The Licensing of Market Development Rights within Technology Alliances : A Shareholder Value Perspective

Technology alliances create market development rights that are shared between partners in an alliance relative to co-developed product technology. Alliance partners will often manage the shared market development rights in a cooperative manner by forming an agreement in which one partner (i.e., the licensor) licenses its market development rights to the other partner in the alliance (i.e., the licensee). Research from the real options and bargaining power literatures provide opposing recommendations regarding whether a licensor creates greater shareholder value by licensing its market development rights to the licensee on a more or less restrictive basis. Empirical analysis reveals that the restrictiveness by which a firm should license its market development rights to a licensee depends upon the licensee's strategic marketing emphasis. The paper's findings add to the alliance literature by explicating the contribution of market development rights management to value creation in technology alliances. Managerially, the paper identifies an alliance partner's strategic marketing emphasis as a hitherto unrecognized factor determining when managers should follow the real options versus bargaining power literature when licensing marketing development rights within technology alliances