Decision Structure and Performance of Networked Technology Supply Chains

Abstract

Supply chains in key growth industries increasingly commercialize a critical piece of technology invented by an upstream technology supplier. The focal technology is licensed to specialist design firms and designed into products, which are fabricated by dedicated large-scale manufacturers. We examine a technology supplier's licensing decision in such emerging multi-party networked supply chains in which a downstream design firm's capability may not be publicly known. We find that the supply chain and firm profits are critically affected by whether or not a license agreement between a technology supplier and a design firm is kept confidential from a manufacturer. Instead of licensing to two downstream firms, a technology supplier may also license to an integrated firm with both design and manufacturing capabilities, which forms a conventional vertical supply chain. We compare a networked supply chain with a vertical supply chain, and show that the network model can, under some conditions, outperform the integrated configuration and increase profits for all supply chain entities. In particular, a downstream firm can be better off decentralized, with design and manufacturing functions taken by different firms. Our research helps explain the emergence of such networked supply chains and offer insights on how to structure them to improve outcomes.

Distributed 3D Printing of Spare Parts via IP Licensing

“…This is because output-based royalty fees have a value-destroying effect; they persistently negatively influence operational decisions taken by the licensee. Despite this effect, royalty payments are prevalent in practice (Lee et al 2020), which can be explained by different types of information asymmetry (Sen 2005, Wang et al 2018) and whether the licensor is an industry incumbent (Wang 1998, Sen andTauman 2018), among others. Some authors consider auctioning off a certain number of licenses as a means of controlling for possible imitation of the IP (Gallini and Wright 1990) or competition (Kamien and Tauman 2002).…”

“…We disregard this type of competition, as we are interested in the effect of IP licensing on the supply chain configuration, which is not an element of direct competition between the firms. We also do not consider demand elasticity as a function of the IP royalty costs, as Wang et al (2018) do, because spare parts demand is mainly governed by the number of failures that occur over time. Our model includes several features specific to spare parts inventory control models in the form of order lead times, fixed setup costs, and inventory holding costs, which are new to IP licensing problems.…”

Promoting Electric Vehicle Cell Innovation Diffusion Considering Patent Licensing Strategy: A Combination of Evolutionary Game and Optimization Algorithm Approach

“…(5) Adoption decision-making hypothesis: producers adoption decision-making is rational weighing the benefits and costs [17].…”

Outsourcing Strategy With Patent Licensing in an Electronic Product Supply Chain

“…Zhang et al [21] studied the optimal patent technology licensing strategy of OEM for a supply chain composed of an OEM and a contract manufacturer, considering the joint R&D investment of two enterprises to improve product quality; Wu [22] constructed a dynamic game model to study the price competition and patent technology licensing of differentiated competitive enterprises, considering the random market demand. Wang et al [23] studied on a technology-supplier's licensing decision in networked supply chain. Yang et al [24] studied how the risk of supply disruption affects the patent-holding supplier's willingness to license its technology to a rival supplier considering two forms of the fees.…”