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Modularity For Value Appropriation - How To Draw The Boundaries Of Intellectual Property

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Executive Summary

The existing theory of modularity explains how modular designs create value. The author extends the theory to address value appropriation. A product or process design that is modular with respect to intellectual property (IP) allows firms to better capture value in situations where knowledge and value creation are distributed across many actors. They propose a theory of IP modularity based on value maximization net of transaction and agency costs. They then use case examples to extend the theory into practical settings and derive strategic recommendations and empirical predictions.

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