Respondents reported licensing as the predominant activity they engaged in with other companies and investors both in the United States and abroad. Table 7.2-2 shows the frequency with which respondents said they had finalized or were negotiating licensing agreements to commercialize technologies resulting from the referenced grants. Respondents appear to form licensing agreements with foreign companies and investors approximately half as often as they form them with domestic companies and investors.

The intense use of licensing signals the underlying importance of intellectual property protection to high-tech small businesses. Case study results also highlight the importance of intellectual protection and licensing activities as a major commercialization strategy of the small businesses. For example, consider the case study of Language Weaver. The company describes itself as “a core technology house based on licensing its software” directly to customers and indirectly through partners who license Language Weaver’s technology and incorporate it into their own products. Licensing activities tend to increase the diffusion of a technology’s effect, and as noted by Jaffe, licensing tends to increase spillover effects, particularly market spillovers.⁶