EconPapers    
Economics at your fingertips  
 

Strategic technology commercialization in the supply chain under network effects

Wei Wang, Gaoyan Lyu, Wei Cui and Yongjian Li

International Journal of Production Economics, 2021, vol. 231, issue C

Abstract: We explore the optimal technology commercialization strategy of an inside innovator in the downstream of a two-tier supply chain when network effects exist via a game-theoretical framework. This setting incorporates in a unified model the two strategic incentives for the innovator to license to potential competitors for free, i.e., expanding the network size and driving down the wholesale price, thus it enables us to disclose how these two incentives interact with each other to influence the innovator's choice between the internal and external commercialization strategies. Our analyses reveal several interesting results. First, it is beneficial for the innovator to license to the entrant, even for free, when the relative quality of the low-end product provided by the latter is moderate. Second, when the network effects are weak and the quality of the low-end product to introduce is high, the innovator prefers the internal commercialization strategies, while the supplier and the consumers prefer the external commercialization strategy. Third, if licensing fees can be collected, the fixed-fee licensing contract dominates the royalty licensing contract when network effects are strong, or when the entrant is relatively weak. In addition, in the extended models, we point out that our key findings and insights are relatively robust with respect to the market structure in the upstream of the supply chain (monopolistic versus competitive) or the cost structure of the differentiated final products (homogeneous or heterogeneous), but they are somewhat different under alternative wholesale price mechanisms (uniform versus discriminatory).

Keywords: Technology commercialization strategy; Network effects; Technology licensing; Supply chain management; Game theory (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527320302577
Full text for ScienceDirect subscribers only

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:eee:proeco:v:231:y:2021:i:c:s0925527320302577

DOI: 10.1016/j.ijpe.2020.107895

Access Statistics for this article

International Journal of Production Economics is currently edited by R. W. Grubbström

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-06-30
Handle: RePEc:eee:proeco:v:231:y:2021:i:c:s0925527320302577