Question

Licensing is a trade-off in that it can save a firm from the high costs of in-house R&D, but instead the firm is counting on a solution that already exists but has not been ___

Answer 1

Licensing allows firms to use existing R&D at a lower cost than conducting in-house R&D, but relies on generalized solutions and is influenced by politics.

Step-by-step explanation:

Licensing is a process by which a firm can gain access to technology or products developed through research and development (R&D) without having to invest in the R&D process themselves. While it saves firms from the high costs of in-house R&D, licensing means the firm is reliant on solutions that already exist but have not been tailored specifically to their needs. This trade-off is significant because innovative firms are able to recoup their investments in R&D through patent protections, which eventually expire, allowing other firms to produce the product more cheaply. However, it is important to note that the process of R&D is often funded by taxpayers, and the direction of R&D can be influenced by political motives more so than by scientific or economic reasons.