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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.
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IP modularity: profiting from innovation by aligning product architecture with intellectual property
2012, Harvard Business School
in English
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IP modularity: profiting from innovation by aligning product architecture with intellectual property
2012, Harvard Business School
in English
- Revised edition
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Book Details
Edition Notes
"August 2012. (Revised November 2012.)" -- Publisher's website.
Includes bibliographical references (pages 21-23).
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Distributed value creation can boost the overall value created, but may create serious challenges for capturing value. In order to draw in external contributors, an innovator often waives legal exclusion rights or reveals formerly exclusive knowledge. But as a result, contributors may appropriate a large share of the jointly created value. In turn, integrating external contributions entails the risk of becoming dependent on outside owners of IP. To address this tension we propose the concept of "IP modularity." We argue that, by managing a system's modular structure in conjunction with its IP, firms can reconcile distributed innovation with value capture.
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