ABSTRACT We argue that stricter enforcement of intellectual property rights can, under some conditions, enhance the international diffusion of technology by fostering markets for technology. Developing economies should be prepared to exploit the opportunities opened up by the presence of such markets, which can significantly expand prospects for inward technology transfer. Introduction For centuries, the creation of markets has been one of the main drivers of economic development. There is one activity, however, in which the formation of markets has not evolved as smoothly as in others. Technologies have normally been embodied in goods, services and people, and markets for technologies that are not embodied in those elements have developed less commonly. This is epitomized by the Schumpeterian legacy, which suggests that research and development (R&D) investment is most often the business of relatively large firms that integrate the search for innovation with their production and marketing assets. However, over the past ten to fifteen years, there has been a rapid growth in a variety of arrangements for the international exchange of technologies or technological services, ranging from R&D joint ventures and partnerships to licensing and cross-licensing agreements, through to contract R&D. Along with this trend, specialized technology suppliers have emerged in many industries. This chapter draws upon a decade-long research program on the nature and functioning of markets for technology – markets for intermediate technological inputs – and their implications for business and public policy.