Optimization and selection of technology licensing strategy under asymmetric beliefs of supply reliability

Purpose The purpose of this paper is to investigate how technology licensing strategy can be used to mitigate supply disruption risks in a supply chain characterized by asymmetric perceptions of supply reliability between a manufacturer and suppliers. Specifically, the upstream supplier (S1, patent-holding firm) may license technology to an alternative supplier (S2) and the downstream manufacturer (M) can adopt a dual source purchasing strategy to reduce potential disruption risks. Design/methodology/approach A game-theoretic framework is developed and solved using backward induction to analyze the optimal licensing choice between fixed-fee and royalty-based contracts, as well as the corresponding procurement and production strategies of the manufacturer and suppliers. Findings The analysis reveals that S1’s choice between licensing modes depends on the fixed-fee arrangement, and its production decision after licensing is shaped by the estimation conditions. In particular, when M and S2 hold inconsistent reliability assessments, S1 always continues production under royalty licensing. Furthermore, M adopts different procurement strategies depending on different estimation situations, especially the estimation of S1. Originality/value This study provides meaningful insights into the interplay between technology licensing and dual sourcing strategies under asymmetric information on supply reliability, highlighting how licensing modes and procurement decisions can be optimized to reduce disruption risks in supply chains.