Final answer:
Licensing is a contractual arrangement where one company allows another company to use its legally protected asset in exchange for compensation.
Step-by-step explanation:
Licensing is defined as a contractual arrangement whereby one company makes a legally protected asset available to another company in exchange for some form of compensation. In this arrangement, the owner of the asset grants permission to another company to use their intellectual property, such as patents, trademarks, or copyrights, in return for payment. This allows the licensee to benefit from the use of the asset without having to develop it themselves.
For example, a company that has developed a new software technology may license it to another company that wants to incorporate that technology into their products. The licensee pays a fee or royalty to the licensor for the right to use the technology.