Modularity for value appropriation

Description

The existing theory of modularity explains how modular designs create value. We extend this theory to address value appropriation. A product or process design that is modular with respect to intellectual property (IP) allows firms to better capture value in situations where knowledge and value creation are distributed across many actors. We propose a theory of IP modularity based on value maximization net of transaction and agency costs. We then use case examples to extend the theory into practical settings and derive strategic recommendations and empirical predictions.

Description

Existing theory of modularity explains how modular designs create value. We extend this theory to address value appropriation. A product or process design that is modular with respect to intellectual property (IP) allows firms to better capture value in situations where knowledge and value creation are distributed across many actors. We use case studies to develop an inductive theory of "IP modularity," from which we derive testable propositions and managerial implications. Keywords: modularity, value appropriation, intellectual property, open innovation, design.

Subjects

Series Statement

• Working paper / Harvard Business School -- 09-097

Other Editions

• Modularity for value appropriation: drawing the boundaries of intellectual propertyHarvard Business School2009-01-01
• Modularity for value appropriationHarvard Business School2010-01-01