14 CREATIVITY AND INNOVATION MANAGEMENT

Innovation Intermediaries: Why

Internet Marketplaces for Technology
Have Not Yet Met the Expectations
Ulrich Lichtenthaler and Holger Ernst

A few years ago, internet marketplaces for technology, e.g., yet2.com, received great attention.
In the light of open innovation processes, it was assumed that they could be an appropriate
means to overcome the imperfections in the markets for technology. Little is known about the
performance of these innovation intermediaries, and very limited information is provided by
the firms that run the marketplaces. Therefore, we have interviewed intellectual property and
technology managers in 25 medium-sized and large industrial companies, who represent the
potential licensees and licensors in the internet exchanges. The results show relatively limited
success rates of internet marketplaces regarding the number of technology transactions that
have been initiated, particularly in comparison with the hopes that had initially been placed
in these tools. Moreover, important problems and recent trends in these web-enabled ex-
changes are identified, and propositions are developed regarding major consequences for
initiating and managing technology transactions.

Introduction the internet could help firms to overcome

these market imperfections. The examples of

I n recent years, the markets for technology

have received great attention from research-
ers and practitioners (Guilhon, 2001; Gans &
Stern, 2003). In these markets, firms acquire
and commercialize technological knowledge to
complement and capitalize on their technology
portfolios (Clarke & Rollo, 2001; de Weerd-
Nederhof & Fisscher, 2003). In contrast to
the markets for most products and services,
the markets for technology have remained
imperfect (Cesaroni, 2004; Lichtenthaler &
Ernst, 2007). As technological knowledge is
usually commercialized by selling products
and services, the markets for technology are
not common (Gans & Stern, 2003; Van Looy,
Martens & Debackere, 2005). At the same time,
there are many imperfections in these markets,
which result in high transaction costs (Arora,
Fosfuri & Gambardella, 2001; Davis & Harri-
son, 2001). These two phenomena are mutually
dependent because a reduction of the imperfec-
tions would lead to a stronger use of the tech-
nology markets, which would reduce some of
their deficiencies (Lichtenthaler, 2007).
Along with the ‘new economy’ hype, many
researchers and practitioners assumed that
successful pioneering companies, e.g., IBM,
which have realized great benefits from
technology licensing, further increased the
great hopes (Kline, 2003; Chesbrough,
2007). In particular, internet marketplaces
for technology were expected to encourage
inter-organizational technology transactions. A
variety of companies, which were often backed
by venture capital, have emerged to facilitate
technology trade through internet platforms.
Prominent examples are yet2.com, NineSigma,
InnoCentive, and the Patent & Licenses
Exchange (Bauman, 2000; Huston & Sakkab,
2006). While their service offerings differ, most
of these firms try to become the central web-
enabled marketplace for trading technological
knowledge (Bauman, 2000; Chesbrough, 2006).
Because of these great hopes, there is now –
several years later – also great interest in the
performance of these marketplaces (Howells,
2006; Huston & Sakkab, 2006). Very little is
known about their success regarding the
number of technology transactions that have
been initiated, and hardly any information is
distributed by the firms that run the market-
places. Therefore, we have asked the potential

Volume 17 Number 1 2008 © 2008 The Authors

doi:10.1111/j.1467-8691.2007.00461.x Journal compilation © 2008 Blackwell Publishing
INNOVATION INTERMEDIARIES
beneficiaries of these marketplaces about their
experiences. We have interviewed intellec-
tual property and technology managers of
technology-intensive companies, who repre-
sent the potential licensees and licensors
in these markets. Accordingly, this article
addresses the following central questions.
What are the experiences of industrial firms
regarding internet marketplaces for technol-
ogy? Why have internet marketplaces for tech-
nology not yet met the great expectations of
researchers and practitioners? The remainder
of the paper is structured as follows. In the
next section, we provide a brief overview of
previous research. Afterwards, the research
design is described. Subsequently, the results
of the study are presented before highlighting
some recent trends in the field. On this basis,
we discuss theoretical and managerial impli-
cations and develop propositions regarding
major consequences for initiating and manag-
ing technology transactions. Finally, opportu-
nities for further research are presented.
As such, this article offers several contribu-
tions. It is among the first empirical studies on
internet marketplaces for technology to analyse
their managerial implications. In the light of
increasing interest in technology transactions
(Rivette & Kline, 2000; Grant & Baden-Fuller,
2004), it deepens our understanding of the dis-
crepancies between a few successful pioneer-
ing firms in trading technology and many
others. Moreover, it contributes to overcom-
ing the under-emphasis on empirical research
into technology intermediaries (Spulber, 1999;
Howells, 2006). Accordingly, this research
deepens our understanding of managing
technology transactions and realizing value
from technology in open innovation systems
(Gassmann, 2006; van der Meer, 2007). Finally,
our findings have implications for emerging
themes in knowledge management, e.g.,
organizational boundaries (Arora, Fosfuri &
Gambardella, 2001; Santos & Eisenhardt,
2005). These issues have been highlighted as
areas ripe for further study in recent reviews
of the literature on intermediaries (Howells,
2006), knowledge management (Argote,
McEvily & Reagans, 2003), technology exploi-
tation (Lichtenthaler, 2005), and open innova-
tion (West, Vanhaverbeke & Chesbrough, 2006).
Past Research
Interest in the role of technology intermediar-
ies has emerged from various fields over the
past 20 years (Spulber, 1999; Chesbrough,
2006). These fields include: (1) literature on
technology transfer and diffusion, (2) research
into managing innovation processes, (3) litera-
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
15
ture on systems and networks of innovation,
and (4) research into service organizations
(Howells, 2006). The first line of research has
identified the role of intermediaries in iden-
tifying partners, helping package technology,
selecting suppliers and providing support in
deal making (Watkins & Horley, 1986; Seaton &
Cordey-Hayes, 1993). The second stream has
addressed intermediaries as organizations,
whose key function is their brokering role in
the technology transfer process (Hargadon &
Sutton, 1997; McEvily & Zaheer, 1999). The
third line of research has underscored the role
of public and private intermediaries that help
companies to adapt specialized solutions to the
needs of individual user firms (Stankiewicz,
1995; Lynn, Reddy & Aram, 1996). The fourth
stream has highlighted the bridging roles that
certain types of service firms play in innovation
systems (Howells, 1999; Miles, 2000).
Regarding more general research into inter-
firm exchanges, transaction cost theory needs
to be tailored to the specific characteristics
of the technology markets (Seely Brown &
Duguid, 1998). In particular, firms may influ-
ence their transaction costs in the medium to
long term by developing dynamic capabili-
ties of trading technology based on learning
effects. The examples of successful pioneering
firms in out-licensing support this capability-
based view of outward technology transfer
(Davis & Harrison, 2001; Kline, 2003). More-
over, the capability-based perspective has
received great attention in inward technology
transfer, above all in the literature on absorp-
tive capacity (Cohen & Levinthal, 1990; Zahra
& George, 2002). In conclusion, there are
various lines of research that have deepened
our understanding of intermediaries in the
markets for technology, but the insights into
their roles are limited, especially regarding
internet marketplaces for technology (Licht-
enthaler, 2005; Howells, 2006).
Research Design
In the light of the limitations of previous
research and increasing technology trade, it is
the goal of this study to gain insight into the
intermediating role of internet marketplaces
for technology. The study’s focus is on the
experiences of medium-sized and large indus-
trial companies whose main business is inter-
nal technology exploitation. Accordingly, these
firms focus on the application of technologies
in their own products and services (March,
1991; Cesaroni, Di Minin & Piccaluga, 2005).
Thus, we have analysed the internet-based
technology exchanges neither of start-up com-
panies nor of firms that provide mainly R&D
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services. Nearly all of the companies in the
sample have at least considered or have
already realized technology transactions as the
technology source and recipient. Therefore, all
firms could be analysed regarding potential
inward and outward technology transfer.
A thorough review of previous research has
shown that technology trade through internet
marketplaces has not yet been examined in
detail (Lichtenthaler, 2005; Howells, 2006).
Accordingly, a qualitative research design was
chosen to respond to the need for deep under-
standing, local contextualization, and causal
inference (Miles & Huberman, 1994). Our dis-
cussion of past research has demonstrated that
these needs apply to the analysis of firms’
experiences with internet marketplaces for
technology. Hence, the case study method was
chosen because of the study’s exploratory
character. In the light of a highly complex
research object, the case study method allowed
for a flexible and comprehensive examination
of the issues. The process of conducting case
studies followed the suggestions that have
been given in seminal works on case study
research (Eisenhardt, 1991; Yin, 2003; Eisen-
hardt & Graebner, 2007). Thus, our approach
was similar to the designs of case study-based
works that have been published recently in
leading journals (Schweizer, 2005).
Through the focused selection of medium-
sized and large industrial companies, different
experiences with internet marketplaces could
be analysed (Miles & Huberman, 1994). Tech-
nology trade was studied at the organizational
level and at the level of specific technology
transfer projects. By applying the firm-level
view, the overall experiences were analysed.
By examining specific projects, the firms’ tech-
nology transfer processes were studied in the
context of a specific project. Only the simul-
taneous analysis of the micro level of projects
and the macro level of corporate experiences
allowed for drawing implications for managing
technology trade (Miles & Huberman, 1994).
Besides analysing firms from various indus-
tries, the sample comprises firms where
licensing plays different roles regarding its
importance, objectives and management. Thus,
the experiences of these firms provided differ-
ent perspectives on technology marketplaces.
After five preliminary unstructured inter-
views, questionnaires were used as a basis for
semi-structured interviews in the final study.
This procedure ensured comparability and
ample opportunity for unobstructed narration.
The data collection process followed Yin
(2003). During the interviews, the interviewer
took notes and typed them up each night.
All data were included in writing up of the
cases, even when not specifically requested in
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CREATIVITY AND INNOVATION MANAGEMENT
the questionnaire. Furthermore, additional
documents, e.g., company-internal analyses of
licensing transactions and company-external
publications, were studied. Next, the memoing
process was followed to record patterns that
the interviewer noted within and across cases
(Yin, 2003). Each interview was structured to
facilitate within-case as well as subsequent
cross-case analyses (Miles & Huberman, 1994).
After these analyses, the implications that are
presented in this article were drawn.
In companies with a dedicated licensing
unit, this unit’s head was interviewed. In com-
panies without a dedicated unit, we talked to
the head of the corporate intellectual property
department. In ten companies, a second person
from the R&D department, who is not directly
occupied with licensing, was interviewed. By
drawing on the insights of this second person,
a more detailed picture of a firm’s experiences
could be gained. Altogether, 35 persons were
interviewed in 25 German and Swiss compa-
nies. The firms’ average R&D intensity is about
6 per cent. Seven of these firms are active in the
chemical/pharmaceutical industry; nine are
active in the automotive/machinery industry;
and the other nine firms are active in the
semiconductors/electronics industry. With an
average of 8,457 employees and average rev-
enues of €2,135 million, the companies in the
sample are relatively large.
We followed a sampling strategy in which
we sought variance regarding the topics analy-
sed in this study. In particular, the choice of
industries was influenced by prior research,
which reported different functions of technol-
ogy licensing in these industries (Grindley &
Teece, 1997; Teece, 1998; Rivette & Kline, 2000).
As the purpose of the study was deepening
our understanding of internet marketplaces
for technology, the sample was not selected
to ensure representation of the population of
all medium-sized and large industrial firms.
Instead, the sample was selected to include
sufficient variation to explore factors relating
to the internet marketplaces. Despite participa-
tion being voluntary, the sample was not a self-
selected group of firms. As the following
section shows, there was sufficient variance in
the managerial approaches of firms to internet
marketplaces for technology. This sampling
process followed prior works in leading jour-
nals (e.g., Edmondson, Bohmer & Pisano,
2001).
Results
Current Practice
All companies are well aware of the potential
benefits of internet marketplaces and have at
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
INNOVATION INTERMEDIARIES
least studied the web pages of different service
providers in detail. In various cases, however,
no consideration had been given to actually
putting technologies into the marketplaces
because the strategy of these firms focused
exclusively on the application of technologies
in their own products. Similarly, various com-
panies did not have any interest in licensing in
technologies through these platforms because
of their focus on internal R&D. By contrast,
many firms have actively tried to use the mar-
ketplaces by offering technologies or search-
ing in detail for interesting technologies. In
general, the firms that addressed the internet
marketplaces most actively are the firms that
also carry out internal activities of initiating
technology transactions more actively.
For instance, most of the firms that offered
various technologies on the internet market-
places also have a dedicated internal organiza-
tional unit that is directed towards managing
technology licensing activities. This finding
points to the complementary character of
internet marketplaces and a firm’s internal
activities of identifying technology transfer
opportunities. Finally, these complementary
activities may result in a portfolio of inter-
firm technology transactions that comprises
various contractual forms, e.g., licensing agree-
ments, strategic alliances and joint ventures.
Some of these technology-based relations even
ended up in a transfer of parts of organiza-
tional units beyond the transfer of technolo-
gical knowledge, i.e., acquisitions in inward
technology transfer and spin-offs in outward
technology transfer. For example, one contact
evolved into a strategic alliance that eventually
resulted in the acquisition of a part of a rela-
tively small firm by one of the large chemical
firms in the sample.
In general, the success rate of relying on
internet marketplaces for technology has been
relatively low with regard to the number of
technology transactions that have been ini-
tiated, particularly in comparison with the
hopes that had initially been placed in the mar-
ketplaces. Many industrial firms have invested
substantial time and resources in preparing
and documenting technologies for the internet
exchanges and in searching for suitable tech-
nologies. For instance, several firms have set
up internal projects with participants from dif-
ferent organizational units to decide on their
technology offerings. However, most compa-
nies have not realized any technology transac-
tion by means of web-enabled platforms. The
maximum of transactions for a single company
has been one out-licensing agreement and one
in-licensing agreement.
As a result, most industry experts have rela-
tively reserved attitudes to these marketplaces,
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
17
which sharply contrast the euphoria that
existed several years ago. Nearly all firms that
have not actively tried to realize technology
deals are informed surprisingly well about
the unsuccessful activities of other companies
regarding the number of technology transac-
tions that have been initiated through the mar-
ketplaces. The limited success of these firms
has been communicated through informal
inter-firm networks. On this basis, only two of
the 25 companies wanted to give the internet
marketplaces another chance in the short
to medium term by offering a considerable
portion of their technology portfolios on
yet2.com and closely screening further
marketplaces. One firm even plans to assign
a person exclusively to the co-ordination
of its technology offerings on yet2.com and
other internet marketplaces, particularly with
regard to an adequate preparation and docu-
mentation of the technologies. Regarding tech-
nology acquisition, most companies still plan
to search the internet platforms or post a notice
of a technology need when trying to identify
potential technology sources in the future.
However, these firms do not expect to realize
many licensing transactions by means of the
marketplaces.
Licensors’ Perspective
According to the industry experts, the most
severe deficit of internet marketplaces is that
the commercialization of technology through
these platforms constitutes a relatively unsys-
tematic approach because it does not add-
ress specific technology customers. Instead,
the firm’s intention to license technological
knowledge is communicated very broadly.
Furthermore, offering a technology through
the internet is a relatively passive approach.
This offer merely constitutes an invitation
to treat because the initiative for the actual
technology transaction has to come from the
potential licensee. An additional reason why a
first inquiry has often not occurred is inherent
in the technologies that have been offered. In
many cases, the source firms have put rela-
tively unattractive technologies in the data-
bases. The main aim behind these offers was
the optimization of the technology portfolio by
externally leveraging technologies of relatively
limited value.
Accordingly, the success rate of commercial-
izing technology through these marketplaces
measured by the number of technology trans-
actions that have been initiated is relatively
low. Thus, it is necessary to offer a substantial
portion of the technology portfolio to arrive at
a single technology transaction. However, this
open approach is often impossible because of
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the concerns of top management and high-
ranking R&D employees. While these reluc-
tant attitudes are partly based on rational
arguments following corporate strategy, they
are often complemented by irrational feelings
of individuals, who are resistant to the idea of
transferring a firm’s technology assets. This
resistance is particularly strong if the technolo-
gies are of relatively high value or close to a
firm’s core technologies. Furthermore, offer-
ing a large number of technologies requires
substantial resources. A thorough presentation
of the technologies is essential to generate
interest from potential licensees. Because
of these resource requirements, many firms
argue that the time needed to identify tech-
nology customers can be put to better using
other – more proactive – commercialization
channels.
This is particularly true in cases where a
firm may describe possible applications of a
technology in relative detail. If these ideas
exist, potential licensees may be identified in a
more direct way by relying on the firm’s exist-
ing business relationships, i.e., buyers, suppli-
ers and competitors, or on its contacts in other
industries through formal and informal net-
works. As a result, internet marketplaces cur-
rently do not seem to be an appropriate means
to significantly reduce the transaction costs in
the markets for technology from the perspec-
tive of potential licensors. Moreover, the chal-
lenge of identifying interesting applications
before actively commercializing technology is
not overcome. Because of the interdependen-
cies between the limited use of the technology
markets and the problems inherent in them,
which may not directly be offset by web-
enabled exchanges, this vicious circle is likely
to persist in the future – at least to a certain
degree.
Licensees’ Perspective
Similar to the licensors’ perspective, industry
experts consider the unsystematic approach
to be the main disadvantage of identifying and
acquiring technology by means of internet
marketplaces. Usually, it is difficult or impos-
sible to find an appropriate technology for a
specific technology need. Despite containing
large numbers of technologies, one reason for
this problem is the limited number of tech-
nologies that are offered in the marketplaces.
While this limitation is inherent in a database
approach, it is aggravated by the fact that many
of the technologies represent residual knowl-
edge, which is of relatively low value and
unused in the source firms. Moreover, the
number of technologies that are offered in one
particular technological field is often limited.
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CREATIVITY AND INNOVATION MANAGEMENT
In many cases, the focus of the internet
exchanges is still on the technological fields
of the websites’ founding members.
If a particular technology need exists, it may
therefore be easier to direct the resources for
identifying potential technology sources to
other channels. Examples of more systematic
approaches are patent analyses and a firm’s
networks. These networks not only encompass
formal relationships with other firms, e.g.,
strategic alliances, but also informal personal
relationships, e.g., inter-firm contacts between
technology or intellectual property experts.
Furthermore, potential licensors may be
observed in many cases as a part of regular
technology intelligence processes. If no spe-
cific technology need exists, the search for
technologies in internet marketplaces is a
random approach with limited chances of ini-
tiating a technology transaction. Because of
increasing technology convergence, the tech-
nology descriptions on the web pages often do
not include the specific application for which
the technology need exists. Thus, the identifi-
cation of a technology still requires a creative
element by matching the particular technology
with the application that the person who is
searching the marketplace has in mind. For
this challenge, posting a technology need does
not represent a solution because it merely
transfers the need to establish a link from the
potential licensee to the potential licensor.
An additional problem of externally acquir-
ing technological knowledge is the fact that a
firm will be continually observed by the poten-
tial licensor regarding infringements of its
intellectual property rights if no agreement is
reached between the parties. This may happen
for a number of reasons, e.g., inappropriate
prices or characteristics of the technologies.
Finally, this process may lead to infringement
lawsuits. In this context, one intellectual prop-
erty expert frankly stated: ‘Nobody likes to pay
license fees’. In addition to these practical dif-
ficulties, these factors are also brought forward
to justify the ‘Not Invented Here’ syndrome,
i.e., negative attitudes to the acquisition of
external technology. In particular, this bias
may be found among R&D experts, who often
tend to invent around the intellectual property
rights of other firms instead of attempting to
get a licence for these technologies.
Integrated Perspective
A comparison of the licensors’ and licensees’
perspectives shows major similarities between
these views. The main problem of internet
exchanges is the unsystematic nature of
partner identification. Because of the limited
success rate in identifying and realizing
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
INNOVATION INTERMEDIARIES
transactions, the search process requires con-
siderable resources. As technology transfer
through web-based exchanges constitutes only
one of a number of channels, the alternative
ways appear more promising to many firms,
particularly if a detailed idea exists for apply-
ing a technology. Thus, internet marketplaces
may only mitigate the difficulty of linking
technologies to appropriate applications or
vice versa, but this still represents the critical
managerial challenge. In addition, the impor-
tance of cultural barriers has to be highlighted,
although they are not a problem specific to
internet-based exchanges. These cultural bar-
riers often prevent a more active approach to
trading technology. In many cases, they may
therefore be considered the underlying cause
of refraining from technology transactions.
An integrated perspective also points to
some industry differences. Firms from the
chemical/pharmaceutical industry appear to
have initially attributed a higher importance to
technology licensing through internet market-
places than firms from the other industries.
However, chemical/pharmaceutical compa-
nies also seem to internally manage their
licensing activities more proficiently than
firms from the other industries. Thus, the data
support prior research, which has underlined
the high importance of licensing transactions
in this sector. Accordingly, these firms are now
relatively reluctant to use internet market-
places for technology because alternative chan-
nels, e.g., informal inter-firm networks, seem
to have provided an essential avenue for initi-
ating technology transactions in this sector in
the past. Similarly, the importance of internet
marketplaces appears to be surprisingly low
in the electronics/semiconductors industry
although the relevance of licensing in this
industry has been described in relative detail
in prior research. By contrast, the potential of
internet marketplaces for technology is con-
sidered surprisingly high in the automotive/
machinery industry. As technology licensing
in this sector has received limited attention
in prior research, it deserves further study to
offer a better understanding to firms aiming at
optimally utilizing their technologies in this
field.
Discussion
Recent Trends
Very recently, major changes have occurred in
the strategic approach of various internet mar-
ketplaces. While these developments could be
observed in various marketplaces, they appear
to have influenced in particular yet2.com.
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
19
At the beginning, yet2.com focused on its
internet-based infrastructure (Bauman, 2000).
Potential licensors put their offers online,
whereas potential licensees could search for
technologies in the database. Recently, how-
ever, yet2.com seems to have realized that
the complexity of technological knowledge
requires a more active approach to exchanging
technology. This new understanding of tech-
nology transactions has led yet2.com to sub-
stantially transform its business model (Jahn,
2005). Before this reorientation, yet2.com had
about 80 employees, who were occupied
mainly with marketing and acquiring new
users of its internet platform. After redirecting
the business model, yet2.com employs about
20 people, who are not primarily occupied
with marketing but with actively facilitating
technology transactions. Thus, yet2.com no
longer focuses exclusively on its internet data-
base. The internet platform still constitutes an
important feature, but yet2.com attempts to
play a more active role in connecting licensors
and licensees. Thus, the business model has
been transformed from focusing on the web-
enabled infrastructure towards concentrating
on a more active approach to technology
brokering.
Therefore, the 20 employees at yet2.com
comprise mainly scientists and engineers,
often with PhD degrees in their technological
fields. Their knowledge is used to facilitate
deals on technology packages instead of focus-
ing on patent rights (Jahn, 2005). These new
service offerings led to approximately ten tech-
nology transfers in 2004. This figure is con-
trasted with the 90,000 registered users, which
underlines the difficulties in facilitating tech-
nology transactions. As a result of the new
strategic approach, however, yet2.com expects
to strongly increase the number of deals that
are closed as a result of its brokering activities
in the coming years (Jahn, 2005). Similar to the
strategic changes at yet2.com, various other
internet marketplaces for technology that
were created in recent years, e.g., NineSigma,
pursue a more active approach to facilitating
technology exchanges. Thus, a major portion
of their service offerings refers to active bro-
kering, whereas databases only represent
additional infrastructure to facilitate deals.
Thus, yet2.com’s reorientation is not a singular
development. Instead, it may represent a new
approach to internet marketplaces, which links
them to active forms of technology brokering.
Theoretical and Managerial Implications
The limited success rates of internet exchanges
with regard to the number of technology
transactions that have been initiated have
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various consequences for managing technol-
ogy transactions. In particular, some problems
of internet marketplaces do not apply to other
types of intermediaries, which offer consulting
services beyond introducing technologies in
databases (Bryant & Reenstra-Bryant, 1998;
Sawhney, Prandelli & Verona, 2003; Howells,
2006; Verona, Prandelli & Sawhney, 2006).
Accordingly, industrial firms could rely more
on agents (Bidault & Fischer, 1994; Morgan &
Crawford, 1996), who help a company to pro-
actively identify technology customers or reac-
tively identify infringers of its intellectual
property. Similarly, the recent developments of
internet marketplaces, which tend to offer
integrated services including a more active
component, may help to overcome the deficits
of pure databases. As such, our analyses point
to the superiority of accessing integrated
service offerings of intermediaries that go
beyond internet-related databases. Therefore,
we posit the following proposition:
Proposition 1: Integrated service offerings
help firms to enhance their benefits from
relying on intermediaries in the markets for
technology.
Moreover, firms should attempt to
adequately use their own knowledge, which is
distributed across the organization (Ernst,
Leptien & Vitt, 2000; Basadur & Gelade, 2006),
in order to link technologies and applications
(Kogut & Zander, 1992; Cillo, 2005). This
finding is consistent with prior research into
managing licensing transactions (Gallini &
Winter, 1985; Anand & Khanna, 2000; Agrawal,
2006; Lichtenthaler, 2007). A successful
approach to this central challenge of exchang-
ing technology could be the ‘functional market
concept’. This concept emphasizes ‘thinking
in functions’ by focusing on technologies as
means to reach various objectives, thus sepa-
rating a technology from a certain context
(Weiß, 2004). In particular, diversified firms
may rely on the overlapping knowledge bases
of their business units and technological fields
to identify licensing opportunities (Brockhoff
& Chakrabarti, 1988; Griffin & Hauser, 1996).
Furthermore, the identification of exchange
partners may be integrated into a firm’s
regular technology intelligence processes
(Gassmann & Gaso, 2004; Frishammar &
Hörte, 2005). Thus, it appears beneficial to rely
on intermediary services as a complement
rather than as a substitute for a firm’s internal
activities (Wenger & Snyder, 2000; Verona,
Prandelli & Sawhney, 2006). Accordingly, we
suggest the following proposition:
Proposition 2: Complementing intermedi-
ary services with internal activities helps
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CREATIVITY AND INNOVATION MANAGEMENT
firms to enhance their benefits from rely-
ing on intermediaries in the markets for
technology.
Furthermore, companies may rely on the
knowledge embedded in their inter-
organizational networks (Madhavan, Koka &
Prescott, 1998; Grant & Baden-Fuller, 2004).
These formal and informal ties may lead
directly to technology transactions, and they
may also provide information and indirect
contacts to other firms which may finally faci-
litate technology transactions (Gulati, 1999;
Hislop, 2002). In addition, these networks may
help to increase the technology push and
market pull effects in a firm’s licensing activi-
ties. For instance, most large pharmaceutical
firms openly communicate their intention to
license in technologies, and they have estab-
lished dedicated licensing units. This open
approach has strengthened technology push
effects, i.e., technology offers that the phar-
maceutical firms receive from biotechnology
companies (Rothaermel & Deeds, 2004;
Gassmann & Reepmeyer, 2005). By contrast,
an advanced example of combining market
pull effects and networks is IBM’s website
alphaWorks (http://www.alphaworks.ibm.
com), which was created in 1996 by IBM’s
internet division hoping that outside compa-
nies and developers would contribute ideas
about bringing the programs to market
(Wolpert, 2002). Today, thousands of persons
are using the web site, on which over 200 tech-
nologies, usually at the early stages of devel-
opment, are available for download, including
the option to license these technologies. The
positive effects of complementing intermedi-
ary services with the knowledge embedded in
a firm’s inter-organizational networks, which
go beyond a company’s internal activities,
suggest the following proposition:
Proposition 3: Complementing intermedi-
ary services with inter-firm networks helps
firms to enhance their benefits from rely-
ing on intermediaries in the markets for
technology.
Usually, a main strength of internet market-
places is their cross-industry character
(Johansson, 2004; Chesbrough, 2006). For
instance, an electronics firm that we inter-
viewed had licensed a technology to a chemi-
cal company through an internet platform.
Thus, dividing marketplaces into industry
areas does not seem beneficial. However, the
IBM example has shown that leading compa-
nies may create their own marketplaces to
enlarge and intensify their offline networks.
This approach may help to combine personal
contacts with the advantages of web-based
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
INNOVATION INTERMEDIARIES
tools. The emphasis on networks may help to
reduce some deficiencies of the marketplaces
because it contributes to a realistic view of
managing technology transactions (Ford, 1988;
Bessant & Rush, 1995; Sawhney, Verona &
Prandelli, 2005). In particular, the develop-
ment of internal capabilities of managing
technology transactions seems to be inevit-
able. Internal capabilities are important for
co-ordinating external service providers, e.g.,
by thoroughly preparing technology offers in
the marketplaces. By suggesting a relationship
between internal competencies and organiza-
tional boundaries, this study has provided
support for competence-based perspectives
in boundaries research, which go beyond
efficiency-based analyses, e.g., transac-
tion costs (Fisscher et al., 2001; Santos &
Eisenhardt, 2005). Similar to the development
of alliance capability, learning effects in co-
ordinating the service offerings of intermedi-
aries likely have positive effects (Sawhney &
Prandelli, 2000; Lichtenthaler & Lichtenthaler,
2004; Kale & Singh, 2007), and they suggest the
following proposition:
Proposition 4: Developing dynamic capa-
bilities of co-ordinating intermediary ser-
vices helps firms to enhance their benefits
from relying on intermediaries in the
markets for technology.
In addition, it has to be highlighted that
technological knowledge is an idiosyncratic
good (Steele, 1989; Fosfuri, 2006). Apart from
the fact that technologies are dynamically
evolving, Granstrand (2000) has identified the
following six major properties of technological
knowledge, not all of them shared by other
types of knowledge. Technology has an arti-
fact link, it has a science link and, in general, a
relatively high degree of codifiability. Further-
more, it has a practical purpose, it is linked to
globally oriented common systems for its
operationalization and assessment, and it may
be protected by patent rights (Granstrand,
2000). Besides the challenges of actually trans-
ferring technology, the characteristics of tech-
nological knowledge lead to appropriability
issues, which exist in all types of intellectual
property regimes (Cummings & Teng, 2003;
Pisano, 2006). Thus, the technology source
often has to actively support the technology
transfer to ensure successful technology
absorption at the recipient (Amesse & Cohen-
det, 2001; Agrawal, 2006). This is necessary if a
firm enters an agreement as a licensor or as a
licensee (Teece, 1998; Arora, Fosfuri & Gam-
bardella, 2001). Accordingly, we propose:
Proposition 5: An active support of the
technology transfer helps firms to enhance
© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
21
their benefits from relying on intermediar-
ies in the markets for technology.
Intermediaries in general and internet mar-
ketplaces for technology in particular may
mitigate the market imperfections that result
from these technology and market characteris-
tics (Shohet & Prevezer, 1996; Lichtenthaler &
Ernst, 2006). However, the markets for tech-
nology will likely remain less perfect than the
markets for most products and services. More-
over, the nature of technological knowledge
contributes to explaining the differences be-
tween some markets, where intermediation
works efficiently, and other markets, e.g.,
technology markets, where intermediation
remains difficult despite information and com-
munication technologies that facilitate inter-
mediary services (Granstrand, 2000; Howells,
2006). In particular, intellectual property rights
may function as a facilitator of technology
transactions. The analysis of Arora, Fosfuri
and Gambardella (2001) suggests that ‘stron-
ger IPRs [intellectual property rights] can
enhance the efficiency of technology transfers,
and hence encourage the diffusion of technol-
ogy, including parts of the technology that
patents do not protect’ (Arora, Fosfuri & Gam-
bardella, 2001, p. 117; see also Williamson,
1991). The fact that intellectual property rights
work particularly well in specific industries
and technology areas, e.g. in the chemical
industry, has contributed considerably to the
emergence of markets for technology in these
fields (Levin et al., 1987; Teece, 1998; Arora
& Fosfuri, 2000; Cesaroni & Mariani, 2001).
Therefore, firms should respond to these
differences in the appropriability regimes by
aligning their intermediary services with
the particular situation (Chesbrough, 2006;
Howells, 2006). Hence, we propose:
Proposition 6: Aligning the intermediary
services with appropriability regimes helps
firms to enhance their benefits from rely-
ing on intermediaries in the markets for
technology.
Conclusion
Simultaneous to the ‘new economy’ bubble,
there seems to have been an exaggerated hope
to overcome the imperfections in the markets
for technology by means of internet ex-
changes. Today, these marketplaces have not
yet met the great expectations of most
researchers and practitioners. Instead, they
merely represent an additional way of identi-
fying technologies or applications. While the
hopes in the beginning may have been unreal-
istic, there are possibilities for improving the
Volume 17 Number 1 2008
22
current situation. The new approach of internet
marketplaces, which goes beyond providing
infrastructure to include additional consulting
services, appears to be a promising avenue.
In particular, it takes into account that most
technology exchanges do not constitute arm’s
length transactions because technological
knowledge is an idiosyncratic good.
As the volume of technology trade likely
continues to increase, the market imper-
fections may simply be reduced by higher
numbers of technology transactions. In addi-
tion, increasing technology transactions may
change the organizational cultures of many
companies towards more open approaches
to transferring technology. In the light of
growing technology transactions, future
studies may help to deepen our understanding
of the role of internet marketplaces for tech-
nology. In particular, large-scale empirical
studies constitute an interesting avenue for
further research. These studies may analyse
firms’ propensity to rely on intermediaries and
the intermediaries’ impact on the performance
of corporate licensing strategies. These studies
may lead to results that are equally relevant
to academics and practitioners.
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© 2008 The Authors
Journal compilation © 2008 Blackwell Publishing
INNOVATION INTERMEDIARIES 25

Ulrich Lichtenthaler (Ulrich.Lichtenthaler@

whu.edu) is an assistant professor of
Technology and Innovation Management at
WHU – Otto Beisheim School of Manage-
ment, Vallendar, Germany. His research
interests include technology exploitation,
technology transfer, interfirm alliances and
licensing. He has published in the Journal
of Product Innovation Management, Journal
of Business Venturing, Research Policy, IEEE
Transactions on Engineering Management,
International Journal of Management Reviews,
R&D Management, California Management
Review and other journals.
Holger Ernst is professor at WHU – Otto
Beisheim School of Management, Vallendar,
Germany where he holds the Chair for
Technology and Innovation Management.
He was visiting professor at the Kellogg
School of Management, Northwestern Uni-
versity, Evanston, IL, USA in 2005 and 2006.
His main research interests are in the fields
of technology and innovation management,
intellectual property management, new
product development and entrepreneur-
ship. He has published in the Journal of
Product Innovation Management, Interna-
tional Journal of Management Reviews, Journal
of Engineering and Technology Management,
IEEE Transactions on Engineering Manage-
ment, Research Policy and R&D Management.
He consults multiple European organiza-
tions in the area of technology, patent and
innovation management.

© 2008 The Authors

Journal compilation © 2008 Blackwell Publishing Volume 17 Number 1 2008