Value capture in open innovation markets: the role of patent rights for innovation appropriation

PurposeThe role of patents for appropriating (capturing) value from innovation investments has for decades been of major interest to both practitioners and academics in innovation management. Many studies have implicitly assumed that firms appropriate value through in-house creation and marketing of innovative products and services, and that the main function of patents is to protect the exclusive sales in product and service markets. We challenge this assumption in light of the variety of business models, strategies and markets now being available, including different organizational and market forms of open innovation.Design/methodology/approachA conceptual framework and typology of open innovation markets is developed, and the role of patents for appropriation is investigated in these markets among 172 Swedish technology-based firms.FindingsThe results show that the importance of patents has a skewed distribution with some firms rating patents very important and with a fat tail of firms rating patents less important. Most importantly, the results indicate that patents are enabling exchange and technology trade in various types of open innovation markets rather than only supporting vertically integrated business models. Thus patents were found to help rather than hinder the use of open innovation markets.Originality/valueThe paper makes two main contributions. First a theoretical reinterpretation of open innovation with a conceptualization of open innovation markets for appropriation of innovation values. Second an empirical illustration of new roles of patents for appropriating innovation values in these markets. The paper in addition illustrates the use of a counterfactual approach to questionnaire surveys, as well as the complementarities between patents and other means of appropriation.

INOVAÇÃO, MERCADOS E POLÍTICAS: ESTUDOS DE CASO E EXPERIÊNCIAS INTERNACIONAISINNOVATION, MARKETS AND POLITICS: CASE STUDIES AND INTERNATIONAL EXPERIENCES

Apresentação do Dossiê: Inovação, Mercados e Políticas.

Organizational Effects of Intellectual Property (Macro Level)

This chapter describes how the level of IP protection impacts firms’ choices in organizing the innovation and commercialization process, which in turn influences the structure of the innovation market as a whole. Weak-IP regimes induce firms to adopt “hierarchical” structures that mitigate expropriation risk by locating innovation and commercialization activities within substantially integrated supply chains. Strong-IP regimes restore organizational choice and enable innovators to adopt “entrepreneurial” structures that rely on contractual relationships among firms that specialize in particular innovation or commercialization functions. If hierarchical structures cannot sufficiently mitigate expropriation risk, then innovation markets will adopt “bureaucratic” structures that rely on tax-based or philanthropic funding. Even when markets adapt to weak-IP regimes by adopting hierarchical structures, or hybrid hierarchical and semi-bureaucratic structures, that support robust R&D investment, efficiency losses will arise to the extent that entry by entrepreneurial innovators is suppressed and the selected mix of innovation projects is distorted.

Introduction

This introduction describes how the book examines the relationships between IP rights, organizational form, and market structure, using a combination of theoretical analysis and empirical evidence drawn from almost 120 years of U.S. patent policy and associated technology markets. This analysis deploys a “dynamic” approach to IP analysis, which anticipates that the effects of changes in IP protections differ depending on firms’ ability to adopt non-IP alternative mechanisms for capturing returns on innovation. In general, larger and more integrated firms will be able to do so at a significantly lower cost than smaller and less integrated firms. The entity-specific effects of IP rights imply that stronger and weaker IP regimes will impact the range of viable organizational forms for structuring the innovation and commercialization process, which in turn impacts the structure of innovation markets and the allocation of resources across different types of innovation projects.

Global Traps for the Russian Innovation System

The features of the transformation of national innovation systems into an instrument of the dominance of conservative leaders of technologically developed markets are described. The difference in institutional conditions in the activities of companies in global innovation markets leads to the emergence of institutional rents. It is shown that in the framework of the formation of a global innovation system, on the one hand, the institutional strength of transnational corporations as market leaders is increasing, on the other, new global transformation processes are underway. They are based on flexible network structures and the dominance of intermediaries with the transition to a system of intermediary monopoly. Such transformations pose new threats to global crises and open up “windows of opportunity” for the Russian innovation system, which is in an institutional trap in which, due to the dominance of foreign companies in most technologically advanced markets, domestic business is forced to give them high institutional rents and is deprived of it this significant part of the resources for its development.

Designing Pro-Competitive Research Data Pools: Which EU Competition Remedies for Research Data Silos in Digital Markets?

The study moves from the assumption that the sharing of data can – under specific circumstances – give rise to anticompetitive aggregations of research-valuable data in the form of closed data silos. It addresses the question whether and how competition remedies available under EU law can be used for the design of pro-competitive data pools in digital markets. Interesting suggestions for these purposes are given by the recent enforcement policies enacted by the European Commission in high technology innovation markets. Although aimed at restoring very different anticompetitive conducts, these remedies nonetheless appear to share the common function of opening up established innovation alliances for the transfer of research-valuable information assets to external competing parties. Against this backdrop, the suitability of such information-based remedies in the context of digital markets is questioned. The study ultimately puts forward the opportunity of a close collaboration between competition and data protection authorities for a joint governance of data sharing remedies.