This document discusses the licensing activity of Himont, an Italian chemical company. It covers several key points about Himont's licensing strategy: 1. Himont's licensing strategy aimed to generate more revenue than would be lost from increasing competition eroding profits, known as the "rent diffusion effect". 2. Licensing technology was an optimal strategy when revenue exceeded losses from rent diffusion, which varied between upstream technology firms like Himont and downstream product firms. 3. Licensing non-core older technologies was a source of revenue and helped fund R&D. It was also a convenient strategy for technology diffusion. 4. Licensing technology in-house was preferable when firms had strong complementary production and marketing assets and low

1. LICENSING ACTIVITY OF
HIMONT
By
Group 8

2. RENT DIFFUSION EFFECT VS
REVENUE
Revenue generated should be more than erosion of profit due to
increasing other firms
As new entrants increases in the industry, the rent diffusion effect
increases
The licensing is an optimal strategy when condition (i) is satisfied
Difference between Revenue vs Rent diffusion is different fo SEFs
SEFs are the process technology firm, whereas Himont was
downstream product technology firm

3. INVESTING IN TECHNOLOGYSUNK COST
A source of revenues
R&D funding
General Trend- Licensing of old technology (non- core technology)
Licensing- A convenient strategy
 Revenue Effect vs Rent dissipation effect
Licensing the technology in-house:
 Firms has distinctive complementary assets in production and marketing
 Transaction cost involved in selling or licensing of technology

4. STRATEGY OF LARGE
COMPANIES
40-50% licensed from third parties
Dow Chemical – acquiring new technology, formed license group
DuPont – opening up of 25 specialty chemical businesses
Eastman Chemical – formed license unit to sell intellectual property

5. DIFFUSED LICENSING
Characteristics of knowledge base
General & abstract -> greater division of labour
Ease of technology transfer – high degree of codification -> fewer
interactions -> ability to reach large markets
Emergence of chemical engineering as academic discipline
Self-enforcing mechanism

6. HANDLING PROBLEMS OF
OPPORTUNISM IN VERTICAL
CONTRACTING:Codification
Reciprocal continuous know-how - Grant back
Difficult for the licensee to invent around the patent
Licensing implies lower control on the diffusion of the technology
Bundling tacit know-how with codified knowledge protected by patent
reduces the problem

7. INCENTIVE COMPATIBILITY
OF LICENSING
3 different ways by which licensing can enhance the success of company
1. hidden value of license
2. Increasing competitiveness
3. Stacking out and defending a prop market advantage
Arora, Fosfuri and Gambardella (inhouse vs licensing)
1. distinctive complementary assets
2. Degree of competition
3. Nature and importance of transaction cost

8. INCENTIVE COMPATIBILITY OF
LICENSING AGREEMENT
Win-Win situation for both the licensee as well as licensor
Monetary benefits for both the parties
Lack of Complementary assets or financial capability were the main
reasons of licensing agreement
Licensing agreement between SEF’s and downstream companies was
mainly business transaction
Licensing between existing firms to newer firms was mainly strategic
decision