Sustainable entrepreneurship rijtjes
Public strategies to foster ecopreneurship (Isaak, 2002)
- Change tax incentives to reward the creation of green jobs and to punish resource use - Build creativity and ecopreneurship incentives into standards for public-sector management - Use ecopreneurship as a strategy for boosting civic competence and social capital - Start a public campaign to de-legitimatise non-sustainable business results -> increase social pressure besides fines.
Private-sector initiatives that can promote ecopreneurship (Isaak, 2002)
- Create their own world of value by setting limits (check paper, unclear) - Search for green strategic innovations - Use green marketing, adding distinction by understatement - Promote green brainstorming to reduce costs - Encourage green networking in the community to generate free publicity - Use social ecopreneurship as an extraordinary motivator for your employees
What are the forms of sustainability oriented entrepreneurship? Describe them in terms of their core motivation, main goal, role of goals and organizational challenges. (Shaltegger & Wagner (2011)
- Ecopreneurship - Social entrepreneurship - Institutional entrepreneurship - Sustainable entrepreneurship Ecopreneurship Core motivation: contribute to solving environmental problem and creating economic value Main goal: Earn money by solving environmental problems Role of economic goals: Ends Role of non-market goals: environmental issues as integrated core element Organizational development challenge: From focus on environmental issues to integrating economic issues Social entrepreneurship Core motivation: Contribute to solving societal problem and create value for society Main goal: Achieve societal goal and secure funding to achieve this Role of economic goals: economic goals are means to reach the main goal Role of non-market goals: Societal goals as ends Organizational development challenge: From focus on societal issues to integrating economic issues Social entrepreneurs are individuals with innovative solutions to society's most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change. Ashoka is the largest network of social entrepreneurs worldwide, with nearly 3000 Ashoka Fellows in 70 countries putting their system changing ideas into practice on a global scale. Social entrepreneurs are seen as influencing small groups and not mass markets, but could influence trends and institutions and thus move towards sustainable entrepreneurship Institutional entrepreneurship Core motivation: Contribute to changing regulatory, societal and market institutions Main goal: Changing institutions as direct goal Role of economic goals: Means or ends Role of non-market goals: Changing institutions as core element Organizational development challenge: From changing institutions to integrating sustainability Sustainable entrepreneurship Core motivation: Contribute to solving societal and environmental problems through the realization of a successful business Main goal: Creating sustainable development through entrepreneurial corporate activities Role of economic goals: Means or ends Role of non-market goals: Core element of integrated end to contribute to sustainable development Organizational development challenge: From small contribution to large contribution to sustainable development
At the level of product design 5 steps have to be taken to become eco-effective. Which ones? McDonough & Braungart (2002)
- Free of substances from the X-list: substances that are known to be bad for humans or animals - Personal preferences - The passive positive list: okay to use since they have a neutral impact on the environment. - The active positive list: materials are completely compatible with human and environmental health, and are selected for their good and useful qualities. - Reinvention of substances that are on the Gray list: substances are not ideal but lack viable substitutes and are necessary for continued manufacture. These steps are aimed at specifying all the inputs that go into a product and making sure that they are either biological nutrients or technical nutrients. The ABC-X list is used to determine whether a product is marketable.
Why do incumbents not act: risk and uncertainty (York and Venkatamaran (2010)
- Incumbents suffer from organizational inertia (they are slow) - Sunk costs in plant and equipment - Specialization leading to competency traps, path dependencies and a reliance on routines - Risk to reputation and legitimacy - Uncertainty over which types of environmental strategy will be rewarded by customers, stakeholders or governments
Which three types of innovation are recognized in Klewitz & Hansen (2014)?
- Process innovation - Organizational innovation - Product innovation
Parrish (2010) identified 5 design principles. What are they? And explain.
5 design principles are identified by Parrish that these successful entrepreneurs use to make decisions: - Resource perpetuation - Benefit stacking - Strategic satisfying - Qualitative management - Worthy contribution These rules he call the principles of perpetual reasoning. Parrish contrasts perpetual reasoning and exploitative reasoning Resource perpetuation When designing the organization and making decisions, the perpetuation of resources is a business goal - Human and natural resources are used in such a way that they maintain their quality and keep functioning - The time horizon is long - The health of employees and the quality of the work experience become legitimate outcome objectives for the enterprise - In contrast, conventional business will exploit resources, while improving profit is the main business goal Benefit stacking - efficiency, achieving synergies Structuring the enterprise so that as many beneficial outcomes for as many different stakeholders as possible were produced by each organizational activity - In contrast, conventional business will specify a desired outcome, and choose the cheapest way to achieve this outcome Strategic satisfying - When organizational tradeoffs are inevitable, the different outcomes would be balanced by identifying satisfactory levels of outcomes and meeting those targets on a continuous basis - Satisficing here is not seen as a weakness, it is a deliberate choice to go for a self-defined threshold level in order to be able to manage a wide range of outcomes - it is a tool that they can use to balance tradeoffs - In contrast, conventional business will aim for maximizing one single outcome such as profit or shareholders value Qualitative management - criteria for prioritizing decision choices - Criteria for decision making are about better outcomes, and the quality of the outcomes and processes - Management can be less often about more and more often about better - Focus on the quality aspects of the products, the quality of the work experience - Typically, conventional businesses focus on quantitative outcomes: more revenue, bigger market share, and assume a tradeoff has to be made between different quantitative outcomes to maximize one of them Worthy contribution - Stakeholders are rewarded on the basis of worthiness - When designing rewards and payments (monetary or otherwise) do so on the basis of need rather than power - Provide those with greater need with the opportunity to earn benefits by contributing to the enterprise - In contrast, in a conventional business, stakeholders with most power and control over the organization's resources are also expected to make the biggest claim to benefits from the enterprise. This means that shareholders and senior management are privileged.
Sarasvathy identifies 4 principles related to the logic effectuation. Which are they? Later the effectuation principles have been further developed into 5 principles. What are they? and describe them. (Sarasvathy (2011)
Answer 1 - Affordable loss rather than expected return - Strategic alliances rather than competitive analyses - Exploitation of contingencies rather than exploitation of pre-existing knowledge - Controlling an unpredictable future rather than predicting an uncertain one Answer 2: - Bird in the hand principle - The affordable loss principle - The crazy quilt principle - The lemonade principle - The pilot in the plane principle The bird in the hand principle Begin with the means available, who they are, what they know, whom they know. Start with the means already within control, focus on the doable. The affordable loss principle Invest only what you can afford to lose, rather than focusing on picking a venture with the best expected returns. If you are going to fail, do so quickly and cheaply. The crazy quilt principle Rather than seeing the market as something to be entered and conquered, make a new market, allow stakeholders to self-protect grow networks and partnerships who commit up front to help co-create, shape the opportunity and the market and thus reduce uncertainty. Direction depends on who joins them and when. The lemonade principle When life gives you lemons make lemonade, start with flexible goals and focus on doing the doable. Contingencies become resources to be leveraged rather than distractions to be avoided. Expert entrepreneurs welcome the unexpected and turns surprises into opportunities. The pilot in the plane principle Don't rely on predictions and trends to know what to do, rather take control and choose your own direction. Bring together people and resources, transform existing structures into better configurations rather than waiting from them to change. The future is not predicted or discovered, but made.
What do Calic and Mokawski conclude about how a sustainability orientation influences crowdfunding success? - Calic, Mosakowski (2016)
Conclusion - Crowdfunding provides alternative sources of finance - Crowd funders have a demographic that favors investments with a positive impact on society - This may make it easier for social enterprises to obtain funding
What are the conclusions of Flammer (2013) about the way shareholders react on eCSR?
Conclusion - Shareholders react positively to the announcement of eco-friendly initiatives - Shareholders react negatively to the announcement of eco-harmful behavior - The more becoming green is institutionalized as the norm, the more that eco-harmful behavior has a negative effect on the perception of the firm - As more firms adopt the norm the lower the reward from shareholders for eco-friendly initiatives - Over time positive reactions to eco-friendly initiatives have decreased - Over time negative reactions to eco-harmful behavior have increased - Having established a stock of environmental resources leads to marginal returns for further initiatives - Having established a stock of environmental resources a firm may suffer less losses due to this insurance/ reputation / ability to manage harmful events
What is the maon conclusion of Milne & Gray (2013)
Conclusion: Through the practice of incomplete TBL (aka sustainability) reporting many organizations seem to confuse narrow and incomplete, partial reporting with claims to: - Be reporting on being sustainable - Actually being sustainable - Or more commonly, with claims to be moving towards sustainability Additional: Sustainability reporting: Who's kidding whom? Since 1990's an increasing number of companies are producing stand-alone sustainability reports, in addition to their annual reports. Although the quantity has increased, quality remained disappointing: the reports: - Cover very few stakeholders - Cherry pick elements of news - Generally ignore the major issues that arise from corporate activity such as lobbying, advertising, increased consumption, distributions of wealth and so on. The needs of the present and future generations are not addressed TBL and GRI - TBL: Triple Bottom line (people, planet, profit) - GRI: Global reporting initiative, both an independent institution and a standardized approach to sustainability reporting - The authors argue that fundamentally, people, planet and profit are not mutually supportive elements, and their equal achievement is impossible - Also, they argue that both TBL and GRI do not address sustainability as such. Rather, TBL and GRI offer a balanced score card solution for a fundamental issue. - This allows companies to continue their change-but-no-change variety of sustainability reports
Incentives to address environmental issues (4) (York and Venkatamaran (2010)
Context: traditionally efforts to reduce environmental degradation focused around 4 main incentives to act: - Governmental / regulation - Stakeholder action / pressure - Ethical - responsible action - Corporate action - economic benefits
What are the goals of crowdfunding? And what are the types of motivation that the funders have? (Mollick, 2014)
Crowdfunding: founder - goals - Raising capital o Substitute for other forms of funding for specific projects o Seed capital to start new firms, products, services - Testing the market/ demonstrating demand: o This can lead to more traditional funding o Or allow a project to fail quickly and cheaply - Marketing purposes o Creating interest in the project in the early stages of development Crowdfunding: funders - motivation - Donation and patronage model - funding a good cause, artistic, social, with no financial return from the donation - Rewards - special often exclusive benefits such as T-shirts, signed photos, tickets to events, discounts, special editions - Pre-selling (pre ordering) - buying in advance secures products for early buyers - Lending - a return on capital invested (peer-to-peer) - Equity stake - a share of the company - Other arrangements - sharing profits, dividends, royalties etc.
What are the four groupings of dimensions and 8 main dimensions of eco-innovation of Carrillo-Hermosilla, del Rio and Konnola (2010)? Explain them.
Dimensions - Design dimensions - User dimensions - Product service dimensions - Governance dimension Design dimensions Design rationales - Design focuses on minimizing negative environmental impacts o Lower end of scale environmental and social sustainability - Redesigning human made systems to achieve positive impact o Higher end of scale environmental and social sustainability These rationales are the basis for 3 approaches to eco-innovation: - Component addition - Sub-system change - System change Component addition (end-of-pipe) - Component level changes minimize and repair negative impacts without changing the system - In situations where a system change is very complicated and time-consuming, this level of change can help to 'gain time'. Sub-system change (eco-efficiency, producing more with less) - Reducing negative impacts by creating more goods and services by using fewer resources and generating less waste and pollution System change (eco-effectiveness) - Shift from linear to cyclical, from open loop to closed-loop, from cradle-to-grave to cradle-to-cradle systems User dimensions - User development o Users are firms or individuals that expect to benefit from the use of a product or service (Von Hippel) o Users can play a role in product and service development, but they are likely to contribute to incremental change, not radical innovation - User acceptance o Assessing market needs o Establishing markets for greener products o A challenge for the new company is to remain competitive while developing products that excel in environmental terms Product service dimensions - Product service deliverable (product innovation) o Identifiable changes in the product/service delivered and changes in the perception of the customer relation - Product service process (process innovation o Changes in the value networks and processes which enable the delivery of the product/service Governance dimension - Radical eco-innovations require techno-institutional system-level changes - Lock-in conditions, which act as a barrier to eco-innovation, may involve major governance innovation in private and public sectors - Transitions towards radically different systems are complex societal co-evolutionary processes
What is the difference between Eco-efficiency and eco-effectiveness? - McDonough & Braungart (2002)
Eco-efficiency: minimize impact Eco-effectiveness: positive impact
What are Greening Goliaths and Emerging Davids and what characteristics do they have? (Hockerts & Wustenhagen (2010)
Greening Goliaths represent larger incumbent firms using incremental innovation to bring about sustainable development. Economic goals are domenating, environmental goals are complementary. Greening Goliaths - Incumbents may be slow to react but are often able to catch up quickly once they have decided to follow - They may then benefit from being able to charge premium prices, following the price level established by the start-up - They can launch Venture Capital funds to monitor innovating Davids - They may be able to influence the setting (or reduction) of environmental standards in their favor (e.g. car industry lobby) - They may try to keep standards fixed rather than encourage continuous improvement Emerging Davids are start-ups and young companies introducing disruptive innovations. Both can play a role in contributing towards sustainable development but they do so in different ways. For future success the interaction of the two types is needed. Environmental goals are at least as important as economic objectives. Emerging Davids - They are not limited by previous (technological) mindsets and are more innovative - They are part of the solution and not seen as part of the problem - Sustainability start-ups have a value-based approach and externalize costs by asking customers to pay a premium for socially and environmentally superior products (and services) - They tend to have a single issue focus and can be less good at addressing a broader range of sustainability issues - Idealistic approach can lead to little or no attention to growth strategies - They prefer to keep their niche market small and exclusive, in order to avoid incumbents moving into their markets.
What is the patenting paradox? What are the motives for patenting(11)? And what are the main issues with patenting(2)? Holgersson (2013)
Motives for patenting? - Research shows that the other means can be more effective at capturing profits - BUT: 60% of patentable inventions are patented - 'the patent paradox' - So why do firms patent? Reasons to patent - Prevent imitation - may be effective under certain circumstances - To avoid going to trial - establish ownership - Retaliation - patent battles require ammunition - Improve negotiation position - access to complementary assets - Block other firms - Enhancing the firm's reputation - demonstrates value - Setting standards - improves bargaining in alliance formation - Marketing - signal innovativeness to customers - Attract venture capital - crucial especially for high-tech firms, reduces risk perception for investors - Safe guard intellectual property within the firm - patent is owned by the company, not the investors - Facilitate open innovation and improve adsorptive capacity Issues with patenting - Disclosure of innovation - provides competitors with information - Monitoring and enforcing patents - due to the limited resources and expertise required and the costs (especially for SMEs)
In the green prison mutual defection might damage the whole industry, how? Also, Mutual cooperation has\s positive consequences for the industry, which are they? and When is it more favorable to have mutual corporation instead of mutual defection? - Pacheco (2010)
Pay-offs of mutual defection: - In a sustainability context, mutual defection could damage the whole industry: o When the government steps in with regulation that requires all companies to make costly changes o When the natural resources necessary for the industry disappear o When the reputation of the industry is damaged Pay-offs of mutual cooperation - The payoffs of mutual cooperation are greater than those of mutual defection so long as the benefits enjoyed from o The absence of industry level governmental regulation o The availability of natural resources to support industry operations, and/or o Positive industry reputation - Are greater than the benefits of defection Therefore, cooperation may be in the best interest of the players in the game as the existence and conditions of their industries can be hampered by defecting behavior.
What were the perspectives of Friedman, Freeman and Porter on ECSR? - Flammer (2013)
Perspectives on corporate eSocial responsibility Friedman's view: social responsibility of business is to increase its profits In this view... CSR will decrease profits due to extra investments and costs and thus violate the contract with shareholders! Freeman (not Friedman!) his view: - The company's aim is to meet the needs of stakeholders, that is any person who is affected by the decisions made by the company; if this is done, profit will be made. - The company's has a moral, ethical and financial duty to serve the interests of all stakeholders and by doing so can be profitable Porter's view: - In this view pollution is a waste of resources - Greening initiatives reduce waste and improve efficiency - Helped by innovation in processes and product design - Thus environmental harm can be reduced while also enhancing competitiveness and financial performance
There are three types of products, which ones? And how should you deal with them in order to be eco-efficient? McDonough & Braungart (2002)
Products of consumption, such as cleaning chemical, shampoos, and packaging materials are made from biological nutrients and designed for safe disposal in the natural environment. (producten die 'op' kunnen). Products of service, such as cars, washing machines, televisions, are made from technical nutrients and designed to provide a service to users and then to be recycled. Unmarketable products, such as hazardous waste, cannot be consumed or used in an environmentally sound way, and should be discontinued and substituted as soon as possible.
Which three means can be more effective than at capturing profits than patents according to research? Holgersson (2013)
Research shows that other means can be more effective at capturing profits: 1 Secrecy - especially for process innovation in small firms 2 Sales or service efforts - attracting and keeping customers 3 Lead time (to market) - first mover advantage and learning effects - be 1st and make rapid adjustments based on market signals and desired functionalities
What are the critical success factors of crowd funding sucess (Mollick, 2014)
Results - Mollick used the presence of a video, updates and spelling as measures of quality and preparedness - He found that certain signals reduced success rates significantly o Spelling mistakes 13% reduction o No video 26% reduction o Lack of early updates (before campaign started) 13% reduction The network role Theory predicts that the network size of the founder should play a role in the success of the fund of the raising effort - Mollick used facebook friends as a measure Results - He found a positive correlation, for example: o The chance of successfully reaching the funding goal for a founder increases with the number of Facebook friends 10 FB friends chance is 9% 100 FB friends chance is 20% 1000 FB friends chance is 40% Do projects deliver on time? - Mollick finds that funded project suffered, on average, a delay of 2.4 months, only 24.9% was delivered on time. - Unexpected success can increase expectations around highly popular projects and is related to delays. Complex and large projects suffer from longer delays - The degree of which projects are overfunded also predicts delays as this can lead to increased scope and complexity - Among the causes listed for delays were: unexpected success, manufacturing problems, the complexity of shipping, changes in scale, changes in scope, and unanticipated certification issues The dynamics of crowdfunding - Quality signals and network size have a significant effect on the chance of funding success - Smaller funding goals are more likely to be reached - Larger and highly popular (overfunded) projects are more likely to suffer delays - the surprise of success, poor planning, inexperience and increasing project scope after funding is secured can contribute to delays The dynamics of crowdfunding So when looking for finance via crowdfunding: - Pay attention to signals of quality and preparedness that compensate for information asymmetry for investors - Develop and utilize your social network - Plan for funding success to deliver on time and set appropriate goals - Over-funding is rare (but be prepared)
Which 5 types of sustainability behavior are formulated in the article of - Klewitz & Hansen (2014)?
Strategic sustainability behavior: - Resistant: ignore sustainability problems - Reactive - React to external stimulation; focus on efficiency - Anticipatory - Second mover advantages, time strategy to realize competitive advantage - Innovation-based - first mover advantages, pro-active solutions to environmental and social issues - Sustainability rooted - business model rooted in sustainability
Bocken et al (2014) Explain model and name all the archetypes and key dimensions
The model has 8 archetypes divided into three groupings. The groupings are: - Technological - Social - Organizational The technological archetypes are: - Maximize material and energy efficiency - Create value from waste - Substitute with renewables and natural processes The social archetypes are: - Deliver functionality rather than ownership - Adopt a stewardship role -> (care for ...) - Encourage sufficiency -> reduce production because durability or education about reduced consumption) The organizational archetypes are: - Repurpose for society/environment -> e.g. become not-profit organization, or home based flexible working - Develop scale up solutions -> scale up in order to increase created sustainable value The key components of the business model are: - Value proposition -> Product/service offering to generate economic, social or ecological return - Value creation and delivery -> create value by seizing new business opportunities, new markets, new revenue streams; key activities, resources, channels, partners, technology; customer segments - Value capture -> cost structure, revenue streams The model works like this. You pick an archetype that your business fits in. Then adjust your value proposition to that archetype. Base on that value proposition what value creation you are going to do (resources, activities etc.) and lastly describe how you are going to capture value from it (costs and revenues).
What is a sustainable business model (Bocken et. al (2014)
The route to a sustainable economy will require the development of innovative sustainable business models. Sustainable business models incorporate a triple bottom line approach and consider a wide range of stakeholder interests, including environment and society.
Three founder identities are identified. What are they? And explain them. - O'Neil and Sarasvathy (2016)
Three founder identities were observed: - Commercial dominant - Ecological dominant - Blended Commercial dominant - Desire for wealth and status as a founder but also showing commitment to preserving the natural environment (ecological) - These entrepreneurs were open to a wide range of stakeholder commitments - "We kind of tell a different story depending on somebody's reason for doing it" - Example: Avantium: research centre that tried to develop plant-based bottles, big invesotrs behind it were Coca-Cola and Danone Ecological dominant - Personal commitment to preserve the natural environment (ecological) but utilizing commercial activities to achieve this goal - This group was focused on recruiting people who shared their ecological goals and were not too corporate (e.g. Dopper) - "If it's just about the money, then you're probably in the wrong spot" Blended - Commitment to environmental entrepreneurship as a means to enact the perceived synergy between a founder's ecological and commercial identities - This group of entrepreneurs intentionally sought to appeal to all stakeholders, offering a wide gambit of incentives so that a variety of stakeholders can self-select into the process and even interpret the goal to their liking. - In terms of theory their approach fits with effectuation: o Who I am, or the bird in hand principle, is basis for initiating the business o Letting stakeholders self-select is an example of how crazy the quilt works, and is central to effectuation: rather than seek out the right stakeholders for the goals, the business is co-created with the stakeholders - Example: Clif Bar & company: ownership is officially shared with the workers
What is the conclusion of Holgersson (2013) about the use of patents and capturing profits from innovation?
To conclude - Patents play several important roles not directly related to the protection of intellectual property - Patents are only one of several means to appropriate benefits and gain profits - In many situations they are seen as a less effective means of securing profits - They can however be necessary when securing VC funding Entrepreneurial firms have several choices in formulating their strategy towards appropriating benefits and it depends on the type of firm, type of product and innovation, their size and funding stage and access to complementary assets.
There are three ways to transform the institutions of the behavior in the green prison, what are they? And explain them - Pacheco (2010)
Transforming the institutions of the game - Institutions represent collective understandings and expectations of behavior - Three types of institutions influence behavior in the green prison: o Industry norms Rules of behavior that are enforced through punishment o Property rights A set of formal and informal rights to use and transfer resources o Government regulation Mandatory rules that are codified and enforced by governmental bodies Escaping the green prison through industry norms - Norms control the interaction between individuals with conflicting interests and are able to maintain stability in competitive relations - The success of these norms is dependent on the ability to detect deviation from the norm within an effective time frame - There may be direct and indirect sanctions - Certification can play a role in communicating these norms to the public/consumers Examples mentioned: - Great barrier Reef tourism operators - 4C (common code for the coffee community) Escaping the green prison through property rights - Maine lobster fisheries o A designated area of the sea, close to the harbor, can only be used by members of the harbor gang for fishing o Since overfishing is a long-term threat for all fishermen, but the short-term benefits of overfishing are appealing, the fishermen took collective action to cooperate o They also monitor and enforce the agreement Escaping the green prison through government regulation - Entrepreneurs may be prompted to request the intervention of governmental authorities to instill cooperative behavior and enable the exploitation of sustainable entrepreneurship creation opportunities - This happens when o The size of an industry increases and the boundaries of its market expand o In the presence of conflictive norms that create uncertainty about competitive behavior - An example is the US Organic Food and Production Act in 1990, and the subsequent USDA Organic certification scheme of 2002, enforced by federal law. -> Too many certificates for organic food existed, all with different requirements. Businesses could choose which certificate they applied for and then choose a less stringtent option and save on costs. This was not good for the reputation of the industry. Entrepreneurs decided to lobby for a government-enforced program that would have symmetrical effects on all parties.
There are two kinds of sustainable entrepreneurship opportunities, what are they? Describe them - Pacheco (2010)
Two types of sustainable entrepreneurship opportunities - Sustainable entrepreneurship discovery opportunities o Exist objectively and are created exogenously o Traditional entrepreneurship theory can explain their existence and the process necessary for discovery, evaluation and exploitation - Sustainable entrepreneurship creation opportunities o Arise endogenously through the structural agency of entrepreneurs o Are more difficult to study and require different theories They are mountains that must be built before they can be climbed o Have great potential to create value through more sustainable business models o Are theoretically interesting, as the barriers to exploit these opportunities need to be studied
What are the two dimensions that have a significant role in capturing the returns of an innovation. And if you fill them in in a matrix, which combination would make what party profit? - Holgersson (2013)
Who captures the benefits? (Holgersson draw upon Teece (1986)) Teece has pointed out 2 sets of factors that have a significant role in capturing returns on innovation investments - The strength or weakness of the protection of the innovation - referred to as the appropriability regime and links to the ease of imitation - The possession of the complementary assets needed to get in the market Appropriability regime - 2 dimensions: o Legal instruments: patents, copyrights, trade secrets o Nature of the technology Product or process Tacit or codified (documented, structured knowledge) - Tight appropriability: technology is relatively easy to protect using intellectual property protection, patents, copyright, or through the use of secrecy, or is it complex, or difficult to transfer. E.G. mobile / wireless signal technology or the Coca Cola recipe - Weak appropriability: technology is almost impossible to protect, is easily imitated or reverse engineered. E.G. software/functionality of a business model innovation Complementary assets - Everything needed to turn the innovation and know-how into a product or service that can be sold: o Manufacturing facility o Distribution channels o Service organization o Complementary technologies - Freely available of unimportant o There are many alternative players and access to customer is easy making it easy for others to enter the market - Tightly held an important o Access to distribution channels and customers, or specialized manufacturing capabilities may be difficult or expensive to obtain. Only a few specialized players. If there is a weak appropriability regime and the complementary assets are tightly held, then most likely the holder of the assets will profit of the innovation (so not the inventor). Because it is very hard to protect the innovation, but attracting the resources is very hard. Therefore the one with the resource will make the profit. If there is a weak appropriability regime, and the complementary assets are freely available then it is really hard for anyone to make a product with this innovation. Since you cannot protect the innovation and everyone can attract the resources to work with it. If there is a strong appropriability regime, and the complementary assets are tightly held, then most likely the part with most bargaining power will profit from the innovation. Since the innovator cannot attract the necessary resources, but can protect the innovation it will become a bargaining process. If there is a strong appropriability regime, and the complementary assets are freely available, then the innovator is most likely to profit. Because he can easily protect his innovation and attract the necessary resources.