Developing reputation to overcome the imperfections in the markets for knowledge

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.