Profiting from Technological Innovation: Implications for Integration, Collabora

Question

Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy

Innovating firms often fail to obtain significant returns on their investment, giving up the profits to customers, imitators, or other industry participants. “Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy”, analyzes why this occurs, and gives recommendations as to how an innovator should proceed and strategize. Three building blocks that comprise the equation for success are explained, specifically regime of appropriability, dominant design paradigm, and complementary assets. Decision tables and a flowchart are presented for complementary asset integration versus contract.

QUESTIONS

What is a possible advantage of a smaller less integrated company making a contract with an established company?

Why is it hard for an innovator to form strategic partnering or attract venture capital?

What is an example of opportunistic abuse on the part of the innovator and on the part of the venture capitalist?

When is strategic partnering ideal for the innovator?

Explanation / Answer

Q1) The possible advantage of a smaller less integrated company making a contract with an established company is that a clear strategic direction will be available which helps the firm in accomplishing the objectives. Depending on the terms of contract, the firm can take advantage of the available resources or funds from the established company to innovate as well as take care of normal operations. The firm also gets the technological as well as intellectual support when needed.

Q2) Innovators create something new which has never been tried and tested before. Hence, investing in a completely new idea or product requires a detailed business plan which includes the research and development, technical/functional understanding, financial feasibility etc. to ensure the investor or venture capitalist is confident. In addition to these, there should be a pilot testing done to prove the product's success to prove the worth of the idea.

Q3) Opportunistic abuse on the part of innovator is when the innovator misuses the funds provided by the venture capitalist and doesn't provide any solid outcome.

Opportunistic abuse on the part of venture capitalist is when they put a lot of pressure on the innovator without giving them much time just on the basis of funds they offered to get the product out in the market and get the business running. Also, venture capitalist might create new clauses depending on the possible success of the product/service.

Q4) Strategic partnering is ideal for innovator when -

1. It is supported financially and technologically by the partner

2. It is provided the required space and time to innovate without putting too much pressure

3. The original product intellectual propert rights remain the assets of the innovator as per the contract

4. The firm helps the innovator in marketing efforts.

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