Most markets function nicely and easily; sometimes, all they need is a tree. A well-known story recounts that three centuries ago on Wall Street in the old New Amsterdam, a buttonwood tree marked the spot where traders and speculators would gather to trade informally. In 1792, 24 stockbrokers signed the Buttonwood Agreement, giving birth to the New York Exchange. Markets for technology and ideas (MFTIs) need more than a buttonwood tree to function though. Tom Lavelle, Senior Vice President at Rambus Technology, which leads the field in high-speed memory architectures, summarized the difficulties for MFTI after Rambus filed a suit against Nvidia for patent infringement: "For more than six years, we have diligently attempted to negotiate a licensing agreement with Nvidia, but our good faith efforts have been to no avail" (Business Wire, 2008). Such MFTIs are plagued by maladies, including asymmetric information, moral hazards, transaction costs, and strategic considerations that can even lead to the complete failure of markets (Fosfuri, 2006; Pisano, 2006). This setting explains why MFTIs appear in only a few sectors (e.g. biotechnology, chemicals, pharmaceuticals, software, and semiconductors) and remain virtually nonexistent in others. Traditionally, firms do not sell but rather embody their technologies and ideas in goods, services, and people (Teece, 1986).
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