Patent Licensing Strategy for Supply Chain Reshaping Under Sudden Disruptive Events

Supply chains are increasingly exposed to sudden disruptive events (SDEs) such as natural disasters and trade wars. We develop a multi-stage game-theoretical model to investigate a novel coping mechanism: when a firm is forced to exit the market because of SDEs, the firm can regain profits by licensing its proprietary production tech to a competitor. We find that, compared with the scenario before SDEs, such events can even increase the profit of each manufacturer under certain conditions. Under certain conditions, the cooperative strategy (i.e., supply chain reshaping) yields a higher supply chain system profit than the non-cooperative strategy. After SDEs, the common manufacturer may either accept or reject cooperation, depending on the customer transfer rate and the cooperation cost. Notably, under the cooperation strategy, the high-tech manufacturer extracts part of the common manufacturer’s profit through patent licensing, and the existence of cooperation cost further contributes to a misalignment between the common manufacturer’s optimal decision and the supply chain system optimum. These findings contribute to the literature by identifying a novel supply chain reshaping mechanism driven by patent licensing and offer strategic guidance for firms and policymakers navigating SDE-induced market exits.