Incentives to exclusive and non-exclusive technology licensing under partial vertical integration

Abstract

In this paper, we compare the scenarios of exclusive licenses and cross-licenses under the existence of partial vertical integration. To do this, a successive duopoly model is proposed, with two technology owners and two firms competing in a differentiated product market. Each technology owner has a share in one of the competing firms, so that competition is also extended to the upstream R&D sector. Thus, this model represents a mixed case to what is normally analyzed in the literature. We explore the implications of the size of innovation and the degree of vertical integration in technology diffusion. In equilibrium, patent holders’ decisions might not be aligned.