1. ¹University of Minnesota, Minneapolis, USA
2. ²York University, Toronto, Canada
3. ³Helsinki University of Technology, Helsinki, Finland

Correspondence: SA Zahra, Center for Entrepreneurial Studies, Department of Strategic Management & Organization, Carlson School of Management, University of Minnesota, Room 3-428, 321 19th Ave. South, Minneapolis, MN 55455, USA. Tel: +1 612 626 6623; Fax: +1 612 626 1316; E-mail: szahra@csom.umn.edu

Abstract

New ventures compete by creating innovative products. Liabilities of newness and inexperience, limited resources, rapid technological obsolescence and constantly changing market conditions often encourage new ventures to license other companies' technologies to complement and augment their internally developed innovations. Building on the knowledge-based view of the firm, we propose that the intensity of new ventures' use of inward licensing reflects the demands of their industries and competitive strategies. The results of an empirical study of 361 US new ventures show that industry characteristics and competitive strategy influence their inward licensing as a means of lowering costs and maintaining strategic flexibility while building their capabilities.