The market value of rhetorical signals in technology licensing contracts

Automated text and content analysis in business-to-business (B2B) settings – such as technology licensing – can offer rich insights for both scholars and practitioners. Drawing on conceptualizations of rhetorical signals and the principles on cooperative communication, this study uses technology licensing contracts to investigate how contractual terms and formulations lead to investor reactions (i.e., licensee's market value). Using automated text analysis, we demonstrate how monitoring and enforcement emphasis can be usefully retrieved from contractual text. Substantially we show that greater monitoring (enforcement) emphasis increases (decreases) the licensees' market value. Greater concreteness reverses these effects of greater monitoring (enforcement) emphasis on the licensee's market value. Combined, the three-way effect of monitoring emphasis, enforcement emphasis, and concreteness generates the greatest increase in the licensee's market value. These insights provide guidance for licensees on how best to formulate their licensing contracts. We show how to conduct automated text analyses to advance research in the area.