The Impact of Aligning Product Development and Technology Licensing: A Contingency Perspective.

In recent years, many firms have started to actively license out technology, either exclusively or in addition to applying the technology in their own products. While some pioneering firms have achieved substantial benefits from outlicensing, many others fear weakening their competitive position in the markets for their products by selling 'corporate crown jewels.' This paper addresses the effects of an integrated technology exploitation strategy, which refers to aligning technology licensing and product development, on a firm's financial performance, i.e., return on sales in the subsequent year. Drawing on a contingency perspective, the study further examines the moderating effects of four external contingency factors related to the appropriability regime and the technology markets in the relationship between an integrated strategy and firm performance. While the product markets refer to the markets for physical products, the technology markets refer to markets for disembodied technological knowledge. Quantitative analyses of new survey and financial data from 122 industrial firms with a one-year lag are presented, and they show a positive effect of an integrated technology exploitation strategy on subsequent firm performance. This positive effect is stronger under conditions that are characterized by effective patent protection, high technological turbulence, high transaction frequency in the technology markets, and strong competition in the technology markets. The main finding of the paper is that, due to interdependencies with a firm's product development activities, it is not beneficial to manage licensing as a stand-alone activity. Instead, integrated strategies help firms to overcome managerial difficulties and to capture value from open innovation. The results have major implications for both management and research into technology exploitation, licensing, open innovation, and technology markets. [ABSTRACT FROM AUTHOR]