Managing technology licensing for stochastic R&D: from the perspective of an enterprise information system

Abstract

Enterprise information technology (IT) plays an important role in technology innovation management for high-tech enterprises. However, to date most studies on enterprise technology innovation have assumed that the research and development (R&D) outcome is certain. This assumption does not always hold in practice. Motivated by the current practice of some IT industries, we establish a three-stage duopoly game model, including the R&D stage, the licensing stage and the output stage, to investigate the influence of bargaining power and technology spillover on the optimal licensing policy for the innovating enterprise when the outcome of R&D is uncertain. Our results demonstrate that (1) if the licensor has low (high) bargaining power, fixed-fee (royalty) licensing is always superior to royalty (fixed-fee) licensing to the licensor regardless of technology spillover; (2) if the licensor has moderate bargaining power and technology spillover is low (high) as well, fixed-fee (royalty) licensing is superior to royalty (fixed-fee) licensing; (3) under two-part tariff licensing and the assumption of licensors with full bargaining power, if a negative prepaid fixed fee is not allowed, two-part tariff licensing is equivalent to royalty licensing which is the optimal licensing policy; if negative prepaid fixed fee is allowed, the optimal policy is two-part tariff licensing.

Keywords:

• enterprise technology innovation
• technology licensing
• R&D outcome
• technology spillover
• bargaining power
• game theory

Acknowledgement

The authors would like to thank the editor and anonymous referees for their insightful comments and suggestions that have significantly improved this article.

Conflict of interest disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. This article focuses on technology licensing policy of firm i under non-drastic innovation to simplify analysis.

Additional information

Funding

This research is partially supported by Humanity and Social Science Youth foundation of Ministry of Education of China [Grant No. 11YJC630058]; Fundamental Research Funds for the Central Universities [Program No. 2662014BQ048]; Research Project of Department of Education of Hubei Province [Grant No. Q20141803] and the 12th five-year plan project of Social Science of Jiangxi Province [Grant No. 12gl18].