| The two essays of this dissertation concern themselves broadly with the strategic use of know-how in high-technology markets. The first essay looks at licensing agreements in such markets. We build a game-theoretic model to suggest that the amount of know-how transferred in licensing agreements may act as a signal to consumers, of the extent of compatibility likely to be achieved between products. Since the ability to achieve this capability varies across firms, and since consumers value capability, licensing can be used as a strategic signal by higher ability firms to separate themselves from lower ability firms.; After proving the existence of a separating equilibrium, we look at the impact of various factors on the quality of this separation. Thus, we find that licensing is a more efficacious mechanism when (a) the firms are more asymmetric ex-ante, (b) buyers have weaker preferences across firms, and (c) the rate of catch-up of the lower licensee firm is higher.; The second essay concerns itself with the ability of firms to absorb technological know-how from outside their boundaries, and the factors that affect this ability. We conceptualize the notion of absorptive capacity in terms of firm-specific dynamic capabilities, and elucidate the dimensions of absorptive capacity. Following this, we use an innovative econometric methodology, called Stochastic Frontier Estimation, to estimate absorptive capacities on a sample of firms in the semiconductor and computer industries. Our results suggest that a firm's prior breadth of technological innovation, it prior quality-weighted experience, and its marketing capability are all significant determinants of its absorptive capacity. Finally, we find that a firm's absorptive capacity affects the breadth of innovations the firm comes up with, and its profitability, especially in more turbulent environments. |
