The role of asymmetric innovation’s sizes in technology licensing under partial vertical integration

Sánchez, Mariola and Nerja, Adrian (2024): The role of asymmetric innovation’s sizes in technology licensing under partial vertical integration. Published in: Research in Economics , Vol. 78, No. 2 (April 2024)

Abstract

In this paper, we compare the scenarios of exclusive licenses and cross-licenses under the existence of partial vertical integration. To do this, a successive duopoly model is proposed, with two owners and two firms competing in a differentiated product market. Each technology owner has a share in one of the competing firms, so that competition is also extended to the upstream R&D sector. We propose a novel analysis where differences in the size of their innovation process are allowed, extending the results in Sánchez et al. (2021). We find that the cross-licensing scenario is preferred when the size of the innovation is small; this occurs regardless of the participation in the competing companies and how many innovate. If the innovation is very large, the owners may be better off with exclusive licenses.

• Item Type: MPRA Paper
• Language: English
• Keywords: Patent Licensing; Exclusive licenses; Market for technology; Asymmetric innovation
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out ; Joint Ventures ; Technology Licensing; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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