Technology licensing under coopetition

Abstract

Technology license markets play important roles as the intermediaries which connect technology licensors and licensees in the fast-changing and technology-oriented business environment. We consider a technology licensing problem by focusing on the competition and the cooperation under license contract between a technology licensor and multiple licensees. By agreeing on the license contract, both parties put themselves into a competition while licensees pay license fees for the licensor's technology. We model the coopetition where the licensor competes and cooperates with licensees under the license contract. We show that the coopetition between licensor and licensees leads to a unique Nash equilibrium in pricing game. We consider market conditions under which the technology licensing is attractive to both parties. We find that the market size growth plays a cardinal role in attracting both licensor and licensees to the technology licensing and that there exist the conditions under which the licensor decides not to practice the technology for its own business.