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dc.contributor.authorGans, Joshua Samuel
dc.contributor.authorStern, Scott
dc.date.accessioned2019-03-25T15:04:01Z
dc.date.available2019-03-25T15:04:01Z
dc.date.issued2017-05
dc.identifier.issn0002-8282
dc.identifier.urihttp://hdl.handle.net/1721.1/121075
dc.description.abstractInnovation’s private value is typically less than its social value, so to encourage innova- tion, researchers in economics and strategy have focused on how innovators can appropri- ate value across different economic, institu- tional, and strategic environments ( Teece 1986; Gans and Stern 2003 ) . For sta rt-ups without pre-existing assets such as manufacturing capa- bilities or brand reputation, researchers have identified appropriability through formal intel- lectual property protection ( which we will refer to as a “control” approach ) and first-mover com- petitive advantage ( which we will refer to as an “execution” approach ) as distinct paths. Most research has taken a start-up’s appro- priability regime as exogenous, i.e., environ- mentally determined ( e.g., control-orientation in biotechnology, and execution-orientation in Internet software ) . This paper develops a simple model highlighting the interplay between con- trol and execution as alternative routes to appro- priability. Whereas a control strategy allows an innovator to forestall imitation once established, control itself takes time, and so can delay market entry. In contrast, an execution strategy is pre- mised on taking advantage of the benefits aris- ing from rapid market entry such as customer learning, reputational advantages, or coordina- tion on a standard. Does the start-up shield itself from competition through investing in entry barriers or does it invest in dynamic capabilities allowing it to “get ahead, stay ahead”? We derive two main results. First, the choices of control and execution are strategic substi- tutes. Notably, when the ability to learn from early customer feedback in the marketplace is sufficiently high, an entrepreneur might choose not to invest in intellectual property protection even if such protection is costless and effective. Second, the choice between control and execu- tion interacts with other key strategic choices such as whether to pursue a narrow or broad customer segment, or whether to commercialize a “minimal viable product” versus a more robust version. Innovation appropriability depends not only on the instruments available to an innova- tor, but on how those instruments interact with each other as part of the firm’s ( endogenous ) entrepreneurial strategy (see Ching, Gans, and Stern 2016; Gans, Stern, and Wu 2016 ).en_US
dc.publisherAmerican Economic Associationen_US
dc.relation.isversionofhttp://dx.doi.org/10.1257/AER.P20171011en_US
dc.rightsArticle is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.en_US
dc.sourceAmerican Economic Associationen_US
dc.titleEndogenous Appropriabilityen_US
dc.typeArticleen_US
dc.identifier.citationGans, Joshua S., and Scott Stern. “Endogenous Appropriability.” American Economic Review 107, no. 5 (May 2017): 317–321.en_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.mitauthorGans, Joshua Samuel
dc.contributor.mitauthorStern, Scott
dc.relation.journalAmerican Economic Reviewen_US
dc.eprint.versionFinal published versionen_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/PeerRevieweden_US
dc.date.updated2019-02-28T19:06:58Z
dspace.orderedauthorsGans, Joshua S.; Stern, Scotten_US
dspace.embargo.termsNen_US
dc.identifier.orcidhttps://orcid.org/0000-0003-2328-3229
mit.licensePUBLISHER_POLICYen_US


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