If the importance of an organisations resources and capabilities is ultimately linked to their ability to generate value for the organisation, then it is critical that an organisation is able to appropriate or benefit from the value created.
We make a distinction between value creation and value appropriation given that successful firms are also likely to be those best able to appropriate the value created.
The rationale behind the existence of property rights is the idea that innovation can be encouraged only by ensuring that innovators are able to benefit from innovation through establishing property rights, i.e. rewarding effort. Intellectual property is typically protected through the use of the following:
- Patents - exclusive rights to a new and useful product, process, substance or design.
- Copyright - exclusive production, publication or sales right to the creators of artistic, literary, dramatic or musical works.
- Trademarks - these are words, symbols or other marks used to distinguish the goods or services supplied by a firm. Trademarks provide the basis for brand identification.
Traditionally, the software industry has been regulated by the copyright system. The advantage of using copyright is that it is an automatic law and hence is not subject to any time delays. A major disadvantage of the time delay in receiving patent approval is that it becomes difficult, if not impossible, for competitors to avoid patent infringement given that a patent may not be publicly viewable until twelve months after it has been applied for or even eighteen months in the US.
Source: adapted from BusinessWeek, 1.12.2003
The Open University, Milton Keynes, B820 Strategy, 2005