Build, Rent and Sell: Options for Commercializing New Technologies Arising from University Research

Abstract

This research investigates the strategic governance choices made in commercializing new technologies arising from university research. <br /><br /> Departing from the traditional licensing vs. start-up approach, it is proposed that there are three primary methods of commercializing these technologies: 1) Build ? creating a new business based on the technology, 2) Rent ? ongoing development and marketing of the technology to established firms that use the technology in their businesses and 3) Sell ? disposition of the technology to an established firm. <br /><br /> Using economic theories of the firm, particularly transaction cost economics, it is hypothesized that: <ul> <li>the build option is positively associated with firms deriving revenue primarily from product market activity (H1a) and expending resources on both technology development activities and production activities (H2a); </li> <li>the rent and sell options are positively associated with firms deriving revenue primarily from technology market activity (H1b) and expending resources on technology development activities but not on production activities (H2b). </li> <li>the greater the patent or other legal protection (H3), the risk of substitutes (H5) or the dynamism associated with the technology (H8), the greater the likelihood that the technology will be commercialized using the rent option;</li> <li>the greater the tacitness and complexity (H4) or the greater the volatility associated with the technology, the greater the likelihood that the technology will be commercialized using the build or sell options; and</li> <li>the greater the importance of specialized complementary assets, the greater the likelihood that the technology will be commercialized using the sell option (H6). </li> </ul> Three studies were conducted providing differing perspectives on the research question. Study #1 examines three start-ups based on new technologies arising from research conducted at the University of Waterloo. Study #2 analyzes the business activities of a number of Canadian and U. S. public start-up firms using archival data. Study #3 is a survey of university faculty members who have had new technologies arising from their academic research put into commercial use. <br /><br /> Hypotheses H1a/b, H2a/b and H3 are supported and Hypothesis H7 received more limited support. Evidence for Hypothesis H5 is in the predicted direction but failed to achieve statistical significance. Hypotheses H4, H5, H6 and H8 are not supported.