Joint ventures and technology licensing involve contracting and royalty payments. This study explores the effects of informal governance, knowledge tacitness, and organizational receptivity on the preference of variable-royalties scheme. Drawing on agency theory, this study assumes that the variable-royalties scheme is a process-based compensation where the licensee is the principal and the licensor is the agent. This study tests hypotheses using information from a survey of 104 firms and partial least square analysis to examine the compensation scheme measured as a continuum from a fixed-fee to variable-royalties. The results show that prior link and relational satisfaction facilitating goal alignment are positively associated with the variable-royalties scheme. Organizational receptivity promotes the legitimacy to imposing routines, evaluating the technology, and forming expectation, and then is positively associated with the variable-royalties scheme. This study shows knowledge tacitness is negatively associated with the royalty payment, which implies less transfer programmability moves compensation from variable royalties to a fixed fee. Our arguments are significantly different from conventional agency relationship that does not involve the dimension of licensee transfer and monitoring capacity.