The Handbook of Technology and Innovation Management

11.1. Introduction

In this chapter, we revisit the motivating question of Teece's seminal (1986) paper: why do some firms profit from their innovation investments, whereas others do not? Teece's answer, as we will review below, blended elements of technological characteristics (particularly the character of knowledge), the degree of appropriability conveyed through intellectual property (IP), and the nature of the complementary assets required to commercialize the innovation.

In Teece's account, firms operating in 'tight appropriability regimes' would be able to capture value from their innovation investments, whereas firms operating in 'weak' regimes would be at risk of failing to do so. He took the degree of appropriability to be exogenously determined, as have scholars conducting empirical research on perceived appropriability within industries (Levin, et al., 1987).

Yet Teece's own insight into complementary assets suggests that a firm's own actions can ameliorate the appropriability problem. If the firm owns or can access the requisite complementary assets, the firm may profit from innovation activities even in weak appropriability regimes. This motivates the present chapter, in that it points the way toward firm actions that can alter the degree of appropriability in their industry. To put it differently, it suggests that appropriability may be endogenously determined – at least to some degree.

This is a potentially important contribution to the strategic management literature, ...