Licensing Strategy
The contractual granting of rights to use technology is commonly called a license. Licensing has become more prevalent since the 1980s. Licensing revenue has to be balanced against the lost profits from greater competition. More competition in the product market favours licensing. Stronger intellectual property (IP) protection also favours licensing, especially in firms that lack manufacturing or marketing capability. On the demand side, firms may choose to license in technology instead of developing it internally. However, taken as a whole, licensing is complementary to internal research and development (R&D); that is, firms that invest internally in R&D are effective in using licensed technology. Understanding how firms should organize their licensing activities is an exciting area for future research.
