Developing reputation to overcome the imperfections in the markets for knowledge

Abstract In addition to exploiting knowledge in own products and services, firms may externally commercialize their knowledge assets, e.g., by means of licensing out technology. Despite strong imperfections in the markets for knowledge, the commercialization of knowledge assets has recently become a broader movement. However, prior research has often neglected the external mode of knowledge exploitation despite the contradictory situation that some pioneering companies realize enormous benefits whereas most other firms experience strong managerial difficulties. Therefore, we analyze whether firms may increase their performance in licensing out technology by initiating market pull effects due to the reputation of being a valuable knowledge provider. We derive six hypotheses regarding determinants and consequences of building reputation, taking into account technological turbulence as an external contingency factor. The hypotheses are tested with new measures and data from a questionnaire-based study of 152 firms across industries. The results show that firms may overcome the imperfections in the knowledge markets by actively developing reputation. The path-dependent nature of reputation contributes to explaining the discrepancies between the success of some pioneering companies and the difficulties of most other firms.

[1]  O. Williamson,et al.  The mechanisms of governance , 1996 .

[2]  J. S. Long,et al.  Regression Models for Categorical and Limited Dependent Variables , 1997 .

[3]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[4]  David B. Balkin,et al.  Entrepreneurship and university-based technology transfer , 2005 .

[5]  Fabrizio Cesaroni,et al.  Technological outsourcing and product diversification: do markets for technology affect firms’ strategies? , 2004 .

[6]  Jeffrey L. Furman,et al.  The Determinants of National Innovative Capacity , 2000 .

[7]  Joel Podolny.  A Status-Based Model of Market Competition , 1993, American Journal of Sociology.

[8]  A. Rao,et al.  No Pain, No Gain: A Critical Review of the Literature on Signaling Unobservable Product Quality , 2000 .

[9]  J. Hennart,et al.  The transaction costs theory of joint ventures: an empirical study of Japanese subsidiaries in the united states , 1991 .

[10]  Mark C. Suchman.  Managing Legitimacy: Strategic and Institutional Approaches , 1995 .

[11]  J. Mathews.  Strategizing by firms in the presence of markets for resources , 2003 .

[12]  H. Tsoukas.  The firm as a distributed knowledge system : A constructionist approach , 1996 .

[13]  O. Shenkar,et al.  Reputation, Image, Prestige, and Goodwill: An Interdisciplinary Approach to Organizational Standing , 1997 .

[14]  Jean-Philippe Escher.  Design and implementation of technology marketing organizations , 2003 .

[15]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[16]  M. Polanyi,et al.  Tacit Knowing: Its Bearing on Some Problems of Philosophy , 1962 .

[17]  David J. Teece,et al.  The Market for Know-How and the Efficient International Transfer of Technology , 1981 .

[18]  Stephen Tallman,et al.  A Managerial Decision Model of International Cooperative Venture Formation , 1994 .

[19]  J. Hair.  Multivariate data analysis , 1972 .

[20]  J. March.  Exploration and exploitation in organizational learning , 1991, STUDI ORGANIZZATIVI.

[21]  K. Clark,et al.  The power of product integrity. , 1990, Harvard business review.

[22]  H. Ernst.  Patent applications and subsequent changes of performance: evidence from time-series cross-section analyses on the firm level , 2001 .

[23]  Henry C K Chen.  Direction, Magnitude and Implications of Non-response Bias in Mail Surveys , 1996 .

[24]  Anne S. Miner,et al.  The Impact of Organizational Memory on New Product Performance and Creativity , 1997 .

[25]  Colin Camerer,et al.  Reputation and corporate strategy: A review of recent theory and applications , 1988 .

[26]  D. A. Kenny,et al.  The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. , 1986, Journal of personality and social psychology.

[27]  Scott Shane,et al.  The Halo Effect and Technology Licensing: The Influence of Institutional Prestige on the Licensing of University Inventions , 2003, Manag. Sci..

[28]  C. Perrow.  Organizational Prestige: Some Functions and Dysfunctions , 1961, American Journal of Sociology.

[29]  I. Cockburn,et al.  Measuring competence?: exploring firm effects in pharmaceutical research , 1994 .

[30]  Charles J. Fombrun,et al.  Reputation: Realizing Value from the Corporate Image , 1996 .

[31]  D. A. Kenny,et al.  Process Analysis , 1981 .

[32]  A. Arora.  PATENTS, LICENSING, AND MARKET STRUCTURE IN THE CHEMICAL INDUSTRY , 1996 .

[33]  B. Kogut,et al.  Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology , 1992 .

[34]  E. Zajac,et al.  Status Evolution and Competition: Theory and Evidence , 2005 .

[35]  J. H. Dyer,et al.  Creating and managing a high‐performance knowledge‐sharing network: the Toyota case , 2000 .

[36]  Toby E. Stuart.  Network Positions and Propensities to Collaborate: An Investigation of Strategic Alliance Formation in a High-Technology Industry , 1998 .

[37]  P. Herrling,et al.  Maximizing pharmaceutical research by collaboration , 1998 .

[38]  Bj⊘rn Asheim,et al.  Knowledge bases and Regional Innovation Systems: Comparing Nordic Clusters. , 2005 .

[39]  M. Houston.  Alliance Partner Reputation as a Signal to the Market: Evidence from Bank Loan Alliances , 2003 .

[40]  R. Kerin,et al.  Exploring the brand value-shareholder value nexus for consumer goods companies , 1998 .

[41]  H. Rao.  The Social Construction of Reputation: Certification Contests, Legitimation, and the Survival of Organizations in the American Automobile Industry: 1895–1912 , 1994 .

[42]  M. Reitzig.  What determines patent value?: Insights from the semiconductor industry , 2003 .

[43]  R. Katz,et al.  Investigating the Not Invented Here (NIH) syndrome: A look at the performance, tenure, and communication patterns of 50 R & D Project Groups , 1982 .

[44]  A. Roth.  Game-Theoretic Models of Bargaining , 1987 .

[45]  H. Grupp,et al.  Indicators for national science and technology policy: how robust are composite indicators? , 2004 .

[46]  B. O'Connor,et al.  SIMPLE: All-in-One Programs for Exploring Interactions in Moderated Multiple Regression , 1998 .

[47]  Barry Bozeman,et al.  Technology transfer and public policy: a review of research and theory , 2000 .

[48]  H. Chesbrough.  The Era of Open Innovation , 2003 .

[49]  David B. Audretsch,et al.  Do University policies make a difference , 2005 .

[50]  U. Schmoch,et al.  Science-based technologies: university-industry interactions in four fields , 1998 .

[51]  P. H. Sullivan,et al.  Technology licensing : corporate strategies for maximizing value , 1996 .

[52]  Francis Bidault,et al.  Technology transactions: networks over markets , 1994 .

[53]  David J. Teece,et al.  Royalties, evolving patent rights, and the value of innovation , 2004 .

[54]  María García‐Vega.  Does technological diversification promote innovation?: An empirical analysis for European firms , 2006 .

[55]  David Ford,et al.  Technology strategy in networks , 1997 .

[56]  David L. Deeds,et al.  Exploration and Exploitation Alliances in Biotechnology: A System of New Product Development , 2004 .

[57]  Linda Argote,et al.  Managing Knowledge in Organizations: An Integrative Framework and Review of Emerging Themes , 2003, Manag. Sci..

[58]  Julie L Davis,et al.  Edison in the Boardroom: How Leading Companies Realize Value from Their Intellectual Assets , 2001 .

[59]  Ulrich Lichtenthaler,et al.  Alliance functions: implications of the international multi-R&D-alliance perspective , 2004 .

[60]  R. Merton.  The Matthew Effect in Science , 1968, Science.

[61]  Robert Wuthnow,et al.  Reputational Status of Organizations in Technical Systems , 1988, American Journal of Sociology.

[62]  Ulrich Lichtenthaler,et al.  External Commercialization of Knowledge: Review and Research Agenda , 2005 .

[63]  Christian Belz,et al.  Technology marketing: a new core competence of technology-intensive enterprises , 2000, Int. J. Technol. Manag..

[64]  John C. Narver,et al.  Does Competitive Environment Moderate the Market Orientation-Performance Relationship?: , 1994 .

[65]  Jeffrey H. Dyer,et al.  Alliance capability, stock market response, and long‐term alliance success: the role of the alliance function , 2002 .

[66]  Tyler B. Coplen,et al.  Sulphur isotope data consistency improved , 1998, Nature.

[67]  Koenraad Debackere,et al.  The Role of Academic Technology Transfer Organizations in Improving Industry Science Links , 2005 .

[68]  Patrick Cohendet,et al.  Technology transfer revisited from the perspective of the knowledge-based economy , 2001 .

[69]  David Kline,et al.  Rembrandts in the Attic: Unlocking the Hidden Value of Patents , 1999 .

[70]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[71]  George A. Akerlof.  The Market for “Lemons”: Quality Uncertainty and the Market Mechanism , 1970 .

[72]  S. Zahra,et al.  Absorptive Capacity: A Review, Reconceptualization, and Extension , 2002 .

[73]  Joel Podolny,et al.  Status, Quality, and Social Order in the California Wine Industry , 1999 .

[74]  B. Kogut.  Joint ventures: Theoretical and empirical perspectives , 1988 .

[75]  P. Lorange,et al.  Cooperative strategies and alliances , 2002 .

[76]  Toby E. Stuart,et al.  A Role-Based Ecology of Technological Change , 1995, American Journal of Sociology.

[77]  Jeffrey T. Resnick.  Corporate reputation: Managing corporate reputation – applying rigorous measures to a key asset , 2004 .

[78]  Vicki R. Lane,et al.  Stock Market Reactions to Brand Extension Announcements: The Effects of Brand Attitude and Familiarity , 1995 .

[79]  Stefan M. Koruna,et al.  External technology commercialisation - policy guidelines , 2001, Int. J. Technol. Manag..

[80]  Stephan M. Wagner,et al.  Buyer-Supplier Collaboration in Product Development Projects , 2005 .

[81]  S. West,et al.  Multiple Regression: Testing and Interpreting Interactions. , 1994 .

[82]  X. Martin,et al.  Knowledge transfer capacity and its implications for the theory of the multinational corporation , 2003 .

[83]  D. Teece,et al.  Managing Intellectual Capital: Licensing and Cross-Licensing in Semiconductors and Electronics , 1997 .

[84]  M. Lindell,et al.  Accounting for common method variance in cross-sectional research designs. , 2001, The Journal of applied psychology.

[85]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[86]  Gary P. Pisano,et al.  Collaborative Product Development and the Market for Know-How: Strategies and Structures in the Biotechnology Industry , 1993 .

[87]  R. Grant,et al.  A Knowledge Accessing Theory of Strategic Alliances , 2004 .

[88]  C. Fombrun,et al.  What's in a Name? Reputation Building and Corporate Strategy , 1990 .

[89]  Holger Ernst,et al.  The Influence of Corporate Acquisitions on the Behaviour of Key Inventors , 2000 .

[90]  Ove Granstrand,et al.  The economics and management of intellectual property : towards intellectual capitalism , 1999 .

[91]  John D Wolpert,et al.  Breaking out of the innovation box. , 2002, Harvard business review.

[92]  David Kline,et al.  Sharing the Corporate Crown Jewels , 2003 .

[93]  J. Dutton,et al.  Advances in strategic management , 1994 .

[94]  Henry Chesbrough,et al.  The Logic of Open Innovation: Managing Intellectual Property , 2003 .

[95]  Mary W. Sullivan,et al.  The Measurement and Determinants of Brand Equity: A Financial Approach , 1993 .

[96]  Bernard J. Jaworski,et al.  Market orientation: Antecedents and consequences , 1993 .

[97]  H. Kelley,et al.  Communication And Persuasion , 1953 .

[98]  A. Arora,et al.  Markets for Technology: The Economics of Innovation and Corporate Strategy , 2002 .

[99]  D. Teece.  Capturing Value from Knowledge Assets: The New Economy, Markets for Know-How, and Intangible Assets , 1998 .

[100]  Bart Nooteboom,et al.  Exploration and exploitation in innovation systems: The case of pharmaceutical biotechnology , 2006 .

[101]  V. Chiesa,et al.  The Externalisation of R&D Activities and the Growing Market of Product Development Services , 2004 .