The impact of technology transfer contract on a firm's market value in Korea

Technology transfer has been evaluated as a driving force of economic growth as well as one way to create new innovation. In order to make a successful technology transfer, both additional emission efforts by the supplier and absorption efforts by the recipient are required, because it is not as simple as the acquisition of a capital good. This study seeks to better understand the nature of successful technology transfer in Korea. We empirically analyzed the impact of the supplier's characteristics (cultural distance, relationship type, form of technology transfer, and licensing type) and the recipient's characteristics (absorptive capacity) on the market value of firms in Korea using the event study methodology. We found that technology transfer announcements significantly increase the market value of firms in Korea, and market responses to the recipient firms are significantly greater than those to the supplier firms. Our results showed that the effect of alliances with complementors (e.g., university, government laboratory) is greater than that of alliances with industry players, and the effect of an exclusive license as a method of technology transfer is greater than that of a non-exclusive license. However, we were not able to determine whether the impact of high levels of absorptive capacity is significantly different from that of low levels of absorptive capacity. Our study will not only complement and extend research on technology transfer, but also provide firms with various methods to decrease the risks related to technology transfer.