IP Modularity: Profiting from Innovation by Aligning Product Architecture with Intellectual Property
Harvard Business School Finance Working Paper No. 13-012
Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 13-012
25 Pages Posted: 2 Aug 2012 Last revised: 7 Dec 2012
Date Written: November 30, 2012
Abstract
In this paper we explain how firms seeking to take advantage of distributed innovation and outsourcing can bridge the tension between value creation and value capture by modifying the modular structure of their technical systems. Specifically, we introduce the concept of “IP modularity”, a special form of modularity that seeks to protect and capture value from intellectual property (IP). We define what it means for a system to be “IP-modular,” and illustrate the application of this concept in a number of practical situations. From the examples, we derive a comprehensive framework that can be used to design and evaluate value capture strategies for modular systems.
Keywords: Modularity, value appropriation, distributed innovation, open innovation, intellectual property
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