Angelica WeissChapter 16: Licensing, Franchising, and Other Contractual StrategiesContractual entry strategies in international business: cross-border exchanges where therelationship between the focal firm and its foreign partner is governed by an explicitcontractIntellectual property: ideas or works created by individuals or firms, includingdiscoveries and inventions; artistic, musical, and literary works; and words, phrases,symbols, and designsIntellectual property rights: the legal claim through which proprietary assets are protectedfrom unauthorized use by other parties.Contractual Entry StrategiesTwo common types of contractual entry strategies are licensing and franchisingoLicensing is an arrangement in which the owner of intellectual property grantsanother firm the right to use that property for a specific time period in exchangefor royalties or other compensationA royalty is a fee paid periodically to compensate a licensor for thetemporary use of its intellectual property, often based on a percentage ofgross sales generated from the use of the licensed asset.As an entry strategy, licensing requires neither substantial capitalinvestment nor involvement of the licensor in the foreign markets.Relatively inexpensive way for the firm to establish a presence in themarket without having to resort to expensive FDIoFranchising is an advanced form of licensing in which the firm allows another theright to use an entire business system in exchange for fees, royalties, or otherforms of compensation.Cross-border contractual relationships share several common characteristics:oThey are governed by a contract that provides the focal firm with a moderate levelof control over the foreign partner.Formal agreement specifies the rights and obligations of both partners.Control refers to the ability of the focal firm to influence the decisions,operations, and strategic resources of the foreign venture and ensure thepartner undertakes assigned activities and proceduresFocal firm also maintains ownership and jurisdiction over its intellectualproperty.oThey typically include the exchange of intangible and servicesIntangibles that firms exchange include various intellectual property,technical assistance, and know-how.oFirms can purse them independently or in conjunction with other entry strategies.In pursuing international opportunities, firms may employ contractualagreements alone, or they may combine them with FDI and exporting.The use of the agreements is context specific; that is, the firm mayuse a contractual relationship with certain customers, countries, orproducts but not others.oThey provide dynamic, flexible choice. Show Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 7 - 8 out of 8 pages. 42.What are the common characteristics of cross-border contractual relationships? Get answer to your question and much more 58.43.Define and describe types of intellectual property. Get answer to your question and much more 44.How does infringement of intellectual property occur and what are some means to protect intellectual property rights? We have textbook solutions for you! The document you are viewing contains questions related to this textbook. Intermediate Financial Management Brigham/Daves Expert Verified 61.Infringement of intellectual propertyUnauthorized use, publication, or reproduction of products or services protected by apatent, copyright, trademark, or other intellectual property right.62.45.What are the major benefits to franchising in China? Get answer to your question and much more End of preview. Want to read all 8 pages? Upload your study docs or become a Course Hero member to access this document We have textbook solutions for you!The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook. Intermediate Financial Management Brigham/Daves Expert Verified Newly Uploaded DocumentsNewly Uploaded DocumentsWhat is an example of a licensing agreement?An example of a licensing agreement is a contract between the copyright holders of software and another company, allowing the latter to use the computer software for their daily business operations.
Which of the following is an advantage of licensing and franchising?There is a lower risk of takeovers or interventions by the foreign government. It enables international firms to produce goods on a large scale without investing in setting up production facilities.
Which of the following is an example of franchising?Franchising is a business relationship between two entities wherein one party allows another to sell its products and intellectual property. For example, several fast food chains like Dominos and McDonalds operate in India through franchising.
What three factors help a company determine which entry mode is most appropriate?These factors can be classified into three categories: ownership advantages of a firm, location advantages of a market, and internalization advantages of integrating trans- actions. This study examines the independent and joint influences of these factors on the choice of an entry mode.
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Which of the following is characteristic of cross-border contractual relationships?
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