Manufacturer's patent licensing strategies based on co-opetition

Abstract

In the context of co-opetition (cooperation and competition), technological innovation endows manufacturers with new competitiveness and vitality. Through patent technology licensing, manufacturers can achieve technology upgrading and efficiency improvement. To study the patent licensing decisions of manufacturers based on co-opetition, this paper constructs a production patent licensing game model that comprises two manufacturers that cooperate in the upstream component market and compete in the downstream consumer market. We conduct a comparative analysis of the game equilibrium of three patent licensing scenarios—competition (no licensing), unilateral licensing and cross licensing—and analyse the impact mechanism of key parameters, such as market share and cost advantage (cost burden). The research results are as follows. (1) When the product substitutability (competition intensity) is not very high and the market share of manufacturer 1 is relatively small or the product substitutability (competition intensity) is large and the cost advantage of both manufacturers 1 and 2 is moderate, Pareto improvement under cross licensing scenario is better than that under unilateral licensing and competition scenarios. (2) The Pareto improvement in the unilateral licensing scenario is always better than that in the other two scenarios. (3) When the cost advantage of manufacturer 1 is small or large, the Pareto improvement in the competition scenario is better than that in the other two licensing scenarios. The paper also analyses consumer surplus in three licensing scenarios. The conclusions can provide a decision-making basis and support for manufacturers to select appropriate licensing strategies and government participation to guide enterprise technology upgrading under different situations.