Licensing Theory

Licensing Theory explains how firms choose to manage their intellectual property, like patents or trademarks. Instead of always producing and selling a product themselves, they can license others to do so. This allows the original company to earn revenue through licensing fees while reducing costs and risks. It also helps expand the product’s reach and encourages innovation by enabling specialized firms to develop the product further. In essence, Licensing Theory explores the strategic decisions behind licensing agreements to maximize a company’s value and efficiency in managing intellectual assets.