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

Taekwon Kim

Global Economic Review, 1997, vol. 26, issue 4, 21-43

Abstract: 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.

Date: 1997
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DOI: 10.1080/12265089708422879

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