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UGF Lecture 7Management > Global Firm > Basis for I > Internalisation > Decision process 1 > Decision process 2
Decision process - example 22. Technology Technology is an OA that is likely to be internalised. It is seen as an intermediate product for which the market is imperfect. Issues such as the roles played by information and knowledge determine the efficiency of the market, which will work better if players have more knowledge. A perfect market is one where all participants have all the relevant knowledge about a good. However, the market is imperfect as the information (the technology) is the tradable commodity, meaning that it not free. Buyers purchase technology because they think it will aid their business - they do not actually know for sure. If they were given all the details about it to ensure its usefulness, they would then know what they needed to know and would not need to buy it. Buyer uncertainty Thus buyer uncertainty defines the market for technology. The seller needs to make efforts to overcome this uncertainty so that they buyers can be sure enough to offer a price that they believe will get a good deal. For example, giving free samples of food so that potential buyers know that they are being offered quality goods. Alternatively, the potential consumer could be offered a free trial of the technology, but the seller needs to be careful that the usefulness of the technology is not eroded by its free use by potential buyers. As the ability of technology to ensure future profits for a company cannot accurately valued, the buyer is more likely to offer a lower price to offset the risk of it not working.
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