Article | California Management Review | Summer 2013

IP Modularity: Profiting from Innovation by Aligning Product Architecture with Intellectual Property

by Joachim Henkel, Carliss Y. Baldwin and Willy C. Shih

Abstract

Firms seeking to take advantage of distributed innovation and outsourcing can bridge the tension between value creation and value capture by modifying the modular structure of their technical systems. Specifically, this article introduces the concept of "IP modularity," which seeks to protect and capture value from intellectual property. The article defines what it means for a system to be "IP-modular," illustrates the application of this concept in a number of practical situations, and presents a comprehensive framework that can be used to design and evaluate value capture strategies for modular systems.

Keywords: modularity; value appropriation; distributed innovation; open innovation; intellectual property; Innovation Strategy; Intellectual Property; Value;

Citation:

Henkel, Joachim, Carliss Y. Baldwin, and Willy C. Shih. "IP Modularity: Profiting from Innovation by Aligning Product Architecture with Intellectual Property." California Management Review 55, no. 4 (Summer 2013): 65–82.