Technology Licensing Strategy Under Asymmetric Beliefs of Supply Reliability

We study the optimal licensing strategy amid the risk of supply chain disruption. Specifically, where an upstream supplier (Licensor, patent-holding firm) licenses technology to another firm (Licensee), so a downstream manufacturer (M) can adopt a dual source purchasing strategy to ensure supply reliability, especially, the estimates of supply reliability among suppliers and manufacturers are inconsistent. Licensor has two licensing strategies: royalty licensing and fixed-fee licensing. Our findings reveal that Licensor will decide which licensing strategy to adopt, considering the fixed fee. In most case, Licensor will decide whether to produce after technology licensing based on estimation conditions, but in case of M and Licensee estimate inconsistently, Licensor will always produce after royalty licensing. Additionally, manufacture will take different procurement strategies based on different estimation situations, especially the estimation of Licensor.