Green technology licensing: Evaluating government subsidies based on different efficiency levels across competitors

Abstract

AbstractGreen technology development results in manufacturers in traditional industries reducing carbon emissions to alleviate pressure on the ecological environment. Some manufacturers efficiently adopt this green technology and some do not. An effective green technology licensing strategy can promote the diffusion of technology from highly efficient manufacturers to those who are less efficient. The government has implemented subsidies to promote green technology among manufacturers. Manufacturers with high levels of technology efficiency should obtain a high level of licensing income; however, it is unclear whether these licensing rewards are effective, especially in the face of fierce market competition. What is the government's optimal subsidy policy to address this problem? In this study, given a possible government subsidy, we develop a game theory model that includes Manufacturer H, with relatively high green technology investment efficiency, and Manufacturer L, with low levels of efficiency. The two manufacturers engage in a two‐dimensional competition in green technology investment and sales volume. We examine the manufacturers' profitability with and without green technology licensing, called Scenario Y and Scenario N, respectively. We identify “win–win” situations for the two competing manufacturers. Specifically, the government should increase the subsidy when the efficiency of industrial green investment is low, Manufacturer L has a clear disadvantage with respect to efficiency, and the competition is fierce.