CAPACITY AND CAPABILITY BUILDING IN THE INDIGENOUS CONTRACTORS THROUGH TECHNOLOGY TRANSFER Abu Hassan Abu Dakar School of Housing, Building and Planning, Universiti Sains Malaysia, 11800 Penang, Malaysia. abhassan@usm.my ABSTRACT: The indigenous construction finns in developing countries are characterized by mostly small and the lack of capacity and capability, confidence, motivation, long tenn aspirations, etc. Many are still struggling without basic foundation on which construction finns' internal strength depends on. The technology transfer has been one of the popular method for achieving the these objectives. It is expected that a substantial degree of technology would be transferred by foreign international contractors to indigenous contractors by the end of a contract period. However, the extent and quality of transfer varies with the parties involved. The variability in achieving a desired transfonnation objective is a major obstacle to the production of capable indigenous contractors. It is therefore, important to identify the factors affecting transfonnation perfonnance; which include in this research, the internal characteristics of the receiving finns, the technology transfer program, and the type of technology. The respondents for this research were indigenous contractors with some past experience in technology transfer programs in construction projects in Malaysia. The findings of the research confinned that the internal characteristics of finns, technology transfer program, type of technology and the transfonnation perfonnance are significantly related. Keywords: Capacity and Capability, Technology Transfer, Indigenous Contractors, Construction Industry, Developing Countries, Malaysia. 1. INTRODUCTION The capacity and the capability of the construction industry in many developing countries, as in any infant industry, are still substantially deficient. These weaknesses are well known and had been widely reported (World Bank, 1984; United Nation, 1984; Kirmani, 1988; Turin, 1973; Wells, 1986). Various efforts were carried out to overcome these problems, including the introduction of the technology transfer program (Abbott; 1985). In construction, the formation of joint-ventures between local and foreign contractors has been recommended by the World Bank (1981). This is supported by Carrillo (1993), the integration of local and foreign constructors in construction projects can facilitate the transfer of technology. Numerous studies have been carried out on technology transfer in fields other than construction (Wallender III (1979), Germidis (1977), Bradbury (1978), Campbell (1984), Marton (1986), OECD (1981), Bennette and Zhao (2004) and many more). In construction, there are a few studies in technology transfer that had been carried out extensively. They are Drewer (1975), Abbot 1985), Mansfield (1992) Simkoko (1989), Carrillo (1993 and 1996), Ofori (1994). In the process of the technology transfer in construction, it is expected that, at the end of the contract period, a substantial degree of technology has been imparted by foreign international contractors to indigenous contractors of host countries who will then be able to play a major role in undertaking similar projects in the future, both domestic and international There are numerous factors affecting the performance of the transformation over time. It is assumed that the rate of success varies and is unique for each program and this depends on various factors, which include the internal factors of the receiving companies, the environments of host countries, the technology transfer program, and the type of technology in question.