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Chapter 9. Choosing the Right Organizati... > Making Use of the Best Capabilities

Making Use of the Best Capabilities

Yet another reason to use contractual modes of opportunity exploitation is that you may not have the best capabilities to exploit the opportunity. For instance, established firms often have better marketing and manufacturing capabilities or knowledge of the customer than you do. (This of course was the point about the benefits of complementary assets in the exploitation of opportunities made in the last chapter.) If this is the case, you may be able reap greater profits from licensing the opportunity to an established firm. Not only does licensing the opportunity reduce the cost of exploitation because the established firm is going to be more efficient and effective at exploiting it than you are, but also this arrangement reduces the need to create duplicative assets.[3] The established company probably doesn’t have to establish new retail outlets or a new manufacturing plant to take advantage of the opportunity, but you would have to duplicate the established company’s investment in these assets if you exploited the opportunity directly. Therefore, licensing is very good idea if you realize that your capabilities at exploitation are inferior to those of existing firms.

A good example of this situation is the licensing of technologies by university inventors. Anyone who has spent even a few moments in a science or engineering department of a major research university will soon realize that most faculty do not know much about how to create new technology companies. As a rule, they almost always know less than the managers of established companies about such things as persuading customers to buy products, managing employees, and creating manufacturing plants. As a result, most university inventors are better off licensing their inventions to established companies rather than starting their own firms.


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