Arm's length and captive transactions: Patent-based view of control in internationalization

This conceptual paper responds to the need for examining the role of patent control over internationalization. It proposes the patent-based strategy of control, in other words, how 3Cs – complementarity, competitiveness, and conditions – impact the strategic decision on corporate control over the patent; thereby the option of commercialization between arm's length and captive transactions. It demonstrates the multiple theoretical natures of business strategies; emphasizes how strategic fit can impact the decision on control; addresses patents as intangible assets that form a comparative and competitive advantage rather than only as a legal right and that have bearing on strategic decision making. The paper proposes that the intention of high control over a patent drives the owner to opt for captive transactions; low control arm's length transactions. Nonetheless, the challenge lies before the decision is made; managers need to assess the ‘strategic fit’ elements that directly impact on the extent of control.

► This paper proposes patent-based strategy of control. ► Complementarity, competitiveness, and conditions impact control. ► They affect decision of arm's length and captive transactions. ► Strategic fit can impact the decision on control. ► High patent control drives owners for captive transactions.