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Trust, Incomplete Contracts and the Market for Technology

  • Paul H. Jensen

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne)

  • Alfons Palangkaraya

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne)

  • Elizabeth Webster

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne)

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.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2013n03.

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Length: 37 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:iae:iaewps:wp2013n03
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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