Abstract
We revisit the paradox of in the literature which consists of two conflicting views on the link between patenting and open innovation — the spillover prevention and the organizational openness views. We use the data from the Survey of Innovation and Patent Use and the Community Innovation Survey (CIS6) in the UK to assess the empirical support for the distinct predictions of these theories. We argue that both patenting and external sourcing (openness) are jointly-determined decisions made by firms. Their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not. Leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers, and consequently, the increase in patenting due to openness is higher for leaders than for followers. We develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers.
Highlights
Over the last quarter century two apparently contrasting trends have marked the innovation process
The authors are grateful to Tony Clayton, Ray Lambert and Peter Evans who contributed to the design of the survey instrument used to collect data on innovation and patent use
Firms are more likely to seek external collaborators if they can protect their innovation by patents, and more generally, guard against unintended knowledge spillovers to partners
Summary
Over the last quarter century two apparently contrasting trends have marked the innovation process. The relationship between the reliance on external sources and the appropriability strategy of firms has been analysed extensively since the early paper by Cassiman and Veugelers (2002) This literature has converged around two conflicting points of view, which Laursen and Salter (2014) dub the “paradox of openness”, namely that opening up to outside sources of knowledge to innovate may weaken the firm’s power to capture rents from that knowledge. Firms are more likely to seek external collaborators if they can protect their innovation by patents, and more generally, guard against unintended knowledge spillovers to partners We call this the “spillover prevention” view. We develop a simple framework that provides a useful way to link the underlying theories based on the costs and benefits of collaborative innovation to the observed relationship between patenting and openness.
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