|Title:||Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy|
|Citation:||Teece, D. (1986). Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research policy, 15(6), p. 285-305.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|Linked by:||Erickson (2018), Mortimer, Nosko and Sorensen (2012)|
|About the Data|
|Data Description:||The author proposes an economic theoretical model to explain who enjoys the fruits of innovation.|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
This paper attempts to explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit. Business strategy - particularly as it relates to the firm's decision to integrate and collaborate - is shown to be an important factor. The paper demonstrates that when imitation is easy, markets don't work well, and the profits from innovation may accrue to the owners of certain complementary assets, rather than to the developers of the intellectual property. This speaks to the need, in certain cases, for the innovating firm to establish a prior position in these complementary assets. The paper also indicates that innovators with new products and processes which provide value to consumers may sometimes be so ill positioned in the market that they necessarily will fail, The analysis provides a theoretical foundation for the proposition that manufacturing often matters, particularly to innovating nations. Innovating firms without the requisite manufacturing and related capacities may die, even though they are the best at innovation. Implications for trade policy and domestic economic policy are examined.
Main Results of the Study
- The boundaries of the firm are an important strategic variable for innovating firms.
- The ownership of complementary assets, particularly when they are specialized and/or cospecialized, help establish who wins and who loses from innovation. Imitators can often outperform innovators if they are better positioned with respect to critical complementary assets.
- It is not so much the structure of markets but the structure of firms, particularly the scope of their boundaries, coupled with national policies with respect to the development of complementary assets, which determines the distribution of the profits amongst innovators and imitator/followers.
- As to global markets, tariffs and other restrictions on trade can in some cases injure innovating firms while simultaneously benefiting protected firms when they are imitators
Policy Implications as Stated By Author
- Public policy aimed at promoting innovation must focus not only on R&D, but also on complementary assets, as well as the underlying infrastructure. If government decides to stimulate innovation, it would seem important to clear away barriers which impede the development of complementary assets which tend to be specialized or cospecialized to innovation.
- The propositions suggested by the framework are particularized to appropriability regimes, suggesting that economy-wide conclusions will be illusive. The policy conclusions derivable for commodity petrochemicals, for instance, are likely to be different than those that would be arrived at for semiconductors.
Coverage of Study
|Level of aggregation:||Economic model|
|Period of material under study:||Not stated|