Technology Licensing in Competitive Supply Chain

Technology licensing has been one of the main sources of income for many firms. A well-designed licensing contract not only increases profits but also helps to fund research and development. This study examines the patent licensing strategies of a leading licensor with two kinds of two-part tariff contracts considering the patent expiration time. First, we develop a benchmark model and then analyze the non-exclusive licensor and exclusive licensor models. By comparing the equilibria of these models, we find significant differences between different types of licensors. Interestingly, we discover that the per-unit royalty rate and the optimal production quantities are not monotonous in competition intensity, showing first decreasing and then increasing trends in some cases. Subsequently, we compare the optimal strategies under different circumstances. Our research comprehensively examines the effect of licensing agreements, types of the licensor, and patent expiration time on the licensor’s optimal strategy and suggests a set of managerial insights. Our study provides implications for firms in patent licensing guidance to maximize profits