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More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies

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Listed:
  • Ku-Chu Tsao

    (Tunghai University)

  • Jin-Li Hu

    (National Yang Ming Chiao Tung University)

  • Hong Hwang

    (National Taiwan University and RCHSS, Academia Sinica)

  • Yan-Shu Lin

    (National Dong Hwa University)

Abstract

This research analyzes the impacts of acquiring vertically two-tier cost-saving foreign technologies through licensing on the home economy’s industry profit, consumer surplus, and social welfare. It is found that upstream (downstream) licensing only leads to higher social welfare than the two-tier licensing if the downstream innovation size is small (large) — that is, acquiring more licensed foreign technologies at different tiers in vertically related markets may worsen the domestic welfare. The above results still hold in leader–follower competition under the two-tier licensing regime and even for the case where this two-tier cost-saving technology is present within the home economy itself.

Suggested Citation

  • Ku-Chu Tsao & Jin-Li Hu & Hong Hwang & Yan-Shu Lin, 2023. "More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies," Journal of Economics, Springer, vol. 139(1), pages 71-88, June.
    • Handle: RePEc:kap:jeczfn:v:139:y:2023:i:1:d:10.1007_s00712-023-00818-x
    DOI: 10.1007/s00712-023-00818-x
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    References listed on IDEAS

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    Cited by:

    1. Kuang-Cheng Andy Wang & Dang-Long Bui & Yi-Jie Wang & Wen-Jung Liang, 2023. "International licensing under an endogenous tariff in vertically-related markets," Journal of Economics, Springer, vol. 139(2), pages 93-123, July.
    2. Yen-Ju Lin & Yan-Shu Lin & Tsung-Han Chou & Pei-Cyuan Shih, 2024. "Environmental policy, licensing strategy, and social welfare," Journal of Economics, Springer, vol. 143(2), pages 141-159, October.
    3. Manel Antelo & Antonio Sampayo, 2024. "Licensing of a new technology by an outside and uninformed licensor," Journal of Economics, Springer, vol. 142(2), pages 111-162, July.

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