Inter-Competitor Licensing and Product Innovation

ABSTRACT This paper studies how inter-competitor licensing between an incumbent and an entrant affects market competition and the entrant's optimal product quality. In the model, the incumbent has developed some non-core technology that is used for the non-core attribute of the final product, and the entrant has a new core technology to introduce a new higher-quality product. For the non-core technology of its product, the entrant can either license it from the incumbent or incur an R&D cost to develop it in-house. The authors show that a royalty licensing contract of the non-core technology between the incumbent and the entrant has a competition-alleviation effect. More importantly, the effect of such licensing on the entrant's optimal quality depends on whether the entrant's core technology can significantly or only incrementally increase its quality over the incumbent's product. The royalty contract will tend to increase the entrant's optimal quality when the entrant's core technology can allow for a s...

• 저널Journal of Marketing Research
• 토픽Intellectual Property and Patents · Management of Technology and Innovation
• DOI10.1509/jmr.16.0331
• 저자Baojun Jiang, Hongyan Shi