Abstract

The power of innovation to create economic value and reward pioneers with exceptional profits is a deeply-held belief of inventors, entrepreneurs, investors and the public. Innovation can enrich companies and individuals and sometimes disrupt entire industries. Yet many studies have shown that the value from innovation is often captured by someone other than the original innovator, whether by imitators, suppliers of key components, intellectual property owners, or providers of related products and services. In an era when new ideas are brought to the market by networks of specialists rather than by one company, a key question is who captures the most value from innovation in such a structure, and why?

Highlights

  • The power of innovation to create economic value and reward pioneers with exceptional profits is a deeply-held belief of inventors, entrepreneurs, investors and the public

  • As the component breakdowns above make clear, many companies contribute to every iPod and notebook personal computer (PC)

  • We have demonstrated a method for estimating the value captured by companies in the supply chain of a specific product

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Summary

Introduction

The power of innovation to create economic value and reward pioneers with exceptional profits is a deeply-held belief of inventors, entrepreneurs, investors and the public. In an era when new ideas are brought to the market by networks of specialists rather than by one company, a key question is who captures the most value from innovation in such a structure, and why?. Many of the best examples of such a dispersed innovation network are to be found in the electronics industry. The industry was dominated by large companies like IBM, HP, Toshiba, Fujitsu and Philips that designed and built their own products, often using internallyproduced components and proprietary technologies developed in large R&D labs. Even as Silicon Valley-type startups flourished in personal computers, software and semiconductors, the large vertically integrated companies created and captured a large share of the value of innovation in electronics into the 1990s

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