How Firms Capture Value From Their Innovations

Abstract

Over the past 25 years, the technology strategy literature has examined how four primary mechanisms—patents, secrecy, lead time, and complementary assets—influence whether and to what extent firms capture value generated by their innovations. Although this literature has had a profound impact on our understanding of how firms capture value from innovation, we have yet to develop a robust theory that allows us to unbundle the characteristics of institutions, industries, firms, and individual technologies that affect the selection of particular value capture mechanisms. The purpose of this article is to provide a foundation for addressing these gaps in the literature. We identify and assess relevant scholarly work regarding value capture mechanisms published in top-tier peer-reviewed management journals between 1980 and 2011. We then review the assumptions, insights, and causal mechanisms for the antecedents and consequences of the value capture mechanisms highlighted in these articles. The ultimate objective is to identify research opportunities that help to better understand the conditions under which specific bundles of value capture mechanisms are most likely to help innovating firms achieve persistent superior performance.

IP litigation is local, but those who litigate are global

“…There has been extensive scholarly interest in IP in the fields of strategy and economics (for two recent literature reviews, see Somaya, 2012 andJames, Leiblein, &Lu, 2013). Past studies on IP strategies have helped us gain a better understanding of the propensity to patent (e.g., Arora, 1997;Cohen, Nelson, & Walsh, 2000;Levin, Klevorick, Nelson, Winter, Gilbert, & Griliches, 1987;Somaya & McDaniel, 2012;Ziedonis, 2004), the likelihood of IP litigation (e.g., Somaya, 2003;Lanjouw & Schankerman, 2001), and the connections between IP and firms' business activities (e.g., Arora & Ceccagnoli, 2006;Pisano, 2006;Teece, 1986).…”

“…In strong IP regimes, small firms try to avoid competitive patent subclasses to reduce litigation costs (Lerner, 1995). In weak IP regimes, potential infringers can be numerous and widely dispersed, directly increasing the cost of identification and litigation (James et al, 2013). This reduces the incentive for firms to resort to formal institutions, and motivates the use of alternative strategies for firms with the right organizational capabilities (Zhao, 2006).…”

Value Creation and Capture in Buyer-Supplier Relationships: A New Perspective

“…James, Leiblein, and Lu (2013) study value capture in the context of innovation, without, however, discussing the role of its value creation. Winkelbach and Walter (2015) describe the value created by science-to-industry technology transfer projects, whereas such transfer could be better understood from the perspective of value capture.…”

Measuring What Matters—Indicators of Social Innovativeness on the National Level

“…Other, even less tangible resources such as knowledge (treated as contextual factors by, e.g., James, Leiblein, & Lu, 2013, p. 1127 are finally not to be neglected not only in determining how well an organization can exploit value from the innovations they produce (James, Leiblein, & Lu, 2013), but also in capturing innovative capacity in itself by counting, for example, the numbers of patents (Furman et al, 2002). Especially in the context of innovation, however, it is not only formally coded knowledge that matters, but also what Polanyi (1966) calls "tacit knowledge."…”