M5-Strategy-S6 - Summary Teece - Appropriability regime

The most important dimensions of such a regime are the nature of the technology, and the efficacy of legal mechanisms of protection:

1. Legal instruments
   1. Patents
      1. Rarely, if ever, do patents confer perfect appropriability, although they do afford considerable protection on new chemical products and rather simple mechanical inventions. Many patents can be “invented around” at modest costs.
      2. They are especially ineffective at protecting process innovations.
   2. Copyrights
   3. Trade secrets
      1. Trade secret protection is possible, however, only if a firm can put its product before the public and still keep the underlying technology secret. Usually only chemical formulas and industrial-commercial processes (e.g., cosmetics and recipes) can be protected as trade secrets after they’re “out”.
2. Nature of technology
   1. Product
   2. Process
   3. Tacit
   4. Codified

Appropriability regimes can take two forms:

1. Tight appropriability or Strong Influence on IP protection
   1. Tight appropriability is the exception rather than the rule
2. Weak appropriability or Weak Influence on IP protection

Tight appropriability
Generic complementary assets	Innovator may license its technology in contract without risk
Specialized complementary assets	One or both parties will have to commit capital to certain irreversible investments which will possibly be valueless
Co-specialized complementary assets	One or both parties will have to commit capital to certain irreversible investments which will possibly be valueless

Weak appropriability
Pre paradigmic	Sound product concept but the wrong design is not fatal
	Be careful to let the basic design “float” until sufficient evidence has accumulated that a design has been delivered which is likely to become the industry standard
	Innovators need to be intimately coupled to the market so that user needs can fully impact designs
	The probability that the innovator would emerge as the winner or amongst the winners at the end of the pre-paradigmic stage is low
	Rivalry is focused on trying to identify the design which will be dominant
Paradigmic
	Volumes increase and opportunities for economies of scale will induce firms to begin gearing
	Core technology is easy to imitate
	Commercial success swings upon the terms and conditions upon which the required complementary assets can be accessed
	Specialized and Cospecialized assets become critically important
	The firms which control the cospecialized asset are dvantageously positioned relative to an innovator
	The more mature a technology is, the more difficult it is to make money as an inventor. Money is made by owning the distribution network

Part of M5-S6 - Reading - Summary Teece - Profiting from technological innovation