Licensing radical product innovations to speed up the diffusion

Abstract

Inventors can commercialize innovative products by themselves and simultaneously license the technology to other firms. The licensee may cannibalize sales of the licensor, but this can be compensated by gains from royalties. We show in this paper how licenses can be used strategically to speed up the new product diffusion process in two instances of markets: (i) a market with strong Intellectual Property Rights (IPR), and (ii) a market with weak IPR holder and pirate rivals. The main findings suggest that licensing is a beneficial strategy for a licensor in the context of strong IPR, because licensor benefits from the royalties, the advertising investment and positive word-of-mouth effects by licensees. We compare this result with a weak IPR context, where piracy speeds up the product diffusion but this does not compensate IPR holder for the sales loss effect who is willing to license to get some royalties. However, pirates do not generally find interesting the licensing agreement. We present a comparative statics analysis based on numerical simulation.

Quantity and collection decisions in a closed-loop supply chain with technology licensing

“…Since then, there have been numerous studies on technology licensing (e.g., Rockett, 1990;Mukherjee and Pennings, 2006;Lin and Kulatilaka, 2006;Arora et al, 2013;Crama et al, 2013;Avagyan et al, 2014;Bagchi and Mukherjee, 2014;Erkal and Minehart, 2014;and Zhao et al, 2014). For example, Rockett (1990) studies the optimal technology licensing strategy in a duopoly market, and he finds that in the industries with lower imitation costs and with products that are easier to imitate, a fixed fee licensing dominates royalty licensing.…”

Price and cooperation decisions in a cooperative R&D supply chain with different licensing models

“…Lin and Kulatilaka, 2006; Mukherjee and Pennings, 2006; Ashish et al ., 2013; Crama et al. , 2013; Avagyan et al ., 2014; Bagchi and Mukherjee, 2014; Erkal and Minehart, 2014; Zhao et al ., 2014; Hong et al. , 2017; Wang et al.…”

“…Since then, there have been numerous studies on technology licensing (e.g. Lin and Kulatilaka, 2006;Mukherjee and Pennings, 2006;Ashish et al, 2013;Crama et al, 2013;Avagyan et al, 2014;Bagchi and Mukherjee, 2014;Erkal and Minehart, 2014;Zhao et al, 2014;Hong et al, 2017;Wang et al, 2021a;Hong et al, 2021). For example, Bagchi and Mukherjee (2014) study a licensor's optimal licensing decisions in differentiated oligopoly markets.…”

Eco-innovation with opportunity of licensing and threat of imitation

“…The spillover (externality) of innovation we consider is unidirectional, from the sustainable manufacturer to the traditional manufacturer, which is consistent with the finding by Knott et al (2009) that spillovers have directionality and differ across firms through an empirical study in the banking industry. Work on licensing, such as that by Avagyan et al (2014); Kamien et al (1992); Katz and Shapiro (1987), looks at why firms license and when they should enter licensing agreements and consider external incentives, such as product diffusion.…”