Diversification through licensing

Abstract

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?’

Learning-by-Licensing: How Chinese Firms Benefit From Licensing-In Technologies

“…Technology diversity has been recognized as an important indicator of innovation performance and technological capabilities [77]. Our results show that licensee firms, particularly those in emerging countries, can conduct a technological diversification strategy through inward technology licensing.…”

“…Indeed, we provide empirical evidence to support the argument that companies can diversify through licensing. There has been a lack of empirical evidence for the past 30 years since Killing [77] and Caves et al [79] first hypothesized that in-licensing could act as a diversification option. Most diversification literature has focused on internal efforts by firms to execute a diversification strategy, for instance, by safeguarding the cohesion of internal knowledge [78].…”

Determinants of out‐licensing strategy of firms: New empirical evidence

“…In general, large established firms have substantial complementary assets for commercialization and therefore tend to commercialize their technology independently (Shane, 2001). However, several studies show that large firms aggressively and strategically license out some of their technology to control market competition by hindering potential strong competitors from entering into their product markets (Gallini, 1984;Katz and Shapiro, 1985); remove licensees' motivation to innovate (Gallini and Winter, 1985); set up industrial standards and/or enhance demand for new products (Shepard, 1987;Grindley and Teece, 1997); and sell products and/or services with licensing technology and expand business (Killing, 1978;Robert and Berry, 1985;Lichtenthaler, 2007). Because large established firms do business in a wide range of areas and are more likely to have many competitors in various product markets, they can have various strategic motives for licensing out their technologies.…”

Managerial perceptions of technology licensing as an alternative to internal R&D in new product development: an empirical investigation

“…A number of studies have simply listed the benefits that a firm derives from licensing-in technology instead of developing it internally (Gold 1982;Lowe and Crawford 1983). The major findings of these studies include the following: (1) speed of market entry; the opportunity to concentrate scarce resources on incremental product improvements; and permits a firm to catch up with competition (Gold 1975(Gold , 1982(Gold , 1987, (2) protection of patents; access to trade secrets and licensor support to reduce product/process development risks (Crawford 1985;Lowe and Crawford 1983), (3) overcomes internal resource constraints such as lack of finance, internal product design, manufacturing and marketing skills (Crawford 1985;Killing 1977), (4) allows ready adoption of an industry standard; acquisition of patents; keep abreast of new technological developments; upgrade internal technical skills (Killing 1978), (5) facilitates diversification and filling of gaps in the firm's product portfolio (Crawford 1985;Killing 1978), ( 6 ) permits matching and overcoming competitive threats; and lengthening product life cycles (Crawford 1985), (7) reduces marketing and technical uncertainties (Shahrokhi 1987), and (8) permits utilisation of spare capacity and allows low cost acquisition of new technology (Lowe and Crawford 1983).…”

“…It comprised of four items: access to future technologies from the licensor, acquisition of technologies that are industry standards, access to licensor patents and saving resources for future in-house developments. These four items together seem to tap the dimensionality of technology licensing as method by which a firm can keep abreast of, and obtain, future technology (Killing 1978), while saving its limited internal resources for other uses.…”