Appropriating the Returns from Innovation

This chapter explores the extent to which an innovator is able to capture innovation rents. After examining the two main drivers of such rents, the strength of the appropriability regime and the ownership of specialized complementary assets, the chapter examines how their interaction is so critical in affecting imitation, commercialization options, and firm performance. After reviewing the underlying conceptual framework and empirical evidence, and using a perspective that cuts across both time and industries, the authors then discuss the implications of innovation profits for the resources to be devoted to the discovery of new or improved product and processes.