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.