Licensing tends to be chosen in a distant market, when the market share of the licensor is small and when the downstream market is significantly competitive. Market for technology provokes effective internal management and organization of companies' intellectual property. On the other hand, for small firms, markets for technology increase the usefulness of strategies based on specialization of such firms in technology development. They do not need to incur expensive and shaky investments in downstream assets and can profit from their research even if they lack the complementary assets. Because markets for technology also contain firms as technology buyers, the growth of such markets increases the importance of external of monitoring of technological developments and it increases the penalty of insularity and not invented here syndrome. The advantage of possessing some critical knowledge or technology may be limited by the ability of competitors to acquire the technology from other source, so markets for technology can also decrease the relative importance of technology as a source of distinct advantage.
For large technology based-firms, markets for technology boost the strategy space and firms can choose to license their technology rather than only depend on internal exploitation. The licensing decision is propelled by the interaction of the profit dissipation effect from licensing. This result from increased competition and the revenue effect from licensing which is caused by economic compensation paid by the license for accessing to the technology. Companies should focus on other internal assets that provide them with distinguished advantages.
Minute knowledge and information about the peculiar needs and feature of specific markets and buyers is an apparent applicant. Markets for technology may actually increase importance of downstream strategies for distinction. At an industry level market for technology, lower entry barriers increase competition and compress product life cycles: all changes that require appropriate strategic responses.