Markets for technology

Firms typically try to profit from their technological innovations by selling them embedded in new processes, goods and services. Less frequently, innovators rely on the market for technology for the exploitation of their technologies or for outsourcing technologies developed by third parties. Traditionally, external sources of knowledge were considered an important option for small and medium firms, as they could not rely on in-house R&D laboratories. Also, small firms are typically more willing to offer their technology on the markets for technology because they lack the downstream complementary assets needed to reach the market for products. However, more recently large firms have also opened their innovative activities to external sources of knowledge and complementary assets (see chapter by Dahlander and Alexy). As a result, markets for technology are becoming larger and more diffused, although their future growth depends on a more substantial involvement of large firms, many of which remain still reluctant to rely on technology trade. Markets for technology do not always imply substantial transfer of knowledge. License agreements often result from litigation for the control of IPRs. This is the case of owners of large patent portfolios who sign cross-licensing agreements that give the parties the freedom to operate in their respective technological and market fields rather than allowing access to outside technology. Litigation sometimes is initiated by patent trolls, namely organizations whose main aim is to accumulate patent portfolios and force potential infringers to licensing-in their technology. Probably, these IPR agreements too do not imply any real technology transfer between the parties. Typically, large firms seek to quickly settle out of court a dispute with patent trolls or small patent owners to avoid the risk of an injunction to stop alleged patent infringement. These various avenues leading to licensing and other forms of technology transactions are characterized by different actors, incentives, costs and benefits of which innovation managers should be aware. After providing a definition of technology markets, this chapter highlights the importance of technology markets for innovation management. It illustrates the motivations for licensing both from the supply side and the demand side of the market, and discusses the barriers to technology trade.