Choice of foreign licensees: information and communication technology firms

Abstract

Purpose – This paper aims to study the validity of potential factors that might affect US information and communication technology (ICT) holders' choice of foreign licensing partners. Design/methodology/approach – This study focuses on ICT industry. The sample firms for this study are drawn from the SDC by Thomson Financial and this sample was used to construct a data in which a unit of observation is the unique US licensor – foreign licensee pair, or a dyad. The hypotheses are tested using the random-effects logit model. Findings – The important explanatory factors relate to the knowledge appropriability and the level of economics freedom of a licensee's country, and familiarity between partners through prior licensing agreements. Market similarity between partners, however, appears to be an insignificant factor. Practical implications – The findings suggest that transaction cost, competition, and national absorb capacity considerations weigh in heavily in explaining firms' choice of foreign licensing partners. Originality/value – The paper makes an important contribution to licensing literature as the understanding of what drives partner choice is still sparse. Especially, the paper makes a uniqueness of dealing with international technology licensing.