The licensing dilemma: understanding the determinants of the rate of technology licensing
AbstractThe licensing of technology entails a trade-off: licensing payments net of transaction costs (revenue effect) must be balanced against the lower price-cost margin and/or reduced market share implied by increased competition (profit dissipation effect) from the licensee. We argue that the presence of multiple technology holders, which compete in the market for technology, changes such a trade-off and triggers more aggressive licensing behavior. To test our theory, we analyze technology licensing by large chemical firms during the period 1986-96 for 107 chemical products. We find that the rate of technology licensing displays an inverted U-shaped relationship with the number of potential technology suppliers and is negatively related to the licensor's market share and to the degree of technology-specific product differentiation.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/6669.
Length: 1160 p.
Date of creation: Sep 2006
Date of revision:
Publication status: Published in Strategic Management Journal (2006-09) v. 27, p.1141-1158
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Web page: http://www.uc3m.es
Licensing; Revenue effect; Profit dissipation effect; Chemical industry;
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