Technology Licensing in a Network Product Market: Fixed†Fee versus Royalty Licensing

Huaige Zhang, Xuejun Wang, Xianpei Hong and Qiang (Steven) Lu

The Economic Record, 2018, vol. 94, issue 305, 168-185

Abstract: This study investigates pricing and technology licensing decisions in a two†echelon supply chain with one upstream firm that provides a key input to two downstream firms. We assume that one of the downstream firms owns a licensable innovation that exhibits network effects and that the other can either accept the licence from the innovator or develop a substitutable innovation. We analyse the effects of the producer†innovator's two alternative licensing strategies (i.e. fixed†fee and royalty licensing) on the members of the supply chain and the supply chain's efficiency. We find that royalty licensing is optimal with low network effects. For high network effects, the innovating firm's optimal licensing strategy depends on the market size and the potential licensee's cost of developing a substitutable innovation. We also find that royalty licensing can achieve better coordination of the supply chain than fixed†fee licensing.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/1475-4932.12385

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:94:y:2018:i:305:p:168-185

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249

Access Statistics for this article

The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson

More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().