Licensing Strategies of the Enterprising - but Vulnerable - "Intellectual Property" Vendors

This paper investigates in an exploratory manner the licensing strategies pursued by firms whose business model is based on developing and licensing out their intellectual property rights (IPRs). These are not traditional suppliers, since they do not engage in production or commercialization, but focus solely on invention. While considerable anecdotal evidence exists about these IP vendors, there has been no systematic investigation of how they use licensing to appropriate value from their investments in R&D. In this paper, we suggest that the licensing strategies they pursue can be differentiated along two main dimensions: whether the driving force behind the inventive process is “technology push” or “market pull”, and the degree to which the innovative activities carried out by the IP vendor are mutually dependent upon the innovative activities of the other relevant market players. On this basis, four main licensing strategies are identified. We investigate the relative benefits and costs of these four strategies, and the factors affecting licensing choices.