Diagnostic Tool for Rating Suitable Partners in Licensing Agreements

Purpose of the paper and literature addressed – This paper is part of a longitudinal research project. The key issue of the process of selecting suitable partners is discussed in its relevance to companies applying relational practices to licensing strategies. The applicability of the interaction approach and the effectiveness of relational practices are tested in their ability to initiate, develop and maintain these collaborative arrangements in an international context. The discussion takes into consideration the constraints to the applicability of relationship management practices in that context, and recommends a diagnostic tool to measure prospective licensees against in order to select them as business partners. The literature addressed includes that on entry modes and relational approaches in an international context. Research method – The paper uses a case study approach to investigate the issues identified. The firm that will provide the case study is a UK SME specializing in the development of chemical products. The company has used licensing as its primary strategy for international expansion. The research project is partly funded by the UK government. Research findings – Relational practices are essential to create the level of trust required for initial information exchanges. When applying them in new remote and culturally distant markets, these techniques need to be adapted to the local culture. In deploying a licensing strategy, building a successful relationship requires the selection of the “right” licensees, able to engage in complex interaction. We propose a diagnostic tool which we call Licensee Evaluation Scorecard (LES) which has this very function. Main contribution – The contribution of the research is to refine the current criteria used by companies, and recommended by literature, to select prospective parties to licensing and franchising agreements; and further refine the thinking on how relevant relational approaches are to the creation and later management of these relationships.