Strategy and Cost in Technology Licensing

YoungJun Kim, Department of Economics, The George Washington University, and Nicholas Vonortas, Center for International Science and Technology Policy & Department of Economics, The George Washington University

1/01/2005
(Original Publish Date: 2000)

The strategic behavior of technology owners creates important determinants of inter-firm technology licensing within a single industry when products are differentiated and knowledge is imperfectly appropriable. Transaction cost considerations factor in heavily when the net is extended to cross-industry licensing. The probability that two companies will engage in a licensing agreement, then, mainly depends on the relationship between them and on their characteristics, including the closeness of their market and technological profiles, familiarity through prior interaction, licensing experience, and the strength of intellectual property protection in the primary industry of the licensor.