The influential factors for taking licensing or joint venture for a firm can be divided into 2 factors which are internal and external factors.
i. Characteristics of the overseas country business environment
It means the knowledge of the host country which include of language, culture, foreign market behavior and so on. Besides that, it also helps a firm to obtain information about overall industry specific to a firm. For instance, it assists firm to identify regulations for the general business, levels of industrial development, customer protection legislation and so on. Hence, if characteristics of the overseas country business environment are unfamiliar for a firm in this case the firm can decide to choose licensing or joint venture method. This is because carry out the both methods, the firm can collaborate with an experienced firm in order to increase the familiarity from its local partner.
ii. Firm size/ Resources commitment
It defined as the formation of the firm whether is large or small. The resources commitment has the relationship with the firm size. This is due to large size of firm might have huge resources but for the small size of firm might have less resources. Therefore, for the small firm the method of licensing is most appropriate because it committed few resources. Joint venture is preferred by the large company due to this method require more resources to support.
It shows the time that that a firm desires to contribute in order to achieve in a foreign market. In other words, the firm seeks to enter the foreign country and expand it in the short period. Thus, through the method of licensing, the firm will pass the right of expansion to its licensee. However, for the joint venture method, the firm will cooperate with other firms where wish to have a fast speed in expansion.
iv. Global management efficiency requirements
This refers the level of the involvement management in internationalization of a firm. The firm will start to limit their resources once there is high level of the involvement of internationalization. Generally, when firms start to enter into a foreign market through licensing or joint venture, they will begin to plan for expanding more outlets in the foreign market in order to gain more profits. So, due to the firm has the expansion plan then it must have the limitation of the resources to prevent insufficient resources.
v. Management risk attitudes
It defined as the risk when a firm entering into the international business. It relies on the situation of a firm, environment competitiveness and its strategic options. In short, the licensing method has the low risk basic due to it committed low level of resources such as capital. On the other hand, the joint venture has the high risk basic because it required high level of resources compare with licensing method.
i. Market potential
It represents the potential growth and size of the foreign market. It is very...