To cooperate or not: technology licensing in industrial symbiosis

In this study, we examine technology licensing in an industrial symbiotic supply chain with one upstream supplier and an asymmetric downstream duopoly. One manufacturer (manufacturer A) owns a technology that enables it to use the supplier’s by-products as production inputs, whereas its directly competing rival (manufacturer B) must either procure conventional raw materials from an external market at a higher cost or obtain a license from manufacturer A. We derive each supply chain member’s equilibrium solutions (output, transfer price for by-products, and licensing fee) with and without licensing. Our results show that the preferred licensing strategy of each manufacturer depends on the downstream market potential. Specifically, when the downstream market potential is relatively small, manufacturer A tends to refrain from offering technology licensing, whereas manufacturer B is inclined to accept it. Therefore, licensing cooperation can only be achieved when the competition intensity of the downstream market is relatively low, and the market potential is moderate. Additionally, we find that the cooperation in technology licensing between downstream manufacturers does not consistently benefit the upstream supplier. From an environmental perspective, technology licensing cooperation has the potential to reduce the environmental impact of by-products.