How to Capture Value from Innovation: Shaping Intellectual Property and Industry Architecture

Abstract

Capturing value from innovation requires innovators to figure out how to blunt inroads into the profit stream by imitators, customers, suppliers, and other providers of complementary products and services. In making strategic decisions around technology commercialization, managers often assume that the intellectual property environment and the architecture of the industry are beyond their control. This need not be so. This article shows how managers can shape both the appropriability regime and the architecture of the industry in ways that can benefit the innovator by blunting the actions of others who may endeavor to tap into the stream of profit generated by innovation. Even small firms can play important roles. Tools include putting information into the public domain, helping to shape standards, and promoting modularity.