Operational characteristics and performance gains associated with international licensing agreements: The US evidence

Licenses received, licenses given, and cross licenses are strategic responses by firms seeking to exchange proprietary information. This paper provides estimates of the capitalized value of gains associated with both domestic and international licensing agreements between non-affiliated firms, and identifies salient characteristics of firms engaged in licensing. In general, licensing agreements are found to have significantly positive capitalized values, for both domestic and international licensing agreements. We find that larger firms are more likely to receive than to give licenses, and that cross licensing firms enjoy superior profitability compared to firms that receive or give licenses. Also, US firms tend to license foreign partners of similar size and profitability, but with lower levels of research intensity. Higher levels of R&D intensity in the home and host countries and higher profitability levels lead to domestic licensing, while higher levels of firm specific sales and R&D expenses lead to international licensing agreements.