Modularity for Value Appropriation – How to Draw the Boundaries of Intellectual Property

45 Pages Posted: 11 Feb 2009 Last revised: 28 Feb 2015

See all articles by Joachim Henkel

Joachim Henkel

TUM School of Management - Technische Universität München (TUM)

Carliss Y. Baldwin

Harvard Business School, Finance Unit

Date Written: November 29, 2010

Abstract

The existing theory of modularity explains how modular designs create value. We extend this theory to address value appropriation. A product or process design that is modular with respect to intellectual property (IP) allows firms to better capture value in situations where knowledge and value creation are distributed across many actors. We propose a theory of IP modularity based on value maximization net of transaction and agency costs. We then use case examples to extend the theory into practical settings and derive strategic recommendations and empirical predictions.

Keywords: Modularity, value appropriation, intellectual property, open innovation, design

JEL Classification: D23, K11, L14, O32

Suggested Citation

Henkel, Joachim and Baldwin, Carliss Y., Modularity for Value Appropriation – How to Draw the Boundaries of Intellectual Property (November 29, 2010). Harvard Business School Finance Working Paper No. 11-054. Available at SSRN: https://ssrn.com/abstract=1340445 or http://dx.doi.org/10.2139/ssrn.1340445

Joachim Henkel (Contact Author)

TUM School of Management - Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

Carliss Y. Baldwin

Harvard Business School, Finance Unit ( email )

Boston, MA 02163
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
445
Abstract Views
2,813
rank
63,171
PlumX Metrics