International Technology Licensing Research Articles

Lobbying for Tariff Protection, International Technology Licensing and Consumer Surplus

Abstract It is well known that the protectionist view for tariff protection can be justified if the tariff induced international technology licensing benefits the consumers. We show that this view may not hold true if the domestic firm lobbies for tariff protection. If lobbying determines tariff following the “tariff-function formation” approach, lobbying reduces consumer surplus by reducing the incentive for licensing. However, if lobbying determines tariff following the “political contribution” approach, lobbying increases the incentive for licensing but creates an ambiguous effect on consumer surplus. Hence, whether the protectionist view for tariff protection can be justified under international technology licensing depends on the way the tariff rates are determined.

International Technology Licensing, Intellectual Property Rights, and Tax Havens

Abstract This paper investigates the determinants of international technology licensing using data for 50 countries during 1996-2012. A multi-country model of innovation yields a dynamic structural gravity equation for royalty payments as a function of fundamentals, including imperfect intellectual property protection and differences in corporate taxation. The gravity equation is estimated with nonlinear methods. Model's fundamentals account for about 60% of the variation in royalty payments. A quantitative analysis sheds light on the impact of global taxation reforms on international technology licensing and innovation. The findings highlight the role of taxation in shaping cross-border technology flows and the consequences of profit-shifting.

INTERNATIONAL TECHNOLOGY TRANSFER, ENVIRONMENTAL POLLUTION AND DOMESTIC WELFARE

Licensing of foreign green technologies is not free to the home country, hence causing tradeoffs in the domestic welfare. This paper constructs a two-stage game model to explore the impact of international green technology licensing on the environment and social welfare. Results show that the total amount of pollution under licensing may be larger than that under no licensing whereas the social welfare under licensing may be smaller than that under no licensing. This implies that foreign technology transfer may not be socially preferred and harmful to the domestic environment. In addition, trade liberalization may help reduce the environmental harm when the import tariff is moderate.

Intellectual Property and Innovative Development: Problems and Trends

Aim. The presented study aims to examine the development of intellectual property in the context of the innovation process.Tasks. The authors define the major prerequisites for the transformation of the institution of intellectual property; monitor the dynamics of trademark applications filed in the Russian Federation in 2016–2020; briefly describe factors influencing the commercialization of intellectual innovative developments.Methods. This study uses general scientific methods (the monographic method, analysis and synthesis, induction and deduction) and methods of structural, systems, and comparative economic analysis.Results. The analyzed trends in the development of intellectual property shows that the use of the ecosystem approach in technology transfer and constructive interaction between individual subjects of technology transfer will facilitate active development of the research potential of certain organizations and implementation of developments in production, while also strengthening the position of the Russian Federation in the global high-tech market. Comparative analysis of the global intellectual property market shows that international technology licensing grows by approximately 18% annually, while domestic technology licensing increases by only 10 % each year. Therefore, it can be concluded that intellectual exchange is one of the drivers of globalization. However, the recent trend towards increased regionalization raises the urgent issue of intensifying the creation of a national technology transfer ecosystem in Russia – one that would be closely linked to the national industrial ecosystem – in order to enhance the competitiveness of goods and services produced by Russian companies. There is an obvious global trend towards the transformation of traditional business models and the emergence of unified corporate, industrial, or national environments of cooperation chains aimed at developing new technologies.Conclusions. It can be argued that the development of intellectual property is one of the factors that determine the sustainable and progressive development of the innovation economy as a whole. This potential is realized through the commercialization of innovative developments and the protection of intellectual property. In view of the high importance of protecting national developments, it is advisable to support them within the framework of the national economic policy.

International joint ventures, technology licensing and ownership structure

AbstractTo enter into a host country market with significant technological distance, a multinational corporation forms a joint venture affiliate with a local partner and collects licensing royalties from the affiliate. Both parties to the joint venture simultaneously decide their respective equity shares and the capital capacity of a continuous investment project via Nash bargaining. Since the multinational corporation receives licensing royalties from its local partner, it will therefore hold a share smaller than its relative bargaining power. In addition, the multinational firm will demand a larger ownership share if the royalty rate is lower, or the repurchase price of capital becomes lower. The joint venture firm will install a higher capital capacity when entering the host‐country market if the price either to repurchase or to resell capital becomes higher. This capacity installation decision, however, will not be affected by the licensing royalty rate.

Diaspora ownership and international technology licensing by emerging market firms

The liability of origin makes participation in international technology licensing challenging for emerging market firms. We draw on signaling theory to propose that diaspora ownership – diaspora members’ equity investments in their homeland firms – constitutes a reliable third-party signal of emerging market firms’ trustworthiness, which facilitates the access of these firms to international technology licensing. We further hypothesize that the efficacy of diaspora ownership as a third-party signal varies with the firm’s subnational context. Specifically, the relevance of diaspora ownership signal increases with the degree of homogeneity of the within-industry R&D effort in the firm’s sub-national location. This is because, under these conditions, additional signals are required to differentiate between local firms operating in the same industry. In contrast, the diaspora ownership signal has a smaller effect in dysfunctional institutional contexts due to their prohibitive transaction costs. We test our arguments on a matched sample of 597 Indian firms operating between 2006 and 2015, and find general support for the predicted relationships. Our study advances research on the liability of origin of emerging market firms, the work on subnational dimension of international business, and the literature on the benefits diasporans bring to their homelands and resident countries.

Technology licensing with asymmetric absorptive capacity

This paper establishes a duopoly model to investigate the impacts of asymmetric absorptive capacity and asymmetric production cost on international technology licensing by an outside patent-holder. We find that, irrespective of fixed fee and royalty licensing, the patent-holder may adopt exclusively licensing if the difference in the absorptive capacity of two firms is large enough; otherwise, it will license to both firms. Surprisingly, such international licensing may be welfare-reducing if the difference in absorptive capacities between two licensees is large enough.

Discriminatory vs. uniform tariffs with international technology licensing

This paper introduces technology licensing between rival firms into a three-country model to examine how an international technology licensing may upset the welfare ranking between a discriminatory tariff policy and a uniform tariff policy. It is found that a discriminatory tariff policy is inferior to a uniform tariff policy in terms of the social welfare of the importing country or the welfare of the world as a whole if the cost disadvantage of the licensor firm is high. This result is robust even if the licensor firm can engage in R&D investment in the long-run.

Tariffs, technology licensing and adoption

This paper develops a two-country Cournot duopoly model to investigate the implications of international technology licensing. It is shown that if the tariff imposed by the domestic country is high, it is optimal for the foreign firm to adopt an inferior technology for its production when it licenses its most advanced technology to the domestic firm. Such a licensing arrangement may improve welfare of the two countries.

Choice of foreign licensees: information and communication technology firms

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.

The dual role of local sites in assisting firms with developing technological capabilities: Evidence from China

As strong local knowledge bases emerge in some developing countries and regions, more research efforts are devoted to examine the role of local sites in technological-capability development of firms from developing countries. However, most of these studies illuminate the direct input (e.g., knowledge, human capital) and the role of motivating multinational companies (MNCs) to upgrade their local operations in developing countries so as to perform more innovation activities. Few articles are presented that examine the role of local sites in the learning and technological-capability building processes that take place during technology import activities. This study investigates how local sites in developing countries help their firms benefit from the spillovers of international technology diffusion, by empirically scrutinizing Chinese licensee firms. The empirical results support the hypothesis that Chinese local sites assist with their firms’ technological-capacity building, driven by international technology licensing-in activities, in three indirect ways. That is, the enrollments of sufficient R&D personnel from local sites, the collaborations with local universities and research institutes, and the collaborations with local industrial community firms positively influence the relationship between firms’ international inward technology licensing and technological capabilities.

Letter from the Editor-in-Chief: Scientists behaving badly

There are 10 articles in this issue of JIBS, four of which were originally submitted to the previous editorial team and subsequently transferred to my watch. The remaining articles were wholly handled by the current editors. Many of the articles cluster around the general theme of globalization and global strategies of multinationals. The issue begins with ‘‘An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment’’ by Cantwell, Dunning and Lundan. Two articles on technology and innovation follow: ‘‘International technology licensing: Monopoly rents, transaction costs and exclusive rights’’ by Aulakh, Jiang and Pan, and ‘‘An international multilevel analysis of product innovation’’ by Lederman. Global marketing strategies in the context of pressures for localization are examined in Shi, White, Zou and Cavusgil in ‘‘Global account management strategies: Drivers and outcomes’’

The structure of payments as a way to alleviate contractual hazards in international technology licensing

This article proposes an empirical model in which the option of choosing between royalties, fixed payments or a combination of the two is made to mitigate contractual hazards in licensing contracts. We examine licensing contracts between Spanish and foreign firms during the 1960s and early 1970s using a new data source of 925 contracts. The link between patenting and licensing is also analyzed. The work provides evidence to support the hypothesis that the moral hazard problem truly influences the type of payment established in arm's-length contracts when there is an important technological gap between unaffiliated firms. This study also shows that the payment chosen depends on the size of the licensee firm.

International technology licensing: Monopoly rents, transaction costs and exclusive rights

As firms increasingly use licensing to exploit knowledge-based assets in global technology markets, appropriate structuring of these agreements has become an important line of research inquiry. One area that has received less attention is the nature of rights granted in inter-firm licensing relationships, although it is an important clause that has implications for profit generation from licensing of proprietary assets. Conceptualizing licensing rights in terms of number of licenses granted and exclusivity rights given to a licensee in a foreign market, this paper examines the determinants of these rights based on monopoly rents and transaction costs associated with different types of licensing contracts. Hypotheses are empirically tested through two studies, one based on large US manufacturing firms and the other on a cross-national sample of medium-sized firms actively involved in international technology licensing. Results from both studies show a greater propensity to use non-exclusive/multiple licensing when the licensed technology has greater potential to produce differentiated products, or when there is greater threat of substitutive technologies entering the market. On the other hand, innovative technologies and a higher degree of asset-specific investments required of the licensee for the technology are related to the use of single/exclusive licensing agreements.

Choosing between international technology licensing partners: An empirical analysis of U.S. biotechnology firms

This paper examines the potential factors that might influence U.S. biotechnology holders’ licensing decisions regarding whom to choose as foreign licensing partners in the context of a global environment. The important explanatory factors relate to the knowledge appropriability regime of the licensee country (i.e. strength of IPR protection), familiarity through prior interaction, business similarity between partners, and prior independent experience as a licensor. U.S. biotechnology firms also license technology more to partners who have joint manufacturing, marketing, and research and development (R&D) experience. The results show that transaction cost considerations weigh heavily when choosing international licensing partners.

The nature and determinants of exclusivity rights in international technology licensing

Existing research on international licensing focuses on firm decisions related to the choice of licensing versus alternative modes of entry into foreign markets, the timing of licensing within the technology life cycle, and appropriate compensation structures to collect rents. This paper complements and extends this stream of research by focusing on decisions related to granting exclusive licensing rights to a technology in foreign markets. The decision surrounding licensing exclusivity is based on the consideration of monopoly rents, technology transfer costs and transaction costs. Factors related to the nature of the technology being licensed, the foreign market environment in which it is licensed, and the characteristics of licensor and licensee firms are likely to influence the choice between exclusive and non-exclusive licensing in a particular foreign market. Propositions developed in the paper incorporate the direct and interaction effects of these three set of variables in predicting exclusivity decisions in international technology licensing.

An analysis of the choice of compensation structures in Korean technology licensing from abroad

Summary Studies on compensation structures of international technology licensing show that the level of intellectual property protection in the host market and the favorableness of the host country's economic environment are positively related to the use of running royalty‐based compensation structure. Lump‐sum fee or fixed royalty compensation is more likely to be used in the introduction and decline stages of the technology life cycle, and running royalty compensation in the growth stage. The international experience and the size of the licensor company are positively related to the use of running royalty. In this theoretical context, this paper analyzes the choice of compensation structures in Korean technology imports. The paper uses the officially reported data to analyze the compensation structures. It analyzes the characteristics of the compensation structures in terms of fixed royalty and running royalty by licensor country, group of licensor countries and size of licensee companies.

International technology licensing contracts, governance structure, and incentives: An empirical examination*

The licensor's efforts and cooperation are essential to a successful technology transfer. There are two kinds of incentives to induce or discourage the licensor's efforts: ownership incentives and contractual incentives. Ownership incentive is defined as the incentive rooted in the licensor's financial equity involvement in licensee firm while contractual .incentive is the incentive provided through performance‐dependent royalty arrangement stipulated by the licensing contract. This article empirically examines the effectiveness of these incentives in inducing licensors’ efforts based on a survey data from 327 international technology licensing contracts. The findings are (1) (partial) ownership is a very effective incentive for the licensor to exert higher level of efforts; and (2) the contractual arrangement, however, is not an effective incentive. This article closes by discussing the implications of the results of this analysis.

Reverse licensing: international technology transfer to the united states

Acknowledgments Acronyms Introduction The International Setting and the U.S. Position International Technology Licensing The Literature Review of International Technology Licensing The Research Model and the Research Hypotheses The Research Methodology and Design The Research Results and Statistical Analysis Summary and Conclusions Notes Bibliography Index

International Technology Licensing: Compensation, Costs and Negotiation

International Technology Licensing: Compensation, Costs and Negotiation