Innovation is the distinctive characteristic of modern economies and has been the common factor for sustainable economic development since the industrial revolution.1 How companies innovate, however, is changing.
Firms have traditionally approached innovation as a closed, proprietary structure. Under this traditional approach, a firm performs each stage of the research and development (R&D) process on its own, under the direction and control of its central management team.2 Firms create new knowledge through their own research using the firm's existing knowledge resources. Knowledge emanating from this R&D process is then owned by the firm, since it created the knowledge.3 The open innovation movement materialized as an alternative innovation structure. With open innovation, firms seek external ideas to combine with their own internal ideas. Open innovation accelerates innovation by increasing firms' access to knowledge. Knowledge is widely distributed throughout the world, with "most smart people work[ing] for someone else."4
Open innovation is characterized by innovation contests, cooperation and alliances between companies, and company cooperation with individuals. None of these activities are particularly new. However, the open innovation concept has been very successful in popularizing the notion of technology transfer and the need to share and exchange knowledge.5 It is also interesting that the "new wave" of industrial R&D is captured in the term "open innovation."6 To accelerate innovation, modern innovation models must increase individuals' and firms' access to knowledge assets and allow more efficient to use of knowledge resources.7 But, is it possible to conceive an innovation system where all the actors (individuals, firms, or universities) can cooperate to resolve problems, share knowledge about the problems without risk, divide the contributions according to their participation, and get a patent for any resulting inventions?
While open innovation discussions often focus on the increased innovation output sharing ideas can generate, open innovation remains a basic economic undertaking and is subject to fundamental economic principles. One of those principles is: economic actors will underinvest in the innovation process unless they believe they will be properly rewarded. One of the primary tools for incentivizing creators in a modern knowledge-based economy is the receipt of intellectual property rights. However, this article challenges the ability of traditional intellectual property institutions to consistently provide fair returns for open innovation contributors in the developing world. In particular, this article questions current practices for measuring contributions in an open innovation environment and explains why collaborative contributors are likely to be undercompensated in an open innovation system. This article proceeds as follows: Part I explains the role incentives play in motivating actors to generate innovations contrasting the vertical integration structure for obtaining Patent Rights. Part II explores the possibility to assign rights from open innovation projects under the traditional intellectual property grant regimes. Part III analyses the predictable imbalance in a co-creation project. Part IV concludes with a proposal for a valuation model that could be used in the open intellectual property system to better encourage global innovations.
Footnotes
1 KANWAR SUNIL and EVENSON ROBERT. 2001. Does Intellectual Property Protection Spur Technology Change?. Yale University. Economic Gowth Center. Center Discussion Paper No. 831. 1-38
2 LANGLOIS, RICHARD N. 007. The Dynamics of Industrial Capitalism: Schumpeter, Chandler and New Economy. Graz Schumpeter Lectures. 1-93: 7.
3 MERGES, ROBERT P. 1999. The Law and Economics of Employee Inventions. Harvard Journal of Law & Technology 13: 1-53
4 CHESBROUGH, HENRY; VANHAVERBEKE, WIM; WEST, JOEL. 2014. New frontiers in Open Innovation. Oxford Press. P. 16
5 Trott, Paul, and Dap Hartmann. 2009. Why "Open Innovation" is Old Wine in New Bottles, INTERNATIONAL JOURNAL OF INNOVATION MANAGEMENT 13(4): 719-736.
6 David C. Mowery. 2009. Plus ca change: Industrial R&D in the "third industrial revolution". Industrial and Corporate Change. Industrial and Corporate Change 18(1): 1-50.
7 CHESBROUGH, HENRY; VANHAVERBEKE, WIM; WEST, JOEL. 2014. New frontiers in Open Innovation. Oxford Press. P. 194
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