Compete, Cooperate, or Both? Integrating the Demand Side into Patent Deployment Strategies for the Commercialization and Licensing of Technology

Profiting from innovation typically involves a choice between commercializing a patented technology \nin the product market to exploit proprietary advantage (i.e., competition) or licensing the technology \nto an incumbent in the market for ideas (a form of cooperation). A firm may thus deploy a patented \ntechnology in ways that may differ in their aggressiveness toward, or accommodation of, competitors. \nWe analyze the deployment of patented technology employing either competition or collaboration \nmodes, or both together (i.e., coopetition), as well as switching among them across demand states or \nover time, or delaying these choices until more information is available. We thus view a patent as a \nbundle of real options that enables a firm manage not only the classic tension between commitment \nand flexibility but also the tension between competition and cooperation. We develop theory and \npropositions to predict which of these patent deployment modes will be chosen by an innovator facing \nan established firm as a function of the strength of the technology, market or bargaining power and \nother market conditions, particularly the level and volatility of market demand.