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In this paper the author examines the appropriateness of taking a licence agreement to implement four different types of strategy for product diversification. The research is based on interviews with managers of more than 40 companies manufacturing more than 70 products under licence in Canada and the UK. The result is a guide to the effective use of licence agreements from the point of view of the buyer. The central question addressed is ‘under what conditions should a firm take up a licence agreement?’

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