Sincerity is a dangerous thing: On how appropriability regimes shape innovation strategies

Abstract

Since the pioneeringwork of David J. Teece ("Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy", Research Policy 15, 1986), the concept of "appropriability regime" -defined as the level of threat stemming from potential imitators in the firm's environment- has been useful in describing specific sectoral patterns at the aggregate level. However, there have been few attempts to formally prove the impact of different regimes on knowledge management strategies at the firm-level. Using firm-level longitudinal data from software and hardware sectors in Spain, we show that differences in appropriability regimes condition the profitability of open innovation strategies, and also induce specific patterns in firms' knowledge management strategies. More specifically, we show that the appearance of diminishing returns from an open innovation strategy is more accelerated in firms immersed in weaker regimes (i.e. firms facing more threats from potential imitators). We also show that this is due to the fact that such firms must resort to more complex (and costly) practices that go far beyond the legal protection of intellectual property, internalizing other management practices related to productive capacity and the commercialization of innovations.