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 3: A Firm Perspective on Technology Transactions

Frank Tietze

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


3.1 INTRODUCTION Since it is becoming increasingly important to open up innovation processes beyond the own firm boundaries, firms are becoming more and more aware of the importance to strategically manage their IP portfolios along open and distributed innovation processes. For instance, IP management includes the selection of internally developed inventions as well as determining whether they should be patented, and, if so, in which countries at what time. IP management also includes the continuous management of firms’ IP portfolios (determining which patents should be kept or be dropped), and poses questions that involve parties outside the own firm boundaries. Those tasks relate to the management of the firm’s technology base and include the makeor-buy and keep-or-sell decisions. Hence, firms have to decide whether a technology should be developed internally or whether it can be acquired or in-licensed more economically as well as whether an own technology should be kept internally or be externally exploited (for example, sold or out-licensed). Figure 3.1 illustrates the development of an innovation and its diffusion through a distributed innovation process with different transactions taking place along the product development lifecycle phases. In the management literature, transactions from the seller’s perspective (which is the focus of this study) are closely related to the ‘external technology exploitation‘ (ETE) concept that was developed in the 1970s by, among others, Anderson (1979), Lien (1979), Marcy (1979), as well as Ford and Ryan (1977). In particular the contributions by Ford (1988), Ford and Ryan (1981, 1977) coined the concept...

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