1. Profiting from innovation and the intellectual property revolution
Gary Pisano 2006
GROUP 2​
Juhana Harmanen 535436​
Helena Henno 82813N​
Elli Leino ​​
Valeriya Zhuvertseva K94840

2. Review of PFI (Profiting from innovation ) by Teece 1986
The paper is a classic in theory of innovation. It brought together strategic management and innovation
The purpose of the paper was to answer the question why innovators sometimes fail to profit from an innovation they have made
It also created a framework for innovator companies to identify how to deal with complementary assets to minimize the risk of being displaced by imitators

3. Teece’s framework in short
There are two features that define wether a company is capable to capitalize on an innovation it has made:
Appropriability regime: Exogenous mechanisms to protect innovations and the possible corresponding returns
Tight or weak
Complementary asset position: Having other (complementary) assets downstream or upstream the value chain eg. delivery chain or manufacturing plant

4. Tight approprability regimes:
Patenting, licencing
Pharma
Petrochemicals
Copyrights
Artwork
Texts
Trade secrets
Recipes
Processes

5. Weak approprability regimes:
Cababilities-based approaches to strategy (innovator vs imitator, and mergers & acquisitions)
Failure: EMI vs GE Medical Systems race in CAT Scanners (X-ray)
When: 1970s EMI as technological and market lead
Problem: EMI couldn't meet increasing demand, didn't have sufficient patents / licences
Solution: GE reverse engineered and utilized its complementary assets (large-scale manufacturing)
Result: EMI was unable to sustain lead followed by GE acquiring EMI

6. Weak approprability regimes:
Cababilities-based approaches to strategy (innovator vs imitator)
Failure: Intel vs Japanise rivals race in DRAMs
When: Leader and pioneer in DRAMs in s
Problem: Weak patenting / becoming public, and nsufficient process devevelopment and manufacturing ramp-up
Result: Japanise rivals with sufficient manufacturing capacity invaded the markets with cheaper replicated products
Success: Intel vs AMD race in microprocessors
When: Invented microprosessors
Problem: IP position eroded and enabled rivals due to licensing
Solution: Learned from previos failure. Had already built the process development and manufacturing needed to stay ahead!
Result: AMD is able to reproduce and replicate. Intel is able to produce continuos improvements and ramp-up production

7. Weak approprability regimes:
Alliances and networks
Success: A large pharmaceutical firm Merck vs Private firms in codifying human genome
When: During the period of codifying the human genome in the 1990s
Problem: Private firms were attempting to patent the genes in order to earn a profit from it
Solution: Created a public database of the human genome in collaboration with Washington University
Result: Avoided a sever value impairment of their complementary asset positions

8. Is PFI still valid?
Globalization has shifted the environment in favor of innovation importance
Competition is tougher due to fast imitation and development of similar or even better products of the same innovation
"the limits of what markets can coordinate are at the heart of what a firm must organize in order to profit from innovation"
- Teece (2006)
Introduction to the research policy 20th anniversary special issue of the publication of "Profiting from Innovation" by David J. Teece

9. New perspective by Pisano
The nature of appropriability regimes is changing: They are no longer given but can be shaped by the innovator
Exogenous perspective
Endogenous perspective
Appropriability regime
PFI
(Teece 1986)
(Pisano 2006)
Innovation
IPR strategy
Strategy
Organization structure
Complementary asset position

10. The changing nature of appropriability regimes
Endogenous appropriability regime
App industry and network effect VS VS

11. Thank you!