The primary objective of this work has been in testing the global hypothesis that technology licensing (the purchase and sale of technology as an alternative to that of goods), is used as a tool in the diversification strategies of small manufacturing firms. The research suggests that diversification does commonly occur in such firms and that technology licensing can be a factor in this. Diversification emerged as important at the median of the small firm scale (100-200 employees). Such firms were found to diversify substantially more than either very small or medium sized firms, although very large firms also exhibited a high degree of diversification. Technology licensing was shown to be used by a minority of small firms. Of those which had utilised inward licensing to obtain new products or processes, a majority had done so reactively, usually to overcome product line deficiencies. Where outward licensing or both inward and outward licensing had been utilised, it had generally been used more proactively, frequently as part of a longer term strategy of product and market diversification and as a means of conserving scarce resources for more profitable use elsewhere. It is considered that the empirical evidence supports the views of previous workers, that smaller manufacturing firms can be divided into sub-sets of proactive and reactive groups and that the hypothesis upon which the study was based was mainly substantiated in the case of companies which had used outward licensing or both inward and outward licensing. In the case of inward licensing companies it is considered that the hypothesis is incompletely substantiated, in that a large majority of inward licensing appeared to be wholly reactive and could only be encompassed within a 'strategy' of survival.
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