Trust, Incomplete Contracts and the Market for Technology
37 Pages Posted: 28 Feb 2013
Date Written: February 2013
Conditional on the decision to enter the market for immature technology, we test for the effects that trust – as proxied by the context in which the negotiating parties met – has on the likelihood that these negotiations are successful. Using a randomised dataset of 860 university-firm and firm-firm technology transactions, we find that the depth of prior relationship and circumstantial knowledge about each other matters, and matters a lot. Parties who knew each other from a previous business are 28.2 percentage points more likely to conclude a transaction compared with cold-callers. Meeting via an industry network offers an intermediate advantage but meeting via a third party or at a conference only offers a modest advantage over cold calling.
Keywords: Markets for technology, R&D, invention, patent
JEL Classification: O31, O34
Suggested Citation: Suggested Citation