Abstract

This article explores the licensing strategies pursued by firms whose business model is based on developing and licensing out their intellectual property. These “intellectual property (IP) vendors” are not traditional suppliers, since they do not engage in production or commercialization, but specialize solely in the generation of IP. Considerable anecdotal evidence exists about these creative and enterprising firms. However, there has been no systematic investigation of how they use licensing to capture value from their IP. Our research indicates that their licensing strategies can be differentiated along two main dimensions. The first concerns the nature of the contractual relationship: whether the license stands alone or whether it is part of a larger package including other R&D collaborative agreements. The second concerns whether the technologies concerned are of high or low cumulativeness. These dimensions yield a typology outlining four different strategies IP vendors can use.