Strategic Behaviors and Competition: Intangibles, Intellectual Property and Innovation

Abstract:     
Intangibles such as intellectual property rights are an increasingly important source of value for businesses today. This increasing importance has significance for the uses of intangibles by companies and the mechanisms and behaviors by which companies extract value from intangibles. The manners in which holders of intellectual property rights wield such rights can play an important role in shaping the effective functioning of intellectual property frameworks. Although intellectual property rights may serve as important tools of innovation, empirical evidence shows that in many industries intellectual property protection is not a primary means by which innovation is protected. Moreover, increasingly pervasive intellectual property portfolio management strategies are often combined today with broad grants of intellectual property rights. These factors may promote strategic uses of intangibles that are thought to be increasingly characteristic of business practice today. These factors may also permit and even encourage the holders of such rights to use them offensively as strategic weapons in a manner that may actually be a disincentive to diffusion and future innovation. Existing models of intellectual property rights focus to a large extent on assumptions about ex ante incentives for individual creators and inventors. Under the intangibles paradigm, new markets for new products and technologies have arisen that suggest a more complex picture of incentives with respect to intellectual property, some of which may challenge dominant assumptions. The operation of markets for technology and uses of intellectual property rights today also suggest that greater attention should be paid to the implications of the uses of intellectual property rights for markets, market competition and future innovation.

Keywords: Intangibles, Intellectual Property, Legal Framework, Intellectual Capital, strategic behaviors, competition, innovation, intellectual property portfolio management

JEL Classifications: H11, K11, K40, O31, O34

Working Paper Series