The licensing dilemma: understanding the determinants of the rate of technology licensing
Article first published online: 13 SEP 2006
Copyright © 2006 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 27, Issue 12, pages 1141–1158, December 2006
How to Cite
Fosfuri, A. (2006), The licensing dilemma: understanding the determinants of the rate of technology licensing. Strat. Mgmt. J., 27: 1141–1158. doi: 10.1002/smj.562
- Issue published online: 29 OCT 2006
- Article first published online: 13 SEP 2006
- Manuscript Revised: 7 APR 2006
- Manuscript Received: 19 AUG 2004
- revenue effect;
- profit dissipation effect;
- chemical industry
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. Copyright © 2006 John Wiley & Sons, Ltd.