Teece: Profiting from technological innovation: implications for integration, collaboration, licensing and public policy

16 important questions on Teece: Profiting from technological innovation: implications for integration, collaboration, licensing and public policy

The analysis of the appropriability stages indicated how access to complementary assets (manufacturing etc.) is criticial if the innovator is to avoid handling over a big share to imitators. Teece will dive deeper in the appropriate control structure that the innovator ideally ought to establish over these critical assets. Which 3 types of structures are there?

1 Contractual modes
2 Integration modes
3 Between those 2 extremes: intermediate forms and channels

Explain the first stage of Teece: thight appropriability regime?

This is the exeption rather than the rule. A innovator is protected by patent, copyrights etc. The innovator is almost assured of translating its innovation into market value for some period of time.

The 3 building blocks (complementary assets, dominant design paradigma, regimes of appropriability) can be related in a way which will shed light on the imitation process and the distribution of profits. Teece begins with examining the appropriability regimes. Which 3 regimes are this?

1 Tight appropriability regimes
2 Weak appropriability:
-Preparadigmatic stage
-Paradigmatic stage
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What is meant with the third building block of Teece: complementary assets?

Succesful commercialization of an innovation requires that the know-how be utilized with other capabilities or assets. Services as marketing, competitive manufcturing, after-sales support als always needed. These services are often obtained from complementary assets which are specialized.

According to Teece the existence of a dominant design is of great significance to the distribution of profits between innovator and follower. Why?

Because the innovator may have been responsible for the breakthroughs as well as the basic design. However, if imitation is easy, imitators may enter the fray (strijd), modifying the product in important ways, yet relying on the fundamental designs pioneered by the innovator.

Explain the first property/structure of Teece: contractual modes?

The advantage of a contractual solution (innovator sign a contract, f.e. license, with independent suppliers/manufacturers/distributors) is that the innovator will not have to have to build/by assets. Contracting is an optimal strategy when the innovators appropability regime is tight and the complementary assets are available in competitive supply. But there is the risk the partner doesn't perform well.

Because imitators have a strong position, what should happen according to Teece?

Innovation must focus not only on R&D, but also on complementary assets as well as the underlying infrastructure.

Explain the third property/structure of Teece: Mixed modes?

The real world rarely provides extreme or pure cases. Decisions to integrate/license involve tradeoffs compromises and mixed approaches. Organizations are mixed modes involving blends of integration and contracting.

Explain the second property/structure of Teece: Integration modes?

Integration (involves ownership) facilitates alignment and control. If an innovator own rather than rents the assets needed, then it is in a position to capture spillover benefits. Sometimes there is no money/time to integrate the assets. Integration is useless when imitators can do it faster/cheaper.

What is meant with the second building block of Teece: the dominant design paradigm?

There are two stages in the development of a given branch in science:
1 The preparadigmatic stage (when there is no single generally accepted conceptual treatment)
2 The paradigmatic stage (a body of theory appears to be scientific accepted)
> At some point in time one design begins to emerge as the more promising. This dominant design makes competition shift from away from design to price. Scale and learning become much more important.

What is meant with the fist building block of Teece:
regimes of appropriability?

It refers to the environmental factors that govern an innovator's ability to capture the profits generated by an innovation. The most important dimensions of such a regime are the nature of the technology and the efficacy of legal mechanisms of protection.

In order for Teece to develop a coherent framework to explain the distribution of outcomes, there are 3 fundamental building blocks that need to be explained. Which threee?

1 The appropriability regime
2 Complementary assets
3 The dominant design paradigm.

In the paper of Teece a framework is offered. What kind of framework?

It identifies the factors which determine who wins from innovation: the firm which is first to market, follower firms, or firms that have related capabilities that the innovator needs. The framework explains the share of the profits from innovation accruing (toekomende) the innovator or the followers and suppliers. It also explains a variety of interfirm activities (f.e. joint ventures)

What does the paper of Teece attempts to explain?

Why innovation firms often fail to obtain significant economic returns from an innovation while customes, imitators, and other industry participants benefit. Business strategy is shown to be an important factor.

According to Teece there are 3 key words in profiting from innovation. Explain them:

1 Appropriation (are you able to appropriate (eigenen van) the rents from innovation)
2 Complementary assets (you need those assets to bring the innovation to the market. This is more than technological know-how, also assets like marketing, sales, manufactering)
3 Imitation

Name the different kinds of (in)formal IP protection? (Flikkema)

Formal: patens, copy rights, design rights (aesthetics, f.e. chair), growers rights (f.e. tulips) and trademarks
Informal: complexity, lead-time advantage (time between your innovation and the imitators), trade secrets, HR (difficult to copy) and reputational assets
> For ex. Intel with the stickers on the laptops and now a strong position because of that, is example of IP protection.

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