TECHNOLOGY TRANSACTIONS - NETWORKS OVER MARKETS

There is a widespread belief in the business community that firms can rely on the market for buying and selling technological opportunities. The argument is: with so much technology development going on in the world, 'there must be somebody somewhere who has the technology we nee d.' According to this belief, acquiring new technology just boils down to finding the supplier, possibly with the help of a specialized inte rmediary. Several large firms have indeed developed ambitious mechanis ms for acquiring the needed technological know-how as they proceed to make and market a new product. We contend that this concept of the tec hnology transfer process is erroneous, as it conflicts with actual pra ctice. The very high transaction costs entailed leave considerable roo m for opportunistic behavior and are more likely to occur when the par ties do not know each other. An effective way to reduce transaction co sts, therefore, is to limit technology transfers to the firm's partner s, i.e. organizations with which the firm has already interacted in th e past. Our research provides evidence that successful technology tran sfers typically take place between suppliers and buyers who had busine ss relationships before considering a technology agreement. In additio n, we report findings that companies using intermediaries (technologic al opportunities catalogues, databases, fairs, etc.) have been disappo inted in their attempts to find new technologies from unknown sources. Because of the high risk of opportunistic behavior, it is practically impossible to assess the value of a technology without knowing who se lls it. Similarly, the technology transfer capabilities of a company a re difficult to appraise without prior knowledge through business inte raction. To a certain extent, it may be better to buy any technology f rom a partner that one knows well than to buy a supposedly good techno logy from a firm with which one has had no experience. To put it blunt ly: the identity of the partner may actually matter more than the tech nology being traded! Consequently, the relevant framework for technolo gy transfer is built on a 'network concept' rather than the 'market co ncept'. Firms wishing to acquire new technology should turn first to t heir network of trusted business partners, looking for available techn ological opportunities instead of trying to buy technology from unrela ted organizations.