Advantages, Disadvantages, and Development of Technology Licensing

Abstract

With the increasing importance of technological innovation in economic development, technology licensing has become a key mechanism for promoting technology diffusion and knowledge transfer, and an essential tool for firms to gain competitive advantages and achieve technology commercialization. This paper analyzes the advantages, disadvantages, and future development trends of technology licensing. The study finds that technology licensing can enhance innovation returns, reduce R&D costs, promote technology diffusion and industrial upgrading, and improve resource allocation efficiency and market competition, thereby contributing to overall social welfare. However, it may also generate several negative effects, including the erosion of licensors’ competitive advantages, risks of technology spillovers and knowledge leakage, weakened incentives for independent innovation among licensees, and increased market concentration and transaction costs. Furthermore, with the development of the digital economy and global innovation networks, technology licensing is evolving toward greater openness, platformization, digitalization, and internationalization. It is expected to play an increasingly important role in open innovation, green transformation, and global technological cooperation. Overall, balancing technology diffusion and innovation incentives remains a central issue in the design and development of technology licensing systems.