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Appropriating the value from innovation: inimitability and the effectiveness of isolating mechanisms

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Abstract

Preventing the imitation of products and their underlying characteristics is a key source of competitive advantage. Isolating mechanisms, such as patents, brand name and speed to market, render an organisation's inventions imperfectly imitable by competitors, helping sustain the above-normal returns achieved from a new product innovation. A theoretical framework is developed whereby the characteristics of isolating mechanisms, namely causal ambiguity, asset stock effects and enforceability of property rights, are shown to be important determinants of appropriation effectiveness. A multiple method research design, consisting of a survey of 238 large Australian organisations, and a further six case study organisations, is adopted. The results indicate that isolating mechanisms in the form of technological capabilities, market-based assets and knowledge protection positively moderate an organisation's returns from their innovation activities, while being first-to-market is found to negatively moderate the business returns achieved. Implications for managers in increasing the effectiveness of their appropriation regime, and future directions for research are proposed.

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