Academic journal article Advances in Competitiveness Research

Innovation without Property Rights and Property Rights without Innovation: Recent Developments in the ICT Sector

Academic journal article Advances in Competitiveness Research

Innovation without Property Rights and Property Rights without Innovation: Recent Developments in the ICT Sector

Article excerpt


At one end of the spectrum, the rapid diffusion of open source software (OSS) since the mid-1990s could loosely be characterized as freely shared innovation, unencumbered by the kind of formal intellectual property rights such as patents that have been traditionally relied upon by the owner of such intellectual property to protect its proprietary products from appropriation by others. At the other end of the spectrum, litigation to enforce the owner's formal intellectual property rights, particularly patents, could be characterized as fostering a legal regime that has imposed additional costs and risks on innovators that are extrinsic to the costs and risks inherent in R&D undertakings.

The reality lies somewhere in between these two polar extremes. As discussed below, patents and open source can co-exist quite well and provide a framework that combines the best of both worlds, producing a mutually reinforcing climate to bring about more socially useful innovation.


Open Innovation

The emergence of an open innovation model, which involves firms opening up their otherwise proprietary innovation to external players in order to accelerate their internal innovation has been suggested by Chesbrough (2003, 2006), Moore (1993, 1996) and Radjou (2006), among others.

Chesbrough (2006) defines open innovation as "the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively" (p.1). Open innovation model is the opposite of closed model, where R&D is vertically integrated and innovation in terms of new products, services, and processes is internally developed and zealously protected through IPRs to prevent imitation by competitors. Open innovation involves mutual sharing by firms of otherwise proprietary knowledge and mixing competition and cooperation to create greater value for all (Isckia and Lescop, 2009). Open innovation, when combined with open coordination leads to business ecosystem, which represents the interplay between multiple industries with wider and beneficial implications for all (Chesbrough and Appleyard, 2007). As an example of business ecosystem, Moore (1993) suggests that IBM's decision in the 1980s to make its personal computer (PC) architecture public led to numerous IBM compatible PCs which when coupled with Microsoft's operating system and Intel's microprocessors set the standard in the PC industry and facilitated the profiliferation of independent application software developers, video content developers, and the like. When open innovation model works well, it is a win-win outcome for all the players in the network. Chesbrough and Appleyard (2007) provide a taxanomy of outcomes in terms of open innovation and closed innovation depending on two dimensions--how the value is created (in-house vs. community-driven) and how the value is captured (company versus ecosystem). As shown in Figure 1, Microsoft, which develops the source code for its operating system in-house and captures much of the value through IPRs is a case of closed innovation. At the other end of the spectrum--the lower right quandrant--is the Linux kernel operating system, whose creation is community--driven and benefits diffused, represents a clear phase of open innovation. One might characterize the upper right and the lower left quandrants as mixed models of innovations. In the upper right quandrant, the owner of My Space, News Corporation, captures the value of the content contributed by the community through advertising. Similarly, in the lower left quandrant, IBM creates the Linux code in-house (which in turn contributes to the Linux kernel operating system) and the value is captured by the broader community including IBM, which is likely to be the largest beneficiary given its size and diversity of needs.

More recently, Isckia, and Lescop (2009) documented the evolution of Amazon as a firm that increasingly moved towards a mixed model of closed and open innovation. …

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