Information rules: a strategic guide to the network economy
Information rules: a strategic guide to the network economy
Innovation and Control in Standards Architectures: The Rise and Fall of Japan's PC-98
Information Systems Research
Impact of Licensing on Investment and Financing of Technology Development
Management Science
A Game-Theoretic Model of E-Marketplace Participation Growth
Journal of Management Information Systems
A Model of Neutral B2B Intermediaries
Journal of Management Information Systems
Electronic Commerce Research and Applications
Journal of Management Information Systems
An Economic Analysis of Policies for the Protection and Reuse of Noncopyrightable Database Contents
Journal of Management Information Systems
Hi-index | 0.00 |
Technology innovators are faced with the question of whether to license an innovation to other firms, and if so, what type of license it should use. This question takes on paramount importance with information technology innovations that lead to new products and services that exhibit network effects. This paper explores the impact of network effects on the licensing choice. The literature suggests that without network effects, a royalty license is preferred by producer-innovators. We find that a fixed-fee license is optimal with strong network effects. For less intense network effects, the optimal license uses a royalty rate, either alone or in combination with a fee. We further derive the terms of the optimal license and discuss the impact of the investment needed to replicate the innovation and the size of the potential market. Our results provide insights for licensing decisions in industries that exhibit network effects.