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

Abstract

AbstractThis 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 (actor. The paper demonstrates that when imitation easy. markets don't work wen, and the profits (rom 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 win fai1. The analysis provides a theoretical foundation (or the proposition that manufacturing often matters. particularly to innovating nations. Innovating finns 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.

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