The Impact of Modularity on Intellectual Property and Value Appropriation

40 Pages Posted: 12 Dec 2011 Last revised: 21 Nov 2012

See all articles by Carliss Y. Baldwin

Carliss Y. Baldwin

Harvard Business School

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM)

Date Written: November 20, 2012

Abstract

Modularity is a means of partitioning technical knowledge about a product or process. When state-sanctioned intellectual property rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect intellectual property (IP). We investigate the impact of modularity on IP protection by formally modeling three different threats to the value of IP: (1) unauthorized use by known agents; imitation or substitution by third parties; and the withdrawal of IP by agents or third party owners. For each threat, we consider the impact of modularity in the presence or absence of an effective legal system. The models permit us to identify specific strategies for protecting IP and thus capturing value in modular systems. We illustrate each of the major strategies with examples from practice.

Keywords: Modularity, value appropriation, intellectual property

Suggested Citation

Baldwin, Carliss Y. and Henkel, Joachim, The Impact of Modularity on Intellectual Property and Value Appropriation (November 20, 2012). Harvard Business School Finance Working Paper No. 12-040, Available at SSRN: https://ssrn.com/abstract=1971203 or http://dx.doi.org/10.2139/ssrn.1971203

Carliss Y. Baldwin (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
334
Abstract Views
2,285
rank
108,885
PlumX Metrics