Anand B., A. Galetovic. 2004. How Market Smarts Can Protect Property Rights

Anand B., A. Galetovic. 2004. How market smarts can protect property rights |

Summary

The evolving technology is making the world and especially the developing nations a hard environment for companies possessing intellectual property rights. The challenge that owners of intellectual property face is that it's more expensive for them to produce a first copy than it is for counterfeiters to reproduce it. Many companies decide to wait for laws to protect them better before entering markets in developing countries. Companies that hesitate to do business there are forgoing immense economic opportunities their bolder counterparts have already seized.

Even in the best of circumstances legal protections are far from ironclad and that therefore a lack of them isn't reason enough to hang back. Reengineering and copying is happening in all the levels and that’s why a survey of 600 managers claimed that lead time, learning curves, and sales or service efforts are substantially more effective in protecting IP than patents are. And patents are generally considered more robust than trade secrets or copyright.

Most of the companies possessing intellectual property rights start by exploiting their core assets - that is, using their established strengths to keep legitimate rivals at bay. If this is not possible competitors are usually threaten with retaliation. However, in situations where pirates and copyists have already begun to erode the core, the threatened company can offer customers less easily appropriated complements - in some cases, they will be services-that, in combination with the core, create value greater than those elements could if they had remained separate. Sometimes the company should consider entering an adjacent business, usually the very one that has sucked value from the core, even if doing so concludes with the core's complete nullification. The decision to follow value where it leads entails redefining the boundaries of the firm. This process also...