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Factors Affecting Intellectual Property Strategy in SME's

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This Presentation explores various factors that affect the development of intellectual property strategies with reference to small to medium enterprises.

Text of Factors Affecting Intellectual Property Strategy in SME's

Intellectual Properly Strategy 2.0

Factors affecting Intellectual Property Strategies in SMEsBy Aditya KochharM.Sc. In Innovative Technology8/17/2014Msc in Innovative Technology Engineering,1To understand various factors that affect the development of intellectual property strategies with reference to SMEs.Objective2Msc in Innovative Technology Engineering, 8/17/20142Teece, D.J. Capturing Value from Technological Innovation: Integration, Strategic Partnering, and Licensing Decisions Interfaces, Vol. 18, No. 3. (1988), pp. 46-61.Thom, J. and K. Bizer "To protect or not to protect? Modes of appropriability in the small enterprise sector." Research Policy(2012), http://dx.doi.org.ezproxy.wit.ie:2048/10.1016/j.respol.2012.04.019.Papers researched3Msc in Innovative Technology Engineering,8/17/20143IntroductionPaper 1 Fundamental building blocks of rent distribution that play key role in defining intellectual property strategies.Paper 2- Empirical analysis of factors within one of the blocks in an SME environment.Combining Paper 1 and Paper 2 Conclusions

Overview4Msc in Innovative Technology Engineering,8/17/2014

4Intellectual Property Strategy is an important aspect of todays business. Small to Medium Enterprises are a backbone of a nation's economy.The factors affecting intellectual property strategy are constantly evolving with time.Introduction5Msc in Innovative Technology Engineering, 8/17/2014

5Paper 1Myriads of would-be innovators have discovered that technical success is necessary but not sufficient for establishing economic utility and commercial acceptance. David J. Teece8/17/2014Msc in Innovative Technology Engineering, 6There are other factors as well that affect the commercial success of innovations.6

Economic rents are always shared.

7Msc in Innovative Technology Engineering, 8/17/2014 Economic Rents/ Profits/Benefits of Innovation are always shared.

A large part of the benefits of the innovation are distributed amongst Customers, suppliers and imitators7Examples of success and failure.

8Msc in Innovative Technology Engineering, 8/17/2014Pilkington (Float Glass)G.D. Searle (NutraSweet)Dupont (Teflon)IBM (Personal Computer)Matsushita (VHS Video Recorders)Seiko (Quartz Watch)RC Cola (diet cola)EMI (scanner)Bowmar(pocket calculator)Kodak (instant photography)Northrup (F20)DEC (personal computer)InnovatorImitatorWinLose

Example: EMI (Electronic Musical Instruments, UK) pioneered CAT Scan Technology but was not able to commercialize it in US because of the lack of service and marketing network in US.8The fundamental building blocks.

9Msc in Innovative Technology Engineering, 8/17/2014Appropriability Regime

Complimentary Assets

Dominant Design ParadigmCapturing the Rent Stream from Innovation:

9Appropriability regime

10Msc in Innovative Technology Engineering, 8/17/2014 Strong

Weak

Modes of Appropriability (examples)PatentsTrade SecretsCopyrightsTrademarkLead Time AdvantageSecrecyComplexity of Design*efficacyNature of technologyThe term regime of appropriability refers to aspects of the commercial environment, excluding firm and market structure, that govern an innovator's ability to capture the rents associated with innovation. The most important dimensions of such a regime are the nature of the technology and the efficacy of legal mechanisms of protection such as patents, copyrights, and trade secrets.

10Dominant design paradigm

11Msc in Innovative Technology Engineering, 8/17/2014

*Thomas Kuhn (1970)Thomas Kuhn (1970)When new technologies are commercialized, process innovation often follows product innovation. As the rate of product innovation slows, designs in the marketplace tend to become more standardized, providing the opportunity for large-scale production and the deployment of specialized assets. The natureof competition and the requirements for marketplace success shift dramatically as the market evolves from its early preparadigmatic phase (with competition based on features and product performance) to its post paradigmatic phase (with competition based more on price).11Complementary assets

12Msc in Innovative Technology Engineering, 8/17/2014

In order to innovate, firms need complementary assets and technologies to support the commercialization of some core technology. These assets typically include manufacturing, distribution, and sales and service. They may already reside in-house. If not, they are conceivably available through merger, acquisition, or contract. The key consideration is the terms upon which they are available to the innovator.12Types of complementary assets

13Msc in Innovative Technology Engineering, 8/17/2014 Generic

Specialized

Co-Specialized

In order to innovate, firms need complementary assets and technologies to support the commercialization of some core technology. These assets typically include manufacturing, distribution, and sales and service. They may already reside in-house. If not, they are conceivably available through merger, acquisition, or contract. The key consideration is the terms upon which they are available to the innovator.13Channel selection for complementary assets

14Msc in Innovative Technology Engineering,8/17/2014 Contractual Mode

Integration Mode

Mixed Mode

14InterpretationsOpen for improvements.8/17/2014Msc in Innovative Technology Engineering,15Distribution of economic rents: 1 of 3

16Msc in Innovative Technology Engineering,8/17/2014Post ParadigmaticPre ParadigmaticWeak AppropriabilityStrong AppropriabilityGeneric complementary assets dominantInnovatorsImitatorsInnovatorsDistributed

16Distribution of economic rents: 2 of 3

17Msc in Innovative Technology Engineering8/17/2014Post ParadigmaticPre ParadigmaticWeak AppropriabilityStrong AppropriabilitySpecialized Complementary Assets DominantInnovators & SuppliersImitators & SuppliersSuppliersDistributed

*Integrate*Godfrey Houndsfield with EMI Scanner17Distribution of economic rents: 3 of 3

18Msc in Innovative Technology Engineering, W200569678/17/2014Post ParadigmaticPre ParadigmaticWeak AppropriabilityStrong AppropriabilityCo-Specialized complementary assets dominantInnovators & SuppliersImitators & SuppliersInnovators & SuppliersDistributed

18The Link between paper 1 and paper 2

19Msc in Innovative Technology Engineering, 8/17/2014Appropriability Regime

Complimentary Assets

Dominant Design Paradigm19Paper 2Small companies adopt IPR's only under highly selective circumstances. Thoma and Bizer8/17/2014Msc in Innovative Technology Engineering, 20The survey of German SMEs21Msc in Innovative Technology Engineering, 8/17/2014Cluster 1Cluster 2Cluster 3Cluster 4SecrecyPatentTrademarkNo Usage of protection MechanismsComplexity of DesignUtility ModelCopyrightLead Time AdvantageTrademarkSecrecySecrecyComplexity of DesignLead Time AdvantageLead Time AdvantageSurvey of 1251 German SMEs to identify their intellectual property management strategiesThe paper discusses that the strategic instruments used in the SMEs can be divided into four clusters.

Lead Time Advantage Dominant ClusterPatent Dominant ClusterCopyright Dominant ClusterNo Usage Cluster

Now, we get the SMEs forming these clusters is because of the nature of business these firms are into.

Lead Time Advantage Dominant Cluster belongs mostly to manufacturing firms that produce products with short generation cycles, particularly, 6 months or less. For example, low end consumer electronics. In this senario, a patent is not of much help, because generally, it takes at least 18 months to get legal protection on a patent, by that time the product is old and is of much less commercial value.

Patent Dominant Group belongs to firms wth 21Percentage distribution22Msc in Innovative Technology Engineering, 8/17/201464%19%11%6%Small companies adopt IPR's only under highly selective circumstances.Lead time advantage and secrecy are far more effective in preventing imitation than patents in industries where short product life cycles and fast pace of technological advance are characteristic.Small firms often follow a niche or differentiation strategy to overcome scale related disadvantages in innovation.distinctiveness: by price, by technology, in the eyes of consumer.IPRs effectively generate distinctiveness in relation to technological novelty and consumer perspective. (technology and design based competition)IPRs are not effective in markets with strong price competition.Maintaining lead time advantage over competitors is considered as most important.High relevance to secrecy and complexity of designComplexity of design is used as a substitute to patents.Patents and secrecy are used together (two types - keeping secret core technological knowhow and patenting codified components, by using secrecy in early stages and patenting at commercialization stage)innovations in the first cluster are less patentable than the secondInnovations might not suffice patenting requirements due to incremental level of innovationsLow Investment and patents are expensiveFirms of patent oriented group have in house R&D on a permanent basisLow Knowledge intensity firms - no protectionPatent group - Knowledge Intensive ManufacturingInformal Group - Knowledge Intensive Manufacturing and ServicesNo protection group - No new to market innovationsprocess innovations with tacitness of knowledge require less protectionExports - higher IPR or informal protectionregional business - no protectionlead time advantage - short product life cycle and pace of technological advanceprotection groups have large counterpartsprotection groups follow niche or differentiation strategies to counter scale production and hence need protectionTabl