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(Killing, 1980). Licensing agreements are characterised by being low cost
and low risk, giving a company opportunities to enter a foreign market

quickly and providing a shorter time for getting into the market than other
entry modes. However, the method has been criticised as being an inferior
entry mode to export and foreign direct investment (McDonald and Burton,

2002).

Transferring knowledge to a country through licensing rather than
exporting or direct investment can maximise earnings. This depends on

the host government’s acknowledgement of intellectual property rights,
and on the ability of the licensor to prevent licensees from competing in

each other’s markets, which is not possible because such agreements are
often illegal (McDonald and Burton, 2002, p. 226). An international licence
agreement allows foreign companies both exclusive and nonexclusive

rights (Brooke and Skilbeck, 1994). Licences are becoming more popular
for the transfer of the newest technologies to competitors. The main

underlying argument for this rather paradoxical tendency is that the
companies attempt to create a global standard for technological
innovations. Philips, for example, has licensed its technological know-how

in the production of compact discs and players to several competitors,
including Sony. Philips’s intention was to prevent a debacle similar to the

introduction of the Video 2000 system some years earlier. Global
standards, at an early stage of product development, enable companies
to be profitable without the threat of intensive competition.

6.5.4 Strategic alliance (co-operation strategy)

This is an umbrella term used for many forms of co-operation. A large
variety of coalitions, such as joint ventures, marketing agreements, supply
agreements, licensing agreements and so forth are called ‘strategic

alliances’ (Harrigan, 1988). Most definitions of strategic alliances are very
broad. Killing (1983) defines strategic alliances as a ‘partnership among

companies that work together to attain some strategic objective’ (Killing,
1983). This definition does not include joint ventures, as no reference is
made to equity participation, which is a distinctive feature of joint ventures.

6.5.5 International joint venture (co-operation strategy)