In: Finance
Licensing propriety technology to foreign competitors is the best way to give up a firm's competitive advantage. (a) Discuss the above statement (b) What alternative entry form might you consider if you are a technology company? Why?
1. Licensing propriety technology is one of the ways in which firms decide to expand markets globally. In this method, the firm (licensor) gives the right of using a technology developed by the firm to other foreign entities( licensee). In return, the firm earns by getting a royalty fee from foreign companies. But the above may have its own dangers -
But there are advantages as well -
Hence we see that licensing proprietary technology has its own advantages and disadvantages. A firm should therefore only look to license a part of its entire technological product line. In this way, the firm may increase its market scope without giving up its competitive advantage.
2. Alternative forms of entry for technology companies might be -