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License and entry decision for innovating firm in international duopoly under vertical differentiation

Masahiko Hattori () and Yasuhito Tanaka ()

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate a choice of options for a foreign innovating firm to license its technology for producing the high quality good to a domestic incumbent firm or to enter the domestic market with or without license under vertical differentiation with convex cost functions. If cost functions are non-linear, the domestic market and the foreign market are not separated, and the results depend on the relative size of those markets. We consider product innovation as quality improvement of goods not process innovation such as cost-reducing. If the size of the foreign market is small, the foreign innovating firm chooses license with entry strategy, and if the foreign market is not small, it chooses license without entry strategy.

Keywords: license with or without entry; convex cost function; vertical differentiation (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-ino
Date: 2017-05-07
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