The nature and determinants of exclusivity rights in international technology licensing

Abstract

and Key Results■ Existing research on international licensing focuses on firm decisions related to the choice of licensing versus alternative modes of entry into foreign markets, the timing of licensing within the technology life cycle, and appropriate compensation structures to collect rents. This paper complements and extends this stream of research by focusing on decisions related to granting exclusive licensing rights to a technology in foreign markets. ■ The decision surrounding licensing exclusivity is based on the consideration of monopoly rents, technology transfer costs and transaction costs. ■ Factors related to the nature of the technology being licensed, the foreign market environment in which it is licensed, and the characteristics of licensor and licensee firms are likely to influence the choice between exclusive and non-exclusive licensing in a particular foreign market. ■ Propositions developed in the paper incorporate the direct and interaction effects of these three set of variables in predicting exclusivity decisions in international technology licensing.

The Effect of the Governance Environment on Marketing Channel Behaviors: The Diamond Industries in the U.S., China, and Hong Kong

“…Consequently, in a relation-based governance environment, sellers prefer to offer a limited number of exclusive contracts to known entities due to the relatively high marginal costs. From another perspective, a preference for exclusive dealing with a closely knit group of people results from an increased reciprocal reliance and a lower need for monitoring (Jiang et al, 2007). In comparison, in a rule-based environment, the relatively low marginal costs motivate sellers to offer more extensive distribution.…”

Diaspora Ownership and Technological Licensing by Emerging Market Firms

“…In developing our hypotheses, we assume that given the higher uncertainty in emerging markets the majority of these license agreements are non-exclusive since the licensors' opportunity costs are lower than in the case of exclusive agreements (Contractor, 1984). The lower level of industrialization in emerging countries makes nonexclusive licensing more likely, and this is supported by evidence showing that the percentage of exclusive licensing drops from 21% in the industrialized countries to about 4% in less industrialized (including emerging) countries (Jiang, Aulakh, & Pan, 2007).…”

Arm's length and captive transactions: Patent-based view of control in internationalization

“…As a result, they put more effort into preventing direct competition and sustaining their competitive advantage by internal transactions, seeking to harvest exclusively the earnings generated by owning the patent. This is because the complexity of a patent increases its sustainability as a monopoly enabling the firm to leverage the unique attributes of the patented technology (Jiang, Aulakh, & Pan, 2007).…”

“…Ambiguities may be related to patent claims -scope of protection (Anand & Khanna, 2000), information resources asymmetry (Teece, 1977), the difficulties of information (van Hippel, 1994), and the extent of overlapping knowledge between transfer parties due to the recipient's absorptive ability, conditions to use the patent, and their readiness to absorb the technology (Jiang et al, 2007); thereby implying different transaction costs across borders (Kogut & Zander, 1993).…”

“…The case example of Matsushita is further evident of competition-driven ALTs transactions. The company licensed the VHS technology to its competitors, including Sharp, Mitsubishi, Phillips and Hitachi for the purpose of competing in the Betamax technology (Jiang et al, 2007). As a result, it accelerated its technological standardization in the world market in addition to sustain its competitiveness through ALTs.…”