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The licensing dilemma: understanding the determinants of the rate of technology licensing

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  • Fosfuri, Andrea
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    Abstract

    The 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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    File URL: http://e-archivo.uc3m.es/bitstream/10016/6669/1/licensing_fosfuri_SMJ_2006.pdf
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    Bibliographic Info

    Paper 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.

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    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
    Handle: RePEc:ner:carlos:info:hdl:10016/6669

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    Web page: http://www.uc3m.es

    Related research

    Keywords: Licensing; Revenue effect; Profit dissipation effect; Chemical industry;

    References

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    1. Arora, Ashish & Fosfuri, Andrea, 2003. "Licensing the market for technology," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 277-295, October.
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    Cited by:
    1. Lichtenthaler, Ulrich, 2010. "Organizing for external technology exploitation in diversified firms," Journal of Business Research, Elsevier, vol. 63(11), pages 1245-1253, November.
    2. Lichtenthaler, Ulrich, 2010. "Determinants of proactive and reactive technology licensing: A contingency perspective," Research Policy, Elsevier, vol. 39(1), pages 55-66, February.
    3. Preet S Aulakh & Marshall S Jiang & Yigang Pan, 2010. "International technology licensing: Monopoly rents, transaction costs and exclusive rights," Journal of International Business Studies, Palgrave Macmillan, vol. 41(4), pages 587-605, May.
    4. Dahlander, Linus & Gann, David M., 2010. "How open is innovation?," Research Policy, Elsevier, vol. 39(6), pages 699-709, July.
    5. Lichtenthaler, Ulrich, 2008. "Externally commercializing technology assets: An examination of different process stages," Journal of Business Venturing, Elsevier, vol. 23(4), pages 445-464, July.
    6. Uusitalo, Olavi & Grønhaug, Kjell, 2012. "Service-dominant logic and licensing in international B2B markets," jbm - Journal of Business Market Management, Free University Berlin, Marketing Department, vol. 5(4), pages 265-284.

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