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

Establishes a framework within which to analyze the profit distribution of innovations and determines the reasons why imitators may outperform innovators. First, the three fundamental building blocks necessary to explain the distribution of innovations are discussed: the appropriability regime, complementary assets, and the dominant design paradigm. Next, the imitation process and the distribution of profits between innovator and follower are examined by relating these three concepts. Then, an appropriate control structure is proposed which the innovator ought to establish over critical, complementary assets. Finally, implications for R&D strategy, industry structure and trade policies are discussed. Analysis suggests that firm boundaries are an important strategic variable for firms that innovate. Also, innovator ownership of complementary assets can be the deciding factor in whether innovators or imitators outperform one another in garnering the most economic return from innovation. (SFL)