Modularity and Intellectual Property Protection

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Modularity and Intellectual Property Protection

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Title: Modularity and Intellectual Property Protection
Author: Baldwin, Carliss Young; Henkel, Joachim

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Citation: Baldwin, Carliss Y., and Joachim Henkel. "Modularity and Intellectual Property Protection." Strategic Management Journal 36, no. 11 (November 2015): 1637–1655. (Was Harvard Business School Working Paper, No. 14-046, December 2013. Revised January 2014.)
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Abstract: Modularity is a means of partitioning technical knowledge about a product or process. When state-sanctioned intellectual property (IP) rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect IP. We investigate the impact of modularity on IP protection by formally modeling the threat of expropriation by agents. The principal has three options to address this threat: trust, licensing, and paying agents to stay loyal. We show how the principal can influence the value of these options by modularizing the system and by hiring clans of agents, thus exploiting relationships among them. Extensions address screening and signaling in hiring, the effects of an imperfect legal system, and social norms of fairness. We illustrate our arguments with examples from practice.
Published Version: http://onlinelibrary.wiley.com/doi/10.1002/smj.2303/full
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:11591705
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