An Analysis of Choice of Compensation Structures in Korean Technology Licensing from Abroad

Studies on compensation structures of international technology licensing show that the level of intellectual property protection in the host market and the favorableness of the host country's economic environment are positively related to the use of running royalty-based compensation structure. Lump-sum fee or fixed royalty compensation is more likely to be used in the introduction and decline stages of the technology life cycle, and running royalty compensation in the growth stage. The international experience and the size of the licensor company are positively related to the use of running royalty. In this theoretical context, this paper analyzes the choice of compensation structures in Korean technology imports. The paper uses the officially reported data to analyze the compensation structures. It analyzes the characteristics of the compensation structures in terms of fixed royalty and running royalty by licensor country, group of licensor countries and size of licensee companies.