Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Exclusive licensing deals a tool for collaboration

15.04.2010
Exclusive licensing deals are a two-way safety net that fosters cooperation as new product ideas weave their way toward the marketplace, according to new research led by a University of Illinois business strategy expert.

Deepak Somaya says the findings reveal that granting rights to a sole partner is a tool to curb risk and leverage cooperation, not to corner the market when breakthrough innovations are ultimately launched.

“We found that exclusive licensing is very significantly about the collaboration needed to reach the marketplace and succeed, not about dominating the marketplace,” he said. “Past research theorized that exclusivity was largely about creating downstream monopolies to drive sales and profits.”

In short, the deals link innovators with partners who are skilled in taking new products to the marketplace, according to findings that will appear in the Strategic Management Journal. Those partners, in turn, develop a vested interest in success because exclusivity means no new licenses will water down earnings potential once the partner has helped the product succeed.

“Partners will be less willing to give 100 percent if they can’t reap the benefits in the end, so exclusivity provides an incentive for cooperation,” said Somaya, a professor of business administration in the nationally ranked U. of I. College of Business.

But exclusive deals also can be risky, according to the study, co-written by business professor Young Jun Kim, of Texas A&M International University, and Nicholas S. Vonortas, an economist at George Washington University.

Partners can turn out to be less effective than hoped or fledgling product innovations can turn out to have broader, more-profitable applications, such as a potential drug for Alzheimer’s disease that later proves useful to treat Parkinson’s disease, Somaya said.

Innovators can manage those risks by limiting the scope of exclusivity, according to the unique study, which analyzed more than 200 exclusive licensing deals involving publicly traded biotechnology, pharmaceutical and chemical firms.

A contract for an early-stage pharmaceutical breakthrough, for example, might grant exclusivity only for Alzheimer’s treatment while the inventor retains rights for all other potential applications.

“With early-stage technologies, the licensor doesn’t want to give away the store, but the licensee also wants protection because developing and commercializing the product will require a lot of investment,” Somaya said. “Scope restrictions address both of those concerns.”

Whether blanket or restricted, the study found that exclusive licensing is commonly used as a contractual “hostage” that innovators voluntarily give up as a sign of good faith that nurtures cooperation.

Somaya says hostages can provide incentives and safeguards for both creators of new product ideas and the sole partners signed on to commercialize them.

“There’s is simple analogy in car shopping. Dealers want you to test drive because it can close the sale. But how do they know you’ll come back? Well, it’s because they have your driver’s license or the keys to your car,” Somaya said.

“But there’s a danger in giving too much of a hostage away, which is where restricted exclusivity come in,” he said. “And in some cases, it may make sense to not give a hostage at all and license non-exclusively to multiple partners. If there isn’t a need for close cooperation, all it does is shackle your own feet.”

Somaya says giving away hostages can yield a level of cooperation that could never be spelled out in a contract, especially with early-stage product ideas that are still evolving.

“Incorporating hostages into licensing contracts is a valuable complement to detailed contractual clauses,” he said. “It creates incentives for partners to cooperate willingly and automatically, even when situations arise that they did not anticipate and even if the other party can’t observe the level of support being offered.”

Jan Dennis | EurekAlert!
Further information:
http://www.illinois.edu

Further reports about: Alzheimer Alzheimer’s Disease licensing deals

More articles from Studies and Analyses:

nachricht Study relating to materials testing Detecting damages in non-magnetic steel through magnetism
23.07.2018 | Technische Universität Kaiserslautern

nachricht Innovative genetic tests for children with developmental disorders and epilepsy
11.07.2018 | Christian-Albrechts-Universität zu Kiel

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Unraveling the nature of 'whistlers' from space in the lab

A new study sheds light on how ultralow frequency radio waves and plasmas interact

Scientists at the University of California, Los Angeles present new research on a curious cosmic phenomenon known as "whistlers" -- very low frequency packets...

Im Focus: New interactive machine learning tool makes car designs more aerodynamic

Scientists develop first tool to use machine learning methods to compute flow around interactively designable 3D objects. Tool will be presented at this year’s prestigious SIGGRAPH conference.

When engineers or designers want to test the aerodynamic properties of the newly designed shape of a car, airplane, or other object, they would normally model...

Im Focus: Robots as 'pump attendants': TU Graz develops robot-controlled rapid charging system for e-vehicles

Researchers from TU Graz and their industry partners have unveiled a world first: the prototype of a robot-controlled, high-speed combined charging system (CCS) for electric vehicles that enables series charging of cars in various parking positions.

Global demand for electric vehicles is forecast to rise sharply: by 2025, the number of new vehicle registrations is expected to reach 25 million per year....

Im Focus: The “TRiC” to folding actin

Proteins must be folded correctly to fulfill their molecular functions in cells. Molecular assistants called chaperones help proteins exploit their inbuilt folding potential and reach the correct three-dimensional structure. Researchers at the Max Planck Institute of Biochemistry (MPIB) have demonstrated that actin, the most abundant protein in higher developed cells, does not have the inbuilt potential to fold and instead requires special assistance to fold into its active state. The chaperone TRiC uses a previously undescribed mechanism to perform actin folding. The study was recently published in the journal Cell.

Actin is the most abundant protein in highly developed cells and has diverse functions in processes like cell stabilization, cell division and muscle...

Im Focus: Lining up surprising behaviors of superconductor with one of the world's strongest magnets

Scientists have discovered that the electrical resistance of a copper-oxide compound depends on the magnetic field in a very unusual way -- a finding that could help direct the search for materials that can perfectly conduct electricity at room temperatur

What happens when really powerful magnets--capable of producing magnetic fields nearly two million times stronger than Earth's--are applied to materials that...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Within reach of the Universe

08.08.2018 | Event News

A journey through the history of microscopy – new exhibition opens at the MDC

27.07.2018 | Event News

2018 Work Research Conference

25.07.2018 | Event News

 
Latest News

Staying in Shape

16.08.2018 | Life Sciences

Diving robots find Antarctic seas exhale surprising amounts of carbon dioxide in winter

16.08.2018 | Earth Sciences

Protein droplets keep neurons at the ready and immune system in balance

16.08.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>