delivery, mental or physical

strain on operators or workers and difficulty in maintaining effective supervision and

control. Plant layout constitutes a very important technological effort that could save

huge sum of production cost. A good plant layout capability with emphasis on quality

control, routine maintenance with negligible breakdown rates and frequent changes in

plant layout constitute one of the best production capabilities. The study verified the

actual number of skilled personnel in the firms that can carry out the production

function between 2003 and 2007. The function was also measured using a rating of: 5 –

Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill; for the ability or skill of the

firm to carry out the production function in-house between 2003 and 2007.

v. Inventory control (TC5)

Continuous and systematic productivity analysis and benchmarking as well as

supply chain and logistics require technological effort in inventory control. Firms are

expected to use and apply new techniques such as Just-In-Time (JIT) and Total Quality

Management (TQM) in procurement and inventory control just like the Japanese did to

gain industrial revolution. Firms were asked to indicate the actual number of skilled

personnel in their firm that can carry out the production function between 2003 and

2007. The function was also measured using a rating of: 5 – Excellent; 4 – Very good;

3 – Good; 2 – Fair; 1 – No skill; for the ability or skill of the firm to carry out the

production function in-house between 2003 and 2007.

vi. Improvements in processes (TC6)

One of the manifestations of innovation and learning are improvements and

adaptations to processes, drawing on in-house technical efforts, outside sources of

knowledge and interaction with leading international enterprises. Minor improvements

and adaptations are part of gaining capabilities in efficient production processes. But

major improvements and adaptations require higher levels of enterprise skill and
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competence—and generally a more advanced industrial system and infrastructure.

Improvements in processes include assimilation of process technology to process

adaptation and cost saving. It also involves monitoring productivity processes and

improving coordination. The firms were asked to mention the name of such

improvements they have undertaken. They were asked to rate the success/functionality

of the process they have improved using a rating of: 5 – Excellent; 4 – Very good; 3 –

Good; 2 – Fair; 1 – Not successful/functional. They were also asked to indicate the

actual number of skilled personnel in their firm that can carry out the production

function between 2003 and 2007. In addition, the function was measured using a rating

of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill; for the ability or skill

of the firm to carry out the production function in-house between 2003 and 2007.

vii. Copying imports (TC7)

This includes activities such as assemblage and adaptive innovation capability.

The firms would be asked to state the number and name of such improvements they

have undertaken. The firms were asked to mention the name of such imports they have

copied. They were asked to rate the success/functionality of the product/device using a

rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – Not

successful/functional. They were also asked to indicate the actual number of skilled

personnel in their firm that can carry out the production function between 2003 and

2007. In addition, the function was measured using a rating of: 5 – Excellent; 4 – Very

good; 3 – Good; 2 – Fair; 1 – No skill; for the ability or skill of the firm to carry out the

production function in-house between 2003 and 2007

viii. Improving existing products (TC8)

Improving existing products include activities such as modifying products to suit

local environment. This involves assimilation of new imported product technology and

product design to minor adaptation to suit markets needs; product quality

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improvements. The firms were asked to state the name of such improvements they have

undertaken. They were asked to rate the success/functionality of the product/device

they have improved using a rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair;

1 – Not successful/functional. They were also asked to indicate the actual number of

skilled personnel in their firm that can carry out the production function between 2003

and 2007. In addition, the function was measured using a rating of: 5 – Excellent; 4 –

Very good; 3 – Good; 2 – Fair; 1 – No skill; for the ability or skill of the firm to carry

out the production function in-house between 2003 and 2007

ix. Introducing new products (TC9)

This involves in-house product innovation and even basic research to industrial

engineering work flow, scheduling, time-motion studies. The firms were asked to state

name of such products they have introduced/developed. They were asked to rate the

success/functionality of the product/device using a rating of: 5 – Excellent; 4 – Very

good; 3 – Good; 2 – Fair; 1 – Not successful/functional. They were also asked to

indicate the actual number of skilled personnel in their firm that can carry out the

production function between 2003 and 2007. In addition, the function was measured

using a rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 – No skill; for the

ability or skill of the firm to carry out the production function in-house between 2003

and 2007

x. Licensing new product technology (TC10)

This has to do with entering into an agreement with another firm to use or

manufacture their product which usually is protected by intellectual property rights

(IPR). Licensing promotes technology transfer and technological capability

development. The firms were asked to state the name of such licensing agreement they

have undertaken. Firms were asked to indicate the actual number of skilled personnel in

their firm that can carry out the production function between 2003 and 2007. The
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parameter was also measured using a rating of: 5 – Excellent; 4 – Very good; 3 – Good;

2 – Fair; 1 – No skill; for the ability or skill of the firm to carry out the production

function in-house between 2003 and 2007.

xi. Experimental Development (R&D) (TC11)

Experimental Development is a kind of research and development (R&D).

While R&D is creative work that is undertaken on a systematic basis, in order to

increase the stock of knowledge, and to use the stock of knowledge to devise new

applications; Experimental development is defined as systematic work that draws on

existing knowledge gained from research and practical experience in order to produce

new materials, products and devices, to install new processes, systems and services, or

to improve substantially those already produced or installed. The Frascati manual

define the scope of experimental development as involving an apparently extensive

range of activities. Such activities include calculations, designs, working drawings and

operating instructions made for the setting up of pilot plants and prototypes. The

respondents were asked to state the amount spent on R&D between 2003 and 2007.

They were further asked to indicate the actual number of skilled personnel in their firm

that can carry out the production function between 2003 and 2007. The function was

also measured using a rating of: 5 – Excellent; 4 – Very good; 3 – Good; 2 – Fair; 1 –

No skill; for the ability or skill of the firm to carry out the production function in-house

between 2003 and 2007.

xii. Patent (TC12)

Patents are usually considered as a measure of technological efforts. It is used

here in this study as a production capability indicating the ability of the firms to engage

in meaningful productions and have copyrights to his credit. The respondents were

asked to state the number of patents they have been granted between 2003 and 2007.
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C. Networking and linkage capability

Linkages in this study include supplier firm linkages, subcontracting linkages and

linkages with institutions that provide trouble-shooting, testing, training and product

design assistance. It also includes external linkage with openly available information

sources that does not require purchase of technology or intellectual property or

interaction with the source. The firms were asked to indicate the number of existing

linkage/networking they have in the years 2003 to 2007 with government laboratories

(NLC1), universities or polytechnics (NLC2), ICT regulatory body (NLC3), competitors

(NLC4), suppliers (NLC5), and financial resources (NLC6). The parameter was also

measured using the intensity of firms’ collaborative efforts with sources of Information

and Knowledge, Sources of Technology/Process, Human Resources, Financial

Resources, Government laboratories, Universities or polytechnics, Competitors,

Suppliers and Policy institutions/Regulators on a five-scale rating of 5-Excellent, 4-

Very Good, 3-Good, 2-Moderate, and 1-Poor. The firms were asked to indicate whether

they are involved in outsourcing or subcontracting. Finally, the parameter was

measured on a 3-item scale of the best description of firms’ linkage and networking

activities in the categories: (a) External linkage with openly available information

sources that does not require purchase of technology or intellectual property or

interaction with the source ; (b) Acquisition of rights to use patents and non-patented

inventions, trademark and knowledge from local/foreign firms, competitors, universities

and government research institutes that do not involve interaction with the source; and

(c) Active innovation co-operation with other local/foreign firms and public research

institutions, subcontracting and outsourcing of product, components, machinery,

software (which may include purchase of knowledge and technology)

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9.0 Factors Influencing Technological Capability Development and

Measurement

The factors to be measured as influencing the firm’s technological capability are

categorized into two; Internal and external. Mathematically, technological capability

(TC) in ICT industry is considered as an objective function with various independent

variables and is given by:

IC = f(x1, x2, x3, x4, x5, x6, x7, x8, x9, x10, x11) + f(y1, y2, y3, y4, y5, y6, y7)+ S1, … (1a)

PC = f(x1, x2, x3, x4, x5, x6, x7, x8, x9, x10, x11) + f(y1, y2, y3, y4, y5, y6, y7)+ S2, …(1b)

NC = f(x1, x2, x3, x4, x5, x6, x7, x8, x9, x10, x11) + f(y1, y2, y3, y4, y5, y6, y7)+ S3, …(1c)

Where IC = Investment Capability; PC = Production Capability; NLC = Networking

and Linkage Capability; and f(x1… x11) are the Internal factors and f (y1... y7) are the

external factors impacting on TC in firms and S1… S3 =Residual factors or slack

variables.

The relationship (equation 1a – 1c) was established using cross tabulation, chi-square

and multiple regression analysis. The independents variables are described below.

A. Internal factors

i. Inherent need for the development of new skills and information (x1)

The firm may develop a fundamental need to acquire information and develop

new skill to enable them meet the demand in the market. This kind of natural or intrinsic

desire often leads to technological capability in the area of skill acquired. The factor

was measured on a four scale rating of extent to which it impacts on the development of

TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

ii. On-the-job training (x2)

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On-the-job training (OJT) is one of the best training methods because it is

planned, organized, and conducted at the employee's worksite. OJT is generally the

primary method used for broadening employee skills and increasing productivity (US

Department of the Interior, (1998). It is particularly appropriate for developing

proficiency skills unique to an employee's job - especially jobs that technological in

nature and requires either imported or locally-owned equipment or facilities.

Morale, productivity, and professionalism will normally be high in those

organizations that employ a sound OJT program. An analysis of the major job

requirements and related knowledge, skills, and abilities form the basis for setting up an

OJT plan. To be most effective, an OJT plan should include: The subject to be covered;

Number of hours; estimated completion date; and method by which the training will be

evaluated. To have a successful OJT program, supervisors need to assign a coach to

each employee involved in OJT. It is the responsibility of the coach to plan training

carefully and conduct it effectively. The parameter was measured on a four scale rating

of extent to which it impacts on the development of TC in firms thus; 4-Highly, 3-

Moderately, 2-Slightly, and 1-not at all.

iii. Research and Development (R&D) (x3)

R&D according to the Organization for Economic Co-operation and

Development refers to "creative work undertaken on a systematic basis in order to

increase the stock of knowledge, including knowledge of human, culture and society,

and the use of this stock of knowledge to devise new applications”. New product design

and development is more than often a crucial factor in the survival of a company. In a

dynamic industry like ICT, firms must continually revise their design and range of

products. This is necessary due to continuous technology change and development as

well as other competitors and the changing preference of customers. Nigerian ICT fims
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must research making adaptive and modified products to suit the local environment

since ICT is a foreign technology to the country. The factor was measured on a four

scale rating of extent to which it impacts on the development of TC in firms thus; 4-

Highly, 3-Moderately, 2-Slightly, and 1-not at all.

iv. Ownership structure (x4)

This has to do with the way in which the business is organized. The form of a

business determines how many owners it has and its financial situation especially in the

aspect of the potential risks and liabilities of the business; the formalities and expenses

involved in establishing and maintaining the various business structures, the income tax

situation, and the investment needs. In particular, investment, productions and linkages

decisions would depend on the firm ownership structure. The study did not use the

conventional seven item scale (sole proprietorship, partnership, limited partnership,

limited liability company (LLC), corporation (for-profit), non profit corporation (not-

for-profit), and cooperative) but used a three item scale of ‘fully owned by Nigerian

individual (s)’; ‘joint venture between Nigerian and foreign individual (s)’; ‘fully owned

by foreign individual (s)’. This is because the study is interested in capturing the share

of the sampled firms owned by multinationals. The parameter was measured as a factor

influencing TC using a four scale rating of extent to which it impacts on the

development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

v. Funds for Training (x5)

For technological capability development, the need to set aside funds for

manpower development and learning cannot be overemphasized. The respondents

would be asked to state the amount spent on training for the study period. The factor

was also measured on a four scale rating of extent to which it impacts on the

development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

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vi. Funds for R&D (x6)

Although R&D is valued as an integral function of technological capability and

technological innovation, it is usually very expensive and some firms could shy away

from it due to lack of funds. The respondents were asked to state the amount spent on

R&D for the study period. The factor was measured on a four scale rating of extent to

which it impacts on the development of TC in firms thus; 4-Highly, 3-Moderately, 2-

Slightly, and 1-not at all.

vii Working Experience (x7)

The experience of the owner of the firm would be measured on the basis of

previous employment as well as the number of years in the present employment. This

criterion is one of the ways used in determining the technological capability of the

entrepreneurs. The factor was measured on a four scale rating of extent to which it

impacts on the development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly,

and 1-not at all.

viii. Linkages (x8)

Informational links established by firms could increase value added The

respondents were asked to state the extent in which the factor has influenced the

technological capability of their firms using a four scale rating of 4-Highly, 3-

Moderately, 2-Slightly, and 1-not at all.

ix. Trade orientation (i.e. import-oriented regimes or export-oriented) (x9)

Trade orientation of an enterprise can impact on the development of

technological capability. Import-oriented enterprises, in the process of use of imported

technologies could develop production capability. In fact, such mastery are usually

displayed in cases where the firm has a sound policy on reverse engineering. This was

how China attained its present industrial development. This parameter was measured
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on a four scale rating of extent to which it impacts on the development of TC in firms

thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

x. Size of firm (x10)

The extents to which firm-level differences in technological effort and mastery

occur vary by industry as well as by size of firm and market. This is because the size of

a firm will determine the technological strategy, the level of risk and the eventual result

of technological efforts and invariably the technological capability of firms. Thus, the

parameter was measured on a four scale rating of extent to which it impacts on the

development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

xi. Availability of micro-level learning support mechanisms (x11)

Technological knowledge is not shared equally among firms, nor is it easily

imitated by or transferred across firms. Transfer necessarily requires learning because

technologies are tacit, and their underlying principles are not always clearly understood.

Therefore, simply to gain mastery of a new technology requires skills, effort, and

investment by the receiving firm, and the extent of mastery achieved is uncertain and

necessarily varies by firm according to these inputs. The factor was measured on a four

scale rating of extent to which it impacts on the development of TC in firms thus; 4-

Highly, 3-Moderately, 2-Slightly, and 1-not at all.

B External factors:

i. Competition with international market (y1)

The respondents would be asked to state the extent in which competition with

local and international market has influenced the technological capability of their firms

using a four item scale rating of 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.
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ii. Technological change (y2)

Technological change impacts on technological capability building in the sense

that as new technologies and processes emerge, competence in use and adaptations are

developed to match the new technologies. In ICTs the rate of technological obsolesces

is higher due to the dynamic nature of the industry. The factor was measured on a four

scale rating of extent to which it impacts on the development of TC in firms thus; 4-

Highly, 3-Moderately, 2-Slightly, and 1-not at all.

iii Government support and policy toward education, particularly education in

science and engineering (y3)

Technological capability development is being influenced by

government support in the provision of adequate infrastructure and conducive business

environment for firms. Nationwide policies in the form of macroeconomic policies,

financial system development, incentive structures, infrastructure, and national

education attainment have important impacts on the capabilities and efficiency of firms.

The factor was measured on a four scale rating of extent to which it impacts on the

development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

iv. Skills from the labour market (y4)

Access to skills and expertise from the labour market could impact on

technological capabilities of firms. In a sense, good and skilled labour are scarce and

when they are found, firms may be required to pay a premium. Small firms may not be

able to afford this. Thus, capabilities which facilitate adoption and efficient use of

technologies often cannot be found or are not readily available on the market. Markets

for knowledge and other such inputs are also characterized by imperfections. As a

consequence, the process of technology development itself inevitably creates

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technology gaps. This parameter was measured on a four scale rating of extent to which

it impacts on the development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly,

and 1-not at all.

v. Technical information and support (y5)

Aside from skills available in the labour market. The firm may have need for

specific technical information and support relevant to a process or product development

which are external and not within its jurisdiction. The factor was measured on a four

scale rating of extent to which it impacts on the development of TC in firms thus; 4-

Highly, 3-Moderately, 2-Slightly, and 1-not at all.

vi. Access to technology infrastructure of laboratories, testing facilities, standards

institutions, and so on (y6)

This parameter was measured on a four scale rating of extent to which it impacts

on the development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not

at all.

vii. Access to appropriate technology (y7)

The factors was measured on a four scale rating of extent to which it impacts on

the development of TC in firms thus; 4-Highly, 3-Moderately, 2-Slightly, and 1-not at

all.

viii. Licensing (y8)

Technology transfer through technical assistance contracts or licensing

arrangements could enhance technological capability development. Direct foreign

investment could increase the ability of firms to "learn-by-copying" and the ability to
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"benchmark" their operations against internationally competitive firms in the same

business (World Bank, 1996). The respondents would be asked to state the extent in

which the factor has influenced the technological capability of their firms using a four

item scale of 4-Highly, 3-Moderately, 2-Slightly, and 1-not at all.

10.0 Measurement of the Impact of Technological Capability on Firm’s

Performance

Impacts of technological capability development on firm’s performance range

from effects on sales and market share to changes in productivity and efficiency.

Important impacts at industry and national levels are changes in international

competitiveness and in total factor productivity, knowledge spill over of firm-level

innovations, and an increase in the amount of knowledge flowing through networks.

The impact of technological capability accumulation can also be measured by the

percentage of sales derived from new/improved products and number of patents.

To evaluate the impact of technological capability accumulation on firm’s

performance based on annual profit, the following model was considered as relevant:

Performance (P) of ICT firms in terms of profitability in the last accounting year is

considered as an objective function with several independent variables Xi.

Mathematically, this is expressed as:

P = ∑f(TCi+j+k) = ∑[f(ICi) + f(PCj) + f(NLCk)] …….. equation 2

Where:

TC = Technological Capability; IC = Investment Capability; PC = Production

Capability; NLC = Networking and Linkage Capability;

i = (1, 2, 3…, 6) investment capabilities in the ICT firms

j = (1, 2, 3…, 12) production capabilities and

k = (1, 2, 3 …, 3) networking capabilities in the ICT firms

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P = Performance (Measured in terms of annual profit in naira)

IC1 = feasibility studies (based on number of successful feasibility studies and rating

of ability/skill of firm to perform the function in-house)

IC2 = search for technology (based on rating of ability/skill of firm to perform the

function in-house)

IC3 = assessment of technology (based on rating of ability/skill of firm to perform

the function in-house)

IC4 = equipment/machinery/facility procurement (based on rating of ability/skill of

firm to perform the function in-house)

IC5 = recruitment of skilled personnel (based on number of skilled personnel

recruited and rating of ability/skill of firm to perform the function in-house)

IC6 = involvement in detailed engineering (based on rating of ability/skill of firm to

perform the function in-house)

TC1 = quality control (based on actual number of skilled personnel and rating of

ability/skill of the enterprise to carry out the function in-house)

TC2 = debugging (based on actual number of skilled personnel and rating of

ability/skill of the enterprise to carry out the function in-house)

TC3 = preventive maintenance (based on actual number of skilled personnel and

rating of ability/skill of the enterprise to carry out the function in-house)

TC4 = Plant layout (based on actual number of skilled personnel and rating of

ability/skill of the enterprise to carry out the function in-house)

TC5 = inventory control (based on actual number of skilled personnel and rating of

ability/skill of the enterprise to carry out the function in-house)

TC6 = improvement in processes (based on rating of success/functionality of

processes improved, actual number of skilled personnel and rating of

ability/skill of firm to perform the function in-house)

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TC7 = copying imports (based on rating of success/functionality of imports copied,

actual number of skilled personnel and rating of ability/skill of firm to perform

the function in-house)

TC8 = improving existing products (based on rating of success/functionality of

products improved, actual number of skilled personnel and rating of

ability/skill of firm to perform the function in-house)

TC9 = introducing new products (based on rating of success/functionality of

introduced products, actual number of skilled personnel and rating of

ability/skill of firm to perform the function in-house)

TC10 = licensing new product technology (based on number of skilled personnel and

rating of ability/skill of the firms to carry out the function in-house)

TC11 = experimental development (based on amount spent in R&D, actual number

of skilled personnel and rating of the ability/skill of the firms to carry out the

function in-house)

TC12 = Patents (based on the number of patents granted)

NLC1 = government laboratories (based on the number of existing linkages and

rating of the intensity of firm collaborative effort)

NLC2 = universities or polytechnics (based on the number of existing linkages and

rating of the intensity of firm collaborative effort)

NLC3 = ICT regulatory body (based on the number of existing linkages and rating of

the intensity of firm collaborative effort)

NLC4 = competitors (based on the number of existing linkages and rating of the

intensity of firm collaborative effort)

NLC5 = suppliers (based on the number of existing linkages and rating of the

intensity of firm collaborative effort)

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NLC6 = financial resources (based on the number of existing linkages and rating of

the intensity of firm collaborative effort)

11.0 Development of computer software for technological capability evaluation

and review

To develop computer software for technological capability evaluation and

review, the study used the flowchart in figure 5 to write the algorithm. The

software algorithm was developed from the time-series information obtained on

TCs and performance indicators. The Visual Basic Programming Language was

used to develop the software to evaluate and review TCs in the industry. The

data from the study are being used to validate the software.

The pseudo code of the algorithm in Figure 5 is as follows:

START

OBTAIN INVESTMENT CAPABILITY

IC1previous = obtain number of successful feasibility studies and rating of ability/skill

of firm to perform feasibility study in-house in previous year

IC1current = obtain number of successful feasibility studies and rating of ability/skill

of firm to perform feasibility study in-house in current year

IC2previous = obtain rating of ability/skill of firm to perform search for technology in

previous year.

IC2current = obtain rating of ability/skill of firm to perform search for technology in

current year

IC3previous = obtain rating of ability/skill of firm to perform assessment of technology

in-house in previous year

IC3current = obtain rating of ability/skill of firm to perform assessment of technology

in-house in current year

 78

IC4previous = obtain rating of ability/skill of firm to perform

equipment/machinery/facility procurement in-house in previous year

IC4current = obtain rating of ability/skill of firm to perform

equipment/machinery/facility procurement in-house in current year

IC5previous = obtain number of skilled personnel recruited and rating of ability/skill of

firm to perform recruitment of skilled personnel in-house in previous year

IC5current = obtain number of skilled personnel recruited and rating of ability/skill of

firm to perform recruitment of skilled personnel in-house in current year

IC6previous = obtain rating of ability/skill of firm to participate in detailed engineering

in previous year

IC6current = obtain rating of ability/skill of firm to participate in detailed engineering

in current year

OBTAIN PRODUCTION CAPABILITY

TC1previous = obtain actual number of skilled personnel and rating of ability/skill of

the enterprise to carry out quality control in-house in previous year

TC1current = obtain actual number of skilled personnel and rating of ability/skill of the

enterprise to carry out quality control in-house in current year

TC2previous = obtain actual number of skilled personnel and rating of ability/skill of

the enterprise to carry out debugging in-house in previous year

TC2current = obtain actual number of skilled personnel and rating of ability/skill of the

enterprise to carry out debugging in-house in current year

TC3previous = obtain actual number of skilled personnel and rating of ability/skill of

the enterprise to carry out preventive maintenance in-house in previous year

TC3current = obtain actual number of skilled personnel and rating of ability/skill of the

enterprise to carry out preventive maintenance in-house in current year

 79

TC4previous = obtain actual number of skilled personnel and rating of ability/skill of

the enterprise to carry out Plant layout in-house in previous year

TC4current = obtain actual number of skilled personnel and rating of ability/skill of the

enterprise to carry out Plant layout in-house in current year

TC5previous = obtain actual number of skilled personnel and rating of ability/skill of

the enterprise to carry out inventory control in-house in previous year

TC5current = obtain actual number of skilled personnel and rating of ability/skill of the

enterprise to carry out inventory control in-house in current year

TC6previous = obtain rating of success/functionality of processes improved, actual

number of skilled personnel and rating of ability/skill of firm to perform

improvement in processes in-house in previous year

TC6current = obtain rating of success/functionality of processes improved, actual

number of skilled personnel and rating of ability/skill of firm to perform

improvement in processes in-house in current year

TC7previous = obtain rating of success/functionality of imports copied, actual number

of skilled personnel and rating of ability/skill of firm to copy imports in-house

in previous year

TC7current = obtain rating of success/functionality of imports copied, actual number of

skilled personnel and rating of ability/skill of firm to copy imports in-house in

current year

TC8previous = obtain rating of success/functionality of products improved, actual

number of skilled personnel and rating of ability/skill of firm to improve

existing products in-house in previous year

TC8current = obtain rating of success/functionality of products improved, actual

number of skilled personnel and rating of ability/skill of firm to improve

existing products in-house in current year

 80

TC9previous = obtain rating of success/functionality of introduced products, actual

number of skilled personnel and rating of ability/skill of firm to introduce new

products in-house in previous year

TC9current = obtain rating of success/functionality of introduced products, actual

number of skilled personnel and rating of ability/skill of firm to introduce new

products in-house in current year

TC10previous = obtain number of skilled personnel and rating of ability/skill of the

firms to carry out licensing of new product technology in-house in previous

year

TC10current = obtain number of skilled personnel and rating of ability/skill of the firms

to carry out licensing of new product technology in-house in current year

TC11previous = obtain amount spent in R&D, actual number of skilled personnel and

rating of the ability/skill of the firms to carry out experimental development

in-house in previous year

TC11current = obtain amount spent in R&D, actual number of skilled personnel and

rating of the ability/skill of the firms to carry out experimental development

in-house in current year

TC12previous = obtain number of patents granted in previous year

TC12current = obtain number of patents granted in current year

OBTAIN LINKAGE CAPABILITY

NLC1previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with government laboratories in previous year

NLC1current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with government laboratories in current year

 81

NLC2previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with universities or polytechnics in previous year

NLC2current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with universities or polytechnics in current year

NLC3previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with ICT regulatory body in previous year

NLC3current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with ICT regulatory body in current year

NLC4previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with competitors in previous year

NLC4current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with competitors in current year

NLC5previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with suppliers in previous year

NLC5current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with suppliers in current year

NLC6previous = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with financial resources in previous year

NLC6current = obtain number of existing linkages and rating of the intensity of firm

collaborative effort with financial resources in current year

OBTAIN ANNUAL PROFIT/TURNOVER (P)

(a) Pprevious = Get the annual turnover/profit in previous year

(b) Pcurrent = Get the annual turnover/profit in current year

PERFORM DECISION ANALYSIS

 82

if IC1current > IC1previous and/or IC2current >IC2previous and/or IC3current >IC3previous and/or

IC4current >IC4previous and/or IC5current >IC5previous and/or IC6current >IC6previous

and/or TC1current >TC1previous and/or TC2current >TC2previous and/or TC3current

>TC3previous and/or TC4current >TC4previous and/or TC5current >TC5previous and/or

TC6current >TC6previous and/or TC7current >TC7previous and/or TC8current >TC8previous

and/or TC9current >TC9previous and/or TC10current >TC10previous and/or TC11current

>TC11previous and/or TC12current >TC12previous and/or NLC1current >NLC1previous

and/or NLC2current >NLC2previous and/or NLC3current >NLC3previous and/or

NLC4current >NLC4previous and/or NLC5current >NLC5previous and/or NLC6current

>NLC6previous and/or Pcurrent >Pprevious

THEN report result and summarize ‘technological capability is SATISFACTORY’

ELSE

REPORT result and summarize ‘There is need to (i) improve on technological

capability of firm (ii) analyze and optimize factors that can improve on

technological capability accumulation and; (iii) improve on government policy to

support firm.

GO TO START
 83

START

OBTAIN NUMBER OF TC’s

IN FIRM

INPUT
NUMBER/RATINGS
OF INVESTMENT
CAPABILITIES

INPUT
NUMBER/RATINGS OF
PRODUCTION
CAPABILITIES

INPUT
NUMBER/RATINGS
OF NETWORKING
CAPABILITIES

OBTAIN CURRENT AND PREVIOUS

YEAR ANNUAL PROFIT, PATENTS,
R&D’s AND LICENSES

YES
IS ANNUAL
PROFIT, IC, PC & REPORT
NLC FOR TC AS
CURRENT YEAR SATISFACTORY
> PREVIOUS?

NO END

IMPROVE ON
TC’s AND GOVT
POLICY TO
SUPPORT FIRM

Figure 5: Flowchart for Technological Capability Evaluation and Review in Firms

 84

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