When vicarious learning rewards the originating firm: Exploring the learning opportunities available to the licensor

Why should companies license-out their technology? While scholars mostly emphasize the financial benefits available to the licensor, this paper affirms that licensing-out allows the licensor to benefit from the vicarious learning opportunities spelled out by its downstream technology buyers, thus broadening its knowledge base and fostering its innovation capability. We analyze this phenomenon by looking at 245 licensing agreements, registered to the Security Exchange Commission (SEC) between 1986 and 2014 and identifying all cases in which the initial licensor licensed back a technology from its initial licensee in a second round, as a consequence of learning vicariously from its initial licensees. Our data provides evidence of our argument.