Summary of the article “profiting from technological
innovation: implications for integration, collaboration,
licensing and public policy” by D. Teece
Goal article:
Why do some innovating firms fail to obtain significant economic returns from innovation,
while customers/ competitors benefit?
Why do sometimes 2nd/ 3rd movers gain more competitive advantage from an
innovation than the firm that founded the innovation?
F.e. RC cola was the first to found cola in a can, was quickly caught up by coca cola &
Pepsi cola
Innovators = firms which are first to commercialize new product/ process in the market
3 fundamental building blocks of this research
1. Appropriability regime
a. Environmental factors that influence innovator’s ability to capture profits
generated by innovation
b. Patents not always that protective, trade secrets more successful: put
product on market but keep underlying technology secret
c. Tacit vs. explicit knowledge
d. Tight = technology is relatively easy to protect
e. Weak = technology is almost impossible to protect
2. Dominant design paradigm
a. 2 stages:
i. Preparadigmatic stage = when there is no single generally accepted
conceptual treatment of the phenomenon in a field of study
ii. Paradigmatic stage = begins when a body of theory appears to have
passed the canons of scientific acceptability
b. Once dominant design emerges, competition shifts to price & away from
design > innovation not halted, but lower tempo
c. More present in mass markets where consumer tastes are homogenous
3. Complementary assets
a. You need other services to make the innovation great such as marketing
b. Generic assets = general purpose assets that don’t need to be tailored to the
innovation (manufacturing facilities)
c. Specialized assets = assets that have unilateral dependence with the
innovation (trucks)
d. Cospecialized assets = assets that have bilateral dependence with innovation
(containerships/ ports)
, If the innovator managed to patent its innovation correctly, he gets market value for some
period of time
Only works with generic assets
If there are specialized/ cospecialized assets, there are more hazards because one/ more
parties will have to commit capital to certain irreversible investments
Innovator can come to market with a product that has a wrong design, but fully patented
and make the design better during the patent time
Tight appropriability is hardly present, firms have to use business strategy to keep imitators
away
Innovators in a weak appropriability regime need to be intimately coupled to the market so
that user needs can fully impact designs
Preparadigmatic vs. paradigmatic stage
Preparadigmatic = rivalry focused on identifying the design that will be dominant, low
production volumes, price not competitive factor
Paradigmatic = dominant design is known, volumes increase, economies of scale
High chance of imitation of dominant product
If dominant product is easily imitable, competitive advantage is determined by price
or complementary assets such as specialized marketing
o Too costly to buy all complementary assets > focus on 1/ few
o Focus on contracts
Advantage of contractual solutions
innovation: implications for integration, collaboration,
licensing and public policy” by D. Teece
Goal article:
Why do some innovating firms fail to obtain significant economic returns from innovation,
while customers/ competitors benefit?
Why do sometimes 2nd/ 3rd movers gain more competitive advantage from an
innovation than the firm that founded the innovation?
F.e. RC cola was the first to found cola in a can, was quickly caught up by coca cola &
Pepsi cola
Innovators = firms which are first to commercialize new product/ process in the market
3 fundamental building blocks of this research
1. Appropriability regime
a. Environmental factors that influence innovator’s ability to capture profits
generated by innovation
b. Patents not always that protective, trade secrets more successful: put
product on market but keep underlying technology secret
c. Tacit vs. explicit knowledge
d. Tight = technology is relatively easy to protect
e. Weak = technology is almost impossible to protect
2. Dominant design paradigm
a. 2 stages:
i. Preparadigmatic stage = when there is no single generally accepted
conceptual treatment of the phenomenon in a field of study
ii. Paradigmatic stage = begins when a body of theory appears to have
passed the canons of scientific acceptability
b. Once dominant design emerges, competition shifts to price & away from
design > innovation not halted, but lower tempo
c. More present in mass markets where consumer tastes are homogenous
3. Complementary assets
a. You need other services to make the innovation great such as marketing
b. Generic assets = general purpose assets that don’t need to be tailored to the
innovation (manufacturing facilities)
c. Specialized assets = assets that have unilateral dependence with the
innovation (trucks)
d. Cospecialized assets = assets that have bilateral dependence with innovation
(containerships/ ports)
, If the innovator managed to patent its innovation correctly, he gets market value for some
period of time
Only works with generic assets
If there are specialized/ cospecialized assets, there are more hazards because one/ more
parties will have to commit capital to certain irreversible investments
Innovator can come to market with a product that has a wrong design, but fully patented
and make the design better during the patent time
Tight appropriability is hardly present, firms have to use business strategy to keep imitators
away
Innovators in a weak appropriability regime need to be intimately coupled to the market so
that user needs can fully impact designs
Preparadigmatic vs. paradigmatic stage
Preparadigmatic = rivalry focused on identifying the design that will be dominant, low
production volumes, price not competitive factor
Paradigmatic = dominant design is known, volumes increase, economies of scale
High chance of imitation of dominant product
If dominant product is easily imitable, competitive advantage is determined by price
or complementary assets such as specialized marketing
o Too costly to buy all complementary assets > focus on 1/ few
o Focus on contracts
Advantage of contractual solutions
