Control versus Execution: Endogenous Appropriability and Entrepreneurial Strategy

40 Pages Posted: 4 Apr 2017 Last revised: 16 May 2018

See all articles by Kenny Ching

Kenny Ching

University College London - Department of Management Science and Innovation; Massachusetts Institute of Technology (MIT)

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 24, 2018

Abstract

This paper considers the role of Rosenbergian uncertainty (i.e., economic uncertainties that arise after successful invention) in shaping appropriability for start-up innovators. Rather than assuming that the appropriability regime surrounding an innovation is exogenous, we focus on the endogenous choice entrepreneurs face between investing in ensuring control-based appropriability versus investing in the execution and operation of their fledgling businesses. Investment in execution allows entrepreneurs to advance more quickly than competitors, while control requires delays in commercialization. Control and execution are strategic substitutes as they represent alternative paths to earning future rents. Because the size and likelihood of these rents is uncertain, entrepreneurs may be unable to rank these alternative paths in advance, and so their endogenous choice will be grounded in factors such as individual preferences, capabilities, or coherence with their overall entrepreneurial strategy. A subtle consequence is that the appropriability regime ultimately governing an innovation will be the result of the endogenous choices of the entrepreneur rather than more traditional environmental factors. Motivated by notable historical examples such as the invention and commercialization of the telephone, we explore these ideas by considering the choice of appropriability regime among a sample of academic entrepreneurs: within a sample of ventures that could have been developed by either faculty or students (or both), we find that faculty-led ventures are much more closely associated with formal intellectual property, student-led ventures are more rapid in their commercialization activities, and, relative to faculty-led ventures, student-led ventures display a tradeoff between patenting and commercialization speed.

Keywords: control, execution, uncertainty, appropriability, intellectual property protection, commercialization

JEL Classification: O32, O34

Suggested Citation

Ching, Kenny and Gans, Joshua S. and Stern, Scott, Control versus Execution: Endogenous Appropriability and Entrepreneurial Strategy (March 24, 2018). Available at SSRN: https://ssrn.com/abstract=2946078 or http://dx.doi.org/10.2139/ssrn.2946078

Kenny Ching

University College London - Department of Management Science and Innovation ( email )

Gower Street
London, England WC1E 6BT
United Kingdom

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States
617-253-3053 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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