Monetizing Technology Through Licensing Agreements: a Cross-national Empirical Investigation

Abstract: Firms in technology and industrial domains are increasingly seeking licensing agreements to profit from the sale of intellectual property (IP) that they create. The marketing of such intellectual property, however, is fraught with two fundamental problems – how to demonstrate the value of the technology/knowledge to the buying party (the value realization problem) and how to protect the knowledge that is being shared from being appropriated away by opportunistic partners. In this research, we draw on governance theories and use data from international licensing agreements between foreign licensor firms and Korean licensee firms to show how firms modulate the three most prominent provisions of technology licensing agreements (TLAs) – the payment format, the extent to which the licensor cedes control rights for the technology to the licensee and the provision of Human Capital – to mitigate the contractual problems in value realization and value appropriation. In addition, we also study the interdependence between these contractual provisions. We finally draw implications for theory and practice.