The transfer of technology brings ideas closer to commercialisation. The transformation happens in several steps, such as invention, innovation, building prototypes, production, market introduction, market expansion, after sales services. In each step, the owners with the technical knowhow (the entrepreneur) and the owner of resources such as capital and command over networks (the investor) cooperate. Since these partnerships between entrepreneur and investor require project work, they are inherently exposed to various uncertainties. Information is incomplete and unevenly available to entrepreneur and investor. Hence, agreements cannot cover all situations that may happen, and asymmetric information may lead to opportunistic behavior such as moral hazard or hold-up. Opportunism exercised by entrepreneurs which puts investors into a disadvantage has found considerable consideration in contrast to "unfair" behavior of investors. Here the condi-tions are explored under which the investor may show hold-up. Measures are studied which help entrepreneurs to protect themselves against unfair behaviour of investors. Who of the two partners has more power to exercise opportunism depends on several factors. The most important factor is the degree of uniqueness which depends on the economies of scales the entrepreneur and the investor have in their respective activities. Since networks open economies of scale, the investor is in a particular powerful position if he controls access to his network. The study argues that smaller institutional settings (such as ventures) often give the capitalist more room for opportunistic behavior. Larger settings for cooperation between human abilities and ownership such as corporation-like settings typically give entrepreneurs more discretionary room for opportunism. In fact, in larger firms "work" is often more powerful while "capital" appears to be mighty in smaller institutions. Thus, the design and size of the institutional setting is most important for the transfer of technology.
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Reference: Spremann, K.; (2017). Hold-up in Ventures for Technology Transfer. Technology Transfer and Entrepreneurship., DOI: 10.2174/2213809904666161221102119
Technology Transfer and Entrepreneurship