Final answer:
Licensing is the business arrangement where one company allows another to use its intellectual property in return for royalty payments.
Step-by-step explanation:
The arrangement for entering foreign markets that allows one company to use some or all of another firm's intellectual property (patents, trademarks, brand names, copyrights, or trade secrets) in return for a royalty payment is licensing. Licensing is a business arrangement where the licensee pays the licensor for the rights to use the intellectual property, typically for a certain period of time. This is a common practice in the business world, allowing companies to expand their reach and market their products and services globally without having to directly invest in overseas operations.
Intellectual property is crucial as it implies ownership over an idea, concept, or image, not a tangible asset like real estate. Protection of intellectual property is governed by diverse laws across countries, and there are efforts to harmonize these through international organizations like WIPO. Licensing offers incentives for research and development by enabling firms to earn monopoly profits from their protected products, thus promoting innovation.