While licensing allows for rapid entry into new markets without having to pay an entrance fee, it is a remarkable research and development dynamic and a constant focus on innovation. By licensing, the company disseminates the know-how and risks acquiring knowledge to become a competitor at the end of the contract. Therefore, if it is not to be reached by the licensees, the company must maintain a permanent development deficit. In addition, if the taker does not meet certain quality or reliability standards, the taker may also damage the company`s brand image or reputation. It may happen that a company already has the knowledge, but it cannot use it in production because the existence of a third-party patent prevents use. If, in this situation, there is more than one company in a sector to avoid the risk of reciprocal remedies resulting from the infringement of one or more of these patents, the tendency is to grant reciprocal licenses. In addition, the cross-licensing agreement in certain sectors (for example. B Pharmacy, Chemistry and Electronics) is a form of cooperation that allows the product portfolio to be expanded without having to bear the burden of significant investments in research and development. The company`s decision to enter a foreign market through the granting of a production licence is based on certain strategic considerations concerning the company itself and its products, the characteristics of the country in which it plans to enter and the sector in which it operates. For example, the product lifecycle phase, the propensity of consumers to buy in the target market, direct and indirect competitors, etc. Licensing is generally an alternative to direct investment when resources are not sufficient for direct investment or when the political stability of a foreign country is uncertain. In some cases, licensing is the only way to enter the market (for example. B because of the country`s opposition to the acquisition of local enterprises) and also in the most industrialized countries, for certain sectors considered strategic (for example.
B the armaments sector), a product can only be sold if local companies retain control of basic know-how. Licensing is a particularly attractive alternative when the product is subject to rapid ageing (for example. B electronic products). By granting licensing fees, the company can generate incremental revenue streams that otherwise are difficult to obtain given the short life cycle of innovation. In general, licences are transferred from advanced companies and economic systems to less developed markets; The licensing company thus obtains the extension of the return on obsolete investments in its own country. Large companies that manufacture complex products, i.e. products containing a large number of patents, tend to accumulate large bargaining capabilities that are used in all disputes with other competing firms, i.e. as a mass of negotiation in cross-licensing agreements involving reciprocal licensing, in which the parties become each of the licensees.