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This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.

The authors study the relation between a firm’s combinative capability and value creation in the context of technological scope expansion. On a sample of Compustat firms that applied for US patents between 1980 and 2001, the authors find that firm value, measured using Tobin’s q, decreases with increases in technological scope (measured as the number of unique patent classes). However, when firms expand by combining different classes into a single patent, the authors find that this negative effect is significantly diminished. These findings indicate that increasing technological scope likely creates value only when the firm is able to integrate the components into a single technology; simply maintaining different technological components within the firm boundary without integration appears to subject the firm to a discount.

This paper applies and empirically tests a real options approach to conceptualizing the value of patents. Based on a theorem derived by Merton (1973), we propose that greater dispersion in the citations of a firm's patents represents greater flexibility for the firm to exercise the option rights embedded in the patents and thus enhances the option value of the patents. A test of this proposition using a sample of 128 US-based biotechnology firms found corroborative results.

To maintain and enhance innovation performance, many firms nowadays look for resources from external sources such as strategic alliances and regional network embeddedness. While considering the important interdependencies among different alliances, research has established an alliance portfolio perspective. From an alliance portfolio perspective, firms can consciously configure the dimensions of their alliance portfolios such as partner characteristics, relational properties, or structural properties. However, within the context of alliance portfolio configuration, the role of regional networks has been largely overlooked. As most high-tech firms are regionally clustered, this is an important research gap. In addressing this gap, this study explores the link between regional network density, alliance portfolio configuration, and its contribution to firm innovation performance. We examine how regional network density and alliance partner diversity influences firm level innovation output. We also investigate the moderating effect of overall network partner status and partner diversity on the link between regional network density and innovation performance. Our empirical evidence is derived from a longitudinal quantitative study of 1,233 German biotechnology firms. We find that regional network density and alliance partner diversity has an inverted U-shape effect on firm level innovation performance. However, overall network status as well as alliance partner diversity negatively moderates the link between regional network density and innovation output. Thus, our study contributes to a better understanding of the link between regional networks, alliance portfolio configuration, and firm level innovation performance.

An innovation's social value depends on various factors that are independent of how the particular innovation is used with other technologies. Examples of such factors are the size of the market the innovation will serve and the manner in which the innovation is managed. However, an innovation must often be implemented with complementary inventions whenever it is exercised and its benefits are realized. In such cases, an innovation's value depends, in part, on the ownership structure of the related inventions. This paper makes its contribution by examining how an innovation's social value is affected when it must be applied in concert with other essential inventions. In this paper, I propose a measure that helps predict an innovation's social value. I also suggest a practical procedure to implement this measure and I evaluate a key feature of this procedure.

Scholars of business, economics, and law have long recognized that rights to intellectual property (IP) intimately shape innovative activity and the pursuit of profits. More than 60 years ago, Michal Polanyi voiced the following concerns about awarding property rights to creations of the “intellect”:The law…aims at a purpose which cannot be rationally achieved. It tries to parcel up a stream of creative thought into a series of distinct claims, each of which is to constitute the basis of a separately owned monopoly. But the growth of human knowledge cannot be divided into such sharply circumscribed phases. Ideas usually develop gradually by shades of emphasis, and even when, from time to time, sparks of discovery flare up and suddenly reveal a new understanding, it usually appears that the new idea has been at least partly foreshadowed in previous speculations. (Polanyi, 1944, pp. 70–71)

Globalization should provide firms with an opportunity to leverage their know-how and reputation across countries to create value. However, it remains challenging for them to actually capture that value using traditional Intellectual Property (IP) tools. In this paper, we document the strong growth in patents, trademarks, and industrial designs used by firms to protect their IP globally. We then show that IP protection remains fragmented; the quality of IP applications might be questionable; and developing a comprehensive IP footprint worldwide is very costly. Growing numbers of applications are causing backlogs and delays in numerous Patent and Trademarks Offices and litigation over IP rights is expensive, with an uncertain outcome. Moreover, local governments can succeed in transferring value to local firms and influencing global market positions by using IP laws and other regulations. In essence, the analysis shows a global IP environment that leaves much to be desired. Despite these challenges, there are successful strategies to capture value from know-how and reputation by leveraging an array of IP tools. These strategies have important implications for management practice, as we discuss in our concluding section. Global companies will need to organize cross-functional value capture teams focused on appropriating value from their know-how and reputation by combining different institutional, market, and nonmarket tools, depending on the institutional and business environment in a particular region.

We examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation. Recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to R&D. Yet the propensity of semiconductor firms to patent has risen dramatically since the mid-1980s. We explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 U.S. semiconductor firms during 1979–1995. The results suggest that the 1980s strengthening of U.S. patent rights spawned “patent portfolio races” among capital-intensive firms, but it also facilitated entry by specialized design firms.

This article explores the effect of technological similarity in acquisitions on invention quantity and quality. In doing so, we confirm previous findings in the literature suggesting that technological similarity exhibits an inverted U-shaped relationship with innovative output and a negative relationship with average invention quality. However, we identify the nature of the technology as an important moderating factor for both relationships. We distinguish between two types of technologies, complex and discrete, and suggest that at high levels of technological similarity, invention quantity and average quality increase more in complex technology industries as compared to discrete technology industries. These effects are attributed to innovation cumulativeness and the interdependencies developed between patent rights in complex technology settings. A study of acquisition and patenting activity in two industries over a sixteen-year period provides empirical support to our claims.