________ agreements enable firms to hold each other "hostage," thereby reducing the risk they will behave in an opportunistic manner toward each other.
A) Turnkey
B) Franchising
C) Cross-license
D) Integrated license

Question

Quizplus · Accepted Answer

A licensor can reduce the risk of losing intangible property, or proprietary know-how, to a foreign partner by entering into a cross-licensing agreement. Under a cross-license agreement, a firm licenses some valuable intangible property (such as a production process) to a foreign partner, but in addition to royalty payments, the firm also requires the foreign partner to license some of its valuable know-how to the firm. Cross-licensing agreements enable firms to hold each other "hostage," thereby reducing the risk they will behave in an opportunistic manner toward each other. Such cross-licensing agreements are increasingly common in high-technology industries.

________ Agreements Enable Firms to Hold Each Other "Hostage," Thereby