Science and the Market for Technology

Well functioning Markets for Technology (MFT) allow inventors to sell their inventions to others that may derive more value from them. We argue that the growing reliance on science in inventions enhances MFT. In addition to higher quality inventions, reliance on science may enhance gains from trade and reduce the transfer cost of knowledge and other transaction costs. Using large scale data, we show that patents citing science are more likely to be traded, especially for novel patents and for smaller inventors. Leveraging the fall of the Berlin Wall as a source of exogenous variation in the relevant scientific knowledge to technological fields, we confirm reliance on science increases the likelihood that the invention will be traded