The technological outsourcing and the moderation effect of firm size in the transactional market for technology

In this his paper we focus on the impact of technology markets on firms’ technological outsourcing/insourcing strategy. In addition, we discuss whether this relationship is moderated by the firm size. We hypothesize that, in line with the transaction costs approach, the cost of using the market (Coase, 1937, Williamson, 1985) together with the firm size (Cassiman, and Veugelers, 2006), could be considered a determinant of insourcing vs outsourcing strategy in the market for technology. Our theoretical assumptions are based on the Williamson one (Williamson, 1985; 1999). Indeed, when innovation is traded within the market for technology (Arora, Gambardella, Fosfuri, 2001; Arora and Gambardella, 2008), risks of technological outsourcing are higher (Arora and Gambardella, 2008). Risks of technological outsourcing are higher because the costs of R&D are higher per sè (Binz et al., 2007), and the diffusion of new technology is not always a certain goal for firm that try to commercialize new ideas (Guns, and Stern, 2003). In addition to this, the market size conditions should be taken into consideration. It means that if the market for technology is characterized by a higher level of closeness, it would be difficult for new technology to be traded. It would be difficult because of competition (Guns and Stern, 2008; Cassiman and Veugelers, 2006). In such a framework, transaction costs will be higher and contractual relationships will be lower due to the high level of protectionism of companies.