Question

Based on the internalization theory, what are the three major drawbacks to licensing? (Check all that apply.)

a) Loss of control over technology
b) Limited market presence
c) Potential for competition from the licensee
d) Increased regulatory requirements

Answer 1

The three major drawbacks to licensing according to the internalization theory are loss of control over technology, potential competition from the licensee, and limited market presence.

Step-by-step explanation:

Based on the internalization theory, the three major drawbacks to licensing include: loss of control over technology, the potential for competition from the licensee, and a limited market presence. Licensing can allow other companies to gain access to your technology, which might lead to a loss of uniqueness and competitive edge. Moreover, once the licensees grasp the technology, they may become competitors. Lastly, through licensing, a firm might only have access to limited markets, as compared to establishing a subsidiary, which may impede their global reach and presence