Complementary Assets and the Choice of Organizational Governance: Empirical Evidence From a Large Sample of U.S. Technology-Based Firms

Despite the considerable volume of research on technology commercialization, the role of complementary assets in driving technology commercialization remains controversial. In this paper, we provide a balanced perspective that integrates notions from transaction costs, firm capabilities, and industrial organization studies. In particular, we analyze the offsetting effects of the nature, ownership, and strength of downstream complementary assets on the gains from trade and transaction costs from alternative technology commercialization strategies. These strategies include competition in the product market, licensing, forming a technological joint venture, and selling the company to, or merging it with, holders of complementary assets. We test our hypotheses using a unique dataset encompassing commercialization transactions occurring between 1996 and 2002, among 545 technology-based firms. Our results suggest that innovators operating in industries requiring cospecialized complementary assets or possessing weak downstream capabilities, which are both associated with relatively higher sunk costs of entry in the product markets, are more likely to merge with incumbents rather than compete in the product market. Findings also suggest that innovating firms operating in industries requiring cospecialized complementary assets or possessing weak downstream capabilities, which are also associated with higher transaction costs, are more likely to adopt more integrated cooperative commercialization solutions.