*The authors wish to thank Marcus Cunha, Kenneth Wathne, and Kevin Webb for helpful comments on earlier drafts of this paper. This work was financially supported by the Center for Entrepreneurship, College of Business, at James Madison University.
The Licensing of Market Development Rights within Technology Alliances: A Shareholder Value Perspective*
Version of Record online: 3 MAY 2010
© 2010 Product Development & Management Association
Journal of Product Innovation Management
Volume 27, Issue 4, pages 593–605, July 2010
How to Cite
Boyd, D. E. and Spekman, R. E. (2010), The Licensing of Market Development Rights within Technology Alliances: A Shareholder Value Perspective. Journal of Product Innovation Management, 27: 593–605. doi: 10.1111/j.1540-5885.2010.00737.x
- Issue online: 3 MAY 2010
- Version of Record online: 3 MAY 2010
Technology alliances create market development rights that are shared between partners in an alliance relative to codeveloped product technology. Alliance partners will often manage the shared market development rights in a cooperative manner by forming an agreement in which one partner (i.e., the licensor) licenses its market development rights to the other partner in the alliance (i.e., the licensee). The real options and bargaining power literatures provide opposing recommendations regarding whether a licensor creates greater shareholder value by licensing its market development rights to the licensee on a more or less restrictive basis. Empirical analysis of technology alliance contracts reveals that the restrictiveness by which a licensor should license its market development rights to a licensee depends on the licensee's strategic marketing emphasis. Specifically, a licensee will create greater value by following a more restrictive distribution strategy when its partner's marketing strategy emphasizes value creation. Alternatively, a licensee will create greater value when its partner's marketing strategy emphasizes value appropriation by following a less restrictive distribution strategy. From a theoretical perspective, the paper's findings provide early evidence regarding the contribution of marketing strategy toward value creation in technology alliances and help resolve the differing expectations offered by the real options and bargaining power literatures. Managerially, the paper identifies an alliance partner's strategic marketing emphasis as a hitherto unrecognized factor determining when managers should follow a more or less restrictive distribution strategy when licensing marketing development rights within technology alliances.