innovation intermediaries and mutual trust
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INNOVATION INTERMEDIARIES !AND MUTUAL TRUST:!
The effects of open innovation to (IP) law!
Paulius Jurčys !
2014 Annual Conference Kyushu University Faculty of Law
!February 10-11, 2014
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OUTLINE
• The significance of mutual trust
• Open innovation and changing approaches to technology management
• The role of innovation intermediaries in creative industries
• Mutual trust and changing role of (IP) law
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THE SIGNIFICANCE OF MUTUAL TRUST
TRUST AND DECISION-MAKING
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Do it myself?
Delegate? !
Do nothing?
Delegation !
as a trust-based action
TRUST AND DECISION-MAKING
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Do it myself?
Delegate? !
Do nothing?
Delegation !
as a trust-based action
TRUST RELIANCE
FAILURE
SUCCESS
Positive contribution to trust
Negative contribution to trust
Autonomy !
or Control?
MULTI-DIMENSIONAL CONCEPT OF MUTUAL TRUST
Integrated concept of trust: complex structure with various components which help explain and justify various roles, functions and definitions of “trust”
Socio-cognitive notion of trust: not merely epistemic notion, but integrates beliefs with motivation (actions leading to results)
Analytic & explicit: positive and normative dimensions of trust
Multi-factor and multi-dimensional model: trust in alter based on beliefs about alter’s powers, qualities and capacities, but also sub-forms of trust in specific qualities of alter (e.g., expertise, loyalty, persistence, etc.)
Dynamic notion of trust: trust is not fixed, but depends on context, reasoning and time
Trust is structurally related to other notions such as previsions, expectations, trustworthiness, uncertainty and risk, reliance, delegation, cooperation and reputation
Micro and macro dimensions of trust: virtuous loop between trust and social order (social order is basis of and requires trust; at the same time trust exploits and fosters social order)
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OPEN INNOVATION AND THE ROLE OF INTERMEDIARIES
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Development CommercializationFuzzy frontend
MARKET REVENUE
CLOSED R&D MODEL
CLOSED R&D MODEL: • In the traditional (“closed”) R&D model, the firm is the core of innovation:
the technology is generated and nurtured within the vertically integrated firm
• Very limited output: only few ideas are materialized into commercially viable products
• In such a “closed” model of innovation, there is huge “spillover” of unintended byproducts and processes. This was regarded as a unavoidable “sunk cost”
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Development CommercializationFuzzy frontend
MARKET REVENUE
CLOSED!R&D MODEL
MARKET REVENUE
NEW REVENUES
OPEN!INNOVATION
EXTERNAL IDEAS & TECHNOLOGY
TECHNOLOGY SPIN-OUTS
PRODUCTS FOR SCALE-UP
IP LICENSING-
OUTIP
LICENSING-IN
OPEN INNOVATION AS OPPOSED TO PRIOR BUSINESS MODELS
• Equal importance is given to external and internal knowledge: internal gaps within the firm may be easily filled with abundant external knowledge
• The centrality of business model for converting R&D into commercial value
• Purposive outbound flows of knowledge and technology: the firm seeks not only to accelerate innovation, but also the expect external markets
• Knowledge management: open innovation requires to create new architectures for identification, access and incorporation of knowledge
• The proactive and nuanced role of IP management: there numerous ways to generate revenue, not necessarily by means of IP
• New metrics for assessing innovation capabilities and performance !
• The rise of innovation intermediaries and intermediary markets (bridging and boding)
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INNOVATION INTERMEDIARIES IN MAKE-UP INDUSTRY
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RETAIL STORES
MAKE-UP ARTIST
• MAC is a manufacturer of cosmetics products and seeks to expand the distribution of its products
• In order to boost sales MAC uses various marketing strategies, promotions and advertisements, which often involve famous stars from entertainment industry
• Backstage make-up artists as intermediaries (their relations with MAC and famous star)
• How to facilitate the development of innovation ecosystems? What role should law play in this process?
Inno
vatio
n ec
osys
tem
PRODUCT LIFECYCLE, IPRs AND GROWTH
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EARLY! GROWTH MATURITY DECLINE
BASIC PRODUCT
Sales
Time
ListedNon-Listed
IPO
EARLY STAGE
GROWTH
Proof of concept IPRS Business
Plan Team in place Product development Market introduction
What really matters in the commercial practice is the maximization of revenues
CHANGING UNDERSTANDING OF “APPROPRIATION”
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Appropriation of knowledge by means
of IP rights
Appropriation of revenues
(Business plan)
• The notion of “appropriation” has transformed as open innovation developed: traditionally firms sought to appropriate internal knowledge by obtaining IP rights.
• In an open innovation era firms shift towards appropriation of revenues. This requires innovative business plan while IP rights become merely a tradable asset
• Intermediaries and intermediary markets facilitate the creation of new mechanisms for learning and appropriation. The crucial factor is mutual trust
MUTUAL TRUST AND THE FUNCTIONS OF (IP) LAW
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MUTUAL TRUST AND THE FUNCTIONS OF (IP) LAW (1)
• Normative → cognitive: if the law is loosing normative powers to guide human behaviour, perhaps there is no need to focus of substantive issues (“cognitive openness”)
• Formalisation of expectations: Instead, law should provide an architecture for stabilizing expectations which arise from trust-based informal structures
• Facilitating function of law: in addition, law should serve as a tool facilitating means of interface, learning and appropriation
• Law reform as an attempt to reestablish trust
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MUTUAL TRUST AND THE FUNCTIONS OF (IP) LAW (2)
• Trust has been usually understood as a phenomenon which is established over time during repetitive interactions.
• Recent emergence of digital communication technologies occurs rapidly and the degree of repetition, is, arguably, decreasing -
• Repetition is replaced by networks and social capital (“the sum of actual and potential resources embedded within, available through and derived from the network of relationships possessed by an individual or social unit. Social capital thus comprises both the network and the assets that may be mobilized through that network.” [Nahapiet])
• The role of reputation and information cascades where own experiences are replaced with the experiences of other
• Are we witnessing de-personalisation of mutual trust?
• Mutual trust and law as triggers of action: mutual trust triggers action, Law and Economics assumption that “law can, does and should” trigger action
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