Abstract
International licensing enhances shareholder wealth for domestic licensors. Moreover, technology licensors earn greater mean abnormal returns than licensors of other goods and services. Announcement period returns are also inversely related to the fraction of total sales derived from foreign sources. These findings are consistent with the hypotheses that U.S. managers act in shareholders' interests in negotiating licensing contracts and that licensing announcements convey more information about potential investment opportunities abroad for firms with less international exposure. We also find that domestic licensees earn only competitive announcement period returns, but that returns are higher for technology licensees and for licensees with smaller fractions of total sales derived from foreign sources. Thus, both domestic (and by implication foreign) licensors and licensees can benefit from licensing agreements.
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