University of Central Florida (UCF) GEB3375 Intro to International Business Practice Exam 3

The best definition of licensing in the context of international business is a contract allowing the use of intellectual property for a specific time in exchange for royalties. This is because licensing pertains specifically to the legal arrangement where one party (the licensor) permits another party (the licensee) to utilize certain intellectual property rights—such as patents, trademarks, or copyrights—under agreed-upon conditions. In return, the licensee typically pays royalties, which are often a percentage of revenue generated from the use of that intellectual property.

Understanding licensing as it relates to intellectual property is crucial in international business, as it allows companies to expand their market presence without the need for direct investment in foreign markets. This method can significantly reduce the risk and costs associated with entering new markets while still reaping the economic benefits from innovations and brand recognition.

The other definitions listed do not capture the essence of licensing accurately. The first option focuses on a complete business system rather than specific intellectual property usage. The third option describes a partnership, which does not necessarily entail the use of intellectual property. Finally, the fourth option refers to the transfer of project management responsibilities, which falls more under the category of outsourcing or foreign direct investment rather than licensing.