The Cost of Integrating External Technologies: Supply and Demand Drivers of Value Creation in the Markets for Technology

Strategic Management Journal (Forthcoming)

38 Pages Posted: 16 Feb 2010 Last revised: 29 Oct 2015

See all articles by Marco Ceccagnoli

Marco Ceccagnoli

Scheller College of Business at Georgia Tech

Lin Jiang

University of Missouri at Columbia - Department of Management

Date Written: July 30, 2012

Abstract

A classic decision faced by technology suppliers and buyers is whether to compete in the product markets or cooperate through licensing. We address this question by examining an important, demand-side barrier to licensing -- the buyers’ cost of integrating a licensed technology. We argue that this cost can be affected by suppliers’ knowledge-transfer capabilities, buyers’ absorptive capacity, and the cospecialization between R&D and downstream activities in the buyers’ industries. Following this argument and a stylized bargaining model, we hypothesize that the supplier’s knowledge-transfer capability stimulates licensing. Moreover, the importance of this capability increases when licensing to industries where potential buyers have weak absorptive capacity or R&D and downstream activities are cospecialized. We find support for our hypotheses using a panel dataset of small “serial innovators.”

Keywords: technology licensing, markets for technology, technology integration costs, cospecialized complementary assets, absorptive capacity, knowledge-transfer capabilities

Suggested Citation

Ceccagnoli, Marco and Jiang, Lin, The Cost of Integrating External Technologies: Supply and Demand Drivers of Value Creation in the Markets for Technology (July 30, 2012). Strategic Management Journal (Forthcoming). Available at SSRN: https://ssrn.com/abstract=1553493 or http://dx.doi.org/10.2139/ssrn.1553493

Marco Ceccagnoli

Scheller College of Business at Georgia Tech ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Lin Jiang (Contact Author)

University of Missouri at Columbia - Department of Management ( email )

514 Cornell Hall
University of Missouri
Columbia, MO 65211
United States

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