Lee Davis

Intellectual property rights, strategy and policy

This introductory essay to the special edition explores the changing role of intellectual property rights (IPRs), and the implications of these changes for firm strategy and industrial policy. Four recent, interrelated trends are important in this regard: (1) the growing prominence of intangible assets as sources of competitive advantage, (2) the globalization of business activities, (3) advances in digital technologies of replicability and transferability, and (4) changes in the legal framework governing the strength and scope of IPRs. We focus, in particular, on the impact of these trends on the importance and effectiveness of patents. We argue that while patents have become more valuable to firms, to fulfill a variety of strategic goals, they seem to have become less effective in actually motivating R&D. This distorts the ‘bargain’ implied by the patent system, increasing the social costs of patenting while decreasing the social benefits. To help restore this balance, various reforms may be implemented, including the use of alternative incentive systems.

Leisure Time Invention

This paper studies the contextual factors that influence whether invention occurs during work time or leisure time. Leisure time invention, a potentially important but thus far largely unexplored source of employee creativity, refers to invention where the main underlying idea occurs while the employee is away from the workplace. We build on existing theory in the fields of organizational creativity and knowledge recombination, especially work relating context to creativity. The paper’s main theoretical contribution is to extend our understanding of the boundaries of employee creativity by adding to the discussion of how access to and exploitation of different types of resources—during work hours or during leisure time—may affect creativity. Based on survey data from more than 3,000 inventions from German employee inventors, we find that leisure time inventions are more frequently observed for conceptually based problems, in cases where interactions with people outside the organization are important for making the invention, and for smaller research and development projects. Our findings also suggest that employee inventions during work time may become more “embedded” in an environment of path-dependent resources than those made during leisure time.

Prizes as Incentives. Reflections on a Century o f Aviation Contests

The dream of ‘space tourism’ has long been confined to the imaginations of science fiction writers. But in 1996, former aerospace engineer Peter Diamandis announced the

Why do Small High-Tech Firms Take Out Patents, and Why Not?

10 million ‘X-Prize’, to jump-start the development of a new generation of launch vehicles to carry ordinary people into space. In late October 2004, test pilot Mike Melville successfully flew the SpaceShipOne more than one hundred kilometres into the upper atmosphere, briefly experiencing weightlessness, before returning to earth. In early November, another test pilot, Commander Brian Binnie repeated the trip, and won the prize. A new era of suborbital passenger flight had begun (Bigelow, 2004; Davis & Davis, 2004).

Profiting from innovations in digital information goods: the role of intellectual property rights

Intellectual Property Rights is cutting edge in addressing current debates affecting businesses, industry sectors and society today, and in focusing not only on the enabling welfare effects of IPR systems, but also on some of the possible adverse effects of IPR systems.

Patent Policies of Small Danish Firms in Three Industries

Advances in digital technology have substantially reduced the costs of reproducing and distributing digital information goods such as computer programs and games, documents, and works of music. Yet while abuses of intellectual property rights are difficult to trace, and infringement suits are expensive and uncertain to prosecute, innovation in these goods has continued unabated. This paper asks: How do firms appropriate the rents from their investments in R&D in digital information goods? To a certain extent, developments in digital technology fundamentally challenge commonly accepted precepts of how firms profit from investments in R&D. Yet software firms have made extensive use of traditional intellectual property rights like patents, copyrights, and trademarks. They have also adopted other approaches to appropriability, including cooperation with academic researchers, first-mover advantages, technical methods to restrict access such as encryption, cross-subsidization, price differentiation, and exploiting network externalities. Given the complexity of appropriating the rents from digital information goods, how effective are the different approaches, and what is the role of intellectual property rights?.

Subsidiary research and development, and the local environment

Empirical surveys of the economic effects of patents have uncovered striking industry differences in patent effectiveness and importance (e.g., Cohen et al.. 2000; Harabi, 1995; Bertin & Wyatt, 1988; Levin et al., 1987). Other studies have focused specifically on the role of patents in high-tech sectors. In telecommunications, for example, firms typically cross-license their inventions, using patents as a kind of bargaining tool or trading currency to secure appropriability (e.g., Grindley & Teece, 1997; Hall & Ham, 1999). The software industry is interesting because the nature of digital technology renders appropriability difficult (e.g., Conner & Rumelt, 1991; Davis, 2002; Shapiro & Varian, 1999). Initially, copyrights were used to protect software innovations; only since the 1980s has it been possible to patent them. In pharmaceuticals, chemicals, and biotechnology, by contrast, patents are widely recognized as both important and effective in securing appropriability (e.g., Arora, 1997; Liebeskind et al., 1996; Merges & Nelson, 1994).