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Strategies That Work When Property Rights Don't

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  • Bharat Anand
  • Alexander Galetovic

Abstract

In many sectors property rights over knowledge and information are weak as they are embodied in employees, competitors can copy or customers can pirate. Yet comprehensive studies show that firms systematically invest in these assets. We offer a simple taxonomy of strategies that firms use to cope with weak property rights. We classify these strategies in three groups: (i) Some firms threaten offenders with strong competition. (ii) Other firms exploit complementarities and offer potential offenders a better deal than they can get elsewhere. (iii) And yet other firms exploit weak property rights and make profits on complementary assets or products that they can own. We go beyond taxonomy by showing when a particular strategy works. It depends systematically on the characteristics of both the asset and the investing firm.

Suggested Citation

  • Bharat Anand & Alexander Galetovic, 2003. "Strategies That Work When Property Rights Don't," Documentos de Trabajo 168, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:168
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    References listed on IDEAS

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    1. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 51-78, National Bureau of Economic Research, Inc.
    2. Josh Lerner, 2002. "Where Does State Street Lead? A First Look at Finance Patents, 1971 to 2000," Journal of Finance, American Finance Association, vol. 57(2), pages 901-930, April.
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