Transcending the Tacit Dimension: Patents, Relationships, and Organizational Integration in Technology Transfer

As a key driver of innovation and economic growth, university-industry technology transfer has attracted significant attention. Formal technology transfer, which encompasses patenting and licensing university inventions, is often characterized as proceeding according to market principles. According to this dominant conception, patents help commodify academic inventions, which universities then advertise and transfer to private firms in licensing markets. This Article challenges and refines this market-oriented view of technology transfer. Drawing from empirical studies, it shows that effective technology transfer often involves long-term personal relationships rather than discrete market exchanges. In particular, it explores the significant role of tacit, uncodified knowledge in effectively exploiting patented academic inventions. Markets, patents, and licenses are ill-suited to transferring such tacit knowledge, leading licensees to seek direct relationships with academic inventors themselves. Drawing on the theory of the firm, this Article then explores the role of organizational integration in transferring patented technologies and associated tacit knowledge to private companies. Presenting a descriptive theory of university-industry technology transfer, it argues that the difficulties of conveying tacit knowledge encourage various forms of organizational integration by which licensees directly absorb academic human capital. From consulting arrangements to seats on boards of directors, licensees are bringing faculty inventors (and their tacit knowledge) “in house” to aid in commercialization. Turning from the descriptive to the normative, this Article provides prescriptions for enhancing tacit knowledge transmission and technology transfer. It concludes by exploring the implications of tacit knowledge for patent theory and the organization of technology commercialization efforts.