Contractual Entry Strategies in International Business Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract
Ideas or works created by firms or individuals and protected by legal means such as patents, trademarks and copyrights
An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation
A fee paid periodically to compensate a licensor for the temporary use of its intellectual property; often based on a percentage of gross sales generated from the use of the licensed asset
An arrangement in which the firm allows another firm the right to use an entire business system in exchange for fees, royalties or other forms of compensation
A contract in which the focal firm provides technological or management knowledge about how to design, manufacture or deliver a product or service
An arrangement in which an independent company is licensed to establish, develop and manage the entire franchising network in its market and has the right to sub-franchise to other franchisees, assuming the role of local franchisor
An arrangement in which the focal firm or consortium of firms plans, finances, organises, manages and implements all phases of a project abroad then hands it over to a foreign customer after training local workers
Build-Operate-Transfer BOT
An arrangement in which the firm or a consortium of firms contracts to build a major facility abroad, operate it for a specified period, and then hand it over to the project sponsor, typically the host-country government or public utility
An arrangement in which a contractor supplies managerial know-how to operate a hotel, resort, hospital, airport or other facility in exchange for compensation
Infringement of Intellectual Property
The unauthorised use, publication or reproduction of products or service that are protected by a patent, copyright, trademark or other intellectual property right
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.