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Chinese Journal of Management Science ›› 2024, Vol. 32 ›› Issue (9): 142-153.doi: 10.16381/j.cnki.issn1003-207x.2021.2166

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Patent Licensing Strategy Selection in the Presence of Chain-to-Chain Competition

Haojia He,Xingzheng Ai(),Hua Tang,Songbo Guo   

  1. School of Economics and Management,University of Electronic Science and Technology of China,Chengdu 611731,China
  • Received:2021-10-23 Revised:2022-04-28 Online:2024-09-25 Published:2024-10-12
  • Contact: Xingzheng Ai E-mail:aixz@uestc.edu.cn

Abstract:

Commercial practice shows that core component suppliers with patents usually use two ways to calculate patent licensing fees. The first is based on the percentage of the product's sales price. The other is based on the percentage of the wholesale price of core components. The argument about patent licensing strategy is mainly since the patentee wants to get more benefits through patent licensing, while the licensee wants to use the patent with less return. Therefore, when enterprises are in a monopoly position in their respective markets, suppliers tend to choose licenses based on product price, while manufacturers prefer licenses based on component price. Although the supplier with several standard patents is in a leading position in technology, it will not become a complete monopolist in its market. For example, Qualcomm faces potential competitors such as HiSilicon and Samsung. In addition, with the development of global economic integration, competition no longer occurs between enterprises but between supply chains. Therefore, it is necessary to integrate the elements of the competitive supply chain into the licensing decision of enterprises, and such research is still lacking. Thus, it aims to study the supplier's optimal patent licensing strategy selection in the presence of chain-to-chain competition. In this paper, for two competitive supply chains composed of one supplier and one proprietary manufacturer, the optimal patent licensing strategy selection and its influence are studied. As a patent holder, the supplier can license the patent to the manufacturer with the percentage of the selling price of the manufacturer's products (product-based strategy) or the percentage of the wholesale price of components (component-based strategy). Two competing manufacturers produce and sell homogeneous products, but their production costs are heterogeneous. After licenses, manufacturers can use patents to reduce production costs.The research shows that, firstly, the licensing strategy preference of supply chain participants depends on factors such as product competition, production cost difference, and unit patent licensing fee. Secondly, for suppliers, the supplier facing the downstream high-efficiency manufacturer always tends to implement a product-based licensing strategy, but the component-based licensing strategy may become optimal for the supplier facing the downstream low-efficiency manufacturer. Thirdly, the low-efficiency manufacturer is always willing to accept the component-based licensing strategy. However, under the condition that competition is mild, the cost advantage is high enough, and the unit licensing fee is low enough, the high-efficiency manufacturer may adopt the product-based strategy. Hence, under certain circumstances, one specific strategy combination (i.e., the supplier facing an inefficient downstream manufacturer implementing the component-based strategy, along with the supplier facing an efficient downstream manufacturer implementing the product-based strategy) can be the equilibrium strategy that both suppliers are willing to implement, and both manufacturers are willing to accept. It enriches the theory of competitive supply chain management and patent licensing in this paper, and it provides a reference for enterprises to effectively manage the operation practice of patent licensing in the vertical supply chain channel.

Key words: chain-to-chain competition, patent licensing strategy, Stackelberg game, Nash equilibrium

CLC Number: