Compete, Cooperate, or Both? Integrating the Demand Side into Patent Deployment Strategies for the Commercialization and Licensing of Technology

Profiting from innovation typically involves a choice between commercializing a patented technology in the product market to exploit proprietary advantage (i.e., competition) or licensing the technology to an incumbent in the market for ideas (a form of cooperation). A firm may thus deploy a patented technology in ways that may differ in their aggressiveness toward, or accommodation of, competitors. We analyze the deployment of patented technology employing either competition or collaboration modes, or both together (i.e., coopetition), as well as switching among them across demand states or over time, or delaying these choices until more information is available. We thus view a patent as a bundle of real options that enables a firm manage not only the classic tension between commitment and flexibility but also the tension between competition and cooperation. We develop theory and propositions to predict which of these patent deployment modes will be chosen by an innovator facing an established firm as a function of the strength of the technology, market or bargaining power and other market conditions, particularly the level and volatility of market demand.