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Supply licensing when the manufacturer strategically commits to invest in R&D

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  • Mericcan Usta
  • Feryal Erhun
  • Warren H. Hausman

Abstract

This article proposes a strategic reason for a proprietary component supplier to license her technology to a competitor or a manufacturer: her anticipation of the manufacturer's strategic commitment to invest in research and development (R&D). We address this phenomenon with a game theoretic model. Our results show that the manufacturer's full commitment to invest in R&D enables the supplier to license, sell a larger quantity through the supply chain, and charge lower prices. These results are robust to the type of demand uncertainty faced by the manufacturer within the class of increasing generalized failure rate distributions. © 2014 Wiley Periodicals, Inc. Naval Research Logistics 61: 341–350, 2014

Suggested Citation

  • Mericcan Usta & Feryal Erhun & Warren H. Hausman, 2014. "Supply licensing when the manufacturer strategically commits to invest in R&D," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(4), pages 341-350, June.
    • Handle: RePEc:wly:navres:v:61:y:2014:i:4:p:341-350
    DOI: 10.1002/nav.21586
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    References listed on IDEAS

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