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Endogenous Appropriability

Author

Listed:
  • Joshua S. Gans
  • Scott Stern

Abstract

Most approaches to entrepreneurship assume that entrepreneurial control over their inventions is critical for success and, in turn, for incentives. Such control is usually supported by regulations that protect intellectual property including patents, copyrights, and trade secrets. Each give the entrepreneurs control over who can appropriate value from their activities. However, we note that another, distinct path exists for appropriation by entrepreneurs' execution. Execution forgoes the formal protection from control instead of a more rapid approach to market in the pursuit of capabilities that will allow entrepreneurs to compete with others in the future rather than block their activities per se. We characterize the conditions under which one path is preferred to another and present evidence from university startups delineating the tradeoffs at the heart of our theoretical approach.

Suggested Citation

  • Joshua S. Gans & Scott Stern, 2017. "Endogenous Appropriability," American Economic Review, American Economic Association, vol. 107(5), pages 317-321, May.
  • Handle: RePEc:aea:aecrev:v:107:y:2017:i:5:p:317-21
    Note: DOI: 10.1257/aer.p20171011
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    References listed on IDEAS

    as
    1. Richard R. Nelson, 1959. "The Economics of Invention: A Survey of the Literature," The Journal of Business, University of Chicago Press, vol. 32, pages 101-101.
    2. repec:bla:stratm:v:29:y:2008:i:1:p:1-26 is not listed on IDEAS
    3. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87 World Scientific Publishing Co. Pte. Ltd..
    4. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    5. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    6. repec:bla:stratm:v:18:y:1997:i:7:p:509-533 is not listed on IDEAS
    7. Gans, Joshua S. & Stern, Scott, 2003. "The product market and the market for "ideas": commercialization strategies for technology entrepreneurs," Research Policy, Elsevier, vol. 32(2), pages 333-350, February.
    8. Joshua S. Cans & Scott Stern, 2000. "Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 485-511, December.
    9. Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. repec:oup:indcch:v:28:y:2019:i:2:p:389-408. is not listed on IDEAS
    2. Burkhard C. Schipper & Kevin Bryan & Michael Ryall, 2019. "Value-Capture in the Face of Known and Unknown Unknowns," Working Papers 333, University of California, Davis, Department of Economics.
    3. Kenny Ching & Joshua Gans & Scott Stern, 2019. "Control versus execution: endogenous appropriability and entrepreneurial strategy," Industrial and Corporate Change, Oxford University Press, vol. 28(2), pages 389-408.
    4. repec:eee:respol:v:47:y:2018:i:2:p:343-362 is not listed on IDEAS
    5. Galasso, Alberto & Mitchell, Matthew & Virag, Gabor, 2018. "A theory of grand innovation prizes," Research Policy, Elsevier, vol. 47(2), pages 343-362.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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