Markets for Technology: The Economics of Innovation and Corporate Strategy

351 Pages·2001·1.15 MB·English

by  Ashish Arora

Markets for Technology
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Markets for Technology
The Economics of
Innovation and
CorporateStrategy
Ashish Arora, Andrea Fosfuri,
and Alfonso Gambardella
The MIT Press
Cambridge, Massachusetts
London, England
© 2001 Massachusetts Institute of Technology
All rights reserved. No part of this book may be reproduced in any form by any electronic
or mechanical means (including photocopying, recording, or information storage and re-
trieval) without permission in writing from the publisher.
This book was set in Palatino by Graphic Composition, Inc., Athens, Georgia, using
QuarkXPress 4.1.
Printed and bound in the United States of America.
Library of Congress Cataloging-in-Publication Data
Arora, Ashish.
Markets for technology : the economics of innovation and corporate strategy /
Ashish Arora, Andrea Fosfuri, Alfonso Gambardella.
p. cm.
Includes bibliographical references and index.
ISBN 0-262-01190-5
1. High technology industries—Management. 2. Technology—Marketing. 3. License
agreements. 4. Technology transfer—Economic aspects. 5. Technological innova-
tions—Economic aspects. 6. Globalization—Economic aspects. 7. Employees—Effect
of technological innovations on. I. Fosfuri, Andrea. II. Gambardella, Alfonso.
III. Title.
HD62.37 .A76 2002
338'.064—dc21
2001044324
This book is dedicated to Esther (AF), Sonal (AA), and Veevan (AG)
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Contents
Preface and Acknowledgments ix
1 Markets for Technology: Why Do We See Them, Why We Don’t See
More of Them, and Why We Should Care 1
I Markets for Technology: Extent and Development 15
2 Preliminary Evidence 17
3 The Division of Innovative Labor in High-Tech Industries 45
II Limitations and Determinants 91
4 Context Dependence, Sticky Information, and the Limits of the
Market for Technology 93
5 Intellectual Property Rights and the Licensing of
Know-How 115
6 Markets for Technology and the Size of the Market: Adam Smith
and the Division of Innovative Labor Revisited 143
III Functioning and Economic Implications 169
7 Licensing the Market for Technology 171
8 Global Technology Suppliers and the International Division of
Innovative Labor 197
viii Contents
IV Implications for Public Policy and Corporate Strategy 221
9 Implications for Corporate Strategy 223
10 The Institutional Context: Problems and Policy 253
11 Conclusions 281
Notes 289
References 309
List of Figures and Tables 327
Index 331
Preface and
Acknowledgments
This book is part of nearly a decade-old and ongoing research project
focused on the process of technological change and its implications for
industry structure, corporate strategy, and, ultimately, for economic
growth. In the course of our earlier research, we have tried to under-
stand the complex and variegated process of innovation and technical
change, particularly during the 1980s and 1990s, decades that appear
todiffer from the post–World War II era of economic growth in many im-
portant respects.
Although economists and management theorists have made signifi-
cant advances in understanding innovation, its determinants and its
consequences, not enough attention has been paid to understanding in-
novation as an economic process, and the different ways of coordinating
the actions of the various economic agents involved in such a process. In
particular, it is not yet well understood how different economic actors,
such as universities and firms, or large and small companies, or firms in
developed and in developing countries jointly contribute to the process
of creation, development, commercialization, and widespread use of
new technologies. As a result, there is an insufficient appreciation of the
implications, for public and business policy and for the rate and direc-
tion of technical change itself, when innovation involves trade in tech-
nology, or when firms specialize in developing technology as a part of a
division of labor in innovation. This book tries to fill this gap.
In earlier research, we have individually and jointly addressed many
of these issues. Our prior research has focused on topics such as tech-
nological alliances (particularly between large and small firms in high-
tech industries), technological licensing, technological spillovers, the
role of intellectual property rights in developing countries and their im-
plications for industry structure, along with detailed studies of these
and other issues in pharmaceuticals, biotechnology, and chemicals.