Factors affecting Intellectual

Property Strategies in SMEs

By Aditya Kochhar
M.Sc. In Innovative Technology
8/16/2014 Msc in Innovative Technology Engineering, 1


To understand various factors that affect the
development of intellectual property
strategies with reference to SMEs.
Objective
2 Msc in Innovative Technology Engineering, 8/16/2014
Teece, D.J. Capturing Value from Technological
Innovation: Integration, Strategic Partnering, and
Licensing Decisions Interfaces, Vol. 18, No. 3.
(1988), pp. 46-61.
Thom, J. and K. Bizer "To protect or not to
protect? Modes of appropriability in the small
enterprise sector." Research Policy(2012),
http://dx.doi.org.ezproxy.wit.ie:2048/10.1016/j.r
espol.2012.04.019.

Papers researched
3 Msc in Innovative Technology Engineering, 8/16/2014
Introduction
Paper 1 Fundamental building blocks of rent distribution that play key
role in defining intellectual property strategies.
Paper 2- Empirical analysis of factors within one of the blocks in an SME
environment.
Combining Paper 1 and Paper 2
Conclusions

Overview
4 Msc in Innovative Technology Engineering, 8/16/2014
Intellectual Property Strategy is an important
aspect of todays business.
Small to Medium Enterprises are a backbone
of a nation's economy.
The factors affecting intellectual property
strategy are constantly evolving with time.
Introduction
5 Msc in Innovative Technology Engineering, 8/16/2014
Paper 1
Myriads of would-be
innovators have discovered
that technical success is
necessary but not sufficient for
establishing economic utility
and commercial acceptance.
David J. Teece
8/16/2014 Msc in Innovative Technology Engineering, 6

Economic rents are always shared.

7 Msc in Innovative Technology Engineering, 8/16/2014
Customers
Suppliers
Innovators
Imitators
Benefits from Innovation
Economic Rents/ Profits/Benefits
of Innovation are always shared.

A large part of the benefits of the
innovation are distributed amongst
Customers, suppliers and imitators
Examples of success and failure.

8 Msc in Innovative Technology Engineering, 8/16/2014
Pilkington (Float Glass)
G.D. Searle
(NutraSweet)
Dupont (Teflon)
IBM (Personal
Computer)
Matsushita (VHS Video
Recorders)
Seiko (Quartz Watch)
RC Cola (diet cola)
EMI (scanner)
Bowmar(pocket
calculator)
Kodak (instant
photography)
Northrup (F20)
DEC (personal
computer)
Innovator Imitator
Win
Lose
The fundamental building blocks.

9 Msc in Innovative Technology Engineering, 8/16/2014
Appropriability Regime

Complimentary Assets

Dominant Design Paradigm
Capturing the Rent Stream from Innovation:
Appropriability regime

10 Msc in Innovative Technology Engineering, 8/16/2014
Strong

Weak

Modes of Appropriability (examples)
Patents
Trade Secrets
Copyrights
Trademark
Lead Time Advantage
Secrecy
Complexity of Design
*efficacy
Nature of technology
Dominant design paradigm

11 Msc in Innovative Technology Engineering, 8/16/2014
*Thomas Kuhn (1970)
Complementary assets

12 Msc in Innovative Technology Engineering, 8/16/2014
Types of complementary assets

13 Msc in Innovative Technology Engineering, 8/16/2014
Generic

Specialized

Co-Specialized
Channel selection for complementary
assets

14 Msc in Innovative Technology Engineering, 8/16/2014
Contractual Mode

Integration Mode

Mixed Mode
Interpretations
Open for improvements.
8/16/2014 Msc in Innovative Technology Engineering, 15
Distribution of economic rents: 1 of 3

16 Msc in Innovative Technology Engineering, 8/16/2014
Post Paradigmatic Pre Paradigmatic
W
e
a
k

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

S
t
r
o
n
g

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

Generic complementary assets dominant
Innovators
Imitators
Innovators
Distributed
Distribution of economic rents: 2 of 3

17 Msc in Innovative Technology Engineering 8/16/2014
Post Paradigmatic Pre Paradigmatic
W
e
a
k

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

S
t
r
o
n
g

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

Specialized Complementary Assets Dominant
Innovators & Suppliers
Imitators & Suppliers
Suppliers
Distributed
*Integrate
*Godfrey Houndsfield with EMI Scanner
Distribution of economic rents: 3 of 3

18
Msc in Innovative Technology Engineering,
W20056967
8/16/2014
Post Paradigmatic Pre Paradigmatic
W
e
a
k

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

S
t
r
o
n
g

A
p
p
r
o
p
r
i
a
b
i
l
i
t
y

Co-Specialized complementary assets dominant
Innovators & Suppliers
Imitators & Suppliers
Innovators & Suppliers
Distributed
The Link between paper 1 and paper 2

19 Msc in Innovative Technology Engineering, 8/16/2014
Appropriability Regime

Complimentary Assets

Dominant Design Paradigm
Paper 2
Small companies adopt IPR's only
under highly selective
circumstances. Thoma and Bizer
8/16/2014 Msc in Innovative Technology Engineering, 20
The survey of German SMEs
21 Msc in Innovative Technology Engineering, 8/16/2014
Cluster 1 Cluster 2 Cluster 3 Cluster 4
Secrecy Patent Trademark No Usage of
protection
Mechanisms
Complexity of
Design
Utility Model Copyright
Lead Time
Advantage
Trademark Secrecy
Secrecy Complexity of
Design
Lead Time
Advantage
Lead Time
Advantage
Survey of 1251 German SMEs to identify their intellectual property management strategies
Percentage distribution
22 Msc in Innovative Technology Engineering, 8/16/2014
Percentage per cluster
Secrecy, complexity of
design, lead time
Patent, utility model,
trademark, secrecy,
lead time
Trademark, copyright,
secrecy, complexity of
design, lead time
No usage of innovation
protection mechanisms
64%
19%
11%
6%
Environmental factors
23 Msc in Innovative Technology Engineering, 8/16/2014
Factors Cluster 1 Cluster 2 Cluster 3 Cluster 4
Industry Sector Knowledge-
intensive
manufacturing
and service
firms
Knowledge-
intensive
manufacturing
firms
Well
represented in
all sectors apart
from non-
knowledge
intensive
services
Non-knowledge
intensive
manufacturing
and service
firms
Geographical
markets
Intermediate
position
Strong
international
orientation
Intermediate
position
Strong regional
business focus
Type of competitors and competition
24 Msc in Innovative Technology Engineering, 8/16/2014
Factors Cluster 1 Cluster 2 Cluster 3 Cluster 4
Main
competitors
Smaller number
of main
competitors
Main
competitors
often larger in
size
Smaller number
of main
competitors
Main
competitors
often larger in
size
Smaller number
of main
competitors
Main
competitors
often larger in
size
Larger number
of main
competitors
Main
competitors
often similar in
size
Type of
competition
Non-price
competition
Technological
edge
Non-price
competition
Technological
edge Relatively
low relevance of
customer service
and flexibility
Non-price
competition
Relatively low
relevance of
customer service
and flexibility
Price
competition
Features of competition
25 Msc in Innovative Technology Engineering 8/16/2014
Factors Cluster 1 Cluster 2 Cluster 3 Cluster 4
Features of
competition
Difficult of
substitution
Shorter product
life cycles Faster
pace of
technology
Difficult
substitution
Intermediate
position in terms
of market
dynamism
Difficult
substitution
Intermediate
position in terms
of market
dynamism
Easy substitution
Longer product
life cycles Slower
pace of
technology
Types of innovation
26 Msc in Innovative Technology Engineering, 8/16/2014
Factors Cluster 1 Cluster 2 Cluster 3 Cluster 4
Type of
innovator
Comprehensive
innovators
Product-only
innovators
Comprehensive
innovators
Product-only
innovators
All types of
innovators
Process-only
innovators
Nascent
innovators
Effects of innovation
27 Msc in Innovative Technology Engineering 8/16/2014
Factors Cluster 1 Cluster 2 Cluster 3 Cluster 4
Degree and
effects of
innovation
Quality
innovations
New-to-market
innovations
New-to-firm
innovations
Relatively low
relevance of
most effects
related to
process
innovations
No specificities Lower
engagement in
significant
product
innovation
Lower relevance
of product-
oriented
innovation
effects
Combining Paper 1 and 2
28 Msc in Innovative Technology Engineering 8/16/2014
IP Strategies
Appropriability
Regime
Dominant Design
Paradigm
Pre Paradigmatic
Stage
Post Paradigmatic
Stage
Complementary
Assets
Generic
Specialized
Co Specialized
AM
Effects of
Inn.
Prperties
Of Innov.
Compet.
Environ.
* Interpretation
Of the three fundamental blocks affecting
distribution of economic rents, appropriability
regime is most controllable.
SMEs tend to choose appropriability modes
that best suit their environment and the
nature of innovation.
Conclusions
29 Msc in Innovative Technology Engineering 8/16/2014
Thank You.
~ Questions Please ~
8/16/2014 Msc in Innovative Technology Engineering, 30