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The optimal technology licensing strategy under supply disruption

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  • Feng Yang
  • Chuanya Jiao
  • Sheng Ang

Abstract

We study the problem of whether and how a patent-holding firm (supplier S1) should license its technology patent to a potential rival (supplier S2). If the license is given, the two suppliers both produce a critical component for their downstream manufacturer simultaneously (sequentially) when the manufacturer adopts a dual (contingent) sourcing mode. However, both suppliers face risks of complete supply disruptions. In the study, we examine how the supply risk affects S1's technology licensing willingness and under which conditions royalty or fixed-fee licensing is its optimal strategy. The results show that when the manufacturer adopts contingent sourcing, S1 is always willing to license its technology to S2 and fixed-fee licensing is the optimal strategy. However, when dual sourcing is adopted, either royalty and fixed-fee licensing could be S1's optimal licensing strategy, depending on the reliability degree of the suppliers’ productions. Our findings extend the conclusion from previous researchers about royalty and fixed-fee licensing in a Cournot duopoly model.

Suggested Citation

  • Feng Yang & Chuanya Jiao & Sheng Ang, 2019. "The optimal technology licensing strategy under supply disruption," International Journal of Production Research, Taylor & Francis Journals, vol. 57(7), pages 2057-2082, April.
  • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:7:p:2057-2082
    DOI: 10.1080/00207543.2018.1521535
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    Cited by:

    1. Jingpei Ma & Xuejun Sun, 2023. "Green technology licensing: Evaluating government subsidies based on different efficiency levels across competitors," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1920-1934, June.
    2. Ebrahimi Bajgani, Sahar & Saberi, Sara & Toyasaki, Fuminori, 2023. "Designing a reverse supply chain network with quality control for returned products: Strategies to mitigate free-riding effect and ensure compliance with technology licensing requirements," Technological Forecasting and Social Change, Elsevier, vol. 195(C).
    3. Youqiong Ai & Thomas Y. Lu, 2019. "On the Rationality of Bundled Rebate Program in Modem Chip Industry: an Analysis on Qualcomm’s Case," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 641-660, December.
    4. Qing Zhang & Juan Li & Tiaojun Xiao, 2022. "Contract design for technology sharing between two farmers," Annals of Operations Research, Springer, vol. 314(2), pages 677-707, July.
    5. Qiao, Haike & Su, Qin, 2021. "Distribution channel and licensing strategy choice considering consumer online reviews in a closed-loop supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 151(C).

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