Green technology licensing under platform selling

Abstract

Industrial practice has shown that technology licensing is of great importance to green technology development. This study investigates licensing strategies for green technology under the background of platform selling. We consider an online platform operating through agency selling and two competitive firms one of which is an innovator investing in green technology. The innovator has an option to offer a license for the green technology to its competitor. Using No licensing scenario as a benchmark, we examine two alternative licensing strategies (Fixed-fee licensing vs. Royalty licensing) when the innovator licenses the technology. We find that licensing enhances the optimal green technology level, each firm’s optimal price, and realized demand. Royalty licensing strategy outperforms Fixed-fee licensing strategy from the viewpoint of environmental performance and the innovator’s profitability. Interestingly, we find that product price may decline with production cost, and when the platform charges firms a higher commission rate, the firms will choose a lower product price in some condition. Furthermore, by numerical examples, we observe an increasing commission rate may hurt the platform.