The Effect of Technological Environment and Competitive Strategy on Licensing Decisions

Abstract

The expectation that firms that have a high differentiation strategy will also have low levels of licensing is not supported. For business units (BU) with products in the growth stages, the competitive strategy of the BU did not significantly affect licensing decisions. The results are not too surprising when one considers new technological advancements and global competition. A company may perceive its technological advantage as transitory and expect rapid imitation by competitors. In such a case, the company might want to license the innovation as quickly as possible to gain global acceptance. It is shown that when products mature, the competitive strategy dimensions do have a significant impact on licensing decisions. Under such conditions, the expectation that high differentiation will lead to protective actions was not confirmed. It is also shown that licensing activity is only related to the competitive strategy of the firm when the product-demand life cycle is in the mature stages.

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