Managerial perceptions of technology licensing as an alternative to internal R&D in new product development: an empirical investigation

Increasingly, companies are using the licensing approach to acquire external technology as an alternative to internal new product development. However, the licensing literature presents lists of benefits and costs without identifying either their relative importance or the underlying dimensions. This article presents the results of a survey of Australian licensee firms designed to fill this gap in the literature. The results show that the major reason for licensing relates more to the immediate need to gain competitive advantage than the relative low cost advantage of technology licensing or having access to future technology. The major impediments to licensing are the entry and exit costs and the loss of decision-making autonomy resulting from licensor-imposed restrictions. Further, only two factors, perceived search costs and low cost market entry advantage of licensing appear to vary among the industries studied. Future research and managerial implications of the results are discussed.