Complements and Substitutes in Value Appropriation – A Choice Experimental Approach

Abstract:     
The ability of firms to effectively use mechanisms that support them in appropriating value from innovation is key to outperforming competitors. Yet, such mechanisms have, for the most part, been studied in isolation, without accounting for interactions between them. We address this gap by studying interactions between product-related patents and three other appropriability mechanisms. To this end, we conduct and analyze a series of discrete choice experiments with 319 managers within a leading international communications equipment company. As a result, we find the number of product-related patents to be complementary to the overall size of the patent portfolio, complementary – with an interesting exception – to contributions to open standards, and substitutive to lead time advantages. Of particular theoretical interest is the existence of both complementarities and substitutabilities within the focal bundle of mechanisms. The complexity of the interactions perceived by managers supports the notion of an important and, because it involves activating complementarities and avoiding substitutabilities among mechanisms, challenging managerial task. Furthermore, accounting for interactions between patents and other appropriability mechanisms helps to explain the patent paradox. Theoretical and managerial implications are discussed.

Number of Pages in PDF File: 40

working papers series