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Title: The costs and benefits of licensing activity : an empirical investigation of UK companies involved in such operations
Author: Adam, Y. A.
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1985
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This study is about determining the circumstances which make, the inter- national sales of technology and know-how-through licensing arrangements a viable alternative to FDI and foreign trade for manufacturing firms. It identifies basic motivations for licensing, and examines company characteristics of British'companies in relation to observed licensing strategy overseas. In addition, it examines the effect on licensing of competition in the-sales of technology. A conceptual model of foreign licensing is tested on cross-sectional data gathered from 202 UK-based. and non-UK based companies. Data for 50 of these firms which were not engaged in any licensing activity, were obtained through direct phone calls and from their annual reports for 1980. Data for the remaining-152 companies, -which were involved in licensing arrangements, were obtained through mailed questionnaires and from published sources. In addition, 33 of these company's managers in charge of licensing were interviewed. The data was analysed by a battery of univariate and multivariate techniques. With regard to the costs and benefits of licensing, company executive responses show explicitly two common directions for their evaluation and concern. A company whose foreign licensing consists predominantly of granting licence rights for the use of its patents, trademarks and know-how in industries other than those in which it is itself active, or in the manufacture of products it does not choose to make or market overseas, is generally satisfied to assess the success of its activity by the volume of royalty receipts minus such easily determined direct costs as are incurred in negotiating, obtaining, and maintaining the licence contracts. Companies which are licensing proprietary rights and know-how relating to its own particular products and activities in contrast are much more involved with the licensee, have higher profit opportunity but greater loss exposure, and have much more opportunity to influence the indirect costs and indirect benefits generated by the licensing agreements. Other findings related to cost-benefit of licensing are that companies (1) which spend a relatively larger percentage of value-added on R&D, (2) which are relatively large in their industry, (3) which are more highly diversified, or (4) which have less experience in foreign manufacturing operations are more likely to license in order to supplement their FDI. Also, if there is competition in the sale of technology, managers are more willing-to-licence than to invest, providing the company does not try to preserve its market position in older products facing competition. The results of the study also show that companies which are involved in licensing are indeed distinguishable from those that do not have any licensing engagement, by a number of discriminatory characteristics. The research also shows that these companies do evaluate licensing as an alternative to FDI when they consider manufacturing in host-market. Finally, there is evidence that the firms which are enjoying-relative scale in their industry,. are highly diversified and have high R&D intensity are likely to adoptapolicy involving reciprocal exchange of technology licence with other innovative firms in their industry.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Foreign trade licensing Economics