How to Appropriate Value from General-Purpose Technology by Applying Open Innovation

Abstract

Artificial intelligence increasingly attracts attention and investments. However, appropriating value from this general-purpose technology (GPT) can be difficult. To understand these challenges, this article analyzes why IBM failed to generate significant profits from IBM Watson Health despite its promising starting points. The findings suggest that, considering the characteristics of GPT, an overly closed approach for taking it to market contributed to the failure. Furthermore, conditions such as the immaturity and the complexity of the application field intensified the challenges. This study suggests that using a strong appropriability regime in open innovation can enhance the appropriation of value from a GPT.

Distinguishing between appropriability and appropriation: A systematic review and a renewed conceptual framing

“…Although individual studies add to existing knowledge, contradictory findings emerge. The appropriability problem-originally defined as the inability of innovators to benefit (or profit) (see Arrow, 1962) from their innovations-persists (e.g., Fisher and Oberholzer-Gee, 2013;Yang et al, 2021).…”

“…resource management because they have received less attention than patents (e.g., Hannah et al, 2019;Miozzo et al, 2016;Seip et al, 2018;Wadhwa et al, 2017) or introduce new categories of appropriability mechanisms (see e.g., Sharapov and MacAulay, 2020, who "add design mechanisms to the strategic toolbox of isolating mechanisms," p. 1). The structural approach-even when extended in these ways-may not suffice to explain phenomena such as why innovators with strong appropriability regimes and complementary asset positions sometimes fail (Fisher and Oberholzer-Gee, 2013;Yang et al, 2021).…”

“…Extant literature generally considers disappointing outcomes and appropriability problem to derive from an innovator's inability to acquire sufficiently effective appropriability mechanisms and/or favorable complementary asset positions (given the context) (Ceccagnoli and Rothaermel, 2016;Teece, 1998;2018). However, in current innovation environments, having strong appropriability mechanisms and complementary assets does not guarantee that value will be appropriated or that the appropriability problem will be avoided (e.g., Fisher and Oberholzer-Gee, 2013;Yang et al, 2021). Our framework provides a new view on this issue: Appropriation outcomes will be jeopardized if misalignment occurs.…”

“…Data markets ( Koutroumpis, et al, 2020) Appropriability (the selection of instruments) and appropriation processes must align with heterogeneous appropriability conditions (such as evolving but discrepant regulations); Appropriation processes matched with different degrees of control can generate varying market sizes for data Artificial intelligence ( Yang et al, 2021) Strong appropriability potential does not automatically translate into appropriation outcomes; the exclusion-oriented process limits the exploration of use cases of artificial intelligence, affecting appropriation outcomes; an illustrative case of misalignment of instruments and processes considering the innovation type as an appropriability condition Blockchain (Schmeiss et al, 2019) Realizing appropriation is not limited to exclusion-oriented processes; The Blockchain makes the appropriation processes (exclusion-and leverageoriented processes) transparent and guarantees fair appropriation outcomes for all actors; Example of applicability at different units of analysis (here, the chain) Digital innovations (Miric et al, 2019) Mobile app developers build appropriability potential on formal and informal appropriability mechanisms; favorable appropriability conditions for smaller developers can be created by the platform owner Servitization Solution development ( Colm et al, 2020) Appropriability potential built on isolating appropriability mechanisms (rights allocation agreements; tacitness) and complementary assets (relationships)) aligns with leverage-oriented processes to achieve safeguarding and/or coordination goals (outcomes) Specificities of service sectors and firms (Chen and Wu, 2020) Appropriability potential is built with complementary in use (both formal and informal) isolating appropriability mechanisms and complementary assets (e.g., distribution, sales, and customer service functions), in response to specific appropriability conditions in service sectors; Exemplifies internal alignment and alignment with conditions Open innovation Open innovation paradox ( Foege et al, 2019) Appropriability potential safeguards knowledge assets;…”

Systematic analysis of 50 years of Stanford University technology transfer and commercialization

“…3,[7][8][9][10] With the increased emphasis on university technology transfer, many universities in the US have established OTLs. 4 An OTL serves as a mediator between the suppliers of innovations (university scientists) and those who can potentially commercialize them, i.e., industry, 11,12 centralizing university inventions and facilitating their commercialization through licensing to existing firms or startup companies of inventors. As examples, technologies that Stanford University's OTL has commercialized include the recombinant DNA technology that helped to jump start the biotechnology industry, internet search engines (e.g., Google PageRank), functional antibodies, and music synthesizers.…”