Power Dynamics and Outbound Openness: Licensing Exclusivity Choices in the Semiconductor Industry

Extant research on open innovation has been disproportionately directed towards inbound innovation while neglecting the outbound perspective, let alone the role of the power dynamic between the partners and how that affects focal firms’ choice of openness. In this study, we examine the organizational and technological factors that influence firms' decisions regarding outbound openness focusing on how power imbalances between licensing partners impact licensing exclusivity and the openness strategies of licensors. Using a dataset comprising 245 licensors in the global semiconductor industry and 1,187 licensing agreements, we find that licensors are more likely to adopt a broad approach to openness - utilizing non-exclusive licensing when they possess stronger financial resources, larger firm sizes, more alternative options, and superior technology compared to their licensees. Conversely, when there is a higher degree of market and technological overlap between licensors and licensees, licensors tend to engage in openness depth, reducing the likelihood of choosing non-exclusive licensing in their technology exchanges. We also discovered that technology quality is the most significant factor influencing these decisions. Interestingly, market and technology overlaps are also shown to be more influential than partner size and alternative options. The study contributes to the open innovation literature by shedding light on the multifaceted nature of bargaining power, emphasizing the necessity of a nuanced understanding of firms' outbound openness strategies.