The importance of patents for innovation appropriation and open financing – a new view

Paper presented at the R&D Management Conference, Cambridge, UK, July 3-6, 2016.

The role of patents for capturing (appropriating) value from innovation investments has since long been of major interest to both practitioners and academics. Previous studies have implicitly assumed that firms appropriate value through in-house creation and marketing of innovative products and services. We question this assumption in light of the variety of business models and strategies now being available, including open innovation. We develop a basic typology of appropriation strategies, and investigate the role patents play for different strategies among 172 Swedish technology based firms. The results show that the importance of patents has a skew distribution with many firms rating patents as very important and with a fat tail of firms rating patents less important. This partly explains the limited importance of patents that previous studies have communicated. The results also show that the protection of sales and sales margins of innovative products and services is only one function of patents, and that patents are also important for the sales of technologies and stocks. Thus, patenting widens the range of appropriation strategies as well as financing strategies available to R&D management, which is especially important for cash strung technology based start-ups and SMEs, as well as for large firms with long R&D times.