Technology Market Transactions

Technology Market Transactions

Auctions, Intermediaries and Innovation

Frank Tietze

Frank Tietze delivers an in-depth discussion of the impact of empirical results upon transaction cost theory, and in so doing, provides the means for better understanding technology transaction processes in general, and auctions in particular. Substantiating transaction cost theory with empirical auction data, the author goes on to explore how governance structures need to be designed for effective distributed innovation processes. He concludes that the auction mechanism is a viable transaction model, and illustrates that the auction design, as currently operated by market intermediaries, requires thorough adjustments. Various options for possible improvements are subsequently prescribed.

Chapter 1: Introduction

Frank Tietze

Subjects: economics and finance, economics of innovation, intellectual property, innovation and technology, economics of innovation, intellectual property, technology and ict

Extract

1.1 INNOVATION, TRANSACTIONS AND MARKET INTERMEDIARIES To create and sustain a competitive advantage and subsequently ensure continuous growth, many firms focus on the creation of innovations. These firms often find themselves in an innovation race against competitors, thus being forced to accelerate their processes from ‘simply being ideas’ to their actual launch on the markets (Cooper, 2008). While firms’ tendency to innovate depends primarily on their internal resources in their research and development (R&D) departments, this has become difficult mainly due to the increasing ‘complexity of modern technology’ resulting from the cumulative nature of many technologies1 and technical products (Hall, 2004: 4). According to Granstrand (2000b: 9), ‘products and services are not only becoming increasingly based on new technologies, but increasingly based on many different technologies. That is, products and services become more multi-technological’.2 Nowadays, for instance, automobiles can hardly be regarded as discrete products but must be seen as complex technical systems that include a wide range of electronics and software components that were not built into automobiles in the 1970s (Miyazaki and Kijima, 2000). The global system for mobile communications’ (GSM) standard for mobile telephony is another example. According to Bekkers et al. (2002), GSM includes at least 140 essential patent families with the major share being scattered across large multinational competitors (that is Motorola owns 18 per cent; Nokia 13 per cent; Alcatel 10 per cent; Philips 9 per cent, and Telia 7 per cent).3 There are various other examples. For instance, the DVD media...