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Trust, Incomplete Contracts and the Market for Technology

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Paul H. Jensen & Alfons Palangkaraya & Elizabeth Webster, 2013. "Trust, Incomplete Contracts and the Market for Technology," Melbourne Institute Working Paper Series wp2013n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2013n03
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    References listed on IDEAS

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    More about this item

    Keywords

    Markets for technology; R&D; invention; patent;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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