Technology Licensing Strategy for Network Product in a Service Industry

Xianpei Hong, Dan Zhao, Haiqing Hu and Shuang Song

Mathematical Problems in Engineering, 2015, vol. 2015, 1-17

Abstract:

Technology licensing has gained significant attention in literature and practice as a rapid and effective way to improve firm’s capability of technology innovation. In this paper, we investigate a duopolistic service provider competition market, where service providers develop and sell a kind of network product. In this setting, we analyze the innovating service provider’s four licensing strategies: no licensing, fixed fee licensing, royalty licensing, and two-part tariff licensing. The literature suggests that when the network products can be completely substituted, two-part tariff licensing is the optimal strategy of the innovating service provider. We find that when the network products cannot be completely substituted, two-part tariff licensing is not always optimal. The degree of the product differentiation, the intensity of the network effects, and the R&D cost of the potential licensee play a key role in determining the innovating service provider’s optimal licensing strategies.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:179369

DOI: 10.1155/2015/179369

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