Technology Licensing and Firm Innovation: The Moderating Effect of Slack and Organizational Myopia

Abstract

Although licensing has repeatedly been acknowledged to be a major vehicle for firms to acquire external knowledge, surprisingly little is known about how firms use it as part of their overall inventive efforts. Furthermore, with the exception of absorptive capacity, the organizational determinants that facilitate or constrain firms' ability to deal with licensed-in technologies have received little attention. This paper starts investigating in a longitudinal setting the effect of technology licensing on the number of patents produced by the licensee within the three years subsequent to the technology acquisition. The findings indicate that technology licensing is positively related to the number of inventions produced by the licensee in the years subsequent to the licensing deal. Subsequently, I investigate the moderating effect that organizational slack and myopia have on this main relationship. The findings also suggest that high levels of Organizational Slack (available financial resources) strengthen the positive effect of licensing on innovation. However, higher levels of Organizational Myopia (the extent to which a firm draws on its own knowledge) can decrease the main effect of licensing.