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Chapter 8. Appropriating the Returns to Innovation

Chapter 8. Appropriating the Returns to Innovation

While obtaining patents and maintaining secrecy are important ways that you can capture the returns from introducing new products and services, they are not the only ways to do it. Other mechanisms include learning curves, lead time, first mover advantages, and complementary assets. Although many of these other mechanisms to appropriate the returns from introducing new products and services work better for large established firms than they do for entrepreneurs, you need to be aware of the range of alternatives available. Many types of new products and services cannot be protected by patents or trade secrets. For instance, you might come up with a snowboard binding design and may be unable to patent that design or protect it as a trade secret.

Moreover, mechanisms such as learning curves, lead time, first mover advantages, and complementary assets are all more effective than patents at capturing the returns to introducing new products and services.[1] In fact, research shows that patents successfully capture the returns to new product introduction only about a third of the time, whereas complementary assets in manufacturing and marketing capture the returns to new product introduction over 43 percent of the time, and lead time works over half the time.[2]


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